You’ve worked long and hard; you’re at the summit of your financial mountain. Now you are about to come down the other side of that mountain. You will use different financial muscles climbing down than you did climbing up. In other words, your financial strategy must change before you enter the retirement phase. You must start to move away from the thinking you employed in the Accumulation Phase, and the more risky investments you chose, to a more conservative approach, with the goal of preserving your nest egg always top of mind. You must ensure that your nest egg lasts as long as you and your spouse do. Furthermore, you have to prevent erosion of your accounts by staying ahead of inflation by at least 2% or 3%.
During the Retirement Phase you face a number of challenges that you were spared while in the working years or the Accumulation Phase of your life. Americans who are still in the Accumulation Phase investing in securities have three immense advantages:
1) They have a working paycheck that keeps up with inflation. Most retirees don’t. Social Security doesn’t keep up with the inflation rate. Whenever there are increases in Social Security the same increases take place with the out-of-pocket costs for part “A” of Medicare, so it becomes a wash. Additionally, even if you’re lucky enough to have a pension, most of them do not increase with inflation.
2) When the stock markets fall or crash, Americans in the Accumulation Phase can buy in low, because they still have a working paycheck that is keeping up with the inflation rate. Conversely, most Americans in retired years cannot practically take current income from their pensions or Social Security checks to buy into a down market.
3) Americans in the Accumulation Phase have the most important investment element available to them that most retirees don’t have: time (i.e., the time it takes to grow your portfolio back from a market downturn). Most Americans in their working years still have 15, 20, even 30 or more years to go before they retire and thus have the all-important luxury of time to wait for the stock markets to come back, while not having to depend on their developing nest egg to meet living expenses.
All three points above are fundamental parts of being successful with one’s investments in the stock markets. Weathering any stock market storms takes a sustained period of time, cost averaging (buying when the markets are down), and an income that keeps up with the inflation rates. It might sound difficult, but fortunately it’s not as hard as it once was.
“Since 1995,” says Phil Cannella, creator and host of The Crash Proof Retirement Show™, “breakthroughs in the insurance industry mean that American retirees don’t have to take on any market risk or ongoing market fees and can stay ahead of inflation and plan against healthcare risks. You owe it to yourself to investigate these breakthroughs. They are nothing less than a godsend for today’s retirees.”
1. Make sure you are 59½ before withdrawing.
