How To Best Protect Your Retirement Income

How To Best Protect Your Retirement Income

Many articles about retirement planning either start or end with someone walking into an office to speak with a financial professional.

Let’s imagine, instead, that you have your entire nest egg in your pocket or purse and you just entered a casino.

There are two blackjack tables from which to choose. At the first table, the rules say that if you beat the dealer, you’ll win 50% on your investment; but if the dealer beats you, you’ll lose 50%.

Then you saunter over to the second table. The rules there say that if you beat the dealer, you’ll make 10% on your investment; but if the dealer beats you, you won’t lose a thing.

At which table would you want to sit? Your decision likely would be based on how you feel about risk in general and how close you are to retirement, among other things.

It’s the same when you’re investing in the market. With some investments, you might make a killing, but you also could lose a bundle. With others, there’s a limit on what you can gain, but you’ll lose less — or nothing at all. There are pros and cons to both, of course, and plenty of debate about which is the right way to go.

The good news is you don’t have to choose one or the other. You may have a place for both in your portfolio. The goal is to figure out what you need and find the appropriate products to help.

The 6 concerns of retirement

I’ve met thousands of pre-retirees over the years, and everyone is different. They come from different backgrounds, and they have and want different lifestyles, but there are six core concerns they all have when entering retirement, and they need strategies that can deal with each:

Income longevity: They want to be certain their money will last their lifetime.

Risk: They worry a big market correction could take away much of their wealth.

Taxes: They don’t want to give Uncle Sam any more of their money than necessary.

Inflation: They want to avoid losing purchasing power as the years pass.

Long-term illness: They worry about becoming sick and/or disabled.

Death: They hope to leave some kind of legacy behind for their loved ones.

If you keep your money fully invested in stocks, bonds and mutual funds ‐ with a singular focus on growing your assets, as many people do — you are hoping that the growth will deal with all of these concerns. But what if you experience loss? It’s important to keep an open mind about safe alternatives that can provide income guarantees* while still offering the opportunity for growth, a disability backstop, tax efficiency and something that can be passed on when you die.

A possible answer for those concerns
A fixed-index annuity addresses all these basic retirement concerns.

Think back to those casino tables — and the one that offered a chance to play and make some money without the risk of losing. A fixed-indexed annuity is like that: It’s not intended to beat the stock market — rather, it provides the opportunity to make something based on the movement of the market. And that gives it more growth potential these days than other traditional safe accounts, such as certificates of deposit or money markets.

Now, I know some people are skeptical about annuities. I can lay out all the benefits they provide, and still a client will hear the word annuity and turn up his or her nose.

And I understand why. There are many different kinds, some have been misrepresented, even the best ones aren’t right for everyone, the contracts and costs can be confusing, and often people buy into them without really understanding what they’re getting.

But I urge even the most die-hard annuity haters to give them another look. They’re powerful tools that deserve consideration — especially by those who are retiring without pensions.

An annuity is a way of giving yourself a pension by asking an insurance company to manage some of your nest egg for you. And if that makes you feel more secure in retirement, what’s wrong with that?

If your financial adviser brings up the subject of annuities, give him a chance. If he doesn’t bring it up, ask. And then, do some investigating on your own.

Once you’re informed, you won’t feel as if you’re gambling with your nest egg. You’ll actually have done something to better protect it.

source: kiplinger.com

The Fed is Scrambling to Prepare for Next Recession

With the next recession on the horizon, the Fed is scrambling to prepare the economy. But the strategy they’re considering will take us into uncertain territory…


Peter Reagan, January 18, 2018

Before the next severe downturn comes, the Fed recognizes they need to get ready. But with interest rates near 0% today, they won’t be able to rely on cutting rates when things get bad. So now, they’re considering something a little drastic…

Typically, the Fed targets a specific rate of inflation. But now there’s talk of “price-level targeting”, in which the Fed would target a specific price level instead and allow inflation to run too high for a time.

Here’s the catch…

The Risk of Price-Level Targeting

This strategy is relatively untested and has not been adopted in 85 years, when it failed in Sweden. Additionally, Chicago Fed President Charles Evans has characterized this tactic as “extreme” and “too difficult to undertake during an economic crisis”.

Yet this strategy is on the table – a clear indication that the Fed can’t fix the next economic crisis with their regular tactics.

In fact, things are so bad, the Fed is willing to experiment with the economy.

How to Hedge Against the Risk

As the Fed considers going “mad scientist” on our economy, do you want your savings exposed? What about your IRA or 401(k) – can you risk your nest egg to the whims of these bureaucrats?

Don’t let the Fed gamble with your money. Instead, consider moving your wealth into something that’s been proven, time and time again, to protect your hard-earned money in times of economic uncertainty: physical gold.

While you still can: Get a FREE Info Kit on Gold here. There is zero cost and zero obligation to you – we’ll even pay for shipping.

Plus, this 16-page “insider’s” guide reveals the little-known IRS Tax Law to move your IRA of 401(k) into an IRA backed by physical precious metals – without paying any taxes on the transfer.

It’s an excellent option for anyone who wants to take advantage of this opportunity with any savings in their retirement account.

But remember, you must act soon. Once the Federal Reserve takes action, it may be too late to take advantage of this opportunity. To get started, click here to get this free info kit on gold.


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Why Car Insurance Is Breaking Your Bank

Why Car Insurance Is Breaking Your Bank

Car insurance rates have been rising, even for people with spotless driving records, and they’re likely to continue to go up in 2018.

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Best Way to Succeed With Your Encore Career

Best Way to Succeed With Your Encore Career

Marci Alboher is vice president of Encore.org, a nonprofit that encourages baby boomers to use their skills and experience to help their communities. She’s the author of The Encore Career Handbook: How to Make a Living and a Difference in the Second Half of Life. Here is an excerpt of our conversation with her:

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Best Financial Moves For Your New Year

Best Financial Moves For Your New Year

It’s not unusual for people to start a new year plotting out all they want to achieve in the coming months, whether that involves a new exercise regimen, a career switch or checking a few more items off their bucket lists. But the beginning of the year also can be a great time to work on your investment portfolio and financial plan.

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Top Ways To Begin Preparing For the Bear Market Shift

Top Ways To Begin Preparing For the Bear Market Shift

Everybody talks about the possibility of a bear market, but few seem interested in doing anything about it.

Despite the kind of national and global uncertainty Wall Street traditionally despises, this bull market keeps charging along. Investors don’t want to get out too soon and risk missing out on more gains. Some have become even more aggressive over the past year.

Still, there’s always that niggling knowledge that what goes up must come down … so people worry.

One of my favorite Warren Buffett quotes is that investors should be “fearful when others are greedy and greedy when others are fearful.” But what is one supposed to do when others are both fearful and greedy?

Here are a few ways you can safeguard your nest egg before the next downturn arrives.

1. Develop an income plan.
If you’re in or near retirement, do you know what your income sources are and when you’ll tap them? Most retirees rely on three or four basic income streams: Social Security, a pension and/or tax-deferred retirement account and maybe some personal savings. If you don’t have a pension or your guaranteed income won’t be enough to cover your basic lifestyle needs, you might want to look at creating your own guaranteed income plan with an annuity.

Annuities are guaranteed because they are backed by the financial strength of the insurance carrier. And if all or most of your retirement and personal savings are tied to the market, think about setting aside a few years’ worth of income in cash or very stable investments. That way, you’ll be ready to ride out the rougher years.

2. Plan your investments appropriately.
It’s daunting, but not devastating, if the market dips while you’re still working. You still have your paycheck to count on, you’re still putting money into your retirement account, and you have plenty of time to recover. When you’re close to or in retirement, it’s a little more intimidating. Your recovery window is smaller — but it isn’t non-existent. If you retire at 67, you likely will still need money in 15 or 20 years. If you have money left over once you’ve covered your basic income needs, you can invest it more aggressively for those later years — but you should do it with a long-term view.

Talk to a financial adviser about your risk tolerance, and know yourself: If you can’t handle a bear market emotionally or financially, it’s best to stick to more conservative investments in retirement.

3. Know your risk.
We often have an irrational fear of things that have a low probability of actually hurting us. When we swim in the ocean, for example, we fret about sharks — even though shark attacks claim only one American life each year on average. Cows claim 20 American lives in an average year, yet most people don’t fear going to a farm. If you’re losing sleep over what could happen to your nest egg in a bear market, find out if your worries are warranted. A financial adviser can stress test your portfolio and illustrate how it would have held up during the tech bubble of 2000 or the mortgage crisis of 2008. He or she also can show you how long it would take to recover from a similar downturn.

Investors always want to know when the next bear market will occur. The answer, of course, is no one knows.

What you can anticipate with some accuracy, though, is how much money you’ll need in retirement and when you’ll need it. A comprehensive retirement plan can help you make the most of what you have and — just as important — help you prepare for the worst.

source: kiplinger.com

Top Stock Picks For The New Year

Top Stock Picks For The New Year

Think the U.S. stock market will gain another 20%-plus in 2018? Guess again. With stocks richly priced, the bull market nearly nine years old, and the Federal Reserve likely to raise interest rates three times in 2018, expect much lower returns.

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Important Retirement Risks To Think About

Important Retirement Risks To Think About

When most people think about investing for retirement, it’s usually in terms of market returns — because that’s what the media wants us to think about.

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Core Inflation to Rise In 2018

Core Inflation to Rise In 2018

Inflation will be 2.1% in 2018, about the same as in 2017, but the composition will be different. Energy prices rose 8% this year as rising crude oil prices spurred gasoline and fuel oil prices, and electricity and natural gas prices trended up. Look for less energy-price inflation in 2018, while other categories pick up the slack.

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New Insight Into ‘Buy-And-Hold’ Tactic

New Insight Into ‘Buy-And-Hold’ Tactic

If you Google “buy-and-hold investing,” you’ll easily find dozens of articles that say the strategy is tried and true.

And you’ll find almost as many that say it’s dated and overrated.

Which is accurate? A lot depends on the individual investor.

Simply put, buy and hold is an old-school passive investment strategy that emphasizes long-term growth over short-term thinking or market timing. An investor who employs a buy-and-hold strategy actively selects stocks and mutual funds, but once that’s done, isn’t concerned with short-term price movements and technical indicators.

An investor’s age plays a role with buy and hold
The strategy generally makes sense for a younger investor who is accumulating assets for retirement but doesn’t plan on tapping into them any time soon. Younger investors usually have years, or even decades, to recover from negative swings in the equity markets.

For example, during the 2008 market crash, when the S&P 500 lost 51% in less than a year and a half, many investors grew scared and sold their holdings at a significant loss. Those who lost the most were the ones who got out of the market near the bottom and failed to participate in the big rebound that followed. Hanging in there paid off for those with a longer-term focus.

But for the older investor who is at or near retirement, this strategy may not work so well. If you were fully invested in the bear market of 2008 and already taking withdrawals, you may have had to take a 40% reduction in income to preserve your assets long enough to not outlive your money.

Buy and hold also may be a bad idea if you don’t have a lot of money to invest, as big pullbacks in equities can all but wipe you out — especially if you end up needing those funds while the market is down. That’s why after the 2000-2002 dot-com (“dot-bomb”) bubble, many market commentators, including author and Fox Business anchor Lou Dobbs, said, “You shouldn’t invest money in the stock market that you can’t afford to lose. Period.”

You may want to rethink the ‘4% rule’ too
Old rules of thumb are hard to let go of in any situation — and the financial industry is no exception. Another popular strategy dating back to the ’90s, designed to “ensure” that your money would last at least 25 years in retirement, is the “4% rule,” which says a 4% annual withdrawal rate from a typical portfolio should be a “statistically safe” amount, although not guaranteed to last a lifetime.

Recently, experts from a variety of sources have said the 4% rule is no longer realistic, mostly because of lower interest rates, longer life expectancies and recent markets showing much larger than normal corrections and recovery periods of five years or more. Some are now saying the percentage should be 3% or less. In 2013, the folks at Morningstar published research that found retirees who want “a 90% probability of achieving retirement income over a 30-year time horizon and a 40% equity portfolio” should withdraw just 2.8%.

Based on those numbers, if you had $1 million in assets, you would be safe to take out $28,000 per year. Most people likely would say that falls far short of what they’ll need in retirement.

Taking another direction instead
So, what else is there if you don’t want to run out of money and you need to use savings and investments to supplement your other guaranteed-income sources?

An increasingly popular strategy is to use a fixed-index annuity with a guaranteed lifetime income rider to create another dependable income stream to go along with your Social Security benefits and pension income.

These annuities do not directly participate in the market, but earn interest credited to the principal — capped at a certain amount — when the market goes up. Your principal is kept safe. You participate only in the market upside (up to the cap, but if the market rises above that, you wouldn’t share in those higher gains). You don’t lose principal when the markets pull back.

Because this is an insurance contract with guarantees and protections provided by the insurance carrier, it can be a good way to keep a portion of your assets safe. By adding an income rider, the carrier is able to guarantee your income for as long as you live and could pay out at a rate as high as 5% to 6% or more, depending on your contract terms and your age. There are almost always fees associated with riders offering guarantees, so it is important to understand how the fees work, including how they are calculated, if they can be changed during the contract period, and how they may impact the growth and death benefits of the contract. It is worthwhile to educate yourself on the costs and benefits to make sure they make sense within your retirement income plan.

If you haven’t heard about this type of annuity from your broker or adviser, it’s probably because it is not a security, it’s an insurance product, and doesn’t fit under the “Wall Street umbrella” or typify the normal brokerage-house model offering. More often, you will find these guaranteed-income products through independent financial advisers who also have an insurance license. Financial advisers are required to work as fiduciaries and have a legal obligation to put their clients’ interests first.

Bottom line: Don’t depend on old rules of thumb to get you through retirement. Keep an open mind and check into all the options available to you.

source: kiplinger.com