Home < Human Resources and Benefits Briefing < February 2009
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With the recent turmoil in the stock market and the general economic crisis, employees are struggling with two questions: What should I do about my retirement investments? How can I deal with the stress I'm feeling?
Jerry Neal, personal financial advisor at UC San Francisco, agrees. "Those who study financial behavior say our behavior bounces between fear and greed. People respond to extremes with emotion, even in the world of personal finance." Regarding what to do about your retirement investments right now, both say there is no one right answer. "When employees ask me about their retirement accounts," says Neal, "I try to find help them find the risk in the action they are contemplating; then I tell them: 'Don't take risks you can't afford.'" Lyon and Neal give similar advice: Know yourself and your tolerance for risk; know how much money you have and when you will need it; develop a strategy for managing your money and stick with it. "People need to take a positive approach," says Lyon. "Money is a resource and you need to control it, not let it control you. That means you must manage it wisely." He suggests:
"You have to be aware of how much money you have and when you need it," Neal says. "If you will need this money in five years or less, it's best in more conservative investments such as T-bills, CDs and bank accounts." Lyon agrees: "If you are near retirement, you need to consider what you need to live on when you retire. You might want to get out of stocks and put your money in a more conservative position. Fidelity suggests an asset allocation of 50% bonds, 30% short-term investments and 20% stocks for those near retirement." If you won't need the money for 10 years or more, Neal says, you should be okay in stocks/equities—provided you can live with uncertainty. If you're having difficulty living with your financial uncertainty, perhaps other UC resources may be of help to you as well. Beth Cohen, director of Academic and Staff Assistance Program at UC Davis, suggests it might be time to step back from the fear and stress of the economic turmoil and regain some balance. "We can quiet the 'alarm' by reminding ourselves that we have taken care of all that we can, and that this is a storm, not the end of our lives," she wrote in a recent column in Dateline UC Davis. She recommends stress management techniques to assist in regaining balance. Cohen points out that it's important to remember what is in our control and what is not. We can control how we react to situations, and perspective reminds us that we have successfully managed other storms. For both your retirement accounts and your stress level, the greatest ally is time. Resources
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Theron Lyon, benefits manager at UC Riverside and a certified financial planner, has a response to both questions: "People need to take their emotions out of this." But, he acknowledges, that's very hard.