In terms of your finances, your preretirement earning years focus on accumulation and growth of your money. You earn money from your job or business to pay for your current living expenses. You set some aside for emergencies and for future needs like college and retirement. Your goal is to accumulate as much as possible by earning it and investing it.
After retirement, you typically no longer have money earned from your job or business to pay for your living expenses. You need safety and liquidity to ensure available funds for day-to-day costs of living, along with growth to help ensure your funds last your lifetime. The growth-oriented portfolio structure of your earning years may no longer apply as you enter into retirement, and you may have to change the way you evaluate your portfolio’s performance.
In fact, in an effort to help reduce risk and protect principal, many retirees move their assets to more conservative investments. Such a portfolio is designed to provide higher rates of current income and less volatility. Put another way, your need to preserve what you have now typically outweighs your need to grow your money at the same rate as the stock market, although you still need enough growth to ensure inflation doesn’t reduce your purchasing power during retirement.
A retirement distribution plan seeks to find that middle ground between reduced risk and greater return, taking into consideration all income streams (i.e., Social Security, wages, pensions, investment income, annuity income, etc.), assets, inflation risk, investment risk and tax exposure. Numerous variables can come into play, so each factor must be evaluated based on each individual’s circumstances.
Creating a retirement distribution plan can be complex and requires a thorough understanding of investment products and strategies and their associated risks. You may want to consider meeting with a Certified Financial Planner to help you create a plan designed to efficiently and effectively use the assets you’ve accumulated to fund your retirement.
Not Forty, But Thirty – Beginning Jan. 1, 2014, U.S. employers with at least 50 “full-time employees” will be required to provide for those employees a minimum level of government-defined health insurance. A “full-time employee” is defined as a person that is employed on average at least 30 hours per week (source: The Patient Protection and Affordable Care Act, BTN Research).
Getting Older – Between now and January 2017, four of the nine existing Supreme Court justices will turn at least age 78 (source: Supreme Court, BTN Research).
Debt – Total outstanding debt of the U.S. was $16.261 trillion as of Oct. 31, 2012, up from $15.223 trillion as of Dec. 31, 2011. The $1 trillion increase in debt is equal to a daily deficit of $3.4 billion. Our debt ceiling is $16.394 trillion. At $3.4 billion of daily deficits, the U.S. will hit its debt ceiling on Dec. 9, 2012 (source: Treasury Department, BTN Research).