Your Personal Finance Questions Answered

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Advice for those already retired and would-be investors tempted to buy stocks that are currently battered.

MADELEINE BRAND, host:

Back now with Day to Day. Our personal finance expert, Michelle Singletary, is back to give us some tips about what we should be doing with our money now that Wall Street is so jittery. And, Michelle, wow, twice in one week. We are lucky to have you.

The last segment we did with you a couple of days ago elicited a lot of letters from people looking for advice from both ends of the investing spectrum, those just starting to build for their future and those who are retired or want to be retired soon.

So one listener is seven years from retirement and has about a third of his 401K funds in bonds, but, he writes, the dramatic drop in stocks makes them pretty tempting, kind of a buying opportunity, and he wants to know whether he should put some of his bond money into stocks?

MICHELLE SINGLETARY: We don't know where the bottom of this market is, and if you aren't doing a lot of research and have someone helping you, you're really gambling right now. I would do what I call dollar-cost averaging, where you put a little bit of money in the market. And so, as the price of stocks go down, you get to buy more shares, and if they go down further, you get to buy more shares, and you do it in a systematic way.

The problem with a lot of investors, particularly unsophisticated investors, in this kind of market is they rush, and they buy, you know, a bunch of stock in one company or one sector, and that's what gets you into trouble later when you get into retirement, and you're not diversified. So stay on your plan if you have plan, and you will pick up some of those bargains if you are dollar-cost averaging.

BRAND: OK. Here's a letter from someone who has already retired, and this person writes, no one ever gives advice to those who are already retired. Is it hopeless for us, or is there something we can do?

SINGLETARY: First of all, that's not true here on Day to Day. In my segments, we've been giving advice to retirees all along, way before this crisis happened, and no, it's not hopeless. Are there some people losing a lot of money? Sure there are. And often, those are the folks who are not diversified.

So listen, if you're in retirement, let's just focus on that group of folks. You need to kind of take a step back, be calm, and before you do anything, even if you are going to end up selling, you need to look at your overall plan. How much do you have coming in Social Security benefits, if you're getting those. If you are fortunate enough to have a pension, how much do you have in cash reserves? You might look at whether or not you need to go back to work part time or full time or if you've got other income coming in that's enough to cover your expenses. You may cut down on the amount of withdrawals you're having from your investment account.

So there is hope, but you do need to take some action and look at your entire portfolio. And I hate to say it, you might need to pay for a little advice and see if you are well-diversified.

BRAND: All right and finally, one listener heard you earlier this week, and she said what you said stopped her in her tracks. She and her husband are both 54 years old. They were about to move all their IRASs mutual funds and Roths to the control of a financial advisor, someone they trust. And they know they need to do what you just said, diversify, but they're really afraid at this point to do anything. They're too scared to make a move. What should they do?

SINGLETARY: Well, I'm glad to hear that they're trying to get advice, and I'm glad that they are looking towards someone they trust, but I still would caution you to find out how much, if anything, it would cost to move all those accounts, because if that person is going to charge them a fee to move and transfer things, that could hurt their returns right now.

I would make sure that they contact the North American Securities Administrators Association. I know that's a mouthful. That's the North American Securities Administrators Association, because I don't care how much they trust this person, they need to make sure this person is licensed or registered.

And before you give your money to anybody, check them out. Do your due diligence because you can't afford, in this market, to make a mistake and go with someone who's going to give you bad advice.

BRAND: Michelle Singletary is Day to Day's personal finance contributor, and she writes The Color of Money column for the Washington Post. Thank you, Michelle.

SINGLETARY: You're welcome.

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