2 April 2014 0 Comments

The sky is falling!

shutterstock_110258246A few weeks ago as Putin was on the march into Ukraine the Dow Jones average took a very large single day dive…down almost 300 points, as I recall.  That evening the television newscasters were exclaiming how people’s 401k plans were being hit with huge losses.  This type of hysteria drives me a little nuts.  There is never a discussion of how much rising stock prices have positively affected people’s retirement plans—that’s not news.  The following day when the DJ recovered just about what it had lost the day before, there was no fanfare.

The sad thing about this media hysteria is that many people are encouraged to sell their 401k assets after they have tanked and wait until they rise again to repurchase.

The big secret of equity investing is to buy low and sell high, but the amateur  investor, spooked by the talking heads of television, are encouraged to do just the opposite.  But, hysteria makes news; good times do not.

For many, payday from a 401k is years off.  The loss of account value means little if their portfolio is diversified.  Time will correct the so called loss.  Those at retirement should already have balanced their account between equity and bonds negating any major financial setback.

The main thing to learn is to react rationally, rather than emotionally when it comes to managing your retirement account.  And, as a buffer, if death happens to take you just as that 401k has bottomed out, make sure you have life insurance sufficient to offset that loss.  In your pre-retirement years, as your family is growing up, have term insurance equal to 10 X your annual salary.  After retirement, maintain some permanent life insurance that will help assure your spouse of a financially carefree transition at your death.  Buy life insurance with guaranteed premiums and death benefits and the hysteria is removed from your family’s future.

Coming up…some real life stories of how life insurance has helped people through the most difficult of times.

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