Retirement day can be an exciting time.
It is also a time of uncertainty.
One of the hardest decisions we face in life is deciding when to make a decision. it’s time to retireThe thought of telling my employer that I won’t be coming back for my next paycheck after a certain date makes me nervous. A lot of questions come to mind.
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Are you saving enough?
Will my nest eggs last longer?
What if I get sick?
What if the stock market crashes?
The list goes on.
Too many people enter retirement without being able to answer these questions. Instead, their plans rely on hope — hope they save enough, that they don’t run out of money, that their health is preserved, and that the market doesn’t suddenly drop.
Good planning helps reduce stress
With proper planning in place, approaching retirement can be much less stressful. All of the above scary questions should be answered long before retirement, and the answers are beyond doubt.
Of course, over time, the answer can change. Many people nearing retirement invest in 60/40 portfolios. This equates to a combination of 60% stocks and 40% of his bonds. This approach, once considered a tried-and-true method for retirement security, doesn’t quite work these days. rising interest ratesAs of this writing, the S&P is down 16% year-to-date, the Nasdaq is down 29% and bonds are down 13%. The 60/40 portfolio is bleeding.
The good news is that there are ways to build your portfolio so it can perform well in good times. It also helps you get through tough times so it doesn’t crash with the market. Today, building a retirement portfolio that focuses on defense first and offense second is more important than ever.
It’s also important to regularly adjust your portfolio to take advantage of opportunities and avoid potential pitfalls. Passive investing may work over the long term, but a more active investment approach works better for individuals who have retired or are nearing retirement.
A variety of derivative-based tools can help offset risk during difficult times. These tools employ option-based strategies to predetermine the range of potential outcomes. Some options to do that are:
Fixed index annuity. People have a lot of preconceptions about it. pension, many of which are wrong. Annuities can be a great tool if used correctly and a great alternative to bonds in your portfolio.
My company has a fixed index annuity, and there are three ways to take advantage of it and profit from it. These are accumulation tools, income tools, and long-term care insurance tools. Let’s look at each.
- first, accumulation toolA Fixed Index Annuity allows you to earn interest based on a stock market index such as the S&P 500. However, there is also some downside protection as you cannot lose the principal. If the market goes up, it works. If it goes down, in the worst case, it will break even.
- Secondly, income toolswhen you retire, your pension can be used to buy what is essentially an annuity, paying you an amount each month for the rest of your life. It can bring some peace of mind to people who are worried about the lack of money.
- Finally, you can also include Nursing care rider This will help you pay for care services in case you need them.
Exchange traded trust buffers. They are also beneficial to investors who are more concerned about losing money than their desire to achieve huge profits. Buffer ETFs allow growth through put and call options while minimizing some of the market risk.
These ETFs buy an underlying asset that is also tied to an index such as the S&P 500. Returns are typically capped at a certain percentage, but with a built-in “buffer” to absorb some of the losses. For example, the buffer may be set to absorb 15% loss. In that case, if the ETF is tied to the S&P 500 and it drops 18%, your loss will be 3%. A buffer is created by purchasing a put option that gives you the right to sell your exposure if the index falls in value.
Of course, regardless of how you build your portfolio, you or your financial professional should not think you’re done with just creating a retirement plan. It doesn’t always work well after.
Things change. Your personal needs change. The whole economy will change. I regularly update my client’s plans and make minor adjustments as their needs change or events. high inflation — I need it.
That’s why it’s worth having someone in your corner as you plan and enter retirement.
Ronnie Blair contributed to this article.
Index or Fixed Annuities are not designed for short term investment and may be subject to caps, restrictions, fees and surrender charges as stated in the Annuity Agreement.
Appearances for Kiplinger were obtained through a PR program. This columnist was assisted by a public relations firm in preparing this article for posting on Kiplinger.com. Kiplinger was not compensated in any way.
Investment advisory services provided through Brookstone Capital Management, LLC (BCM), a registered investment manager. BCM and First Coast Financial Group Inc. are independent of each other. Insurance products and services are offered and sold through individually licensed and designated agents, not offered through BCM.
Comments regarding safety and security of products and securing income streams are for definitive insurance products only. They do not refer to securities or investment advisory products. Guarantees for fixed insurance and annuity products are subject to the claim-paying ability of the issuing company and are not provided by Brookstone Capital Management.