Current Retirees

There is a big difference between a current retiree who is 85 and a current retiree who is 65. If you are 85 you should have a very low risk of running out of money during your lifetime. If you are 65 you have a major risk of outliving your income and principal. Medical science and healthier lifestyles are increasing the longevity of Americans.

The content on this page focuses on issues that impact younger retirees, but is also applicable for older retirees.

Pension Plans

Count yourself lucky if you retired from a company that pays you a guaranteed pension for life. The benefit is guaranteed by the net worth of the company and the Pension Benefit Guarantee Corporation. You also have social security and personal savings to supplement the income you receive from your pension plan.

If you retired from the right company, you should not have any financial issues during your retirement years.

IRA Rollovers

You are not so lucky if you retired from a company that sponsored a 401k plan. You rolled your assets into an IRA  when you retired and you are responsible for making your own financial decisions. Which means you are also responsible for the performance of your assets.

Based on our more than 50 years working with investors, there is a good chance your will be damaged by Wall Street's most predatory business practices. You did not have to deal with Wall Street when your assets were invested in your company's 401k plan. Now you do and you may not be prepared for what you are up against. 

Preservation of Capital

Your number one financial goal for retirement assets is capital preservation. 

You have to preserve the value of the assets that produce returns (interest, dividends, appreciation) that fund your lifestyle during your retirement years. A major risk is spending principal early in your retirement years so it is not available later.

You also have to preserve the purchasing power of your assets. That means your assets have to income and offset the impact of inflation. The younger you are, the bigger the risk. For example, 2% inflation over twenty years, reduces your purchasing power by half. 

Investment Performance

Some investors, who are in their early retirement years, believe they can adopt conservative investment strategies and live happily ever after. A conservative strategy might be investing in short-term bonds, CDs, and money market funds. If only life was that simple.

For example, if you distribute 4% of your assets each to cover your cost of living and inflation is averaging 2%, you need 6% to break-even.

Investment Risk

You have to take enough risk to produce the rates of return you need to achieve a comfortable, secure retirement. But, what is enough? It is the amount of risk you have to take to achieve a 6% rate of return (see above example). Your risk may get down to your exposure to bonds with longer maturies and higher quality stocks (blue chips, higher dividends). 

Investment Expenses

This is the one number in a sales presentation that is real - as long as you get complete, accurate, documented information. Don't be surprised if Wall Street advisors prefer to withhold this information. The more excessive the expense the greater the odds the information will not be disclosed to you.

Paladin says.....

At this stage of your life, a big mistake can undermine your short-term and long-term financial security. You need facts and insight from a source you can trust to protect your financial interests.