Retirement Planning

Retirement can mean lots of different things to different people.  For some people it may be traveling and spending more time with grandchildren.  For others, it could be pursuing hobbies and perhaps a second career or even volunteering for favorite charities or causes.  However, there is a universal truth that rings true for everyone.   You only have one chance to get it right!  Or to put it another way, you only have one chance not to screw it up!  As you get closer to retirement, the margin for error narrows exponentially.  An exposure takes many forms.

Unless you’ve just woken up from a thirty year hibernation, you know the incredible highs and lows that have occurred with the stock market.  Volatility is here to stay and things can change on a dime.  The stock market is your best friend when it’s up and can be your worst enemy when it’s down.  Many people have put money into their mutual funds at regular intervals during the last twenty (plus) years.  This is called “dollar cost averaging”.  Simply put, you put a set amount into your mutual fund every month, but you are buying more shares when the market is down and less when the market is up.  This has been a tried and true method of mitigating stock market risk for years.  Over the long haul and after many years the stock market “should go up” (and has gone up).  Flash forward:  You are now in retirement mode and you are either taking money out or about to take money out at regular intervals.  This is called “reverse dollar cost averaging.”  Make no mistake about it; there will be precipitous downturns in the market.  Guess what?  When you are taking your money out when the market is down, you will never have a chance to get that money back.  If there is a prolonged long slump in the stock market, you can throw out all your expectations about assumed interest rates out the window.  Your chances are running out of money have suddenly become real.  The 2008-2009 downturn in the stock market was a proverbial slap in the face for people who were using this money for retirement purposes.

One of the biggest myths known in the investment world is how “safe and secure bond and bond mutual funds are”.  Not so fast….Bonds have an attributable fixed interest rate.  However, if you have an environment where interest rates are rising, then bonds can/will go down significantly.  Resulting in loss of principal.  We are in the lowest interest rate environment in our nation’s history since the great depression.  Interest rates can only go up!!!  Bonds will go down and so will your principal.

Did you ever think you would live to see banks paying 2/10 of 1% in a savings or money market account?  If you account for inflation and taxes, you’re losing money daily by having a significant amount of your portfolio in these accounts.  CDs are not much better.  Currently, five year CDs are paying 7/10 to 1.25%.  Of course it makes sense to keep some money completely liquid but having a bulk of money to fund your retirement can be a financial disaster, akin to a leak in a boat that will be guaranteed to sink in some point in the future.

During the better half of the 20th century, millions of people worked for just one or two companies in their career.  More often than not these companies had pension plans that rewarded their employees for the years of service.  Those pension plans, combined with social security, paid people a steady stream of income that they could not outlive.  Unfortunately, these types of “defined benefit plans” have become a thing of the past.  They have been replaced by less costly (to the company) 401k plans.  In essence, employees are now left to fend for themselves thus creating retirement uncertainty.

Retirement Solution:  Millions of baby-boomers are preparing for retirement or are currently retired.  The biggest demographic shift in our nation’s history is occurring.  Billions of dollars are being positioned for this unprecedented economic trend.  People want choices.  They still want:

  • Safety
  • Security
  • Guaranteed of principal
  • Potential for growth
  • Competitive interest rates
  • Access to their principal when needed.



Are Your Finances In Shape?

This time of year, it is more than likely you are assessing your physical health. Don’t forget about your financial health! Sitting down with a professional and following this simple budget plan could be the most important thing you do all year.

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