About 10,000 people are retiring every day. And all of them will need to have income to live on during their retired years. Financial advisor Carroll Ramer talks about some strategic considerations in this report.
Ramer agrees with White House advisor Dr. Jeffrey Brown that income is the outcome that matters most for retirement security. It comes back to the two phases of life: the accumulation phase and the distribution phase. During the accumulation phase, younger people can tolerate more risk in their investment decisions.
However, once they get within ten years or so of retirement, they are nearing the distribution phase of life. They will reach a point where they will be living on their accumulated assets, and it becomes important not to run out of money during those next twenty, thirty, or forty years of life.
So if you are planning for your retirement years, you need to take into account that Americans are now living longer than ever. Inflation is something you need to think about, says Ramer, because the Federal Reserve System has made a two percent inflation rate part of their monetary policy. You also need to be aware of stock market volatility and low interest rates.
Ramer explains that today’s investors are comfortable accepting lower rates of return in exchange for guaranteed income. The unpredictability of the stock market makes it a risky strategy to plan to live on returns from a stock portfolio. People are realizing that dipping into principal to live may cause them to run out of money. The old rule that you could spend four percent of your principal each year to support yourself is no longer true. CDs and money market accounts are nearly useless these days.
Carroll Ramer is a financial advisor with the Silver Lake Agency in Kasson, Minnesota. Retirement News Today is a featured network of the Sequence Media Group.