Preparing
for Good Times and Bad
During
the 1990s, investors witnessed the longest period of economic
prosperity in U.S. history. But after a full 10 years of
growth, the nation eventually cycled back to a period of economic
decline.
The
effects of the business cycle and market fluctuations are obviously outside of
your control. But there are several powerful strategies you can use to help protect
and manage your retirement portfolio in any economic climate.
An appropriate asset allocation — along with a thoughtful schedule for
retirement plan withdrawals and long-term-care insurance — weaves together
a financial strategy that may help your savings last a lifetime.
Asset
Allocation Review
Are your funds distributed appropriately among asset classes such as stocks,
bonds, cash, and real estate? Your risk tolerance, target retirement date,
and overall financial situation should all be taken into consideration.
Allocations generally become more conservative as retirement approaches. But
even retirees may want to earmark a portion of their portfolio for growth
investments, such as equities, in order to safeguard it from the potential
effects of inflation.
Plan Withdrawals
Carefully
When it comes time to create an income stream from your portfolio, remember
that there are regulations governing withdrawals from tax-advantaged
retirement plans such as traditional IRAs, 401(k)s, and 403(b)s.3
Although you must begin taking required minimum distributions (RMDs) by age
701/2 or face a stiff penalty, new rules simplify how RMDs are calculated.
If you have a pension or other sources of income, you may be able to
withdraw less, ease your tax burden, and leave more of your retirement fund
intact so it can continue to grow tax deferred.
Ensure
Health-Care Options
The cost of nursing-home stays and home health care has risen dramatically,
but many retirees will someday require long-term care for an injury or
chronic illness. A long-term-care insurance policy may help protect you from
a dangerous cash drain during your retirement years.
You may need help implementing these strategies for your specific situation.
Twenty years or more down the road, you will be glad you were proactive
about preserving your retirement funds.
