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Market dive means it's retirement crunchtime for boomers

Nearing retirement, they have little time to recover from the drop in stocks and housing. Here's how they're coping.

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Some boomers have already embraced this message.

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Already nearly fully retired, New York attorney Alan Naftalis invests his savings roughly 50 percent in stocks, 50 percent in fixed income. If anything, he could see raising slightly his stock weighting. He soon expects to buy a country home in upstate New York, ideally on a lake. He'll also need to purchase a car and maybe even a small boat. "With the new house, my monthly costs will be going up significantly," says Mr. Naftalis, who trusts stocks to outperform bonds over the long term.

Target-fund investors kept investing, despite crash

Other older boomers may be buying into that view, too, if target-date retirement funds are any indication. Target-date funds typically shift their portfolios gradually from stocks to bonds and other income investments as holders approach and enter retirement. The 2011-15 target-date funds, those most likely to include boomer investors retiring in the next few years, have experienced only one month of net outflows since the stock market's plunge in 2008, according to Morningstar.

Despite the turmoil when many investors were fleeing stocks, older boomers in target-date funds kept putting in money. Last year, net asset inflows totaled only about $431 million less than in 2008, despite the crash, Morningstar data show. The average percentage of stocks held by these funds: 57.3 percent.

One reason for that stability: Target-date funds are increasingly part of 401(k) plans, which helps drive assets into these funds, says David Wray, president of Chicago-based Profit Sharing/401K Council of America. But there's also another factor at play: "The advice being given people approaching retirement is that, no matter what the market's doing now, if they expect to live for an extended period in retirement," they should have some equity holdings, he says.

Of course, people need to "look to their own situation," he adds. When choosing how to invest, they should weigh their own risk tolerance and other factors – and not just embrace a standard rule of thumb.

Also, risk tolerance and "new thinking" can go just so far.

On the advice of her financial planner, Graham largely held to her 60-40 stock-bond allocation through the market's recent debacle. But if stocks seem poised to tumble again, Graham expects she would bail out of stocks and maybe even bonds.

"I'd wait until the market seemed to have bottomed," she says. "Then I'd get back in."