Investors have a lot to be fearful of these days. They have legitimate concerns about the deficit, the state of the economy, and high unemployment rates.
1. I am going to run out of money. This is the big one. Almost all investors took a huge hit in their personal and retirement portfolios in 2008. Many have been the victims of a sluggish economy and downsizing. It’s the perfect storm for financial disaster, especially if you are at or near retirement. Consider these options:
- Delay retirement. You can increase your Social Security benefits by 7 to 8 percent for every year you delay retirement. You will also be increasing your 401(k) plan contributions. Finally, you will delay the time when you need to tap into your retirement nest egg, which gives it more time to grow.
- Buy a fixed-income annuity. With a fixed-income annuity, you give the insurer a lump sum return and you receive periodic payments for the rest of your life. For conservative investors, fixed-income annuities (not to be confused with variable deferred annuities) can significantly reduce the possibility of running out of money. TIAA-CREF and Vanguard are the leaders in low-cost fixed annuities.
2. The dollar is falling. Many investors worry that record deficits will continue to erode the value of the dollar. They believe a falling dollar will affect the quality of their life in retirement.
Dan Solin is a Senior Vice-President of Index Funds Advisors. He is the author of the New York Times best sellers The Smartest Investment Book You’ll Ever Read, The Smartest 401(k) Book You’ll Ever Read, and The Smartest Retirement Book You’ll Ever Read. . His latest book is Timeless Investment Advice.
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