Current Thinking

Don’t Get Spooked: Overcoming Investing Bogeymen

A blog by Rich Rausser, CPC, QPA, QKA, Senior Vice President, Pentegra Retirement Services – October 27, 2015

Halloween is of course a time when gaggles of ghosts, ghouls and goblins (and, this year, a new influx of Star Wars characters) invade our front steps in search of something sweet. While we do not recoil in horror at these annual sights, many people planning for their retirement live in fear of a different kind of bogeyman: the performance of their portfolio.

For these people, how to invest wisely for retirement is a cause for anxiety all year round. But this All Hallow’s Eve, let us explore how such concerns should be just as fleeting as a flock of trick-or-treaters demanding nothing more horrific than a Kit Kat.

Focus Pocus: As with any worthwhile endeavor, having a focused approach to your investment strategy is critical. Simply chasing trends can be as futile as poor Dr. Loomis trying to track down Michael Myers in the Halloween flicks. Staying focused on what you are investing for can keep you on track even when the markets are going bump in the night.

If your time horizon for needing your savings is far in the future, your investments may have time to recover any losses you may incur in the short-term. If you keep your objectives in mind, your portfolio should benefit when markets stabilize.

The Sell Spell: Conversely, if retirement is just around the corner, you may want to reconsider holding any volatile investments that would give even Dracula pause. Regardless of where you are in your retirement timeline, panic need not drive your investment decisions.

You do not need a magic potion to know when to sell an investment; one recommendation to consider is to follow “sell” criteria you have established ahead of time, such as a percentage gain or loss in a given investment’s value. Deciding in advance when to sell an investment takes emotion out of the mix and may ensure that the decision will be an objective one. Otherwise, you face the specter of running around like a Headless Horseman … who ultimately triumphed in The Legend of Sleepy Hollow by winning the hand of Katrina Van Tassel but never maintained a prudent 401(k) portfolio.

Bobbing for Bargains: On the flip side, a market downturn may offer an opportunity to snare some bargains. Falling values can give investors a chance to buy shares when prices are low. Obviously you do not want to repeat what Victor Frankenstein did when shopping for suitable grey matter; as you will recall, he ended up with a bargain-basement brain.

Failure to do proper research was old Vic’s downfall. Take time to review a company’s past performance and future prospects before you invest.

Paranormal Annuities: Supplementing your retirement income by purchasing an out-of-plan annuity can provide some peace of mind on those dark and stormy nights. An annuity provides a guaranteed level of income to retirees for as long as they live.

If a retiree puts 20 to 25 percent of retirement savings into an annuity, with Social Security providing supplemental income and the rest of the retiree’s account balance consisting of various other pieces, the retiree is in effect “pensionizing” part of the retirement savings. There is no trick involved here; just another post-retirement treat.

Return to the Living Portfolio: The days of “set it and forget it” may work to a certain extent, but as a long-term strategy it may be strictly for the birds … and not just Alfred Hitchcock’s. Schedule a regular (once a year is usually sufficient) re-examination of your portfolio’s performance in an effort to ensure that some gremlins have not sprouted up while you were otherwise engaged.

I personally do so each January 1 – a date that is easy to remember, and one on which other work rarely needs to be addressed. This is a perfect time to go over each of your retirement plan investments and consider making possible changes, as explained above. Rebalancing your portfolio so that no one source contains the majority of your funds is something you may wish to consider.

By adhering to this advice, the sage investor may be able to look forward to many Halloweens – with a horror-free retirement – for years to come.


About the Author

Richard Rausser

Richard W. Rausser has more than 30 years of experience in the retirement benefits industry. He is Senior Vice President of Thought Leadership at Pentegra, a leading provider of retirement plan and fiduciary outsourcing to organizations nationwide. Rich is responsible for helping to shape and define Pentegra’s viewpoint on workplace retirement plans, plan design strategy, retirement success and employee savings trends. His work is used by employers, employees, advisors, policymakers and the media to produce successful outcomes for American workers.  In addition, Rich is responsible for Pentegra’s Defined Benefit line of business, which includes a team of Actuaries and other retirement plan professionals as well as Pentegra’s BOLI line of business.  He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.


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