Rethink Your Retirement Plan


There are few guarantees in life–especially when it comes to planning for your golden years. But one thing is certain: If you start investing when you’re young, you have a better chance of meeting your goals.

While 2008 was bad news all around for most investors, it was especially trying for retirees or those nearing retirement age. You probably don’t need to be reminded that stock markets worldwide suffered their greatest losses since the 1930s. Domestic stock funds lost 37%, on average, while international stock funds lost more than 44%.
Even so, a 401(k) plan is still the ideal way to invest for the long term, says Richard Peace, CFP, a financial planner with FSC Securities Corp. in Colorado Springs, Colorado. “By investing periodically, you’re dollar cost averaging, so you buy more shares when prices are low.” If you invest $200 a month, for example, you’ll buy eight shares of a mutual fund when they sell for $25, but 10 shares if the price drops to $20. You’ll wind up with a lower cost per share and higher profits when the share price goes up to higher levels.

Most financial advisers also tell young investors to stick with stocks, despite feeling psychologically scarred from the last year.  Why? Take a page from history. An investor who bought stocks at the worst possible time–the start of 1931–lost more than 43% that year but still had an 8.2% annualized return at the end of 1951 and a 10.8% average annualized return through 1961, according to Ibbotson Associates, a Morningstar company. So, despite the substantial losses of 1931, investors who remained in the markets regained all losses by 1935. If the stock market can provide that kind of a return through the Great Depression, World War II, and the Cold War, investors may anticipate similar growth from their investments over the next 20 or 30 years.

In this article, you’ll find individuals and families who, undeterred by market volatility, have continued investing in their retirement and are poised to reap the rewards. More importantly, black enterprise asked financial advisers to evaluate each of their current strategies and suggest ways to turbocharge their 401(k) investing–and yours.


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