At times like these when the stocks we hold have been beaten up pretty badly a LOT of us kick ourselves for not selling before this all happened, but since most of us don't have a crystal ball to guide us we're better off not trying to be market timers. If the stocks you hold provide dividends that you feel are safely covered by the earnings the underlying companies generate and your retirement wasn't planned to be funded by SELLING those stocks in the first place their actual market value probably isn't as critical as it may seem right now. Most of us have homes that represent some imaginary number on paper but unless you are trying to sell your home into the present market, or you're trying to use it as collateral, who cares what somebody else thinks it's worth??
Now, if you were one of those people who mortgaged yourself to the hilt so some bank actually owned your home and your stocks were bought on margin, then you indeed would be concerned that someone has revalued your net worth and finds you lacking. Just one more good reason to avoid unnecessary debt.

Thanks, Dave. Both my friend and I are fortunate that our homes are paid for.

However, I have to amend something I wrote above. I discovered that my portfolio is not what you'd call diversified. It's almost entirely in stocks. I don't know why my broker made that decision, or when. I have a call in to him. And I'm mad at myself for not picking this up earlier. I just assumed.....

It is vitally important that your portfolio be diversified, and that you have a prudent allocation in stocks and bonds and "cash equivalents" consistent with your needs and your risk tolerance. You do not want to be in a position where you have to sell stocks that have gone down in value because you need the money for living expenses. The way to avoid that is to have enough cash equivalents on hand -- money market accounts, CDs, treasuries, etc. to tide you over for up to 5 years so that you can "ride out" a market downturn without selling stocks at a loss.

If your portfolio does not fit this description, you should take a close look at it, probably with the help of a certified financial planner who is FEE ONLY. That means he or she has no bias to sell you anything because there is no broker's commission involved. That person will review with you your entire financial situation and come up with a plan that is best FOR YOU, not your broker. I would therefore not make any changes in your portfolio until after you have consulted with someone like this.

I think, therefore, that it is in your best interest to go to GOOGLE and put in "certified financial planner" as the search term. You can then go to a website that will help you select such a person in your neighborhood. Try to find one who has been around in this work for a few years and who has advised seniors. You don't want someone who lacks such experience. Remember this: the market will turn around. What we do not know is how long that will take and therefore what you should do to protect yourself in the meantime.

One more thing: Interest rates are low right now, and probably going lower. Sometimes older people who need money for living expenses get tempted into investing in one or another "high yield" instrument, because it pays more interest income than treasuries or CDs. This is a big mistake. The reason these instruments are high yield is because they are HIGH RISK, and few months later you could find out that you have lost 20 or 30% of your money. So if your broker tries to sell you one of these, tell him no.

Am I right that T-bonds are paying miniscule amounts? Below two percent? Isn't that like paying the government to store your money? Wouldn't you buy FDIC-insured CD's if safety is the goal?

I wish I'd taken more seriously our neighbor, who boldly liquidated his (sizeable) stock portfolio over 18 months ago. Yes, he missed some market 'up's', but he looks very smart now.

I transferred 20% of our stocks to a money market account. I wouldn't have touched it, but we went way out on margin buying rental properties and I felt the need to have a reasonable cash cushion.

Treasuries are not paying a very good interest rate these days, and CDs may be a better bet. But remember that treasuries are free of state income tax, and that might be a consideration depending on where you live. Interest on CDs are taxable at both the federal and state levels.

A "ladder" of CDs -- 3-month, 6-month, and 12-month -- may be a reasonable option in this tough climate. When the 3-month CD matures, put the money in 12-month and keep the ladder going. It's not a generous return, but at least it's safe and predictable.

I don't know why my friend's broker chose T-bonds. Maybe that was the only thing she would agree to.

Haus_proud, my financial planner is fee-only, but the thing is, he's a Morgan Stanley broker, a VP. I'm told Morgan Stanley is in some difficulty right now. If I hold shares in stocks that were simply purchased through MS, not MS funds, I assume I wouldn't be affected by their corporate problems. Is that true?

Also, if I were to diversify at this point, I'd have to sell some stocks at a low point. Is that something I should do?

Thanks for the much-needed advice!

Sit tight, Alisande. Now is the time to buy good stocks at good prices, not sell. (I bought a little Coke stock today, for example.) Your stocks may be diversified; that is they may be a mix of industries and not all technology, or all health services, or all retail firms.

I got out of the market last year after I read what was going on in the derivatives market in a free investment newsletter I signed up for several years ago. I try to read as many different financial news sources as possible, but nothing has compared to what Martin Weiss has said about what is happening. A large percentage of his predictions (since 2004) have come to pass.

I asked my (ex) CFP about this derivatives business last summer when the sub-prime rumblings started to show up in the news. He said I didn't have any of these and that all my stocks/bonds were 'safe, low risk, etc. He was a liar. I found this out after I set up a free portfolio on Yahoo Finance and did some digging into each individual stock to see who had what, etc.

I asked him about a holding I didn't understand and he said they were 'junk bonds'. He had me in Fannie/Freddie, Bear Stearns, Wachovia too. Yikes! So much for 'safe' investments. I had the risk level of a retired person so I fired him and transferred my entire portfolio to another broker and liquidated a good portion of it while the prices was still high. I've been following what I sold and they have dropped to 20% below what I paid for them. For the time being, I have purchased some TREASURY ONLY money market funds, a little gold and some CD's that are with banks that have a rating of at least B or above.

If I want to gamble, I'll go to Vegas where I will at least be entertained. I do not consider it 'entertaining' to PAY someone who lies to me while I watch, wait, wonder and worry if I will have a retirement income left to support me after the liars on Wall Street are done 'playing' their sub-prime games. I'm much happier knowing I will get ALL of my money back, little as it may be, rather than risk losing ANY of it to those crooked 'casino' dealers on Wall Street who would play 'roulette' with money I cannot afford to lose.

Here is a small bit from one of Dr. Weiss's newsletters written in April of this year. He is still warning people to get out while they can and get into treasuries because he believes this economic storm is far from over. He is not suggesting that people start buying quite yet. But don't take my word for it, check out the archives and decide for yourself.

Distortions, Deceptions and Outright Lies
by Martin D. Weiss, Ph.D./April 7, 2008

"First, most of the derivatives owned by commercial banks, investment banks and so-called "non-bank banks" are kept off their balance sheets. This means that ...

The actual value and stability of the nation's largest and most important institutions are largely unknown �" and probably greatly overstated.

Second, with only the rarest of exceptions, the hundreds of thousands of bond ratings issued by Fitch, Moody's, and Standard and Poor's are uniformly bought and paid for by the very same companies that are being rated. As I've written here many times, the result is that ...

There is a built-in bias in the entire system, causing inflated ratings, delayed downgrades and the continuing deception of millions of investors.

Third, brokers and brokerage firms, despite a clear self-interest to keep their clients in the stock market, are routinely allowed to play the role of "objective" advisers and managers. The result is that ...

Investors are almost universally encouraged to buy when they should be holding and to hold when they should be selling. Despite a plethora of guidelines, rules and laws created to encourage fairness, the very structure of the system continually promotes unfairness.

Lies, Lies, Lies

In this environment, the unrelenting pressure �" even the mandate �" to transform well-meaning public officials into chronic liars is undeniable, and the examples are many:

* High-ranking government officials in the 1970s who swore the S&Ls were safe, even as thousands of thrifts were failing all around them.

* FDIC and Federal Reserve officials in the 1980s who vehemently denied the threat to commercial banks, even as the bank failure rate surged to the highest since the Great Depression.

* State insurance regulators in the 1990s who swore to the safety of annuities and life insurance policies, even as six million policyholders were being trapped in failed companies.

* Major Wall Street firms of the early 2000s that consistently affirmed "hold" and "buy" ratings for the shares of hundreds of companies that were going bankrupt. (For our detailed study documenting these extreme deceptions, see our white paper, Crisis of Confidence on Wall Street.)

* Auditing firms like Arthur Andersen, KPMG, and Deloitte and Touche that facilitated or even encouraged accounting distortions and cover-ups. (For the details, see our white paper submitted to the U.S. Senate.)

Today, the names and places may have changed. But the systemic deceptions have not."

Links that might be useful:

www.moneyandmarkets.com/distortions-deceptions-and-outright-lies-9690

Financial WMD
by Martin D. Weiss, Ph.D. 05-24-04
www.moneyandmarkets.com/financial-wmd-8784

Bank and Thrifts Screener
www.thestreet.com/screener/index.html?src=ratingsindex&tab=3

When I look at the list of the most widely held stocks I find only drops in share price. IBM (for example) has lost five points every day that I have peeked.

Personal finance is a difficult subject because not only will two people have different risk tolerance, but also one's situation changes due to life circumstances (planned or unforeseen).

There is no right or wrong in what anyone does with their portfolio. I feel sorry for dreamgarden; a bad experience can be a nightmare. I've had very good experiences with CFPs, and in fact just bought lunch last week for my ex-boss, an independent CFP, to ask for the "skinny" on these new equity-indexed UL policies that Dave Donhoff sells. Very interesting comparison against VUL policies, but neither one is appropriate for us. I really appreciate having not one, but two reliable CFPs with whom I can "bounce ideas around" - we're very fortunate. BTW, neither makes a dime off us personally so they have no axes to grind.

Anyway, back on-topic: if you are properly diversified and can spare the dividends, ignore the noise and panic. You have a long life expectancy ahead of you and hopefully can budget-wise afford to take the long view (5-10 yrs).

As Brett Arends, ROI columnist for the WSJournal points out, this can be a good time to rebalance the portfolio. There are some decent yields in munis right now, apparently, so if you want to put a slightly larger percentage into bonds, why not take advantage of this? But don't get out of equities entirely - growing your principal can be just as important as preserving your principal, when you need money over a 20 yr or longer period.

Not even professionals can time the market. As many experts have pointed out, if you take the last 10 years on the Dow, if you missed only the top 30 non-consecutive DAYS of a bull rise, your ROI would drop substantially. I can't remember the exact numbers, but it was something similar to "staying in - a gain of 5%" vs "missing 30 days - a loss of -3%".

However, being philosophic about investing only works as long as you have sufficient cash to fund your everyday expenses. What's the size of your emergency reserve? Can you get through six months without a problem?

If not, then I'd try to raise some cash to that level. Here are some thoughts from the October 2nd ROI column that you might find useful:

"...There are some quick practical thoughts for all of your trying to hold your family's finances together in this nightmare.

1. Tax-free money market funds are paying more than 5%. This is a slam dunk. It's an open question how long this will last. But Vanguard Tax-Exempt Money Market (VMSXX) is currently yielding about 5.67%, tax free. If you're in a 25% tax bracket, that's the equivalent of a taxable 7.54% interest rate.

2. Inflation-protected Treasury bonds are still paying about 2% after inflation. That's a reasonable rate of return, if not a steal. These are about the safest investments you can own, because they are paid by the federal government and the interest rate adjusts with inflation.

3. If you invest in the stock market, think globally. This entire fiasco has hit both our nation's economy and our credibility. It is very likely it will accelerate the shift in power and relative wealth to other countries. Meanwhile our stock market still trades at its historic premium to others. Some foreign stock markets are now much better value than Wall Street.

4. Don't panic. This is not the time to be bailing out of the market. It's already fallen a long way. But it's never the wrong time to rebalance your portfolio if needed. If you've been taking a killing across the board, maybe you need to move investments around to make sure you're positioned better. That may include holding some cash and bonds as well as equity mutual funds.

5. Avoid regular, non-inflation protected Treasury bonds. The interest rates right now are absolutely terrible.

6. WaMu or rather, the artist formerly known as WaMu  still has a one-year CD paying 5%. It's available online only. It's FDIC-insured, which means at least $100,000 is covered per depositor and in certain circumstances more. Minimum balance is $1,000. I don't want to encourage people to sell shares and hide in cash, but for peace of mind this is a pretty good interest rate.

7. Closed-end funds are on sale, again. I'm sounding like a broken record here, because this has happened several times this year. Closed-end funds are like regular mutual funds, except they only issue a fixed number of shares which you then buy or sell on the stock market. A lot of people are fed up with the volatility and are selling. But these are long-term investments. The smart move is to buy good quality closed-ends that pay big yields and whose shares are selling for well below their net asset value. Then make sure you have the funds on a dividend reinvestment plan with your broker. That means the dividends each month or quarter will buy you more shares. Over the long term, this investment approach is a winner.

8. Cash, cash, cash. We could be in for a long, hard recession. I hope not, but I fear otherwise. Most families should have at least three months' living expenses in ready cash. Bluntly, in this scenario, I'd suggest more like six months. Most Americans have no clue how bad things might  repeat, "might"  get.

9. When you start slashing your household expenses, don't just go for the big ticket items. Take a hard look at those recurring bills as well. A $60 a month cell phone plan you hardly use isn't really costing you $60. It's costing you $720 a year. It all counts.

10. If you can  and that's a big if in this environment take another look at refinancing your mortgage. Long-term rates just fell again. You can get conforming 30-year fixed loans for less than 6% interest. Not only can you save money by cutting your interest rates: This can also be a useful source of extra cash. If you wait till you really need it, you may not be able to get it."

Anyway, Susan, good luck and remember the immortal words of Douglas Adams, author of Hitchhiker's Guide to the Galaxy - "Don't Panic!!" (Where is Zephod when you need him, anyway, LOL?)

Hmmm...those closed-end funds sound appetising. Thanks! None of this is day-to-day living expenses. With a Dow at around 8800 as I type, this could go on for a long time. The first change in attitude seems unlikely to come until after the new President and Legislature are sworn and people have some idea where they are going.

Back On Topic for the OP:

You need a new financial planner. For a retired 65 year old to be holding an "almost all" equity position is crazy. There is a simple (some would say over-simplified) formula which is approximately: 100 - age = percentage in stock. This may be too conservative if you are in great health. However, the entire purpose of this basic rule is to prevent individuals such as yourself from experiencing major portfolio declines when you need a steady income stream. Those of us in the market for the long run will recapture the recent losses, and more, but are anticipating our returns over 20+ years. This isn't your situation.

Your friend did not do the right thing because she sold low and we do not know the tempo of the market recovery. She locked in her losses.

Currently your portfolio is dangerously unbalanced for your needs. Your advisor is making commissions off of it somewhere. I suggest going to the Vanguard web site and reading their educational materials about investing for retirement, they have a big section on individuals who are retired already.

In a word, no, don't do it.

Your only losses right now are on paper.

Once you sell your shares and cash out, your losses become real, tangible, dollars.

I know it can be very tough to handle right now, given what's going on.

When I sat down last night and tallied up just how much I have "lost" since the beginning of the year (well into 6 figures) it was EXTREMELY rattling.

Don't worry.....I'm not tempted to sell. I appreciate everyone's advice, and feel better about hanging in.

I also feel somewhat better after talking to my broker this morning. I based my assessment of my portfolio on a pie chart that was apparently misleading. He said I have a number of closed-end bond funds that trade on the stock market, so they were therefore counted as equities by the computer. I actually have something like 49% stocks, 40% bonds, and 9% cash. There's an "other" category, too. Not sure what that is.

I'm gonna look for a part-time job. I can't earn any more than around $12,000 a year, or the government will start taking some of it back. And unfortunately, living out in the country the way I do, every job involves a gas-burning commute.

Thanks again.

That's a sensible conservative mix, Susan, so it sounds pretty reasonable. I'm glad you have someone you feel you can rely upon; that's important in your situation. How about looking into a barter situation - would that be more advantageous for you?

Barter? 'Splain, please, jkom. I know what barter means (I think), but who could I approach about it? I have writing and editing skills to trade.

Bear in mind I live in a very rural area.

Thanks!

Hmmm, is there no nearby town or college where you could bulletin-board an offer to exchange your services for whatever services you could use, such as car repair, handyman work, etc.? Out here such things are common on Craigslist or the neighborhood blogs. The IRS can't tax a non-cash transaction, it's a huge underground economy that drives them crazy.

We're not barter users, but many of our friends who have small or independent businesses do it on a regular basis. Just recently there was an article in the local paper about two people who started a vegetable garden barter. They're avid gardeners but didn't have any land, so they contract with individual homeowners, build simple planter boxes, raise veggies and fruit, and share the bounty with the homeowners. A part of the harvest is contracted to local food banks, both parties get a set proportion to eat themselves, the gardeners get to garden, the homeowners don't HAVE to garden, and everybody's happy.

IOW, it's a creative exchange of resources. Perhaps you might have more resources to offer than just writing and editing, if you give it some thought?

dreamgarden,

I'm sorry you had a bad experience. It certainly is enough to turn anybody off for a very long time. I'm glad you're comfortable with your current decisions.

FYI, banks are not rated A, B, C, etc. Banks have what are officially called CAMEL ratings. They are not available to the general public. An institution's CAMEL rating is comprised of confidential financial information given to the regulators. I believe bankrate.com provides a fake rating they refer to as CAML (?). I say "fake" because it's not a regulator provided rating. It's done by bankrate.com's analysts & carries the same risk of being inaccurate as say S&P or any of the brokerage analysts.

/tricia

Jkom-"There is no right or wrong in what anyone does with their portfolio. I feel sorry for dreamgarden; a bad experience can be a nightmare. I've had very good experiences with CFPs, and in fact just bought lunch last week for my ex-boss, an independent CFP, to ask for the "skinny" on these new equity-indexed UL policies that Dave Donhoff sells. Very interesting comparison against VUL policies, but neither one is appropriate for us. I really appreciate having not one, but two reliable CFPs with whom I can "bounce ideas around" - we're very fortunate. BTW, neither makes a dime off us personally so they have no axes to grind."

Jkom, you don't need to 'feel sorry' for me, as I am doing just fine. Thankfully, the 'free advice' I've received from Dr. Weiss (and a few others) has more than made up for the money I would have lost (had I stayed in the market).

With all the cheer-leading your doing on behalf of CFP's, it seems as if your ex-boss is the one who should be buying YOU lunch! I'm curious, what part of your recommendations in this forum are based on your own personal experiences vs that of what your ex-boss is telling you?

You said in another thread: "If you are working and still contributing to a retirement plan, the market noise should not and need not affect you."

That doesn't seem to jive with what Peter Orszag, the head of the Congressional Budget Office is saying: "The upheaval that has engulfed the financial industry and sent the stock market plummeting is devastating workers' savings, forcing people to hold off on major purchases and consider delaying their retirement. Public and private pension funds and employees' private retirement savings accounts like 401(k)'s have lost some 20 percent overall since mid-2007. Some people will delay their retirement. In particular, those on the verge of retirement may decide they can no longer afford to retire and will continue working."

An unprecedented number of people (baby boomers) are beginning to enter their retirement years. What advice would you offer them?

Some readers seem to be paying close attention to what your saying. For their sake, lets hope your 'crystal ball' is right.

A link that might be useful:

www.msnbc.msn.com/id/27073061

triciae-"FYI, banks are not rated A, B, C, etc. Banks have what are officially called CAMEL ratings. They are not available to the general public. An institution's CAMEL rating is comprised of confidential financial information given to the regulators. I believe bankrate.com provides a fake rating they refer to as CAML (?). I say "fake" because it's not a regulator provided rating. It's done by bankrate.com's analysts & carries the same risk of being inaccurate as say S&P or any of the brokerage analysts."

Thanks for the information, though I'm not sure how much I trust the ratings of regulators. After all, they are compensated by those they rate and gave very favorable ratings to those who are now deeply embroiled in this sub-prime soup.

FWIW, my banker was interested in the site I derived the A,B,C,D, information from. Do you have any input on this? Thanks!

A link that might be useful:
TheStreet.com
www.thestreet.com/screener/index.html?src=ratingsindex&tab=3

Dreamgarden,

You'll not be able to find out an institution's CAMEL rating unless you are executive management at the institution. They are not in the public domain.

The regulators did not give "very favorable ratings to those who are now deeply embroiled in this sub-prime soup." The regulators do not give the public ANY bank ratings. The reasons are obvious...sometimes, an institution may be experiencing a short-term concern that lowers their CAMEL & if the regulators were to publish that information it could cause a run on the bank needlessly. There are many considerations in a CAMEL rating including temporary situations that can easily be rectified by the institution.

Jim Cramer & a couple buddies started TheStreet.com although I don't believe he's doing anything now more than an occassional editorial. Not sure if he still owns part of the company. A quick Google should bring forth an answer? TheStreet.com's ratings are just more analyst's opinions. Their rating structure doesn't have any connection to the CAMEL rating.

Again, FYI...CAMEL ratings are numerical & not alphabetical. I 'think' that's why bankrate.com uses numbers for their CAML (no "e") rating...trying to make it look more like the real deal even though it isn't.

I'm sure your banker was curious about where you'd obtained this so-called "B" rating. Your banker probably found it amusing since he/she knows that their regulatory rating is confidential.

/tricia

My advice, dreamgarden, is based 90% on my own experience. I was one of the admin staff working daily with 120 clients providing an exhausting level of customized personal service. My co-workers, supervisor, and I worked with a mandate that the customer got whatever level of service they desired; we rarely said no unless it was something we absolutely could not find an answer for.

So I am well aware that most CFPs are not able to provide the level of service our office did. My ex-boss is generous with his advice and counsel whenever I need help or have a question. As I know better than anyone that his professional advice does not come cheap (nor should it), why should I not pay for lunch when his free advice (given to me after I left his employ) made us a profit of some $75K on a $50K investment in 2-1/2 yrs? He is generous with his charitable work and a thoughtful and ethical professional.

There are many mediocre CFPs and planners just as there are mediocre lawyers. But there are also some very good ones, and to tar everyone with one brush just because you had a bad experience is ridiculous. I met a number of hard-working and decent professionals while I was "in the business", who deserve respect for trying to do the best they can for their clients.

Your attitude reminds me of execs who used to diss the admin assistants because they weren't "real" professionals who did the "really hard" work; you are simply reversing the prejudice.

I have said before and will say again - if you can handle your own investments, more power to you...and me, because that's what I do for our family. But the vast majority of people are very poor investors, who would really benefit from good professional advice. Sadly, such advice is usually well out of their ability to pay. But even when it isn't, most people simply do not "get it" and remain befuddled and confused.

Many people here have said they have found trustworthy and reliable brokers. I do not disparage this, for there ARE good brokers, even though there are some bad ones too. I'm sure I could find a good broker if I needed one, but why should I bother when I have an personal network that includes two pros who are even more skilled and far more knowledgeable than any broker, when discussing a holistic approach to estate planning?

Such people are not easy to find. Like many very successful professionals, their business comes from referrals, not splashy TV advertising or media bytes. And despite an interest in growing their businesses, they turn down more potential clients than they accept. Unless it's a good match on both sides, you can't create a win-win situation that will work over the long haul. These folks love what they do and have a vested interest in making their clients successful because that's what creates long-term success for them as well.

You either understand and live by the kind of principles laid out by Stephen Covey, or you don't. I neither work for nor do business with people that are only in it "for the money"; like you I don't have to, and that's the way I prefer to live. I pick my professional help carefully, and I have been very fortunate to find a number of trustworthy pros who do care about doing the best job they possibly can.

Sometimes I think people take more time and care in choosing a car mechanic than they do picking financial or legal help!

Hi Chisue,

I'm fortunate to be receiving three pensions, one a government-given non-contributory one which they could shrink or cancel, but I think the latter highly doubtful. The second is a government-operated, compulsory, contributory one, started over 40 years ago, and both of them offer raises of a portion of the rise in cost of living, quarterly. But the major problem of the contributory one is that they paid out as they were receiving, so their fund, while it increased for a number of years, has begun to shrink, and with the large number of boomers soon to draw, will find it shrink more, I think, despite recent levy increases.

The third is a private one and they offer increases from time to time, but if future investment results are poor, may reduce or stop those increases.

I have a small personal tax-deferred retirement fund, as well, partly in an equity (Berkshire Hathaway, as matter of fact) ... which carries a required annual withdrawal rate, currently about 8.5%, I think, which percentage increases (till it becomes 20% at age 90 - and continues at that annual rate).

They more than meet my modest needs for income, and I expect them to continue to do so.

When I was about 70, I discussed my situation with a financial advisor who was on a radio phone-in program.

I told him that I thought that I should plan to fund my retirement till age 100, which was six blocks of 5 years each.

If I choose to use up all of the assets in the first block in the first 5 year term ... not one dollar will be left to bring in more income through the rest of the years of my life, so I'd better plan to use only a small portion during that first 5-year term.

Same with the funds that I consider to be available for use in the second 5-year term.

Not only that ... we've had to deal with inflation every year snce the mid-1930s, so I can expect that the same lifestyle will cost me more dollars annually in future.

Also, many of us find that life may be in a residential retirement home, or more costly nursing home, for a period near the end of life, requiring a larger payout in the last years of life.

Thus I should plan to liquidate only about the first 5-year block over the first 10 years or so, with the result that I should plan to have 5/6ths (83.333%) of the original investment still in place after 10 years.

Many advisors tell us that it is worthwhile to invest substantially in equities when one looks at a 10-year or longer timeframe.

When I consider that current dividend income is taxed at a much lower rate in Canada, and there may be capital gain on equity investments, which doesn't become taxable until liquidated, then at only half of regular rate, that gives me a double incentive to use that kind of investment.

When I invest in guaranteed-dollar assets, the number of dollars in principal won't grow (especially when interest rates are low), the only return that one gets is interest, which is received now .. and taxed at top rate.

So I feel comfortable in carrying about 80% of my assets in equity-based investments, even at the age of 70.

He said that he agreed with my assessment of the situation: I don't know whether I told him that I'd passed the stockbroker's course and five of the 6-course system leading to Chartered Financial Planner designaion, but think not.

I bought shares of a bank 41 years ago, for about $4.20 or so ... paying about a dime or 12 cents dividend.

Share prices moved up, down and sideways over the years between ... and as the price increased, the dividend rate continued to rise, also, usually running at about 3%.

A year ago May the share price was $107.00 ... paying $3.08 dividend annually, taxed at a much lower rate than interest ... and with no capital gain yet to pay. Through the rest of the year, it ran in the 80s, 90s, over 100 again and they raised the (tax-advantaged) dividend to $3.48 annual rate, then the share price dropped into the 70s near year-end ... as they were involved in the crappy sub-prime mortgage systems that had been put into place in the U.S.

Through the spring they were in the 60s and 70s, then the 50s over summer ... with people here suggesting that of course, I'd sold.

Nope - down too far, already ... and too much tax to pay.

In the 60s in Sept., Oct. 3 closed at $58.50, down to $49.10 last Friday, Oct.10 ... and at this rate, it's paying 6.89% dividend, which, after tax, is about equivalent to 8.75% - 9.0% interest.

Now, I am considering selling them and buying them back, to pay tax at a lower rate than leaving them, along with a number of other long-held stocks, to be liquidated at my death, developing a much larger income, with much of it taxed at a higher rate in that year than usual. Better to liquidate some as I go along, taxed at a lower rate.

But, if I want to rebuy the number of shares that I had before, I'll need to find other money to pay the tax on half of $44.90 or so capital gain income, next April.

Which leaves less to buy other stuff, when I figure that prices may have stabilized.

Good wishes for increasingly shrewd management of your income and assets, despite the malfeasance of many of the professional money managers.

ole joyful

If I ever had any second thoughts about my decision to go with a managed account, they were erased after reading these messages. You guys know what you're doing; I barely know enough to ask an intelligent question! My sole claim to investment "expertise" is when my husband was living and I had my own money invested in a few Vanguard funds. I sold everything in November 1999, watched everything go down at Y2K, and then bought them back, making a nice profit.

Re the barter, it's an idea that appeals to my nature but it's unlikely I'll get into it unless I can work something out with my eye doctor, dentist, or veterinarian--long shots all. I'm fortunate that my son lives nearby and takes care of the handyman stuff. In fact, yesterday he installed a fireproof mat under the woodstove so I can start using it again this year to cut down on my oil bill.

Fuel (heating oil, propane, and gasoline), taxes, and insurance take the biggest bites out of my checkbook.

alisande -- Oh, don't sell yourself short. You sound pretty savvy to me.

Yes, the ever-increasing utility bills! And health-related costs! And now even groceries!

I do a different sort of budget, including income taxes as an item. First- and second-largest amounts on my budget are 1) RE tax and 2) income taxes. Medical/dental and groceries (including non-food incidentals) are equal in third and fourth position, but utilities are creeping up to a three-way tie with those two.

I wonder if you would actually be dollars ahead by working. Unless you could work from home, the additional commuting and clothing costs could take a big bite. Our clothing and auto-related expenses are very small as retired people! (I'm typing while wearing jeans and a 25-year-old sweater. LOL)

Chisue, I'm sitting here wearing Old Navy and Eddie Bauer, both from the Salvation Army. :-)

Interesting that you should raise that point about the economics of working; it's one that I've considered over the years. Back when I was a La Leche League leader in the late 1970s, I discussed this issue many times with the young mothers in our group. The majority of them had few skills, and were planning to get minimum-wage jobs. I pointed out the cost of working outside the home: commute, clothing, lunches, and child care (!). And then there were the money-saving things they could do if they stayed home: vegetable gardening (and canning, freezing, etc.), cooking from scratch, making the kids' clothes, etc.

As for me today, the value of my holdings has gone down so far that if I continue to take my usual monthly check it will erode principal. I definitely need to produce some regular income, and I think "regular" is the operative word. I occasionally receive nice checks for my writing, and when the market started declining my first thought was that I'll work harder to produce more submissions. But very quickly things reached the point where I no longer have the option to wait and see what comes in.

It's likely I'll work in a place that doesn't require power dressing. One of my favorite quotes is from Thoreau: "Beware of all enterprises requiring new clothes." :-)

Alisande--it sounds like barter won't work as well for you as a part-time job, just for the sake of getting cash in hand. But I did want to say that if you can find people who are interested in bartering, writers/editors have a lot to offer. I'm the only writer-type in my family and my social group, and every year I'm asked to help out with at least a few resumes and cover letters. I do it informally for free, but I wouldn't be surprised if you could find people willing to trade for the help. There are a lot of nice, smart people who struggle with putting the right words together. They can really value having some assistance in that area.

alisande,
I came in late to this conversation. I'm not a widow, but, like you, am retired.

We also use a CFP, and through this latest market mess, I'm very happy with the job he's done for us. While our portfolio is down, of course, it's nowhere near the percentage of the market because of the diversification.

I work part time; I'm on call after hours and on weekends for an eldercare agency. I carry a work cell phone and have computer access, so being on call doesn't hinder my normal activities.

Even in a rural area (I live in one also), there ARE part time jobs to be had. I don't know your interests, but if you enjoy kids, consider working as an aide at the local schools. Most of them start by substituting for the regular aides, then step in when a job opens up. If you have a degree, consider working as a substitute teacher. Schools are always looking for substitute teachers.
If you like older people, look for agencies that supply non-medical, in-home assistance for the elderly (light housekeeping, transportation to/from doctor's appts, meal prep).

What kind of work did you do before retirement?

Hi, Z8G. Thanks for the suggestions.

My last full-time job was for a newspaper: writing, photography, copy editing. Before that, I was a textbook editor and freelance writer. I still freelance for a newspaper, and could probably get more of that work if I wanted. I also get published occasionally in magazines.

The local high school and middle school are just down the road from me, so your suggestion about working in a school definitely interests me. Covering their school board meetings for the paper, I've seen what they pay non-faculty positions. It's not very appealing! However, the fact that the commute would be less than two miles is very appealing. Also, schools close for snow days and get all the holidays off. I know the Superintendent pretty well, so perhaps I'll give him a call.

This week I applied for a part-time job at a university library. The commute is less than ideal (22 miles), but since they have lots of non-resident students I hope they're liberal with snow days, too. The hours are unusual, but I rather like them: 4:00 to 9:00 p.m., four days a week. That would give me the mornings to write and occasionally make a stab at housework.

I've never worked in a library, but I've served on two library boards and have volunteered as an instructor. I like the idea of working in a library setting.

I do like older people, and volunteered for years as a singer/pianist at nursing homes. Now, if someone would pay me for that . . . :-)

If you want to sub, consider high school. My DH did some temp subbing for a while, mostly for something to DO after retiring. The grammar school work bored him. In the high schools there is some adult conversation with other teachers in the department. His degree is MSJ and he subbed in English and Social Studies. One year he co-taught/assisted in a J-class that was over-enrolled but didn't have quite enough students to make up two classes. In the lower grades they stick you in a classroom with the kids; you are merely a monitor. Now, *permanent* subbing could be different.

In addition to subbing (very real possibility in the Language Arts program) consider getting your name on a list for tutor.

I know that one should sell high and buy low.....but my circumstances are not good.....I am 66, disabled, DH's son has embezzled all of the DH's funds.....as well the son's not taking care of business of paying taxes, so a lien has been placed on our home that was completely paid for. DH and I have only been married for 7 years and I was widowed for 25 years before that....so I know how important it is to protect your assets.

I was losing sleep watching my stocks drop, drop, and drop some more, so I had a conference with my adviser and he agreed that for my state of mind, that I should move from the mutual funds into short term CDs and Money Market Accounts....I can always move back into the mutual funds without any charge when/if this turns around.

All of the things that are happening right now is taking its toll on my health because I am not handling the stress very well and we are having to live on SS checks and my small KPERS retirement. I guess I had to be more concerned about protecting principal than growth for now and if I don't have my health, what good is money???

So I think that every situation is different.....but at least I made a decision, right or wrong, but now will live with it for now.

Hi again alisande/Susan (and others),

You sound fairly shrewd to me, as well, lady.

I was hoping that you'd not chicken out, but choose to stay fairly heavily equity-invested ... even as you approach possible soon-to-develop, plus possibly increasing physical decrepitude, and possibly, similar experience mentally.

It seems to me that carrying a percentage equal to 100 minus one's age in equities may be fine for a few very risk-averse (and rich) persons, especially ones really worried about short-term risk, but not thinking much about the long-term risk in settling for an investment system where the principal can't grow, so the only earnings relative to this year are made now ... and taxed now (and at top rate, in Canada).

Possibly I didn't make it clear enough in my earlier message when I stated that, nearing age 80, I'm running about 80% of assets in individual stocks and equity-based mutual funds, that I live on substantially below my current pension income, apart from investment income, so, lacking major health catastrophe, do not plan to need to cash any equities under pressure in the near future.

And then, markets being heavily down, I might choose to use my Letter of Credit for living expenses, rather than cashing stocks ... if, as recovery starts, they may well increase 25% or so in the first year (or even two), and most likely above average rates of growth for another year or two, I'd be happy to pay last year's 6.25% interest rate, and even more so at current 4.75% rate, even if non-deductible, as loan was for consumption. I do think that this drop may be deeper, and more prolonged, plus subsequent recovery slower, than in earlier cycles. As my age increases, the possibility of the major need in the short term increases ... but I have an added advantage that much/most of my health care in Canada is not a direct charge on me.

That bank stock that I referred to earlier (check it at Yahoo-> Finance "CM.TO" if you wish) ran in the 60's much of the time since mid-year, sometimes in the high 50s, as it was at close on Fri, Oct. 3 ... then at close Oct. 10 was 49.10 ... and back up Oct. 17 to CD$58.00.

I've wondered recently about selling and re-buying (but it'd be another bank who's made fewer unwise investments in recent years - these guys were hit some by the ENRON debacle, as well). But the share prices of the other banks, including the one that I prefer, didn't deteriorate nearly as far.

I wouldn't want to do it this year, as I bought shares in Canada's premier phone co. a couple of years ago (that has various other interests as well) and there was an offer to buy them out at $42.75 last year, to close early this year. But, with the financial problems, it was delayed (the banks would have had to pay a huge penalty if they backed out, prior to a certain date). But no dividend payments through most of this year. As a major funder was to be the Royal Bank of Scotland, that now is being heavily supported by the British gov't., there's a substantial feeling that the original price won't be met, so current price offered has been dropping. At the original price, I'd have had a substantial capital gain, so wouldn't have wanted another, in this year. If the phone co. deal is delayed again past the New Year, I might well sell some of the bank, this year, to develop that capital gain (at my current marginal tax rate, rather than the 45 - 50% or so rate that will likely apply on some of the assets if I let them ride till my death, with all being deemed "sold", and capital gain developed, all at once, then). There's also some feeling that the phone deal will die: which would please some of us, for we disliked seeing this strong, stable, dividend-paying ("widows and orphans") stock being essentially privatized - major in-country (required) party to the buyout being a major Canadian pension fund.

Good wishes for increasingly shrewd management of your income and assets.

ole joyful

While my asset level hasn't shrunk by six figures, as someone (cynic?) referred to, it's sort of up near that level.

I've bought some more in recent months - made a rather unwise choice, I think, as it was speculative stuff, and I've been taking a beating on them, since. At times like these it's best to stick with solid issues.

I have some more funds on hand, and some Line of Credit available ... need to look up a stock certificate to beef it up somewhat.

I bought shares in a major mining and processing company early this year, for about $35.00 and when it went to $50. a few months later, I was a happy camper. Then it slid slowly back down to about $35.00 ... and kept on sliding: it's down below $20.00, now. That jacks the percentage dividend rate up nicely, and I doubt that they'll drop the level.

Currently, I'm wondering about buying some more ... for it is a quality company and will recover.

Question: how long will it take?

Second question: will it go down quite a lot further, in the meantime?

No one knows.

But, as one mutual fund manager told some of us sales people of mutual funds at a training session nearly 25 years ago, "I like to buy a dollar for 60 cents".

That sounds like a good idea, to me.

I'm much less enthused about the reverse - selling a dollar for 60 cents: that doesn't appeal to me too much.

I think that, barring some catastrophe, I'm reasonably well protected against being forced to do so.

ole joyful