Retirement planning is hard because safe, secure income is the key to a confident retirement. But here’s the real question: where do you find it? Bond mutual funds? They are often called “fixed income” investments, but are they safe?
In my view, any asset that refers to itself as “fixed income” should come with a guarantee of actual fixed income for as long as you need it, right? Otherwise, if the account is volatile and can fluctuate down due to market forces—at the same time you’re are withdrawing from it, what good is that? There are many reasons I do not recommend bond funds for retirement income. Poor performance and lack of guarantees are the main ones.
Problem #1: Bond funds are risky, they are volatile, and they can lose money.
Taking steady withdrawals from bond funds can exacerbate your problems, not solve them. If you take a steady amount of income from a bond fund that is going down in value, you are accelerating depletion, not securing your retirement.
Problem #2: Bond funds have no income guarantees and you are at risk of spending down your principal with nothing backing you up.
You can buy bonds directly and get a fairly decent rate right now, but short term bonds pay more than long term bonds. Isn’t your plan for retirement a long term proposition?
When you buy a short term bond at a higher rate today, what will the rate be when it matures and you are forced to look for a new bond? This is known as reinvestment risk, and many bond investors today are taking that risk without knowing it.
Replacing your income from work is job number one when planning a confident retirement.
Guarantees matter in retirement, especially with income. What good is an income investment if the principal is not protected? What good is an income investment that goes up and down in value with the whims of the market, or with interest rates rising and falling?
Wouldn’t you rather have an income that is guaranteed for life, rather than temporary—especially if you can protect your heirs?
As we move along in the 2020s toward the 2030s, the national debt has surpassed $32 Trillion, and will surpass $40 Trillion before you know it. We’re not hearing any discussions of lowering the debt or cutting spending. Therefore the “usual suspects” often recommended for retirement income like bond funds, stock funds, and REITs are in a more precarious position than ever.
It would be nice to lean on a pension but pensions are becoming more rare.
Why do pensions and other forms of guaranteed lifetime income make sense in retirement? Because lifetime income—guaranteed–can take much of the uncertainty out of your financial plan. Who would not want a pension of $30,000 to $50,000 a year to go along with a six or seven figure 401(k) waiting for them as they retire?
The fact is that fewer than 20% of Americans are now retiring with pensions, and some of those pensions are not as sizable as in the past.
If you don’t have a pension, but you want one, is there a way to “buy” one?
The logic of owning a reliable and steady source of income that lasts a lifetime is becoming more and more clear. Most of us do not think less of a person who owns a nice pension. We don’t question their intelligence.
Then why would anyone question the intelligence of a person who dedicates a part of their retirement savings to a high quality, top rated annuity that guarantees lifetime income?
Annuities are made for retirement. They can step in to a plan for retirement and fill the void left by the problem of “no pension.”
They are not for ‘30 somethings’, they are for “50, 60, and 70 somethings.” It’s quite simple really: by using fewer dollars to create the income you need in retirement with an annuity, you have more money left over to invest for growth.
Bucket Planning versus Pie Chart Planning
Separating your retirement money into financial “buckets”—each with its own specific purpose and time deadline, may help you gain a new sense of confidence that your money will last. Bucket planning with annuities in your “income bucket” may be a way to transform your retirement into something better.
That said, it is very important to compare annuities with an experienced Certified Annuity Specialist®, or other qualified professional, who does not treat annuities as a sideline, and has verifiable years of experience.
That’s why more retiring professionals are choosing principal secure NEXT GENERATION index annuities rather than bonds to anchor their retirements. You yourself may be interested in learning more about annuities but you can’t wrap your head around the lingo—like caps, spreads, bonuses, and participation rates.
That’s a natural reaction because no one likes to feel dumb, and none of us wants to make a financial mistake due to a lack of clear transparent detail.
Relax. As an Accredited Investment Fiduciary® and a Certified Annuity Specialist®, I can help you understand how annuities work. I compare over 1200+ annuities for my clients, with no sales pressure. Right now, with interest rates higher than ever, it’s a perfect time to learn more. Lock in your income rate for life while protecting your heirs and your spouse. I’ll show you how.
