What tools can you use to grow your money? If you think about your money and retirement, where can you put it to help you reach your retirement goal? We ask folks this question as they come to us to form a retirement plan, and we get a variety of answers: stocks, mutual funds, bonds, annuities, gold, real estate, CDs, savings accounts, money market accounts, oil and gas, currency, etc.
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Let’s talk about some of these for a moment, and the possible results.
With stocks, you have the potential for the stock to increase in value. You have a piece of ownership in the company and if the company does well, your share values may increase. How much? Who knows? It depends on a lot of factors. If you are fortunate enough to invest at the right time, you may experience huge increases in values over a short period of time. If your timing is bad, you could experience huge losses.
If you don’t like risk, you may have much of your money in the bank. With the backing of the federal government on your deposits, you may feel safe from the possibility of losing your money. What are bank accounts currently paying? Five to 6 percent, right? Maybe back in the good old days, but you would be lucky to get anything like that in today’s interest rate environment. It seems like banks act like they are doing you a favor by holding your money for you and not really paying you much in return, all the while charging account fees. However, in many cases bank accounts are liquid. You can drive down to your local bank branch and draw it out.
Bonds are viewed by many as safer than stocks. But are they, really? When interest rates go up, the values of bonds go down. With interest rates very low, ask yourself, “Where will the rates go in the future?” and “What will it do to the value of bonds?” One result we can get from a bond is potential tax benefits. If we buy municipal bonds, we can get some tax advantages that other investments do not offer.
How about annuities? Our view is there are good ones and bad ones. Annuities offer tax deferrals and the opportunity for income for life if you exercise certain options. This means if you start taking a fixed income stream for life from an annuity, even if your money runs out, the insurance company still has to continue paying you that income for the rest of your life.
So far we have talked about tools to use with our money, and the results we may experience. What matters most to you in life? When we ask this question, we get answers like health, family, kids, grandkids, faith, pets, etc. If the tools you use make you a lot of money but you lose your health, will the amount in your bank account help you?
When The Retirement Guys help formulate a retirement plan (we call it The Retirement Game Plan), we think it is vitally important to come up with a comprehensive plan that ultimately helps you enjoy and focus on what is important. Think about what that is for you.
Do you have a written income plan? If not, why not? Without income, there is no future (retirement). It’s all about income. If the answer is no, you’d better get with someone that can sort it out quick. I (Mark) sure don’t want to be stressed out worrying about if I will outlive my money in retirement, and I bet you don’t, either.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550
