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Safe Money Retirement Alternative

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Retirement is a long journey that you should plan to last three decades. During the journey you’ll be using the money you have previously saved, earnings from your investments, government or private pension, Social Security and maybe earned income, inheritance or gifts.  The greatest fear of most retirees is running out of money before they run out of retirement.

Retirees that historically looked to banks for “earned interest to supplement Social Security”. However, the zero interest-rate policy has broken the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough.

Downward mobility is the antithesis of the American Dream. It’s an especially bleak trend for soon-to-be retirees, who do not have the ability to recover losses, change careers or do the kind of financial damage control available to younger workers.  It’s easy to see why the greatest fear of retirement is “running out of money”.  So why do so many retirees and those in retirement’s red zone keep their money in risky places?

Contrary to what you read and hear from Wall Street and other financial pundits, when it comes to predicting the future direction of markets remember that no one knows because there are simply too many imponderables.  The market goes up and down with economic and financial cycles and so does the value of the investments in the market.

The “investments” bought and sold take many shapes and sizes from shares of individual stocks, mutual funds, options and more with each offering a dazzling array of choices.  Those who sell stocks to the general public make a commission each time a stock is bought or sold; therefore, it is in their best interest that people participate in the market.

With 2015 ending flat and 2016 off to a rocky start, some worry that retirees taking on too much risk could be in trouble if the bull market gains are over.  The current economic backdrop is: the lowest interest rates in a generation, volatile and uncertain markets for equities & bonds, political gridlock preventing economic solutions, an unstable banking industry.

There’s no doubt that the early part of 2016 has caused investors to pause and ask this question: Is the multi-year bull market coming to an end. Trying to stimulate growth through easy money isn’t working.  Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy.  Many investors say that the economy is going through a healthy correction, but there’s no doubt that another financial crisis will come one day.

After the last Great Recession, Americans had little faith in big banks and hedge fund managers. Once again, the financial sector is taking advantage of people and the politicians seem to be in for the money, power, and perks, and the wealth spread between the economic stratas is increasing.  The debt number is nuts!!

2008 was a positively grim year for retirement funds: the country as a whole lost $2.4 trillion in the last two quarters of the year alone.  This crisis was such a bona fide 100-year flood that the entire world is still trying to dig out of the mud seven years later.

By 2010 and 2011, many retirement accounts had reportedly crept back up to their 2007 levels. Yet for investors who did not keep investing at the same rate, their balances may likely have maintained a loss, rather than a gain, from pre-Recession levels. That’s because much of account growth since the crash can be chalked up to continued savings in retirement accounts.

Insurance companies that offer safe money alternatives have stood tall and remained financially strong during the economic storms.  Bear in mind that annuity carriers, unlike Wall Street and banks, have survived and prospered by judicious management and careful attention to their financial affairs.  At last fixed index-linked annuities have been vindicated.

The current rush of others toward fixed annuities is proof that these “safe money alternatives” will flourish in the uncertain economic times ahead.  A much safer approach for the risk averse and the retirement-minded is to determine how much they can afford to lose without destroying their retirement and safeguarding the remainder from loss of principal.  Even better, why not lock up a guaranteed lifetime income with your “I cannot afford to lose retirement money” by choosing a fixed annuity to deliver the peace of mind you should be seeking in retirement?

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Wednesday, April 6th, 2016 Wealth Management

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