If you have a fear of outliving your retirement savings, you’re not alone. A recent survey from Allianz Life states that over 75% of those over age 44 fear outliving their money more than they fear death. On top of that, over half of these people do not feel prepared for retirement. If you are one of these people, here are a few ideas that you should consider to help you feel better prepared and more at ease.
tip # 1
Evaluating your expenses and potential income with the understanding that as you get older, most people spend less on discretionary expenses. Also, be aware that Social Security is inflation adjusted. Although, those things take time to have an impact, they are working in your favor.
tip # 2
Have a professional financial advisor run retirement calculations with different scenarios to get a better idea of what you can expect to receive in income from your retirement assets.
tip # 3
This might be the single most important thing you can do now to secure the best and most reliable retirement income possible. Many investors have their assets in the wrong investments and they are putting themselves at significant risk while believing they are being safe. As an example, many investors will keep a larger than necessary proportion of their overall nest egg in low-yielding CDs or bonds when they could get much better income and growth from dividend-paying stocks.
Here's just one idea:
Investing $100,000 equally in these five stocks (Pepsi, AT&T, Johnson and Johnson, Alliance Bernstein, and OG&E) over the past five years would have generated over $23,000 in income with an average dividend of 4.67% and grown in value to over $122,000.
tip # 4
While annuities are often misunderstood, using a quality annuity with a guaranteed income rider as a part of your overall retirement income strategy can significantly improve your income and give you a guarantee of income for life. One strategy I often use is what I call the Reliable Income Strategy. If you have a portfolio of $500,000, this is how the strategy would be implemented:
Reliable Income Strategy
Example Portfolio Value = $500,000
Annual Income = $23,000
35% ($175,000) Annuity with a Guaranteed Income rider at 5%
45% ($225,000) Dividend Yielding Stocks with an average yield of 5%
20% ($100,000) Bonds yielding an average of 3%
This strategy would yield you $23,000 a year and although the value of your investments might dip during market downturns, your income stream would remain relatively consistent as the income is from a guaranteed income rider, dividends and interest. This strategy also provides you the opportunity for your investments to grow in value over time and increase your income.
Of course, the best thing you can do is to schedule a time to visit with an experienced financial advisor and go over your particular situation and needs and let them help you get a clear picture of your situation, analyze your portfolio and recommend personalized solutions to help you overcome your fears of outliving your money.
Mark Johnson is a financial adviser with Heartland Wealth Management, 3351 W. Rock Creek Road, Suite 130, Norman. He can be contacted at 561.7051 or Mark.Johnson@heartlandwm.com.