>>
Speaker: With the stock market bouncing back, it may finally be the right time to open up those 401K statements that you've been avoiding all these months and take control of your finances. Jill Schlesinger, Editor-at-Large for CBS MoneyWatch.com is here to guide us all through it. Good morning.
>> Jill Schlesinger: Good morning.
>>
Speaker: So people aren't as scared anymore. The stock market's up 40 percent. They're thinking about opening the envelopes. What should they keep in mind as they do that?
>> I think you should do the thing that's unimaginable. Imagine how bad you felt on March 9th, when the market was at its absolute low point. We need everybody to take a real gut check. So here's the three general categories: I was an insomniac; I could not sleep; the market made me crazy. I was kind of okay, but it was a little scary, and I really didn't even know what to do. And then I slept like a baby; it was terrific; I didn't have a lot of money in the stock market, or maybe I had so much time before I needed my money, I just was fine.
>>
Speaker: Um-hum.
>> Jill Schlesinger: Or I was totally in denial, which is a separate issue. But, you know, those are the general categories. You need to really understand how you felt during this period of time.
>>
Speaker: Okay, and once you know that, before you go reallocating and mixing up all your assets in your 401K, is there anything you should do?
>> You should absolutely take a risk-tolerance test. Most 401Ks have this. If you don't, there's a lot of online tools. They're gonna ask you a bunch of questions. How would you feel if the market went down 20 percent? Well, you now know because it was down 40 percent. I felt rotten, or it was okay. Once you take that test, you're ready to make some changes, potentially, in your 401K or other retirement account.
>>
Speaker: All right, so then you've taken that test. Let's say that you decide that you are risk tolerant, that you slept pretty well when the market started to tank. What should you do with your 401K?
>> Jill Schlesinger: We divide this up into -- not so much age. I know people will say I'm X years old. What should I do? It's when I need my money. 30 years before I need my money. I can have 50 to 70 percent in higher-risk assets. That would be stocks, international stocks, maybe some junk bonds.
>>
Speaker: Even after the recession, don't be afraid.
>> Jill Schlesinger: Well, if you've got 30 years, and you're belly can take it, and you slept well --
>>
Speaker: Um-hum.
>> Jill Schlesinger: -- okay. If you're 20 years out, maybe you want to pull back a little bit. Again, the longer the period of time before you need the money, the more risk you can take. But if you're only, say, 5 to 15 years out, and you're pretty risk-tolerant. You did okay. You pull back the risk. What we want people to do is be very aware of their risk tolerance and the time horizon for when they need that money.
>>
Speaker: What if, during the recession, you didn't sleep too well, and you were a little bit restless about your 401K?
>> Jill Schlesinger: Restless, right. You need only five milligrams of Ambien. In that case, what we would say is same thing with same time horizons; we pull back the risk level. I want to point something out. Zero to fifteen percent in risky assets -- let's just say that you said, "I didn't sleep very well, and I have five years before I'm gonna retire." It's okay to have just, say, 10 percent in risky assets. That's okay. But again, you must know yourself, and don't get swayed by other people doing different things.
>>
Speaker: What if you we're a complete and utter mess, a complete insomniac?
>> Jill Schlesinger: You needed 10 milligrams of Ambien, and you really have to immediately reduce your risk. Now, here's the good news. Since the market is up, you can basically take whatever portfolio you had, just cut it in half in the risk level. That's the easiest thing. Do not chase the market higher because you will get lured into that. Save more money.
>>
Speaker: So the thing that you have to consider is if you're sleeping well, then your 401K is allocated properly.
>> Jill Schlesinger: Pretty much. And here's the thing. You can save more money. You can spend less in your retirement. And you can work longer. Working longer will have the biggest impact on your retirement years than anything else. Someone just said to me before we came on the air, "What if I don't have a job?" That means, while you're working, save a lot.
>>
Speaker: Would you say work longer? Do you have to work quite a few number of years longer than you expected, or just one or two?
>> Jill Schlesinger: No. A couple of years can change it so dramatically because here is what happens. You're not pulling money out of your retirement, and you're earning money. Working longer, the most significant impact on your retirement planning.
>>
Speaker: Jill Schlesinger, thank you so much.
>> Jill Schlesinger: Thank you.
>>
Speaker: I think I'll sleep pretty well tonight.
>> Jill Schlesinger: Good.
>>
Speaker: No Ambien. No Ambien for me.
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==== Transcribed by Automatic Sync Technologies ====
