It’s that time of year again. Halloween is here. It’s time to stock up on candy, carve your pumpkin, and find the perfect costume. Soon, scary movies will be on television and you’ll have little ghouls and goblins showing up at your door for trick-or-treating.
This may be the scariest time of the year, but it only lasts a month. The truth is there could be gaps in your retirement strategy that could come back to haunt you for years or even decades. Below are a few common retirement planning mistakes that can have frightening long-term consequences. If any of these sounds familiar, it may be time to meet with a financial professional.
Having the wrong allocation.
Asset allocation is an important part of any retirement strategy. Your allocation influences your risk exposure and your potential return. Generally, risk and return go hand-in-hand. Assets that offer greater potential return usually also have higher levels of risk. You can use asset allocation to find the right mix of assets for your retirement income goals and risk tolerance.
Having the wrong allocation can be problematic. For example, many people have less tolerance for risk as they approach retirement. As you get closer to retirement, you have less time to recover from a loss and thus less tolerance for risk. However, if you don’t adjust your allocation, you could have more risk exposure than is appropriate. A downturn could substantially impact the amount of income you have set aside for retirement.
One way to protect your assets and reduce your risk exposure is to use a fixed indexed annuity (FIA) for part of your allocation. FIAs offer potential interest that is tied to the performance of an external market index, like the S&P 500. If the market performs well, you may earn more interest, up to a maximum amount set by the insurance company.
However, if the index performs poorly over a given period, you won’t lose any premium. Most FIAs have a principal guarantee* which means you won’t lose money due to market loss. You may earn zero interest, but your contract value won’t go down.
Not guaranteeing* your income.
Income is the name of the game in retirement. One key to a successful retirement is having income that meets or exceeds your expenses. However, much of your income may be unpredictable. While Social Security income is guaranteed, your income from your personal savings may not be. It can be difficult to plan your retirement when you don’t know how much income you will have or how long it needs to last.
Again, an FIA can help you manage this risk. Many FIAs offer optional benefits called guaranteed* withdrawal riders. With these features, you’re allowed to withdraw a certain amount each year. As long as you stay within the allowed withdrawal amount, the income is guaranteed* for life, no matter how long you live or what happens in the financial markets. This predictable income can help you make more informed financial decisions and live comfortably in retirement.
Not working with a financial professional.
Are you more of the DIY type? That’s an understandable approach, but it could also create some frightening risks. For instance, you may not see potential risks, like gaps in your asset allocation. Or you may not fully estimate your income need for a long retirement.
A financial professional can use their knowledge, experience, and resources to develop a customized strategy for you. They can identify gaps in your plan and recommend appropriate strategies, such as FIAs or other financial vehicles. Sometimes an outside opinion can help you identify risks that you didn’t see yourself.
Ready to take the terror out of your retirement strategy? Let’s talk about it. Contact us at Cornerstone Wealth Management. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research, a Registered Investment Adviser. Cornerstone Wealth Management Group and Cambridge are not affiliated.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
19301 - 2019/9/24