Will You Have Retirement Plan Wipe-Out?
You Wanted Easy Street|What’s Happening
Retirement was supposed to be a time when you would be able to sit back and enjoy the good life. Your financial worries were supposed to vanish when you retired. You worked very hard on your investments during your working years to make sure that during your retirement years you would be on easy street.
You Did Everything Right
You delayed financial gratification throughout your working years. You used retirement calculators to get as close as possible to narrow down how much money you would need to retire. You basically made all the right financial moves now you want to reap the financial rewards.
If you made all the right moves why do your investment worries seem to be just beginning? Why do you fear retirement plan wipe-out? Maybe because the stock market isn’t cooperating.
Unfortunately the stock market is a powerful force that you just cannot control. The stock market doesn’t care that your money needs to last as long as you do or that your money needs to hold its value. The market has a mind of its own.
Avoiding Wipe Out Is About Control
You have worked too hard for too many years to see your retirement plan investments wither away. The 1st step to avoid retirement plan wipe out is to know what you do and do not control and then focus on the controllable.
Beyond Your Control|Market Risks
Investors before you and investors after you will never be able to control certain market risks. You may be able to offset these risks, but you cannot always control them. If you do nothing to offset, they will have damaging effects on your retirement investments.
The stock market has good days and bad days. If your investments are in the stock market you have experienced how devastating the wide swings of the market have been on those investments.
What goes up, usually comes down. In your retirement years when you are relying upon your investments as your single source of income, you cannot afford for the market to be in a downward cycle for too long. When you are living on the returns of your investments vs a paycheck, market swings can be very unnerving.
Inflation dilutes the value of your retirement investments slowly over time. Again, you have no control over inflation, only the ability to take actions that can offset inflation.
What You Do Control|Investment Choices
In your retirement years, to help offset market volatility you would be wise to limit the amount of your retirement investments you have in the stock market. You cannot afford the market swings when you are in your retirement years.
When you were younger and still in your working years, you could ride the wave of the market swings because you had time to wait for the rebounds. At retirement age, the exact opposite is true, you do not have time to ride it out. Many retired investors find out the hard way that by the time the market does rebound, it’s too late for them.
Avoid Volatility & Inflation|Annuities
If need to rely upon your retirement investments for cash flow you need a guaranteed stream of income. The stock market is too volatile to offer any guarantees so to help offset volatility and inflation you may consider looking into annuities.
An annuity offers an advantage not offered by other investment vehicles, a lifetime guaranteed stream of income. Ask your financial planner about the different types of annuities that are available; fixed, variable, indexed, deferred, immediate.
Expense Ratios|Mutual Funds
For the money you do keep invested in the stock market through mutual funds, be sure to choose funds that keep more of your money working for you. Choose mutual funds that charge low expense ratios.
Theoretically, high expense ratios are supposed to offer higher returns, however, that’s not always the case, instead high expense ratios just leave less of your money in your investment. When you are retired, you cannot afford to waste money on fees.
You worked hard at accumulating your money, you now have to work hard at keeping it. If you take the right approach, you can minimize negative affects to your portfolio. If you find that you need additional help or information, do not be shy about contacting your financial planner.