Advisers urge caution for retirees hoping to bet on stocks

Jennifer Troxell Woodward, contributing writer//May 24, 2019

Advisers urge caution for retirees hoping to bet on stocks

Jennifer Troxell Woodward, contributing writer//May 24, 2019

Retirement can be that much sweeter for people playing the stock market.

But even if they feel they have money to spare, retirees need to think about what they stand to lose in this high-stakes game.

“Retirees should only invest in the stock market when they need to or only when they can afford to,” said Gene Dickison, founder and president of MTM Financial Group LLC in Lower Nazareth Township. “They should do it when all your expenses are paid for and they are just doing it for fun … It’s like going to the Sands Casino but with less alcohol.”

Dickison and other retirement planners said a conservative approach is better in most situations that involve investments by people of retirement age.

They should figure out their nondiscretionary expenses and their spending money, and treat the stock market as more of a hobby and less of an obsession. In addition, it is important that seniors put in the research and carefully watch for swings and dips in the market.

Gut check

According to financial adviser Michael Waterhouse of Independence Planning Group in South Whitehall Township, wealth managers and financial planners should work with clients to access their experience regarding investing in the stock market and how much volatility they are willing to accept as they enter their retirement years.

“I always ask how much guaranteed monthly income do they already have coming in versus their monthly expenses,” Waterhouse said. “How much they should invest in the stock market depends on their appetite for risk, what other assets they have in place and how much is already invested in the stock market.”

Waterhouse said that he does not recommend that retirees invest a large percentage of their portfolio in the stock market, but their purchases should include equities, bonds, guarantees and a predictable legacy for their loved ones.

“The allocation depends on the clients’ tolerance for risk, their specific financial situation and if there is a significant gap between what they need and what they already have coming in,” the financial adviser said.

Dave Rowan, president and founder of Rowan Financial LLC in Bethlehem, said investing in the stock market can be good for retirees. However, he warned, what starts as a hobby can quickly turn into an obsession.

If your stock market activity is keeping you up at night, or you are checking stocks several times a day, then you need to learn to back out a bit. Walk away if too much time and money is invested, Rowan said.

Set limits

Retirees must evaluate their financial standing before putting their money in the stock market, he added, and they should not feel compelled to risk more than they are willing to in the market.

“If you are financially stable, investing 10 to 20 percent in the stock market is reasonable,” Rowan said.

On the flip side, there are those who are not where they need to be financially by the time they have reached retirement age, he added. Stocks are less a hobby and potentially more of a necessity.

“These people may need to put 50 percent to 60 percent of their savings (into the stock market) to get themselves in a better position,” Rowan said. “People with a boatload of money have more to play with.”

Thomas J. Scalici, co-founder and CEO of CornerstoneAdvisors Asset Management LLC in Bethlehem, is wary of retirees trading individual stocks on their own.

“Individual stocks are about three times as volatile as stock funds are and most people cannot stomach that type of volatility,” Scalici said. “As a result, they tend to get in and out of stocks at the wrong time.”

Dickison at MTM advises that retirees seek the assistance of a wealth management expert or be prepared to do the homework and research involved in making the best investments in a stock market that can go downhill fast.

If one is unwilling to pay a financial planning expert, Dickison said there are some reputable financial organizations available to work with those interested in playing the stock market. Some services charge monthly fees for financial advice at an affordable price, and there also some good magazines and literature available on the stock market and safe investment choices.

David Markle, owner of Markle Wealth Management in Danielsville, said he has one wealthier client that invests pretty heavily in the stock market – $700,000 to $800,000 of his savings and income.

Markle said that this particular client manages these investments, which include shares of big companies like Google and Apple.

“One piece of advice I give is that once stocks are mentioned in a magazine, they have reached a price that you should not buy anyway,” Markle said.