The past decades have delivered stagnating wages and a staggering increase in the cost of living, making it difficult to meet monthly expenses and even more difficult to contribute to retirement savings.
The result is that a greater number of people of retirement age are forced to continue working when they should be enjoying the fruits of their hard-worn labors.
The outlook for future retirees is no less bleak. Pensions have all but perished and there’s a lot of uncertainty around the future of Social Security, leaving many to wonder if the coffers will be depleted by the time it’s their turn to retire.
For many Americans, retirement planning has become more like navigating an obstacle course than living the American Dream.
In addition to fears of running out of money or depending on welfare, you could easily be derailed by taxes, long-term care, a stock market crash or several other financial threats.
What happened to the days when putting in your time meant you could retire and go check the boxes off your bucket list? Those days are history. The changing financial landscape requires a change in your approach to retirement planning.
There are two major pillars of a strong retirement income strategy. The first is multiple income streams that address the unknowns like how you will pay for long-term care should you need it. This is crucial for providing your desired lifestyle during retirement. Planning these income streams early allows you to achieve the appropriate balance between risk and return by diversifying your investments then phasing out risk over time. Your age at the time you devise your retirement strategy will help determine your risk tolerance and, therefore, which financial vehicles are right for you.
If you’re younger you have more time to save money, but you typically need to save more. So, it makes sense to invest in the higher-risk, higher-return financial opportunities like stocks. If you’re closer to retirement, your risk tolerance is much lower because you want to protect the savings you have already accumulated, so you should stay away from riskier investments and put your money in something with safer returns. In addition to Social Security and retirement accounts, your income streams can include certain types of annuities and insurance products, real estate, and various alternative investments.
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