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A Great Standby for Retirees!


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Being fully funded for retirement means that you can safely lock-in your retirement spending goals without taking market risk.  The worst-case scenario is that later in retirement the retiree ends up being forced to make substantial cuts to their spending, which could make their final years quite worrisome and difficult.

Seniors need an increase in interest rates to restore your savings accounts to relevance.  Income inequality is “the defining challenge of our time and a zero interest rate for seniors contributes to inequality.

Seniors on fixed incomes have to get returns somehow, and junk bonds and riskier stocks have been the answer for many.  But the idea of a system in which the returns to frugal saving are zero with certainty, while the returns to investing money in risky high-yield stocks and bonds — a form of gambling — often pays off, is troubling, to say the least.

Seniors in particular, will be better when the Fed abandons its low-interest-rate policy, despite some initial turbulence.  Low interest rates and high stock market valuations both suggest that we should expect lower investment returns in the future.  Over the past 13 months, the S&P 500 has seen two corrections of more than 10% and is down about 3%.

The trouble is we’ve lived through an amazing bull market in all … asset classes.  Investors are betting that bull market is going to continue indefinitely.  That violates a fundamental principle of finance.  You can’t assume that you did well taking risky investments in the past [and] that you’re going to get the same returns taking risky investments in the future.

Millions of Americans who saved diligently over the years have been crying out for relief. Many have found themselves struggling, thanks to rates that have remained near 0% for years.  If you are living off the interest your assets generate, a low-interest rate environment obviously means less income to live on yet the cost of everything we purchase is going up, requiring more income to meet expenses.

Any time you go to the store, eat at a restaurant or fill up at the gas station, there’s a chance you’ll end up paying more for the same products than you would have paid the day before.  We’re all living longer. And most of this longevity can be attributed to leading more active, healthy, and smoke-free lifestyles, as well as advances in medical treatments. But just because we are living longer doesn’t mean we’re going to remain healthy throughout our entire lifetime.

Few consumers need to be reminded that costs on everyday items are rising: They see it at the checkout. Health care expenses in retirement can be significant.  The reality is that medical expenses may be a very real (and substantial) cost for retirees, especially with us all living longer.  But whether it’s medical care, prescription drugs or food, senior citizens’ wallets are being hit particularly hard, and at a time when Social Security isn’t rising. Recipients got no raise for this year.

Annuities are a great standby for retirees – Annuities can provide peace of mind. Annuities are a type of insurance product that guarantee regular payments (at a either fixed or variable rate) for a designated period or until your death, even if you turn out to be a centenarian and laddering can be done with annuities,.

Fixed annuities do deliver the guaranteed lifetime income as an option you can exercise plus you retain the flexibility and predictability that is needed for the longest and most expensive journey you’ll ever take: retirement.  Check out fixed annuities and see if they’re suitable for your retirement needs.

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Tuesday, April 12th, 2016 Wealth Management

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