What Are You Going to Do?

[MarkBarbieri]

If you are anything like me, your investments have dropped significantly. Your company's stock has fallen. It's making less money than it planned this year. Unemployment is rising.

So what are you going to do? Sell your stocks and buy gold? Sell your gold and buy rice? Spend it now while you've got it? Buy stocks because they are a bargain? Sell your house? Buy a house? I'm curious as to how people are reacting to these times.

As for me, I'm unhappy about the drop but I'm comfortable with my asset allocation. My retirement is for 20 more years, so I don't plan to change anything there.

At the end of each year, I evaluate my kid's college savings against the expected cost of college to determine how much I should be setting aside. I expect to increase my college savings rate dramatically next year.

Even though our income hasn't changed, we've cut back on household expenses. I've dropped most subscriptions (Gamefly, Wall Street Journal), changed our satellite TV plan to the cheapest one available (no more ESPN or IFC), and cut several other recurring expenses. We've adjust our thermostat and signed a new electricity contract. We'll be sleeping with the windows open more often at night. I'm cutting back on spending in general to increase our cash balances. I think that will better prepare us both financially and psychologically if bad times hit us personally.

We had already cancelled our next WDW trip (planned for January) because the kids lost two weeks of school for Hurricane Ike and we didn't want to have them unnecessarily miss more. That'll also help us save some money. We're also making less ambitious plans for spring break and next summer (more camping, less expensive destinations).

I'm tempted to start piling more cash into the market because things seem cheap now. On the other hand, I like having some cash cushion in case things get worse. We'll probably keep our regular investment rates as they are and just build cash.

So what are you doing?

 

[PatsMom]

I am pretty much sitting tight. Like the OP, I have cut some expenses just to have more cash on hand. But I continue to dollar cost average into the market in my 401(k). And DH's IRA (he's already retired) is staying in its current allocation. He has the most conservative of our investments because of his age so his account value has not dropped as drastically as mine. DD's college money has been in cash for the last two years in a 529 plan money market account. She starts college next year.

 

[Quiksilvr]

Like you, I have a long time before retirement. I'm also refraining from the tendency to get panicky and avoid plowing money into the stock market. I've continued to contribute to the maximum in my 401(k) so that I can buy up shares in funds at lows and hope they go higher. I'm not smart enough to time the market, so dollar-cost averaging is the only way for me to go.

My job is pretty secure at the moment. My firm survived the Great Depression so I think it will survive this. So long as I keep handing in good work and there is work to be done, they will have a place for me. Our firm is one of the best at what I do, so we anticipate our workload remaining steady. We have not made major cutbacks, but we do find that we have less in the bank account at the end of each month.

Luckily, we have high incomes and are doing rather well. We keep socking away money into our emergency fund so that we can survive if we have a catastrophe. It would be great to get it up to a year, but I doubt we'll be able to do that. We've got about five months' worth now and will probably top out around 8 months. It seems like a lot of cash to have lying around, but it's earning 3% and is FDIC protected, so in this market I'd rather have the gain than a loss for the emergency fund. We might start buying when things start looking up. We'll miss out on some gains that way, but I'm pretty risk averse.

 

[Hoodie]

Won't retire for another 30+ years, so fretting about my 401(k) won't help.

May try to cut back on expenses to put more in to it actually. This will settle out eventually and that buy low thing is pretty tempting.

 

[DMickey28]

We also have 30+ years until retirement so we aren't even looking at our 401K's right now. We decreased the amount we put into them about a year ago anyway and we will keep at that for a little while. We are stock piling cash right now. We have an emergency fund of two months right now and are looking to get up 6 months within the next 6 weeks.

Once the emergency fund is fully funded we are looking into jumping into a few long term investments in the stock market while it's still lower.

My parents are under 8 years from retirement and they are thinking of pulling the remainder of their 401K out and investing it in paying off the mortage. I am not sure that's the best idea but I really am clueless!

 

[Quiksilvr]

We also have 30+ years until retirement so we aren't even looking at our 401K's right now. We decreased the amount we put into them about a year ago anyway and we will keep at that for a little while. We are stock piling cash right now. We have an emergency fund of two months right now and are looking to get up 6 months within the next 6 weeks.

Once the emergency fund is fully funded we are looking into jumping into a few long term investments in the stock market while it's still lower.

My parents are under 8 years from retirement and they are thinking of pulling the remainder of their 401K out and investing it in paying off the mortage. I am not sure that's the best idea but I really am clueless!

Please advise your parents to carefully review whether they will be hit with a tax penalty for withdrawing funds from their 401(k) early. If they are of a certain age, they made so without penalty. One may also withdraw for purchasing a home (if the plan allows it) but I am unsure whether it is permitted for an existing mortgage.

The tax hit is serious. If they are not old enough to withdraw without penalty yet still wish to invest in something else, have them place their balances in the stable value fund in their 401(k) plans. Our stable value fund is still returning a consistent 3-4%, which is better than nothing, obviously

 

[Disney Doll]

We have about 20 years till retirement.
Our investments have a good balance between risk and safe, so we are leaving things as is.
I think panicking and moving money around will make the situaiton worse in our case.

 

[HelenePA]

So far the only thing we aren't doing is booking any vacations for next year. It might be smarter to do stuff locally and not plop down 4k$ on a Disney vacation next year. Other than that Nothing different.

 

[mickeyboat]

Against my better judgement, I checked my 401(k) this afternoon. As of yesterday I have lost 32% since the beginning of the year. It is going to be very difficult to sit on my hands, but that is what I plan to do.

Denae

 

[CTPinkPrincess]

Against my better judgement, I checked my 401(k) this afternoon. As of yesterday I have lost 32% since the beginning of the year. It is going to be very difficult to sit on my hands, but that is what I plan to do.

Denae

I made the mistake of checking too. Down about the same %, but as I also have twenty-plus years until retirement, not much I can or should do (with regard to the 401k).

 

[ElizK]

My 401k has lost 18% since the beginning of the year. Oh, well, I still have 25 years until I can retire. I do wish I had some money I could invest. Stocks are on sale this week!

We cut out cable, call-waiting, etc, about a year ago. We do have our priorities though: we kept the cable modem and the DVR!

 

[C.Ann]

Spending far less - saving more - hanging on to my health insurance for dear life - and trying to obtain whatever prescription medications I can for the least amount by shopping around.. I'm also refusing all medical tests, procedures, and treatments that are not 200% absolutely, positively necessary..

People should have seen this coming (at the very least) as far back as last January, but many chose to bury their heads in the sand and now they're starting to panic..

I'm hoping for the best, but preparing for the worst..

 

[DMickey28]

Please advise your parents to carefully review whether they will be hit with a tax penalty for withdrawing funds from their 401(k) early. If they are of a certain age, they made so without penalty. One may also withdraw for purchasing a home (if the plan allows it) but I am unsure whether it is permitted for an existing mortgage.

The tax hit is serious. If they are not old enough to withdraw without penalty yet still wish to invest in something else, have them place their balances in the stable value fund in their 401(k) plans. Our stable value fund is still returning a consistent 3-4%, which is better than nothing, obviously

Thanks ... I will advise them to check that. They are pretty money savy so i am sure they will do the right thing. They are over 60 as well.

 

[lvanleer]

Thanks ... I will advise them to check that. They are pretty money savy so i am sure they will do the right thing. They are over 60 as well.

Actually as long as they are over sixty, they should be ok because the age is 59 1/2 and under for penalties.

 

[bicker]

Just out of morbid curiosity, is there anyone who is within 15 years of retirement (like us) who was more than 75% invested in stocks? Or were we the only idiots?

 

[gina2000]

Just out of morbid curiosity, is there anyone who is within 15 years of retirement (like us) who was more than 75% invested in stocks? Or were we the only idiots?

This is not a good time for your masochistic side to rear its ugly head.

Fifteen years is still a long time.

 

[bicker]

This is not a good time for your masochistic side to rear its ugly head.

Ain't it the truth?

 

[corndog]

Unemployment is rising.

Actually, unemployment is falling.

 

[C.Ann]

Actually, unemployment is falling.

--------------

Not in our area.. Quite a jump from just last year..

Like most things regarding the economy, quite a bit depends on your geographic location..

 

[gina2000]

Actually......


http://www.forbes.com/afxnewslimited/feeds/afx/2008/10/09/afx5531372.html

WASHINGTON (Thomson Financial) - The number of individuals filing new claims for unemployment insurance fell as expected as hurricane related claims receded in the latest week. Those individuals continuing to file claims for unemployment rose to a level not seen in over five years, the Labor Department said today.

The number of first-time claims filed in the week ending October 4 fell 20,000 to 478,000, in line with expectations of economists polled by Thomson Reuters IFR Markets.

The Labor Department said that approximately 17,000 claims related to Hurricanes Ike and Gustav were added to this week's total initial claims figure. That is down from the 45,000 hurricane-related claims seen in the previous week, and the 50,000 claims reported in the week before that.

When stripping out these hurricane related claims, initial claims still would have risen from about 430,000 in the week ending September 20 to 440,000 in the week ending September 27 to 460,000 in the week ending October 4, noted Abiel Reinhart of JP Morgan Chase (nyse: JPM - news - people ).

'Regardless of whether one is including or excluding hurricane-related claims, the number of claimants is still highly elevated and points to more job losses,' Reinhart said. Economists tend to see claims above a level of 400,000 as a signal of recession.

The four-week moving average for initial claims rose by 8,250 to 482,500, the highest level seen since October 2001. Economists prefer the four week moving average because it smoothes out fluctuations in weekly data.
The number of people continuing to receive unemployment insurance in the week ending September 27 rose by 56,000 to 3.659 mln, the highest level since June 2003. Economists were expecting continuing claims to rise slightly to 3.6 mln from the 3.591 mln continuing claims reported last week. That number was upwardly revised in the latest week to 3.603 mln.

David Resler of Nomura Securities International has suggested that most of the workers who filed initial hurricane related claims over the last few weeks, will probably continue collecting benefits for several weeks 'and their addition may explain most of the increase in the total number of workers continuing to draw benefits during the last two weeks of September.'

The four-week moving average for continuing unemployment claims increased by 31,750 to 3.563 mln, the highest level since October 2003.