“A couple of months into being retired, it looked like 15 to 20 percent of what we had was gone,” Brussat said of his retirement portfolio, which is invested in stocks and bonds. “It was scary then, but less so now.”
Brussat, 69, retired as an engineer at Lockheed Martin in Marietta.
“I take all of this as a reminder to be more conservative in the way we live so we cover ourselves for these unexpected down cycles,” he said.
Last Friday, Standard & Poor’s announced it had downgraded the United States’ credit rating to AA+, which likely triggered Monday’s major stock sell-off. On Monday, the Dow Jones Industrial Average closed down nearly 600 points, but Tuesday the Dow rebounded by more than 400 points, closing at 11,239.77.
Catherine Turner, the founder of Marietta-based Navigational Wealth Planning Inc., which specializes in retirement portfolios, said much of the fear and panic has been driven by the media and statements from Washington politicians.
“We are going to see a market rebound, but how fast, I can’t tell you,” she said. “The markets are trying to find their footing. Once the initial fear and panic that brought the markets down leaves, what will be left is the market finding stabilization.”
Financial advisor Casey Smith said retirement-age investors should focus on diversification and planning their portfolios for the long term.
“No matter what happens — even if it was the opposite — you should be properly allocating based on your age or risk tolerance,” said Smith, the president of Wiser Wealth Management in Marietta. “It’s what makes you sleep okay at night regarding your portfolio.”
Smith said he and his colleagues have gotten only a few calls since Friday’s S&P downgrade.
“It’s kind of a running joke, and it’s not really that funny, but they say that they are calling in for their ‘reality check’,” Smith said. “They know that we aren’t going to let them sell or buy into gold.”
Younger investors, though, have time to ride out the day-to-day market rollercoasters. Smith likened their situation to be like going into your favorite store and finding out that everything is 18 percent off.
“It’s absolutely a great time to be adding new money to the market for the long term,” Smith said. “If they’re going to retire in 15 to 20 years, or even 30 years, it’s a great time to be investing.”
Smith also said the current market situation is “totally different” from 2008.
“In ’08 banks were taking money from taxpayers to stay alive. Right now, this is the government in disorder, a lack of leadership and it’s a reality check for us back at home,” he said.
Tom Maloy, a board member of the Georgia Tea Party, said he was not surprised by the market’s reaction to the credit downgrade.
“The chain of events started at the end of the recession up until now,” he said. “The debt ceiling had nothing to do with the downgrade. It’s the debt, period. Congress and the president don’t seem to understand it’s the debt and the debt is caused by spending. Its not a revenue issue, it’s a spending problem.”
And although some have blamed the tea party faction for contributing to the downgrade, Maloy said that will not stop the group’s course.
“I can assure you this is not in any way, shape or form the fold of the tea party,” he said. “The tea party caucus tried to do the things S&P said needed to be done, and (Senate Majority Leader) Harry Reid wouldn’t let them do it.”