When it comes to investing, there’s no such thing
as a “safe bet.”
Every type of financial vehicle has some level of risk, even checking and
savings accounts. Back in the 1920s, people believed that the safest place to
keep their money was a bank, and they were right. But as they witnessed during
the Great Depression, even those assets were not 100 percent safe. Bank runs
caused banks to deplete their cash holdings, and they had to call in loans and
liquidate assets to try to keep up with withdrawal demands, which subsequently
led to bank failures.1 In response, the government created the
Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000
per depositor, per FDIC-insured bank, per ownership category.2
Throughout history, bank deposit accounts have generally been
considered the safest place to keep assets. However, today’s longer lifespans
illustrate that risk takes many forms, including the potential risk of
outliving your money if you don’t save enough, have a well-diversified
financial portfolio to help outpace inflation and seek out multiple sources for
reliable income streams. We can recommend a variety of strategies to help
retirees pursue each of these goals, based on individual circumstances. Give us a call, and let’s discuss your options.
Consider even Social Security. The agency projects that by 2034,
its Trust Fund will be reduced to the
point where it can pay out only 74 percent of promised benefits to retirees.
While it’s unlikely this safety net will collapse, Congress will need to take
steps to keep the fund fully solvent.3
However, individuals who invest in 401(k)s should be aware that
even if their company closes or goes bankrupt, vested 401(k) assets belong to
the account owner; the employer or the employer’s creditors can’t touch them.4
Another factor that can potentially affect your retirement assets
is the impact long-term inflation can have on cost
of living expenses for people who spend 20 to 30 years or more in retirement. Inflation
has remained low for many years, and some market experts believe that, as a
result, many investors are not well-prepared for a resurgence of inflation.5
With the knowledge that
investing offers the possibility of growth but also the risk of loss, it’s a good idea to consider working with a financial
advisor to help tailor a financial portfolio to your specific goals, timeline and tolerance for different types of risk.
Your financial advisor may also suggest annuities, and although they are not investments, some annuity contracts credit
interest earnings that are linked to the performance of an external market
index. These types of annuities, often referred to as fixed index annuities, offer
a combination of higher interest growth
potential and guaranteed income. The guarantees are backed by the insurance company so it’s important to check out the credit rating and financial strength
and experience of the issuing insurer.
Content prepared by Kara
Stefan Communications.
1 History.com. “Bank Run.” http://www.history.com/topics/bank-run. Accessed Aug. 6, 2017.
2 Federal Deposit Insurance
Corporation. June 3, 2014. “Deposit Insurance FAQs.” https://www.fdic.gov/deposit/deposits/faq.html. Accessed August 15, 2017.
3 Chris Farrell. Forbes/Next Avenue.
June 24, 2016. “The Truth About Social
Security’s Solvency And You.” https://www.forbes.com/sites/nextavenue/2016/06/24/the-truth-about-social-securitys-solvency-and-you/#2590b10b2199. Accessed Aug. 14, 2017.
4 Dana Anspach. The Balance. Nov.
22, 2016. “If My Company Closes, What Happens to
My 401k?” https://www.thebalance.com/if-my-company-closes-what-happens-to-my-401k-2388225. Accessed Aug. 14, 2017.
5 Rebecca Ungarino. CNBC. Aug. 5,
2017. “Inflation isn’t stirring, but still the
biggest risk to investors even as it’s ‘least apparent’: Brown Brothers.”
https://www.cnbc.com/2017/08/05/with-inflation-dormant-investors-downplay-risks-to-the-economy.html. Accessed Aug. 6, 2017.
Investing involves risk, including the potential loss of
principal. Any references to reliable income generally refer to fixed insurance
products, never securities or investment products. Annuities are insurance
products that may be subject to fees, surrender charges and holding periods
which vary by company. Annuities are not a deposit of nor are they insured by
any bank, the FDIC, NCUA, or by any federal government agency.
Annuities are
designed for retirement or other long-term needs.
We are an independent firm helping
individuals create retirement strategies using a variety of insurance and
investment products to custom suit their needs and objectives. This
material is intended to provide general information to help you understand
basic financial planning strategies and should
not be construed as financial advice.
The information contained in this material is
believed to be reliable, but accuracy and completeness cannot be guaranteed; it
is not intended to be used as the sole basis for financial decisions. If you
are unable to access any of the news articles and
sources through the links provided in this text, please contact us to request a
copy of the desired reference.
Investment Advisory Services offered through Global Financial
Private Capital, LLC.
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