An Uncertain Economy Your Retirement Money
July 26th, 2010 | 
Author: An Uncertain Economy Your Retirement Money
Many of you are in the red zone right before retirement or you’ve already retired. No doubt your number one fear is running out of money in retirement. You’re part of a very large and growing demographic force: 35 million over age 65 50 million drawing Social Security and 78 million baby boomers now turning 62. This means the future demand for everything used by the “retirement set” will increase and “retirement prices” will rise dramatically. Many of you may have accumulated a retirement nest egg in a pension account will draw a company pension and/or have other savings and investments earmarked for retirement. Where should you keep your retirement money?
If you’re keeping up with economic and financial developments here’s what you’re seeing: subprime credit meltdown that has destroyed housing and is now spilling over into automobile debt and credit cards; highly volatile stock and bond markets; a weak dollar fueling higher prices for oil and other goods; more unemployment and rising inflation; retail sales consumer confidence and new jobs creation in sharp decline; drastic interest rate cuts by the Federal Reserve to avoid a recession; a money giveaway stimulus package from Washington to prop up the lagging economy; widespread talk of recession and stagflation. These all add up to troubled economic times which should prompt you to review where you have your retirement money.
You’re told the stock market is the best long term but “long term” has a different meaning in retirement. Didn’t the dot.com stock market meltdown in 20002002 send many retirees back to work and prevent others from retiring? Aren’t the current inflationadjusted stock market indexes below their previous peaks? Regardless the loud voices of Wall Street and investment companies are advising you to buy now at bargain prices. Are the markets headed higher or is their advice selfserving? Who can forecast the economy or the stock market?
If the stock market craters as it did in 200002 and 197374 and you lose some of your retirement money how will you replace it? Since there will be no second chance I encourage you to think carefully before you commit your money. If you’ve been told that you’ll do just fine over the longer run generally meaning ten years make sure you can wait this long for a market rebound. Also remember that a rebound is not certain!
What about fixed rate places like government bonds bank CDs and money market accounts? These are rocksolid safe unless your greatest fear is outliving your money. Since current fixed rates are lower than inflation you’ll be losing purchasing power with these choices. The potential loss of purchasing power will only add to the risk of outliving your money. What about real estate collectibles and nonmarket investments? These are not only risky but generally illiquid. Before committing your retirement money ask yourself this question: “How will I handle the worse case outcome?”
There is one savings place that offers an “opportunity” to make an abovemarket rate of return without the risk of loss if held to term. It is guaranteed by some of the world’s oldest strongest and largest financial companies. The rate of return is determined by stock/bond market indexes with owners sharing in the upside potential but avoiding downside losses. The worse case outcome is a guaranteed positive rate of return. The earned interest is income tax deferred until actually withdrawn and there is no mandatory age when the money must be used. Additionally it can be turned into a guaranteed lifetime income that can be started stopped and stored. What’s more it offers penaltyfree partial liquidity for emergencies and bypasses probate if the owner names a beneficiary. It can be opened for a small or a large amount and sometimes more money can be added later. There is no law which limits the amount of money that can be placed in it. It is truly a safe place to keep retirement money.
It is maligned by Wall Street and bankers because it competes with their products. The financial press doesn’t like it either primarily because they are uninformed misinformed or just plain biased. I’m talking about fixed indexlinked annuities that are offered by insurance companies: the same companies that insure your home live health business and other valuable assets. The worse case outcome is a positive albeit small rate of return if held to maturity but there is an opportunity to do much better. Fixed indexlinked annuities are not for everyone but you need to consider them as one of your safe options for retirement money. Where are you keeping your retirement money in today’s uncertain and troubled economic climate? If in risky places now is a great time to review your options.
Shelby J. Smith Ph.D.
March 2008
Learn about safe money places check out the Retirement Pros website http://www.theretirementpros.com/ I’m also doing free monthly video seminars online sign up at: http://www.theretirementpros.com/TeleSeminarMRM.php
About the writer: Dr. Smith has an earned Doctorate in Economics from Iowa State University of Science and Technology along with a Bachelors and Masters degree in Economics from the University of Wyoming. He started his professional career as a college professor and held professorships at several Midwestern and Southern universities. He entered the corporate arena as the Chief Economist of a Regional Federal Home Loan Bank moved then into the banking business where he served as Economists Chief Financial Officer President CEO and Chairman of several institutions. He started a financial marketing company that catered to financial institutions and their clients by providing investment products. For the past twenty years Dr. Smith has been providing consultation and services to conservative investors and savers positioning their assets for retirement. In the process Dr. Smith has managed a broker dealer and held licenses that allowed him to offer securities and insurance products to the general public. He is currently the ask the expert at the Retirement Pros a senior officer at BHC Marketing Ltd. and writes newsletters and other retirement articles for the retirementminded.
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