In Hawaii, seniors’ incomes are boosted by the state’s strong union culture, which provides many retirees with the safety net of monthly pension checks, said Sante. That’s not the case in most of the nation, where a growing number of seniors are losing the guarantee of monthly pension checks throughout retirement, Sante said. In recent decades, companies and government organizations have drastically scaled back pension benefits or replaced them with 401(k) plans. For many retirees, Social Security has become the primary source of income.
Read Austin reverse mortgage the rest here: Seniors in 48 states face serious income shortage
How Long Will Your Retirement Savings Last?
(Note: That example was based on July 19 data.) Its almost impossible even for people who have studied finance to be told at age 55 to take their assets and project them out to age 65 and calculate what annuity prices are going to be at that time, says Jack VanDerhei, research director at the Employee Benefit Research Institute , a nonprofit in Washington. For the vast majority of defined-contribution plan participants, I think this is going to simplify it to the point that they can understand what theyre facing in terms of a shortfall, VanDerhei says. If this actually gets used the way it is intended to, I think its going to be a huge help. BlackRocks index and accompanying tool assume a constant inflation rate of 2.5%. Thats because its tough to find annuities linked to the consumer-price index, and doing so could increase the cost to the point that people think they dont have enough money to retire, says Chip Castille, head of the firms U.S. and Canada defined-contribution group.
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Increase Your Retirement Income
“If it weren’t for inflation, cash and bonds would be all you need,” says Lubinski. But even with modest inflation of 3% a year, your buying power would be cut in half in about 25 years, so you need to invest for future growth, too. When you add stocks to your portfolio, however, you also add risk. In the 1980s, Lubinski began working on an investment strategy that would provide secure income in the early years of retirement and shift riskier stock investments to a longer-term portfolio. He divided clients’ assets into five-year increments, and funded each with enough money and appropriate investments to provide income for that period of retirement. The first phase of this “income for life” model focuses on guaranteed income.
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Taper-proofing fixed-income retirement portfolios
This is the ultimate goal and if this happens, cha-ching! According to Christopher J. Towle of the asset management firm Lord Abbett, “Rising interest rates generally indicate improving economic conditions, and equity prices often appreciate as a result. And due to convertible bonds’ potential conversion into an issuer’s equity, this asset class, historically, also has appreciated in most cases when the 10-year Treasury yield has risen by 100 basis points (bps) or more.” Convertibles can also help investors limit volatility.
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