Oct 08, 2008

When Your Retirement Nest Egg Breaks

As of October 7th, 2008, Americans have already lost 2 trillion dollars on IRA, Keogh, 401(k) and other retirement plans, estimates Julie Hirschfield Davis of the Associated Press. And the stock market is likely to continue to sink.

So what should you do? Well, I don't claim to be a financial wizard, but aside from eliminating my worst-performing fund and putting the proceeds in one that has done far better, I'm sitting tight with a majority of money in stocks. That's because history tells me that no matter how exaggerated the panic, stocks will eventually go back, something I won't benefit from if I move all my money to cash or bonds. Especially for younger workers who have plenty of time before they need their money, this seems like the most sensible course.

I think it's also good to consider the idea that "you are not your retirement account". And just because you may have less money later in life does not mean you will be miserable. For example, many studies show that more people think they retired too early than believe they waited too long, meaning that a decision to keep your job a few years more or transition to a part-time one may actually make you happier.

And how about treating the financial meltdown, as miserable as it surely seems, as a wake-up call to do more of the things that really make retirement fulfilling? That is, to get more exercise, adopt healthy eating habits, and spend more time with friends, family and doing things that truly interest you. Or put another way, this is a great time to put that old adage into practice: Money can't buy happiness.