Kevin McCormally: I am Kevin McCormally of Kiplinger's. I am here with Mary Beth Franklin, the Retirement Editor of Kiplinger's Personal Finance Magazine, to talk about retirement investing in volatile times. Mary Beth, it's a really scary market particularly for folks who have got their stock invested now. What kind of advice you have got for them?
Mary Beth Franklin: Well, first of all, don't stop funding your 401(k) and don't be tempted to pull all your out of the stock market, because when the market turns around, if you have all your money on the sidelines, you could have missed out on that big rally. But it is a good time to look at your portfolio, see if you are appropriately invested and whether you are taking too much risk for your stay in life.
Kevin McCormally: Well, how much risk can people afford to take with their retirement savings?
Mary Beth Franklin: Well, it all depends on your age and how close you are to retirement. Young people with decades to go can afford to be invested completely in stocks, but if you are closer to retirement, you might want to take some of that money and put it into bonds and maybe money market accounts.
Kevin McCormally: Mary, now let's just talk about the proper allocation of investment is really complicated, isn't there a simpler way?
Mary Beth Franklin: There is. Luckily for most participants in 401(k) plans, they cannot take advantage of target-date retirement funds. It basically says, pick a date closest to your retirement date, let's say, you are in your 40s and plan to retire 20 years from now, you pick a 20, 30 retirement fund. What that does is take all your money invested in a bunch of other mutual funds and as you get closer to your retirement date, your investments get more conservative.
Kevin McCormally: Any final thoughts?
Mary Beth Franklin: Yes, when the market is down, you are buying stocks cheap and it will eventually turn around and you will be in a better position for that rally.
Kevin McCormally: Thank you.
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