Six Simple Steps To Recession Proof Your Retirement
Six Simple Steps To Recession Proof Your Retirement
There is no question that if we are not in a recession by the economic numbers, consumers are behaving as if we are. To recession-proof your retirement income, take these six steps:
1 - Pick a retirement income strategy that is not tied to market fluctuations
There are plenty of calculators available to design your retirement income strategy. But beware! Not all are designed to be in your best interest. A lot of them are geared towards the investment vehicle the site is selling. A great number of retirement income planning calculators make the mistake of trying to predict the future; we know how dangerous that game can be. Some are just unaware that they are tying you to market fluctuations, even if you don't want to. Be certain to pick the strategy that best suits your situation. You should be looking for the lowest rate of return needed, combined with the greatest investment flexibility.
2 - Put strategies ahead of investments
Too many times investors go for an investment they think is worthwhile, or one that is 'hot'. But many times that 'hot' investment or worthwhile investment doesn't fit into their retirement income strategy. For example, if you are living on interest gleaned from bank CDs, would you sell them all and put your savings into just one stock? I don't think so.
3 - Align your investments to your income strategy
Once you pick your income strategy, you can pick the investments that align to that type of strategy. Just as in the previous example, if you picked a strategy that was an all fixed 'income investments' strategy, you wouldn't be out hunting for stocks. If you find you are, then you might be in the wrong strategy.
4 - Budget your annual income to a level monthly number, especially if you are paid on a commission basis or get paid bonuses.
In order to match up income and expenses, budget your funds to last throughout the year. This will make it much easier month to month, and especially at the end of the year to make sure your income exceeds your expenses. Commissions, bonuses, even part-time salary paid in uneven increments (such as consulting income), need to be annualized (how much is this a year), and then divided by 12 to make it monthly.
5 - Estimate expenses on a level basis (such as your income), and match them up.
Once you have an idea of your monthly income, match up the expenses and make sure you are exceeding your expenses with your income. Many utilities offer a budget billing plan, and many other expenses can have the billing changed to a specific day of the month to keep them all in step.
6 - Stay ahead of inflation by avoiding low to no rate of return accounts. You can have safety and an inflation-beating return.
Market's up. Market's down. Market's down again. Now it's up. You get the point. Times are a bit uncertain, but aren't they always? When the markets are taking off, you start wondering when they will stop, and when they are going poorly, you wonder when they will turn around. Safety is good. When you are going for safe, you can look for the highest yielding investment with safety without going for a 0% rate of return account. But with the most diverse income strategies, there should be a growth component. And you never know when things will turn around, so don't be so quick to completely jump ship from your long-term plans. Many of these plans, and growth components in income strategies, are built for the long haul and already assume market volatility and uncertainty. Just make sure you review and rebalance at least once a year.
Finance expert Alan Klayman is the founder of the MyIncomeStrategy.com program (http://www.
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