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Outliving Retirement Assets is Number One Fear


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Retirement planning is not just about accumulating a sizeable nest egg to pay for retirement living expenses?   It is also about managing the accumulated funds during your retirement years in order to provide further retirement income, so that your nest egg continues to grow even at retirement.

If you withdraw your funds too quickly, this will result in you outliving your savings. Meaning, your money will run out before you pass on. Indeed this is a big concern and a major challenge many retirees face.  In fact, the number one concern for seniors isn’t health insurance or the demise of Social Security. It isn’t the economy nor is it the fear of Alzheimer’s.

The number one fear for seniors is outliving their assets.  As life spans have been growing, so has the fear of living so long that the nest egg, the equity in your home, the stocks, bonds, CDs and whatever other sources of income you have dry up before you’re ready to leave this life.

Retired people most value above anything else when it comes to income in retirement is certainty. They want a guaranteed annual income every year forever.  However, next year is looking “worse than at any point in the past decade,” and whether it is the see-sawing balance of further volatility for markets.

Is your retirement portfolio down in the dumps because you are heavy into equities? Are you selling stocks and mutual funds at a loss to get cash to cover living expenses? Are you confident that the market will come back over time and wish that you had cash to ride out the storm?

Bonds, supposedly the safer alternative to stocks, aren’t looking so safe right now. While the S&P 500 index is up 1.6% this year, many fixed-income funds have negative returns—particularly those that own a lot of lower-rated bonds. Some are down 4% or more. Rate risk has been on a lot of investors’ minds for months amid speculation about when the Federal Reserve might raise interest rates.

Bond yields move opposite to bond prices, so rising interest rates erode the value of a mutual fund’s bondholdings. That’s rate risk.  It’s been crazy volatile lately. The stock market has gyrated based on fears about interest rate hikes from the Federal Reserve.  It’s a nervous market here and that’s moving due to the fact I think the market wants to hear from the Fed its intentions of future rate hikes.  .

If a stock is climbing for no reason at all and continues to climb, chances are it will fall for the same reasons.  The chance that you’ve uncovered a rare gem that the rest of the free world has overlooked is quite slim, especially if you got the idea from an investment forum or a newsletter.  Unfortunately, far too many retirees have not taken steps to reduce their investment risks by heading for the safe places. Why is that?

First, you’re bombarded with advertisement, advice and promises that encourage you to keep your money in the market.  You’re told that “longer term” you’ll do a lot better with stocks, bonds, mutual funds, diversified portfolios and other risky investments than if you keep your money in safe places like bank CDs, government bonds and fixed annuities.

You’re presented with slick graphs and charts showing that here’s how much better you’ll do with your money at risk.  The entire brokerage industry is dependent upon you to put your money at risk in the market and they’re working very hard to make sure you do.  You can’t read a newspaper personal advice column, watch the news or read any of the thousands of magazines or newsletter devoted to investing without being told you’ll be much better off by placing your retirement money with Wall Street for safe keeping.

Don’t throw good money after bad. If you buy a stock and it falls while the rest of the market is going up, understand the difference between a market correction (when everything falls because prices are ahead of themselves) and a bad investment (when your stock falls because there are problems with the company or industry).

One option is to look into locking in a guaranteed lifetime income you can’t outlive.  You see, there is insurance for longevity risk: insurance companies which are among the world’s largest, strongest and oldest financial institutions are willing to guarantee you a lifetime income you can’t outlive if you’ll deposit with them some of your retirement money.  They will take the risk associated with the markets, stocks losing value, real estate crashing and other unforeseeable developments that can erase your retirement money.

You don’t have to give up control of your money to get a guaranteed lifetime income because in the past couple of years insurance companies have begun offering new products that specifically take care of longevity risk faced by retirees.  These new plans allow you to change your mind if your circumstances change.  Bottom Line:  Annuities supply a source of income that can supplement other retirement incomes like pensions and Social Security.

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Tuesday, December 15th, 2015 Wealth Management

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