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Planners Exiting the Market to Protect Retirees

Small investors – particularly those on the edge of retirement — and their professional advisers are reeling from the market’s extreme ups and downs, which we chronicled in a story in today’s Wall Street Journal.

One striking shift: Even some financial planners who manage their clients’ money are yanking it out of the market and parking in cash. Often, the reason they give is that their clients are retired and need it for living expenses.

Of the $85 million managed by Kevin Skipper, a financial adviser in Columbia, S.C., 60% was in stocks until May, when he started moving it out of equities. Now, it’s in cash, short-term bonds, a bullish dollar fund, and an exchange-traded fund that shorts the stock market.

And Joe Wirbick, an investment adviser in Lancaster, Pa., who has moved $30 million in his clients’ portfolios into cash in the past few weeks, says, “Just because it came back at the end of the day doesn’t mean it can’t fall tomorrow. It’s just too crazy right now. I didn’t base this decision on today’s market volatility but on the last three months’ market volatility – and what I see happening in the economy in the next two or three years.”

He did the same in February 2008, and stayed in cash until the end of that year. But in 2008, he parked clients’ savings in money-market accounts yielding 5%. “Now they’re paying what, two tenths of 1%?” Mr. Wirbick says. “There are no options for what you do with cash right now. But I’d rather them get nothing and stay whole than try to figure out this volatile market.”

To return to stocks will require “some time and a substantial move in either direction – or the government coming out with another bailout,” Mr. Wirbick says.

Even younger investors have lost their nerve. Brad Pistole, a financial adviser in Springfield, Mo., who specializes in annuities and life insurance, is picking up clients “in their late 30s and early 40s saying, ‘I want out of the market,’” he says. “If someone is 35 and they’ve been in the market for 10 years, they’ve experienced almost nothing but losses.”

What about you? Are you all in cash, or are you staying the course?


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.