Life After Work - Will I Be "OK"?

  Transamerica’s Center for Retirement Studies asked 2,690 retirees to identify their greatest fears in retirement.   Of the eleven most commonly sited fears, six of them are directly related to having enough money in retirement. Despite this fear, the same study found that only 22% of the respondents indicated that they own an annuity – the only financial vehicle other than social security and a pension that can provide income for life.   In academic circles, this has been labeled the “annuity puzzle.”   Simply put, even though multiple studies have shown that about 70% of those surveyed find the concept of protected lifetime income attractive, relatively few people actually end up utilizing annuities to provide that income.   Why is that? In my view, there are 3 primary reasons: 1.       While people like the idea of creating a pension, few want to actually pay to create one. You spend your whole life building a retirement nest...

  Most of my posts have dealt with how to protect yourself against the financial aspects of retirement.   But there is an emotional aspect as well.   Multiple surveys have concluded that about 30% of all retirees struggle emotionally – either because of a loss of purpose and/or fewer social connections.   And your health can impact both the financial part as well as the emotional part.   Poor health can not only be expensive, but it can keep you from doing many of the things you long planned to do. You’ve taken the time to get a solid financial plan in place, but how do you know if you are ready emotionally?   I’m going to suggest a new tool introduced by Cam Marston, a leading expert on workplace and marketplace trends.   Cam’s Phase TM into Retirement assessment tool was specifically designed to help you discover how ready you are in 5 key dimensions that drive how you will handle retirement emotionally.   Those 5 dimensions are Purpose, Healt...

  You can prepare all you want for retirement, but unless you have so much money that you can’t spend it all, part of whether or not you will be “OK” is just plain luck.   Did you retire just in time to experience poor market returns (i.e., 2007 and 2022) or did you retire just before stocks took off (i.e., 2019 and 2023)?   When you are accumulating a retirement portfolio, the timing doesn’t really matter.   You’ll experience both up and down years (mostly up), but over the long run the stock market goes in only one direction – up.   But once you start taking money out to fund your retirement, it can matter a lot.   Given the volatility we’ve seen in the stock market over the last 6 months, this is an important risk to consider. Let’s assume for a second that you choose to follow the standard annual 4% withdrawal rate to provide your income.   If the value of your investment falls when you begin taking this withdrawal, you start depleting your retir...

  When building any type of portfolio, the financial services industry almost always assumes that a portfolio made up of 60% stocks and 40% bonds is the proper place to start.   This is especially true with a retirement portfolio since by definition pre-retirees and retirees are older and are assumed to be more conservative.   But is this really the right way to go? Before I tackle this topic, I should acknowledge upfront that I’ve never bought a bond in my life.   And I likely never will.   In the long run, stocks always outperform bonds, so I’ve never seen the point of adding bonds to my portfolio.   Don’t get me wrong.   There were certainly time periods such as the financial crisis of 2007-09 when I wish I owned bonds instead of stocks.   But no one can predict with any accuracy when such times will occur.   Now that doesn’t mean I don’t understand the potential benefits.   Proponents of a 60/40 portfolio will highlight the followi...