When $1 Million Isn't Enough

Is a million dollars enough to retire comfortably on? Many baby boomer millionaires don't think so, especially once recession fears come into play. Almost 30 percent of 60-year-old baby boomers with investable assets of $1 million or more say they feel more financial stress now than six months ago, according to a new survey from Bell Investment Advisors and Opinion Research Corp.

The admittedly small survey of 500 boomers born in 1948 found that 40 percent are "downsizing" their lifestyles this year by contributing less to charity (22 percent), canceling, shortening, or postponing vacation plans (21 percent), reducing retirement savings (18 percent), or putting off retirement altogether (11 percent).

Of course, a millionaire also has the luxury of rejiggering investments to try to come out ahead. And 54 percent of affluent boomers cited chasing higher returns on investments as a primary goal for the next five years.

But even millionaires aren't immune to making irrational investment choices as the media endlessly report a looming recession. Some 23 percent of affluent boomers say they are planning to change their investment strategy in response to a potential recession, with 69 percent seeking more conservative investments like money market funds and bonds. Only 21 percent said they would invest more in stocks or stock mutual funds.

That could be a mistake, says Jim Bell, founder and president of Bell Investment Advisors. In many cases, these conservative investments barely keep pace with inflation, especially as interest rates on consumer products like certificates of deposit have dropped with each Federal Reserve cut in interest rates.

"Bonds and cash have the false allure of safety since their principal fluctuates less than that of equities, but equities along with commodities will better allow boomers to maintain their standard of living over decades," Bell says. "Boomers must learn to live with the volatility of equities if they want to keep their purchasing power intact."

Most financial advisers will tell you that a sound investment strategy and diversified portfolio will create regular returns if you don't mess with it too much, which Bell reiterates: "The key to navigating the slowdown is to remain rational and stick to a plan, rather than letting emotions steer you off track."

Tell us: Is a million bucks enough to retire comfortably? Or does it depend upon how the money is invested?