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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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    • Mr. Wirbick had nothing to do with selling out in 2008. I’m not surprised he took credit for it though.

    • This article and comments make sense; especially, when fees you are charged vs. interest income are taken into consideration. Having cash to pay bills makes more sense.

    • When the market gets high it is about to short. Suppose it rallied 500 points more to 700 points, it is time to short. Of course, if your brokerage house has lopsided bets, there is no one on other end you’ll will squeezed. However, there is some good news on the short/sell side is the liquidity will come from EU as well as knowing the (US or U.S.) economy whatever it is, it is not churning out enough cash. You’ll see how many times, there are some females/male principals to trash the US$ in order to rally the market. There must have reference point e.g. either Yan is too strong or Euro too strong or China has too much imported inflation because of weak dollar …etc that it must return. Frankly if European Central Bank chairman is “Draghi”, probably he’ll raised a collateral damage by raising rates to draw the cash to store in ECB. If he maintains rates low, he’ll be accused dual mandatory goals ( low rates spur investment and high interest rates maintain inflation fighting goal.) What I can say is look for “leadership” indeed.

    • For the first since first investing in stocks and mutuals since 1974, today I liquidated half my sizable positions. I used to firmly believe in buy and hold……….no more. With massive computer generated buys/sales I believe the small investor is no longer playing in a level field. The uncertainty of European and this country’s debts was the final straw.

    • I think that a lot of people are in that same mind set. If your a boomer ready to start retirement in this wacky economy and market you really need to be careful. I put about 85% if my retirement funds in cash for now. I will get back in when I believe things are getting better. I have done ok over the last 10 years but only by careful investing. The most important thing is to get a broker who doesn’t take your invested money & forget about it. The days of holding everything long term is over. You must be vigilant yourself as well as your advisor. We do not try to time the market but we do move things around as we believe is necessary.

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.