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The One Big Fear That Many Retirees Have

The One Big Fear That Many Retirees Have

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Thursday, 31 May 2018 04:45 PM Current | Bio | Archive

There’s probably only one thing that retirees fear more than not having enough money to retire, and that’s running out of money in retirement.

No matter how diligently you save and invest, there are always unexpected expenses that can pop up out of nowhere and siphon off all your hard-earned money. Imagine saving and investing for decades, only to see your nest egg disappear due to illness, a house fire, or some other calamity.

That’s why it’s more important than ever to make the right investment decisions before you retire, not just so that you’ll have enough money to retire, but so that your money will last you through retirement.

Many Retirees Not in Sound Financial Shape

The bad news is that not many American households have enough money saved up that running out of money years in the future is a worry. Most Americans have to worry about running out of money within a year.

Nearly half of American households have less than a year’s worth of savings built up for retirement, and only about 25% of households have enough that they can even think about comfortably living 5-10 years or more in retirement. If you’re among those Americans who are disciplined and have enough money saved up, though, you’ll want to make sure that your savings continue to go to work for you after you stop working. That means making sure that your investments continue to gain in value after you’ve stopped working.

Past Performance Is No Guarantee of Future Performance

Many investment advisers will urge their clients to invest in stocks, as stock markets have traditionally been one of the quickest ways to build up wealth. But the performance of stock markets has been uneven over time. If you’re lucky enough to get into stock markets when they make double-digit returns, you could quickly see your nest egg multiply to levels that will enable you to retire comfortably. But if you invest in a market that is underperforming, making low single-digit returns, you could end up spending years or even decades fretting about whether you will have enough money to retire on.

The future is never certain, which is one of the reasons investors find it so frustrating to make the right decisions. Investors who invested heavily in stock markets in the early part of the century probably saw the performance of markets throughout the 1980s and 1990s and figured they could make the same kind of returns. But the dot-com bubble and crash followed by the housing bubble and 2008 financial crisis set investors back years. Annualized growth of stock markets since 2001 has been less than 5% for both the Dow Jones and the S&P 500. While that’s not a terrible return, it is nowhere close to the levels seen during the 1980s and 1990s, and is below the historical average.

Gold Can Help Investors

Gold, on the other hand, has an annualized growth rate of nearly 10% per year since 2001, double that of stock markets. Investors who took advantage of gold’s ability to hedge against inflation and financial calamity were rewarded by tremendous returns on their investment. Even those who got into gold later, during the financial crisis, have seen their portfolios outperform stock markets.

But as every investor knows, past performance is no guarantee of future performance. Your investment decisions are personal, based on your individual needs and your expectations of the future. The only thing that is certain is that you need an investment that will continue to grow in retirement, so that you can live off interest as long as you can and not run down your principal.

How Do You View the Future?

It’s up to you then to determine when you expect to retire and what you expect the overall business and investment climate to be like when that happens. Your investment decisions should then reflect those views and expectations.

If you have 30 years or more until retirement, you can probably afford to invest in stock markets, even if you think the prospects of another financial crisis are highly likely. You’ll want to be careful, obviously, but you have time to make up for any mistakes you might make.

If you’re less than 10 years away from retirement, on the other hand, you’ll want to be more careful. You’ll have to assess your own appetite for risk and determine just where you want to invest your money. And you’ll have to predict where you think markets are going to go over the next decade.

If you’re a stock market bull and think that the Dow Jones will continue to make record returns over the next several years, then you’ll probably want to continue plowing money into stocks. But if you think that the economy will enter another downturn now that the Federal Reserve has started tightening its monetary policy stance, you’ll want to think about investing in gold.

Gold has many advantages, not least of which is its use as an asset to protect wealth in times of financial calamity. When stock markets perform poorly, gold often performs very well. And with a gold IRA you can even roll over your existing retirement assets from a 401(k) or IRA into a gold IRA, with all the same tax advantages of a traditional IRA account.

As with any investment decision, time is of the essence. Putting yourself in a sound financial position before a crisis hits is key to protecting your investments. So if you’re worried about the direction the economy and stock markets are taking, start thinking today about how best to protect your retirement savings.

Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.

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TrevorGerszt
When stock markets perform poorly, gold often performs very well. And with a gold IRA you can even roll over your existing retirement assets from a 401(k) or IRA into a gold IRA, with all the same tax advantages of a traditional IRA account.
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