The pundits and newscasters are finally using the “R” word, getting up to speed with what the rest of us have known for a year now.  We are, indeed, living in a recession.  And the effect that has on senior citizens living on retirement income—which is usually rather fixed—calls for diligence and wise investments to insure a stable financial life.

Many of us are baby boomers, having lived through two major surges in the economy within the past 30 years, as well as the down-turns following those surges.  We had 401-k plans and we participated in managing our investments to one degree or another.  We watched our balances soar, and then rapidly decline, depending on what the economy was doing.  Our anxiety about the declines was tempered by the knowledge that we were still creating new income and would eventually recover.

And now we’re retired.  Living on income primarily generated by investments.  We have watched our portfolio balances decline steadily this past year, depending upon the mix, as much as 33% or more.  Some of us are losing our homes because of Wall Street greed.  Some of our pension funds have also been impacted for the same reason.  This creates anxiety that’s difficult to temper. 

The historical position taken by most financial advisors and bankers is to make no changes in your investments when the stock market declines.  It is indeed a good time to buy when prices are so low.  However, a 65 year old baby boomer, for example, could expect to live another 30 years; her portfolio has to be secure for that period of time, and the issue that generates anxiety among seniors is How far can the market decline and for how long before my future is compromised? 

SCJ’s  September Feature article, http://seniorcitizenjournal.com/index’preserving’.html, outlined a number of steps to consider in attempting to maintain financial stability in rocky times.  If the economy does not recover within the next few months or years, the obvious question most senior citizens face now is Is there anything out there that I can invest in to preserve my principal, as well as guarantee me some return, however small? 

The answer is Yes.  One option is the Certificates of Deposit, which is designed to do both:

1.  The rate of return is guaranteed at the outset; and
2. The principal is guaranteed to be returned to you in full, so long as you honor the terms of the certificate and don’t take the funds out before the due date.

If a portfolio is well balanced, it contains some percentage of investment in CDs, unrelated to the condition of the economy.  However, we are now experiencing the worst economy since the Great Depression and it behooves financial advisors to hear the anxiety of their senior clients when there is no evidence on the horizon that the economical situation is going to improve.  Some forecasters say years could pass before we reach financial stability again.  If your portfolio could not withstand several years of assault such as we experienced in 2008, it’s time to talk with your advisor.  And it’s time for your advisor to hear your anxiety and respond appropriately, recommending steps to be taken to address your concerns about financial stability for the remainder of your life.