He has seen some difficult cases. A new 67-year-old client walked in recently who lost 50% of his portfolio value. His investments weren't outlandish and were managed by a highly regarded advisor, he notes. "They were using modern portfolio theory with asset allocation models with some of the most respected fund families in the universe," Cortazzo adds.

Even with cases such as these, Cortazzo feels it was more difficult to be a financial advisor during the dot-com boom than it is now. "This year, people are saying they want to be more conservative," he says. "In 1999, I had people wanting to do things that were potentially devastating to their net worth because they wanted to take on so much excess risk."

A Matter Of  Timing

One of the chief complaints about modern portfolio theory as used in retirement planning is that it can't protect investors from bad timing.

A prime example would be retirement-age investors who saw their portfolios shredded in recent months. "The long term may not match with your time frame," says Paula Hogan of Hogan Financial Management LLC in Milwaukee. "Equities are risky even if you hold them for a long time. The day you need to take them out could be the day the value is down. Look at all the people out there who thought they were going to retire in '09."

She says advisors shouldn't be bashful about pulling client funds out of the current market. If a client wants to have a basic lifestyle in retirement and can't afford to lose any more, "you have to put a stop to the hemorrhage," she says.

She also believes 20% to 30% of a retirement portfolio should be in an inflation-indexed immediate annuity. The annuities, she adds, should be spread out among a diversified group of companies.

Cortazzo of Macro Consulting Group also uses income annuities as a way to transfer risk and create a guaranteed stream of income. It's the type of strategy that often goes missing in individual investor portfolios, which he sometimes feels are managed too much like those of institutions.

"Managing money for an individual is very different than managing money for an institution," he says. "Account cash flow and timing risk are much more critical to an individual than a large entity."

While annuities don't enjoy wide popularity among investment advisors, Hogan says, she feels the current crisis may change attitudes. Many advisors, she notes, developed and reinforced their skill during the 1990s bull market, when every correction was brief and equities quickly resumed their ascent, making risk management almost an afterthought.

"As an industry, we are taught that stocks are your friend, just hang on," she says. "I think when you have a recession of this severity, not only advisors' but consumers' notions of what is normal and prudent practice will change."

When it comes to their retirement outlook, consumers certainly are growing more pessimistic, according to recent poll data. Only 46% of Americans feel they will be able to live comfortably in retirement, according to an April Gallup poll. That's down from 53% a year ago and 59% in 2002. The poll also found 63% of Americans are worried they will not have enough money for their retirement.

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