Retirees have the life experience to gauge whether the recent market downturn was based more on emotion than on factual information.
A majority of retired investors are convinced that the recent market downturn was based more on emotion than on factual information, according to an August survey conducted by Millionaire Corner/Spectrem Group. Nearly 62 percent of retirees share this opinion versus nearly 55 percent of those who are still working or identify themselves as semi-retired.
The recent market volatility was sparked by Standard and Poor’s Aug. 5 downgrade of the nation’s credit rating. The CBOE Volatility Index, or so-called “fear gauge,” jumped 45 percent to its highest level since May 2010.
For those of retirement age, the recent market volatility was, as they say, not their first time at the rodeo. They lived through the 1980s savings and loan crisis and the subsequent 1990-1991 recession. Older, and with less time to recover their financial losses, the economic meltdown of three years ago may still be keenly felt. Few saw that one coming, but if there was any upside, it is that they took steps to better prepare themselves for the next crisis. Just over 58 percent percent of retirees said they felt better prepared for the chaotic events in August compared to 2008 versus 53 percent of those still working or who are semi-retired.
They were more likely than non-retirees to call their advisor to seek direction about what they should do, as well as conduct independent research about their steps during the days of see-sawing markets. They also reported more pro-active contact from their advisor, an indication of their status as long and valued clients (perhaps not coincidentally, our research found that the higher the net worth, the more likely an advisor called during the downturn to check in and offer reassurance).
Both groups, though, equally feel that their experience from the 2008 crisis helped them to cope with the most recent events. Still, more retirees did view recent events as a crisis rather just normal market correction, which non-retirees are more apt to believe. And in a month of persistently bad economic news, both groups are also equal in their concern about another downgrade of the U.S. debt rating.