Middle age: Diversity is the key

The market's turmoil may be especially unsettling for middle-aged homeowners.

For good reason, too: Unlike recent stock market fluctuations, investors in their 40s and 50s are suddenly seeing the value of their homes decline along with their stock portfolios. They are probably in their maximum earnings range but may have more financial responsibilities — buying a second home, switching jobs, caring for elderly parents, paying for a child's wedding.

And they need to have two big nest eggs: for their children's education and their own retirement.

"That's probably compounding the worry," said Liz Pulliam Weston, a personal finance expert and author.

For those worried about protecting college savings, if you haven't chosen an age-weighted investment strategy, which shifts more money to cash and bonds as your children get closer to college age, do it now, Weston said.

When it comes to retirement savings, don't fret. People should be prepared to live until they are 95, so a middle-aged investor still has a ways to go.

In fact, some financial planners are urging investors to look on the bright side of the shaky market. Blue-chip stocks — notably diversified, well-managed large companies — can be bargains now.

"Don't put your head under the covers," said Brian McQuade, managing partner of McQuade Brennan, a public accounting and consulting firm in Washington. "This is the time to buy."

If a steady stream of income is in your retirement future — like Social Security or a pension plan — you can be more aggressive in investing than someone who won't have a fixed income in retirement. And if you have a 401(k) plan with employer matching, "definitely don't turn down free money," said Carl Emerick, a financial adviser with Sentinel Wealth Management in Reston, Va.

Financial planners said the older you are, the less you should have in stocks and the more in fixed-income products. Stuart Ritter, a financial planner with T. Rowe Price in Baltimore, said that at about age 55, you should have only about 70 percent of your money in stocks.

"What that means is you're reading about all this stuff in the stock market but not all your money is in stocks," he said. "One of the things to bear in mind is the volatility you read about in the newspaper might not be your personal volatility."

If you're still feeling antsy about your financial security, direct that energy to cutting expenses by paying down credit cards or looking into refinancing your mortgage. But be smart about it. In the tight credit market, you must have solid credit and a conventional mortgage and plan to stay in your home for at least a couple of years. If you can pay off the cost of refinancing within 18 months, it's a no-brainer, Weston said.

This is also a good time to review financial plans to make sure they still match your goals. Strike a balance within your portfolios. Remember not to have too much in stocks while also not becoming too conservative, said Fran Kinniry, of Vanguard Group.

Build a good emergency fund. It never hurts to have three to six months of living expenses in a certificate of deposit or money-market fund. Put more money into your 401(k) plan and IRAs, and generally save more, advisers said.

Last, if the anxiety continues to build, Helen Modly of Focus Wealth Management in Middleburg, Va., has a cure that takes two seconds: "Turn off the TV."

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