So, your hoped-for retirement ideas are being shaken by all the negativity concerning the economy, the stock market, political unrest, etc. Therefore, you gravitate towards investments that seem to be safe and sound. However, most people can’t pull off retirement with investment rates that hover around 2%. Indeed, to realize an income of $3,500 a month (on a capital retention basis) at 2%, you would need $2,100,000. Of course, relying on Social Security is a safe bet, right?
My hunch is that most people aren’t going to have several million dollars as they approach retirement age. Therefore, it will be necessary to wade out into what might be considered risky waters.
But what is real risk? Perhaps it isn’t volatility, but rather permanent loss and outliving your money. To be a little sarcastic, I remember a phrase that went something like this: Investing in (you insert a safe investment) is a way to go broke safely. The real issue here is what is your real return – that’s your return after considering taxes and inflation? Even years ago, when guaranteed investment returns were in the double digits, a person’s real return after taxes and inflation could have been negative.
So, it is likely necessary to venture into other investments. But even here, there are ways to invest to minimize what is one of the biggest risks with equity investments, namely volatility.
Volatility has always existed and if history repeats, it always will. Where volatility becomes a real threat is when you let it control your emotions, namely fear and greed.
After all, over the years our economy has survived wars, crises, recessions, depressions, stagflation, and burst bubbles. And, not to be pessimistic or overly dramatic, but if our economy did collapse where would your money be safe?
But back to the retirement dilemma, I would like to leave you with this thought. What if there is a way to make retirement happen in a logical and reasonable manner? Do you think it might be worth your time to discuss this with someone who has helped many people at this important stage in life over the years? Give us a call as there might be a way to change your outlook from fear to optimism.