stock crash: what are our parents going to do?

[gentlemango]

I get that we're all young here and instead of freaking out & selling we need to ride out the market and not mess with our retirement.

But what about our parents? My mother planned to retire in the next 2-3 years. Her health is declining to where she will not be able to work much longer. Her retirement has taken a huge beating. What should she do? How will she survive? She could never live through our cold winters with her health condiions & we are underwater and can't afford to sell and move to take care of her. I am worried sick.

[Jessie D]

3 years might be enough for the market to recover. I'm more worried about my MIL who gets dividend checks as a majority of her income.

[katheek77]

I know this isn't the answer you're looking for, but, for others who are looking 30 years into the future, ideally, you reallocate your holdings to less risky ones to help minimize the impact of stock crashes.

I really don't know what's going to happen to people who lost most of their retirement.

[Paxjourney]

To OP... I have the same fear for my mother. She planned on retiring in 3 years. Early retirement, she will get her retirement from her job (state job, vested etc) But some of her personal retirement accts did take a hit. She owns her own place (no mort) and is debt free. She is either going to push back retirement and wait 5 years or work in the private sector for her job.
I think she will be okay. But one of my siblings is struggling and in a job sector that is mostlikely going to mean he will lose his job. I see my mum helping them out alot and maybe them living with her etc



On the flipside my MIL has chosen to Move in with her best friend. Both are single women in ther Mid fifties and money is getting tight. DH and I would LOVE for my MIL to move in with us. However she lives 90min away and has a good job that is secure. She would have toruble finding a job in our area so she is going to live and work there for aslong as she can.

[dachshund mom]

I've just started learning about investments, but my understanding is when you're 30+ years from retirement you invest in aggressive stocks that, yes, are taking a beating right now. As you get older, it is slowly moved into other areas that aren't at risk if the market fluxuates. If your mom is that close to retiring, most of her retirement fund should be in very stable bonds at this point which are not going to be affected much. Does she have a good financial advisor?

[cappuccinosmom]

I think my parents will be fine. Right now it's a bit tense for them, but more because my mom has been out of work for months unexpectedly and that kind of messed iwth their well-laid-out plans.

They are not burdened with a lot of consumer debt and have maybe 3/4 of their mortgage paid for. And they were not planning on retiring in the next 3-5 years anyway, so they have plenty of time for a change of plans.

If worst comes to worst, we'll just gather on a family compound and pool resources.

[Lisa85]

According to Jim Cramer (MSN/Today Show's stock guru) this morning - anyone who cannot afford to take a huge hit on their stocks and plans to retire within the next 5 years should pull all of their money out now, no matter the penalties.

I hate to say it, but I agree with him. I don't think the market can recover in 3 years or less. IMO it will be AT LEAST 4 or 5 to get back to where we were.

If I were her, I'd cash out all of my retirement funds and pay off the house if she has any mortgage left and continue to work as long as she's able.

[Belleweather]

I don't know what to tell you -- it looks like most baby boomers are going to have to find ways to economize and probably work longer than they want to, even if it's part time work. I think you'll see a lot more of people moving in together, working part time shifts during their retirement, etc. Honestly, I think it's probably mentally and emotionally healthier for people as long as they can work. After that, I don't know what happens. I think we may see more elderly people slide back into the sort of poverty that was common before we had Social Security and rely on their children for support.

My mom, who is already retired and fairly well off, has cut her 'allowance' and stopped planning big expenditures and trips for the next few years. She's thinking about doing some temping to help ride this out. I'm not worried about her. I am VERY VERY worried about DH's parents, who didn't have much of a retirement fund anyway. DH and I are the only children on either side of the family who have any sort of "wealth" at all, and would be expected to help in a crisis. Unlike the present "sandwich generation", we're stuck with children to raise and student loans ourselves and may not be ABLE to support our family and two sets of parents. I don't want to be in a position of having to chose between the needs of my kids and my parents.

[lucyem]

Its a freaky roller coaster ride. I do not think anyone really knows what to do. I think the government has made things worse and the press has fueled the fire and now we will be living everyones nightmare. My FIL is seriously going to have a heart attack over it all. He had stretched things a bit as he always does because he has about a million projects going on at once and it is not good. I spoke to him last night and he sounds really bad. I do not think he is going to be able to keep up with his bills and is presently selling anything he can except stock. He will take such a big hit he is hoping that once we get through the election and new year and people start to calm down that things will be a little more stable.

[Ruthiegirl]

Honestly, I think my parents are going to have to swallow their pride and move in with us. They simply do not have enough money and their health is declining quickly. They will not be able to work much longer and have done a poor job managing their money. Rough, but true.

Now, someone tell me how I am going to live with my crotchety parents. :

[monkeys4mama]

My mother retired last year and she's very stressed out about all this. She didn't have a lot, but she worked hard to save it and felt she could live a comfortable, if modest life with what she'd set aside. Now it's a lot less than she was counting on and here she is already retired. I hope things will stabilize and that she'll be OK through all of this.

[velochic]

Our parents shouldn't have had their money in the stock market. If they allocated their assets properly, then they have their money in bonds and cash investments. If they have most of their retirement in stocks, they were making investing mistakes that probably would have bitten them anyway at some point. When you are 5 -7 years from retirement, the stock market is not the place to have your life's savings.

If they've made the mistake of keeping retirement money this close to retirement in the stock market, then they'll either have to continue to work, or family will have to step up to the plate.

My dad has a gov't pension... he's in his late 70's (been retired for more than a decade) and we also have farmland we cash rent. He should be fine if his wife doesn't lose her factory job. They (for some stupid reason) held on to a house of theirs that is sitting empty (paid for) and won't sell it or rent it. They could potentially lose the house they're actually living in. I can't take them in... my mother lives with us and well, dad and mom divorced for a reason. Mom had no money anyway. We've been supporting her 100% for 4 years and about 30% prior to that for about 10 years.

[runes]

My parents just paid off their mortgage earlier this year, thank goodness! My father is seventy-two and my mother is sixty one and they both still work full time. They're the type of people that will work until the day they pass away. They've already radically cut their expenses and my mom is queen of frugal. They'll be fine.

[Valkyrie9]

I'm thinking my aunt may move in with us at some point. She retired 15 years ago or so from United Airlines and her retirement benefits have been getting jacked over the last decade. It's pretty bad. She recently declared bankruptcy and she works 2 part-time jobs and supports a deadbeat boyfriend. She's going to have to go somewhere one of these days, and my immediate family and I are the only option she has that doesn't include religious zealotry, so she's going to have to suck it up. It'll be a challenge for all of us, but I'll feel a lot better knowing she's taken care of.

I'm a lot less worried about peoples' money in the stock market than I am the impact of inflation on those who have fixed incomes. (i.e., the already-retired who can't afford investments at all and live on Social Security or pensions)

[McFeelings]

Originally Posted by Lisa85

According to Jim Cramer (MSN/Today Show's stock guru) this morning - anyone who cannot afford to take a huge hit on their stocks and plans to retire within the next 5 years should pull all of their money out now, no matter the penalties.

I hate to say it, but I agree with him. I don't think the market can recover in 3 years or less. IMO it will be AT LEAST 4 or 5 to get back to where we were.

If I were her, I'd cash out all of my retirement funds and pay off the house if she has any mortgage left and continue to work as long as she's able.

I saw this too and I think you are confusing "pull your money out of the market" and "pull your money out of retirement accounts." You can pull your money out of the stock market right now and put it into much more conservative bond funds, money market, etc. without incurring fees or penalties by keeping it in your IRA, 401K, etc.

My understanding of what Jim Cramer was saying was to pull out of the market if you need the money in the next 5 years. So if the money is in straight stocks or mutual funds, then put it in a MM account, CD, t-bills, or bonds. If it is in a tax sheltered account (IRA, 401K, 529, etc), that is invested in the stock market, I'd explore any and all options available first to reallocate the account funds into safer investment vehicles (while still remaining in the account) to avoid taxes and penalties.

[Lisa85]

Originally Posted by McFeelings

I saw this too and I think you are confusing "pull your money out of the market" and "pull your money out of retirement accounts." You can pull your money out of the stock market right now and put it into much more conservative bond funds, money market, etc. without incurring fees or penalties by keeping it in your IRA, 401K, etc.

My understanding of what Jim Cramer was saying was to pull out of the market if you need the money in the next 5 years. So if the money is in straight stocks or mutual funds, then put it in a MM account, CD, t-bills, or bonds. If it is in a tax sheltered account (IRA, 401K, 529, etc), that is invested in the stock market, I'd explore any and all options available first to reallocate the account funds into safer investment vehicles (while still remaining in the account) to avoid taxes and penalties.

Yeah, sorry, that's what I meant - pull all money out of the stock market - not necessarily retirement funds.

[TiredX2]

Originally Posted by velochic

Our parents shouldn't have had their money in the stock market. If they allocated their assets properly, then they have their money in bonds and cash investments. If they have most of their retirement in stocks, they were making investing mistakes that probably would have bitten them anyway at some point. When you are 5 -7 years from retirement, the stock market is not the place to have your life's savings.

Except that isn't even common advice. Yes, you are supposed to transition as you age but the most common rule of thumb is 120-age = % in stock.

So a 60 year old would still have approximately 60% of their portfolio in stocks. For example, look at this article:

Stock Allocation Rule: 120- Age
http://www.bargaineering.com/article...minus-age.html

In the target date funds, Vanguard has 47% stock for a 66 year old, Fidelity has 48% and T. Rowe Price has 54%. While people are transitioning, they have traditionally been told that you need to keep large amounts in equities as a hedge against future inflation. If you followed "expert advice" for a 60year old even you could have easily lost 15% of your total portfolio in 2008 so far.

I'm not attacking you, velochic, just pointing out that even people who thought they had the right asset allocation were hit hard by this.

I will add, though, that following this asset allocation while close to retirement/retired should only work for those who have, in their portfolio, approximately 25 times what they need to withdraw in a year.

[claddaghmom]

My dad's retirement has halved in 6 months.


It's sickening to hear.


He's only 45 so he was not in the *i'm retiring in 3 years so I better protect my money* mode.

But we're talking several zeroes here.

[texmati]

I know...I'm worried too.

[velochic]

Originally Posted by claddaghmom

My dad's retirement has halved in 6 months.


It's sickening to hear.


He's only 45 so he was not in the *i'm retiring in 3 years so I better protect my money* mode.

But we're talking several zeroes here.

We're older than your father. He shouldn't worry *at all*. The economy will rebound before he has to retire.