You have to squint to see the interest rates paid by bankers; stocks up big one day and down big the next; dividends from blue chip stocks are not guaranteed and neither is their favorable tax treatment; safe bonds pay tiny returns; investment real estate is for the brave; gold, silver and other precious metals are a crap shoot; get rich quick schemes are crazy if you want your money back. We judge our retirement money by how big it is (how much) rather than how long it is (years it will last). Rather than focusing on “how big” let’s think about “how long”.
The greatest fear of most retirees is running out of money before they draw a last breath. This is called longevity risk and is probably the most overlooked aspect of retirement. We faithfully save during our working years (401k, IRAs, investment accounts, etc.) yet we have no idea how much money we’ll have on the day of our planned retirement. What’s more, if we did know the exact amount we’d have at retirement, how much lifetime income it would buy would be a mystery. Furthermore, even if we knew the lifetime income there is no guarantee it would last as long as we do. This riddle is faced by someone every 7.5 seconds because that’s how rapidly baby boomers are turning 65 from now through 2030.
If you’re interested in a guaranteed income for life that you cannot outlive regardless of what happens to the stock market, interest rates or real estate prices, the insurance industry has come to your rescue. I would like to encourage you to watch two videos that can be obtained free on-line and both are great strategies to avoid outliving your money. The first is called “PayCheck for Life” and is about eight minutes in length. The video explains how you can get a guaranteed paycheck for life by putting some of your retirement money in a fixed index-linked annuity – no maybes, no guessing and no hoping. There is a companion twelve minute video entitled “Retain Your Gains” that explains in detail how fixed index-linked annuities offer you the advantages of stock market investing without the downside risks. Both videos explain the guaranteed lifetime income option that is available. While fixed index linked annuities and guaranteed lifetime income are not for everyone, every serious retirement-minded person should at least investigate the possibilities. Both of these videos are also currently available at www.TheRetirementPros.com.
Retirees and working adults are increasingly responsible for making and understanding sophisticated financial decisions involving investments, diversification, retirement and money management. Many lack the basic knowledge to assume these responsibilities, placing their financial wellbeing and retirement lifestyle in jeopardy. It is generally a mistake to take your retirement money as a lump-sum and then “invest” it without professional help – the results are oftentimes disastrous and lead to the fulfillment of your greatest fear: running out of money in retirement either because you lost it by taking unsuitable risk or earned little by being too risk adverse. Similarly, it is important to understand the suitability of financial and investment advice given by those who advice you; therefore, make it a goal to raise your financial literacy so that your financial decisions in retirement are suitable for your circumstances. A good starting point is to watch the aforementioned videos and if locking up a guaranteed lifetime income [which may or may not be a high yielding investment as your longevity is uncertain] find and engage the service of a professional that knows annuities. The videos will give you the knowledge needed to determine if annuities are for you.
Shelby J. Smith, Ph.D.
August 2012
i read an excellent article on financial planning. This article has given me enormous insights and also convinced me why we all require financial planning. I am leaving the link here : http://www.article.confidyne.in/why-we-all-require-financial-planning/. please read.
Thanks for the post and sharing the videos, both of which provided excellent information regarding securing a financially stable future. In today’s society, one can never be too safe with this topic, so it’s better to prepare earlier rather than later. We know retirement can be and is a scary thing, but if finances are stabilized before you get there, then it will be easier.
Reading this blog post makes me wonder how much time, efforts and money i have wasted trying to save up for my retirement. These schemes did look enticing but now they seem just plain crazy. Hope the insurance industry is up to it as effective as it sounds.
Hi DrShelby
Thank you very much for sharing a most wonderful topics of peoples life.It’s true that we should plan for our retirement plan before we get retired.However, retirement planning is a serious matter and we all have to consider it sooner rather than later. Appropriate retirement planning is the first thing that a successful career has to offer you. You should not wait to plan your retirement because funds may get scanty later.
Thanks
Robert
Dr. Shelby, I think you make some great and and insightful points in your post. I agree with you that “Retirees and working adults are increasingly responsible for making and understanding sophisticated financial decisions involving investments, diversification, retirement and money management”, but it’s also important to note that financial advisors can be a great help. My blog can also provide some helpful pointers about retirement for readers of your blog http://warrenelkin.com/blog/ Keep up the great work, I love reading your blog.
Hi Dr Shelby,
I enjoyed reading your post; you raise very good points about the financial matters of retirement. There are two things your post has made me think about: 1) If we are taught from an early age about finances and saving for the future by our elders, would it make us more inclined to save and handle our money better? I mean, we are told this, but maybe it should be incorporated somehow into the hidden curriculum. 2) Thinking about if you are going to have the chance to spend the money you have saved or not is probably a distraction. Maybe it is better to do what you would if there was a definite answer and you know you are going to retire. And there’s no point or reason to regret if anything happens.
Your post has really made me go into my own world!
Thank you