Time to Get out of the Market? It Depends on Your Age

Lower gas prices may mean you have money -- or more money -- for retirement savings in 2009.

Standard and Poor's (NYSE:MHP) chief economist David Wyss puts it another way: Tumbling gas prices have given beleaguered U.S. consumers the equivalent of a $200 billion tax cut.

So ditch the expensive coffee and join the office pool. Brown bag the lunch. And use your gas budget savings to start a retirement or other savings plan.

Depending on how old you are, when you want to retire, and how aggressive an investor you want to be, two local certified financial planners have some good New Year's investing strategies for you.

NEAR RETIREMENT? TIME TO PRESERVE CAPITAL

If you're within three years of retirement or need money soon, Sacramento certified financial planners Tina Florence and Steven De Jong advise you to stay out of the stock markets.

"Certificates of deposit or fixed income securities," De Jong said. "I'm just looking for them to preserve capital."

Florence urges clients even near retirement to keep an amount of cash equal to a year or two of full living expenses out of the stock market.

Retirees or soon-to be retirees should not invest in stocks or equity mutual funds unless they can afford to lose that money.

If markets decline further, she said, they won't have time to earn it back before retiring "and then they'll be stuck."

40-50 SOMETHINGS: HOLD ON, STAY INVESTED

For people in their 40s and 50s worried about losses, Florence advises you to stay invested. She recommends a semiannual portfolio review and rebalancing.

She checks for changing family circumstances -- a job loss, health and changing family budgets and savings patterns.

"I'm urging people to hold on tight. Markets do recover. They always do," she said. "Better to ride it out than pull out your money and try to figure out when to jump back in. The classic scenario I'm trying to help my clients avoid Â… is selling low and buying high when you feel better."

De Jong says he worries that if his clients "go completely out of equities, they will miss some good returns when the recovery begins."

30-40 SOMETHINGS: REWARDS AHEAD

De Jong says that while he has reduced the percentage of money he thinks clients should invest in stocks or equity mutual funds, people in the 30- to 40-year-old group won't regret buying.

"I'm encouraging them to keep investing regular sums of money and remain substantially invested," he says. "I prefer asset allocation vs. market timing. With dollar cost averaging (regular purchases of stock mutual funds when prices are low and high), they're buying at extremely low prices now and will be rewarded very well by being in the market."

20-30 SOMETHINGS: BE CREATIVE IN 2009

Young working adults often maximize 401(k) retirement plan contributions to secure matching contributions from employers. They complain they can't save enough for a house.

Florence said she advises some younger clients to reduce but not stop their 401(k) contributions and save for a condo, townhouse or home down payment -- and try to buy it while prices are depressed.

"People who can afford to buy and manage a home right now will look back in a few years and recognize that they got a great deal," she said.