With a great many investment portfolios down 15% or so, what can retirees do to make up for that lost source of income?
Now that COVID-19 has officially changed everything, let’s talk about how you can maintain as much of your retirement income as possible.
The combination of factors we have witnessed is almost overwhelming.
MoreAn impressive year in the stock market concluded the decade with a bang, which means it is a good time to ask yourself, “Are my retirement plans better off in 2020 than they were a year earlier?”
Along with a Dow Jones above 28,000, we have witnessed two other noteworthy events: Advisory firms are developing lower-cost strategies to help you spend that stock market windfall in retirement. And the government has made it easier for employees to turn their savings into pension-like lifetime income.
Once you’ve created an income plan for your retirement, don’t think you’re done when the numbers on paper meet your immediate expectations. A successful plan requires regular analysis and adjustments. Both might be required, either because your goals change or the world shifts.
That is the benefit of an income allocation plan over other types of planning.
When I wrote an article called Don’t Bet Your Retirement on Monte Carlo Models, I suggested reliance on safe sources of income, including annuity payments, and a modest outlook on the market to avoid huge ups and downs that you can’t control.
MoreWhen dealing with percentages, an offer that sounds good at first may turn out to not be so great, depending on where you are in your retirement planning.
As you accumulate savings, for instance, you’re looking to generate growth in your account and so you may hire an investment advisor to help you make the best choices.
Their fees are typically around 1%.
That number seemed low to my trainer, for example: “Only 1% a year,” as he said.
(Of course, on $1 million of savings, you would pay $10,000 – and more – each year.)
MoreWhen you sit down with a traditional financial advisor to plan your retirement you will provide her with the spending budget you have in mind. The advisor will adjust that amount for inflation and after running through a “black box” model, will predict how many years your retirement savings – typically made up of cash, stocks and bonds — will last.
The model to make this prediction is called “stochastic” — a fancy way to describe what is a typical Monte Carlo simulation model.
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