You've got to have a plan

October 8, 2008 6:14:16 PM PDT
Whether you plan to retire soon or in several decades, this economic crisis has cost you money. People have lost a lot out of their 401Ks. [CHECK THE MARKETS: Get the latest numbers from Wall Street]
[FINANCIAL CRISES: From the Depression until today]

There are things you can do now, to protect your money later. It's all about having a plan. And your plan is different than mine because we take risks differently. It's about planning for those risks so that when this happens, you can survive the financial roller coaster ride.

You probably don't need to be told it this week, but investing really is like a roller coaster. You need to be prepared for the ups and the downs, which are more fun on a roller coaster than in the stock market.

"Every 6 to 8 years, you'll be thrown a curveball in the market and part of investing is knowing this is going to happen," said Dan Estes with Charles Schwab.

But there's another similarity, too. The downturns on roller coasters and stocks investing don't hurt as much when you're young as when you get older.

"I started planning for retirement when I started working," said investor Mel Schwartz.

And back then in 1937, Schwartz made a plan, which is still working 61 years later.

"Are you worried you're going to outlive your money?" we asked him.

"No, I am not," he answered. "I would like you to tell me how much time I have left. Next month, I will be 94."

"The real challenge comes in for the client who doesn't have a plan, now trying to figure out, how do I catch up now what I lost when I don't have time to do it," said Dan Estes with Charles Schwab.

Estes advises his clients to start early investing almost entirely in stocks, but as you get within 10 years of retiring, start moving towards less risky investments like bonds. It insulates from months like we've had recently.

"As you get older, you have less and less time to make up the downtimes in the market," he said.

And the market will punish people who have to scramble to catch up. By starting with stocks and moving gradually towards bonds, you'll put money away in safer investments and smooth out the highs and lows of the financial market.

"It will come back," Schwartz assured us. "It may take three to five years, may be a little less. I may not be here to witness it, but in the meantime, I am not going to worry about what happens."

Investment advisors can help you come up with a plan. Or it's likely your company may have an 800 number you can call for advice with your 401K. The important thing is to stick with it, even now, putting money away for retirement. Think about it. A dollar today will buy a lot more stock than it did just 10 days ago.

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