According to various surveys on retirement preparedness, more than half of those who are soon to retire or recently retired expressed concern over their financial futures. A sizeable percentage also feared that they would fall into poverty. It’s no wonder they feel that way in view of the plethora of media reports on the abysmal prospects of today’s pre retirees and retirees. But before you conclude that your future is hopeless, find out where you stand. How much are you likely to have in income and Social Security at the age you want to retire? If you want the comfort of an assured lifetime income on top of Social Security, consider an income annuity, perhaps investing a bit in an income annuity when you retire and more in another income annuity five and/or ten years later when the annuity will pay you more since payments are pegged to your age – the older you are, the more you’ll receive. If you fear you’re going to fall short, delaying retirement, downsizing your home, and/or relocating to a lower cost locale can work wonders on your budget.
Incidentally, I also worry about those who are convinced their finances are in pristine condition. You never know until you prepare a projection using reasonable assumptions, like 3% for annual inflation, life expectancy of age 95 to 100, and no more than 5 to 6% annual investment returns. But whatever your age or financial situation, don’t become paralyzed by fear of the unknown. Chances are you’re okay and if not, the sooner you work to improve your financial condition, the better.
Smart Money Tips
- Do you want to invest for both capital growth and a rising income? This may sound too good to be true, but it isn’t. Some top-notch companies have a tradition and history of regularly raising their dividends. Retirees in particular have benefited from investing in companies with rising dividends which help provide income to keep pace with rising living costs. I’ve often said that retirees need to invest for both growth and income. The only two investments that offer the potential for both are investment real estate (which is a hassle to own and manage) and stocks of companies that pay rising dividends. Many of the greatest companies in the world have a track record of paying consistent and consistently rising dividends. A handful of mutual funds and exchange-traded funds also invest primarily in these companies.
- Photograph your valuables. You never know when a natural or manmade, as in thievery, disaster will strike so preparing in advance is a smart thing to do. Just in case you ever must file an insurance claim, take photos of your valuable possessions now, including furniture, jewelry, and the many electronic devices that reside in most homes. In the event you suffer a loss, having a photographic record will make it easier to show what you had and will greatly facilitate the claims process.
Food for Thought
A mind that is stretched by a new experience can never go back to its old dimensions.
-Justice Oliver Wendell Holmes, Jr.
Money Can Be Funny
Money isn’t everything, but it ranks right up there with oxygen.
-Rita Davenport
Word of the Week
acrasial (ey-CREY-zee-uhl) – Ill-tempered, intemperate, or angry.
Origin: From the Latin acrasia, which comes ultimately from a mixture of two Greek words; acratis meaning “without power” and acratos meaning “unmixed.”
The acrasial protestor so worried the organizers that he was asked to leave.