Are you worried you are going to run out of money during retirement? Do you feel an underlying sense of dread and unease whenever the subject of retirement planning comes up? You’re not alone.
I get pretty passionate when discussing this, because I’ve seen the same weary, anxious look on the faces of far too many good, hard-working people like you. Why is this whole retirement thing so darn scary? You shouldn’t have to live like this!
Retiring Baby Boomers are in the eye of the storm. Several different “fear factors” are converging together, all of them working to ensure you are as stressed as possible about your finances once you retire.
#1 Your parents were alive for the Great Depression. You are a product of your upbringing. You were told to “work hard and save, but never spend a dollar.” If you do spend any money the sky will fall and you will end up eating food scraps in the back alleys of downtown Sarasota.
#2 Pensions are a thing of the past. The golden age of defined benefit pension plans is long gone. No longer are people retiring to the security of a guaranteed pension.
Could you imagine getting a guaranteed union pension that covered all your bills? Could you imagine knowing you earned a benefit that paid you money as long as you were alive? Now, it is up to you to plan for your old age.
#3 The financial media is hysterically negative. This irresponsible fear-mongering affects everyone. It is hard to stay calm when a guy, in a suit, on a major TV network, is saying things like, “The worst crash of our generation is coming .”
Without the benefit of my professional expertise, I’d be scared too!
#4 Your “safe” savings choices aren’t working anymore. Interest rates are at historic lows. In the early 2000s you could have found a 5-year CD paying five percent without too much trouble.
But now, we are going on 15 years where CDs, money markets, and other “guaranteed” financial vehicles have been paying less than one percent. In many cases much less than one percent. Right now, nationally, the average interest rate on a savings account is .08 percent.
What does all this mean? Retirees, for the first time, are almost being forced to employ stocks and bonds in their retirement portfolio. What other choice do you have? Most people understand that getting .01 percent of their retirement savings is not the answer.
If you were living in 1981 right now you could walk into your friendly neighborhood bank and put your money into a three-month CD and get around 16 percent interest. Whoa! Who would even consider putting their money in the stock market if you could get 16 percent guaranteed at the bank?
Sadly, we are not living in 1981. But I have amazing news! You do not need to be scared of stocks and bonds. In fact, this unique interest rate environment might “force” you into utilizing the most powerful financial vehicle ever conceived by human kind.
So I want you to be encouraged. The four “fear factors” working against you do not have to sabotage your retirement. With a little bit of education and planning you are going to thrive!
So far this year:
Bonds have returned -3.4%
Stocks have returned +6.6%
Why do I bring this up? “Conservative” bond portfolios sometimes lose money too. That’s why a diversified portfolio of stocks and bonds are always appropriate- no matter your age.