enlarge The Associated Press

Traders watch with concern as the market shifts on Wall Street. That concern is shifting to people who are wondering how to invest the money that will pay for their retirement.

Baby boomers have a lot to think about when it comes to investing their money these days. Age. Job security. Income. Risk tolerance. And, of course, retirement. It's a complicated subject made even more complicated by today's economy. The best approach, say financial planners, is patient, informed and rational investing.

Younger baby boomers obviously have more time to reap benefits from their assets, said Susan Veligor of Cornerstone Financial Planning. But youth doesn't guarantee immunity from the economy's impact.

Thomas Rogers, a financial planner in Portland Financial Planning Group, said job security makes boomers' financial needs much more immediate. That issue, combined with current income, affects just how much boomers have to invest.

Take the housing market, Rogers said. Some boomers are cash-strapped because they overextended themselves when purchasing a home. If they are fortunate enough, they can turn to savings to help meet those fixed expenses, Rogers said. That doesn't leave much for investing for retirement.

"The investment climate is highly nerve-wracking," Rogers said. At the very least, boomers should continue to contribute to their 401(k) or other retirement plans, he said. "It's an effective strategy," he said. And if boomers stop contributing because they "can't stand" watching the investment decline in value, they should invest the money in another lower risk product, he said.

But the first priority is to have cash reserves to meet unexpected expenses, said Rogers. Once those funds are set aside, he said, assets can be allocated for long-term investment purposes.

"There are good places to park cash reserves," Rogers said. Among those places are money market funds, large mutual funds, or insured CDs he said. "They have liquidity and they're not going to lose value."

"It's appropriate to say the U.S. treasuries are the safest possible investment," he said.

Risk tolerance is a huge factor in how boomers use their investment funds, planners said.

Jerome Price, a financial planner in Scarborough, said the baby boomer generation tends to take more risks than the generation preceding them and fewer than the generation that follows. Risk tolerance also varies significantly within the age span of the boomer generation.

"Younger clients have such a long time that I'm fine with them taking a lot of risk," said Veligor.

Regardless of their ages, boomers make investment choices based partly on an emotional component. President of AARP Financial Mac Hisey calls it "behavioral finance," while Rogers terms it "money psychology." Whatever the particular label, it's a major component to determining a client's risk tolerance.

"It's hard not to let emotions influence financial decisions," said Rogers. "We try to minimize the impact emotions have," he said. Sometimes that means reining an investor in and "argue they need to take on lower risk." In other situations Rogers said he needs to push clients' comfort level. For example, if a client simply isn't going to meet his needs by staying in CDs, he may need a higher stock market allocation than in an ideal world, he said.

When it comes to investing, said Hisey, human nature goes against rational decision-making. Investors "react emotionally" in their choices, he said. An example is when a client chooses not to buy stocks at low prices, believing that the time to buy is only when stocks are high. "If they sell high," he said, "they just end up sitting on the sidelines."

Veligor said the emotional piece of investing means she tries to "meet (clients) where they are." Indeed she has some clients in their late 50s and early 60s who simply refuse to go the stock market route. "You can't change them," she said. In such a case, she said, investors may choose to invest in high-yielding bonds and inflation-protected bonds.

Risk profiles also depend on a client's...