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Retirees Losing Faith in the Market

In the past few months, Nancy Stein, an 80-year-old retired real-estate agent in Northbrook, Ill., has sold a large chunk of the stock she has spent nearly three decades acquiring.

Her certified financial planner, Casey Madden, warned her that she’d owe capital-gains tax, and pointed out that she doesn’t need to sell it, “but she told me, ‘I don’t care. We’ll work on that later,’” he says.

In a Wall Street Journal interview on Oct. 5, Ms. Stein said that the reason for her exit from the stock market was two-fold: First, “I didn’t see how there could be as much debt in this world, and the world go on in the way we’d been going, this country or Europe.”Retir

The other reason: “I felt the people buying were people inside the market. They weren’t the investors of the past who wanted to protect what they had, or see it grow a little bit.”

She’s far from alone in feeling a loss of control over her investments. A September survey of 958 investors by the Gallup Organization found that investor optimism last month fell close to the lows reported during 2008’s financial crisis. You can read the full results here.

Nearly two-thirds of investors in the survey, done quarterly with Wells Fargo & Co., said that they have little or no control over their effort to build and maintain retirement savings. Although the top reasons given were unemployment and a weak economy, extreme market volatility and Washington politics ranked high, too.

Optimism plummeted among U.S. retirees between May and September in the survey’s index to -60 from 61 in May. People who haven’t retired yet were almost as glum, with their optimism swinging to -41 from 24.

What’s particularly worrisome is that people who are still working are counting on their investments even more than people already retired. Almost two-thirds of those surveyed who have not yet retired said that their 401(k) accounts will provide a major source of retirement income – compared with one-third of retirees. And 32% of those still working say stock investments will also provide much of their funding, compared with 26% of retirees. (The survey has a three-percentage-point margin of error.)

Do you share the sentiments of the investors who were surveyed? And are those feelings affecting the choices you’re making for the long haul?


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    • Investing today is unlike the past….there has been increase distance between the corporation and individual shareholder. Stock splits appear to be a thing of the past. The retail investor appears to be at a disadvantage compared to computerized trading. The average individual investor usually had a time horizon of 20-30 years for capital appreciation whereas today it is for one hour. Corporate America seems to be in a lock-down mode just as the Country.

    • Nope, I think it’s a pretty good time to buy shares, especially with the recent volatility, enter a limit order for 20% less than the current price, and you’ll probably have it within a couple of weeks. These days interest rates are low enough so the opportunity cost of waiting for a market recovery isn’t that much. Also recently it seems that all stocks tend to move together– same direction and same amount, regardless of what their fundamentals look like, so you can get pretty good deals if you know what you’re looking for. What scares me is long-term CDs that yield only a couple percent.

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.