Taking Care of Mom and Dad: Life on the Investment Margins

Old people, like professional investors, live and die at the margins of investment returns. Small increases or decreases can make for big increases or decreases in their quality of life.

This is the opposite of the way people in the beginning or middle of their working lives -- you, in most cases -- are advised to think about money. You're probably accustomed to hearing advice about taking advantage of compounding...and of keeping your retirement money working in long-term investments so that the ups and downs of daily stock market swings don't matter.

While a stock-market decline is painful for everybody, younger people saving for retirement actually benefit because they can buy shares cheaper. Likewise, a drop in interest rates is a boon for younger Americans who can refinance their mortgages to slice their payments. But cheaper shares and lower rates are an entirely different story for retirees who are selling shares and depend on fixed-income instruments for money to live on. They can't afford the long-term view anymore. They need steady income and can't ride out downturns.