Tag Archives: Investing

Retirement Concern: How to Alleviate Four Common Fears for Retirees

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Source: TD Ameritrade’s The Ticker Tape 

https://tickertape.tdameritrade.com/retirement/reduce-common-retirement-concerns-fears-17461

1. Investment Loss

One of the biggest financial fears retirees may have is investment loss. Because the markets move cyclically, there’s a good chance you’ll experience a market downturn during retirement. This can be doubly painful if you’re a retiree, because you have little choice but to sell at a loss for the capital you need. For retirees this is called “sequence of return risk,” because withdrawing investments in a down or declining market may cause you to liquidate too many shares, which then leaves fewer shares to grow when the market bounces back.

2. Running Out of Money

When you’re younger, a market decline can be weathered in multiple ways: perhaps by saving more, working longer, getting a second job, or just waiting it out because you won’t need to use your savings for years. But once you’re close to or in retirement, running out of money becomes a serious concern. Few people would want to go back to work at age 95 because they ran out of money. Fortunately, the flooring strategy helps here too. Lifetime income means just that: an income stream that’ll last no matter how long you live. By deploying annuities and other lifetime income strategically—just to meet your essential expenses—you can cover basic needs and avoid becoming a burden to your kids or others.

3. Major Health Event

As we get older, it’s common to see an increased need for health care. It’s natural, as a retiree, to worry about a major health event that can set you back financially. But it’s possible to prepare to some degree for such events.

4. Inflationary Effects

Inflation is sometimes considered the “quiet killer” of retirement. Over time, prices rise, making your money less valuable. A dollar today is worth more than a dollar tomorrow. Keeping up with inflation is an important part of retirement planning.

Planning Matters

One of the best things you can do for yourself is to plan ahead. Meet with a retirement specialist to create a plan that might help you avoid unpleasant surprises in the future. The earlier you start, the more likely you are to avoid the common fears faced by retirees. Having a plan in place and making consistent contributions to a retirement portfolio can go a long way.

 

What Is Financial Health? – Morningstar Blog

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When evaluating a client’s “financial health,” advisors should take into account both economic stability and emotional well-being.

Emotional health is wreaking havoc on their finances. Some clients may be financially well-off, but so fearful of making a wrong choice that they don’t make any, leaving their wealth to slowly erode in cash accounts. Then there are clients who spend too freely, choosing blissful ignorance about potential damage to their bottom line.

Neither of these types of clients are financially healthy—regardless of wealth—because an individual’s attitude toward finances is just as essential to overall health as it is to the economic aspects of one’s life. In fact, the American Psychological Association  reports that money is continually one of the top sources of stress in U.S. households, regardless of the economic climate. 

It’s time to redefine the term “financial health” so it includes both a person’s economic stability and emotional well-being around his finances.  

— Read on www.morningstar.com/blog/2019/04/11/financial-health.html

What Is Financial Health? – Morningstar Blog

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Economic stability is only part of reaching financial health 

What is financial health? The topic usually brings to mind only a person’s monetary wealth, but, as many advisors know, even the wealthy can suffer because of their finances. For example, consider the client who has more than enough financial resources to last the rest of his life, but gets anxious about even the smallest splurge. A standard financial algorithm would classify this type of client as being in excellent financial health, since he possesses enough material wealth to withstand any reasonable economic shock. Yet, this finance-related anxiety can ultimately mean his quality of life is quite low.
— Read on www.morningstar.com/blog/2019/04/11/financial-health.html

Should You Try Timing to Avoid Bad Markets? – Retirement Researcher

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Everyone likes the markets when stocks are going up. We’re all getting the returns that we are “supposed” to be receiving for putting our money at risk. Naturally, we aren’t big fans of the market when stocks start falling. Unfortunately, stocks are “supposed” to go up and down – a lot.

The financial markets are based on the relationship between risk and return. We wouldn’t be able to harvest the long-term returns we expect without the risk. And, well, this is what risk looks like.
— Read on retirementresearcher.com/occams-should-you-try-timing-to-avoid-bad-markets/

Should You Own Bonds in a Rising Rate Environment? – Retirement Researcher

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One of the first things that finance students learn is that bond prices (and therefore bond returns) are inversely related to interest rates. Considering that all else is equal, when interest rates are going down, bond prices will go up, and when interest rates are going up, bond prices will go down.

This is fundamental to how finance works, and this raises the obvious question of why you would want to hold bonds when rates are rising – why would we choose to lose money?
— Read on retirementresearcher.com/should-you-own-bonds-in-a-rising-rate-environment/

The Art of Disciplined Investing – Retirement Researcher

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Disciplined investing is rewarded by the financial markets because capitalism, by and large, works. For investors to put their capital at risk, there needs to be a commensurate expected return. This is finance. Everything else is just details.

Investors are rewarded for taking risks. That means that sometimes that return doesn’t appear. In fact, if you look at the equity premium, or the returns stocks minus the returns of short term US Treasury bills, it’s actually pretty rare for the premium to be close to the average.
— Read on retirementresearcher.com/the-art-of-disciplined-investing/

Understanding Bonds: Riding the Yield Curve

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Rates on bonds of different maturities behave independently of each other with short-term rates and long-term rates often moving in opposite directions. By comparing long- and short-term bond yields, the yield curve describes future trends in bond returns.
— Read on www.kiplinger.com/article/investing/T052-C000-S001-riding-the-yield-curve.html

Equity Volatility Does Not Spell Recession – TheStreet

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A Recession Is Not Imminent.

Equities and bonds are worried about a recession.

With the escalating trade war with China, the odds of a U.S. recession have risen a little, to say a one-in-three chance. Still, we are hard pressed to see an actual U.S. recession.
— Read on www.thestreet.com/markets/equity-volatility-does-not-spell-recession-15065765