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Your Retirement... Will it be Fact or Fiction?
By Tomas Cullin
It becomes more apparent each day that inflation has crept back
into our lives even though government statistics may not support
this viewpoint.
Rather, it's the real world cost of food, drugs, fuel, utilities
and education that indicate the inflationary trend.
If you're like most Americans, your retirement account hasn't
grown much over the last 5 years. In fact, it's been pretty
flat. Many of us have vivid memories of the dot.com crash and
the huge plunge in our 401(k) plan and IRA valuations. For one
brief year, it looked like we might be on the road to recovery.
But, this simply hasn't happened to any significant extent.
About 25 years ago, if you worked for a reasonably good sized
company you could expect to receive guaranteed monthly income
from your employer's defined benefit plan. As you approached
retirement, it was relatively easy to predict the amount of money
you would receive from the plan, which, by the way, was funded
totally by your employer.
When 401(k) plans were introduced to the workforce many employers
saw an opportunity to shift the liability of retirement income
away from the company and onto the employee.
From the employer's point of view this was sensible because the
cost of funding defined benefit plans had become prohibitive.
From the employee's standpoint the subtle transfer of
responsibility from employer to employee was lost in the
excitement of reducing their taxable income.
Today, most people who are planning to retire count on a
combination of their 401(k) plan, their IRA, social security and
(if they're lucky) some supplemental mutual fund accounts.
Typically, little thought or effort has gone into coordinating
the effectiveness of these resources. That is, until it's too
late!
If you are planning to retire any time soon, make sure you
understand and account for the reality of inflation. You may
want to address this yourself... or maybe you will hire a
financial planner. Regardless, make certain inflation is
factored into your equation for future income requirements.
The combination of higher inflation plus flat stock and bond
markets can devastate your standard of living. While it's true
some investors will find a way to beat market indices, the
average guy or gal will have a tough time.
When you reach age 62, you're entitled to receive social
security. Although the amount you receive is lower than what you
get at "normal retirement," nevertheless it is guaranteed income
that should be part of your overall plan.
If you withdraw monthly income from your IRA or 401(k) plan, be
prudent in the amount you take out. For example, not too long
ago, it was reasonable to withdraw 8.0 percent because the annual
investment return typically averaged 10.0 percent or more.
Those days are gone... at least in the foreseeable future. So,
plan for withdrawals of only 5.00 or 6.00 percent because your
account likely will not be able to average more than a total
return of 7.00 or 8.00 percent annually.
Many who own real estate and took advantage of refinancing their
homes have just come off a joy ride. Hundreds of millions of
dollars have been regurgitated through the economy as people
chose to use their home equity to pay off debt or satisfy some
extravagant desire.
For those who did not refinance and have diligently managed to
pay down their mortgage, an additional option for retirement
income might be the reverse mortgage. Under the right
circumstances, this ability to get money from your home without
assuming personal liability could be an important part of your
retirement resources.
When it's time for you to retire and receive income, maintain a
balance between fixed (guaranteed) and that which can adjust to
inflation. This might be as simple as using social security for
the fixed portion (this does adjust somewhat for inflation)
together with a mutual fund account that continues to grow in
order to compensate for the actual increase in your cost of living.
About the Author
Tomas Cullin is a credit repair expert. He recently authored a very popular report: The Dangers of Identity Theft and How To Protect Yourself.
Get it at http://creditrepairadvice.net/idtheftsls.html He has hundreds of tips, tools and articles on his website that you can use for your own ID protection! It's a great resource! Visit him on the web at: http://creditrepairadvice.net
or the BLOG http://creditrepairadvice.net/crablog.
Article Source: http://www.simplysearch4it.com/article/31965.html
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