Diversification, balance and a healthy aversion to excessive risk are key to keeping your cool during uncertain economic times.

2011 was another challenging year for the U.S. economy and financial markets. The ongoing rollercoaster ride we find ourselves on has us asking one question: What should I be doing to protect my money?

What NOT to do is panic, according to Darin L. Gibson, owner and president of Irvine-based Burnham Gibson Financial Group, Inc. But doing a critical assessment is definitely required. “Retirees need to take a hard look at their cash flow, expenses and overall investment allocations,” he says.

In an interview with be.magazine, Gibson shares some worthwhile advice on how to protect your retirement finances and stretch your dollars during a time of fiscal uncertainty.

be: What should retirees watch out for in a volatile market?

Gibson: They need to take a hard look at their cash flow, expenses, overall investment allocations and where assets are distributed in order to make sure they’re not taking excessive risks given their age, time horizon and need for access to cash. They really should understand what they’re investing in and why, especially in today’s climate. Retirees traditionally have had laddered CDs, and historically they’ve been able to live off that income. But with rates at record lows it becomes even more challenging to derive the necessary income with that strategy.

be: Is this the time to panic?

Gibson: Of course not. We are experiencing extreme volatility. There will always be negative things to point to at any point in history. Retirees in their 70s and 80s shouldn’t have significant funds exposed to the equity markets. Ultimately, the focus should be on a well-balanced strategy with access to immediate cash reserves, while having other investments that provide a steady stream of income.

be: What can retirees do to protect their investments? Are there any safe bets?

Gibson: There are a number of different tools available out there in the marketplace, but they all have cost and tradeoffs. Programs like annuities can provide a revenue stream and hedge some market risk, but they come with a cost. Bonds can provide a steady income stream as well, but they carry some risk with interest rates at such lows.

A well-diversified, balanced portfolio, aligned with expectations for market volatility, is a good strategy to help a retiree feel less anxious about what’s happening in the market.

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