We are living longer lives, and that’s a good thing. But there is a downside – your retirement savings must stretch to cover you and your spouse for a protracted period of time.
According to the latest figures from the Centers for Disease Control and Prevention, if you were 65 years of age in 2001, at that time you could expect to live an average 18.1 more years. That compared with an average 16.4 years of life expectancy at age 65 in 1980, and 13.9 years to go at age 65 in 1950.1
To keep up with inflation, you must not only preserve your nest egg’s principal but keep the income growing as well. For example, an income of $2,000 a month when you retire will be worth just $1,107 a month 20 years later, assuming a 3 percent rate of inflation.
But how do you invest your money to satisfy both of these conflicting imperatives? Preserving principal requires shorter-term fixed investments such as certificates of deposit, savings accounts, fixed annuities, and short-term bonds. In return for stability, however, investors accept returns that may not keep up with rising expenses. They lose principal slowly, overtime, to inflation.
Alternatively, if you invest for higher return potential, you are likely putting your principal at greater risk, generally subjecting yourself to the vagaries of the marketplace, short-term volatility and uncertainty. That uncertainty could translate into continued growth and robust retirement income or it could mean that you need to cut expenses as your income decreases or even face finding employment or assistance in the most dire of circumstances.
Fortunately for Valley residents, you can take advantage of the expertise of a Financial Planner or Financial Services Representative from the Barnum Financial Group to evaluate your current circumstances and take realistic steps to help manage risks to your future retirement income. Working with a financial professional is key because not one solution is appropriate for all circumstances. Whatever you do, be sure that you are fully informed about the pros and cons of any financial product or investment strategy.