The stock market is know to have periods of both growth and decline and a correction is defined as a decline of 10% or less, which is perfectly normal and can be made up in a 3-6 month period.
Jonathan Jackson, retirement planner with Freedom America Inc in Brandon, Florida, says that while corrections can be bad for anyone who sells at the wrong time, but can be devastating to retirees because they have no choice. Their income is coming out regardless of what the market is doing and are forced to incur these losses.
Most retirees are used to taking 5% of their value out for income, says Jackson, and when they incur a market correction of 15%, the money they take out is almost 6%. Repeated market losses can result in greater and greater percentages that are taken out and soon retirees are forced to take less income or risk running out of income.
There are retirement products available today that eliminate the loss of principal due to the market, which can guarantee lifetime payouts and increase over the years to keep up with inflation, says Jackson. A qualified advisor, like Jackson, should make sure a portfolio has the right balance of safety and risk, with retirees being handled differently, in that advisors need to keep them rich, not make them rick.
Jonathan Jackson is with Freedom America Inc and can be reached through his website or at 813-600-5314. Jackson spoke with Retirement News Today, providing online, on-demand retirement news video content.