Protect Your Retirement Plans against Stock Market Volatility

As you approach retirement, consider how much risk you're willing to take. An annuity can help protect your principle from market loss.

Over the long run, the stock market has been a historically reliable generator of wealth for generations of investors.

Over the short run, things are a lot more dicey. In fact, for investors who are relying on their investments for retirement income, a stock market crash at the wrong time can be devastating to individual financial plans.

Here is a brief list of major bear markets over the past 50 years:

* 1961-1962. Stocks declined 28% from December 12, 1961 to June 26, 1962.  * 1966. Stocks fell 22.2%  over 8 months from February 9th to October 7th 1966. * 1968 - 1970. The S&P 500 fell 36.1% from November 29th 1968 to May 26,1970. * 1973-1974. The US stock market lost 48.4% between Jan. 5th 1973 and October 3,1974. * 1980 to 1982. US stocks fell 27.1% between Nov. 28,1980 and Aug. 12, 1982. * 1987. On Oct. 19, 1987,  the US stock market, as measured by the S&P 500, lost 23% of       its value in a single day. This sudden decline occurred in the middle of an even larger           correction from Aug. 25 to December 4, 1987, when the S&P 500 fell 33.5%. * 2000 to 2002. The "dot-com bubble" saw the S&P 500 fall 49.1% between    March 24, 2000 and Oct. 9, 2002. * 2007-2009 The "housing bubble" collapse caused the S&P 500 to lose 56.8% over     17 months, beginning October 9, 2007 and bottoming on March 9, 2009.

Stocks eventually recovered from each of these collapses, but many investors who needed income in the aftermath of these crashes never recovered.

Those in the workforce can ride out such storms and even buy more when stocks are cheap, but retirees reliant on their nest eggs for an income to live on, don't have that option.

A bear market forces them to sell assets just when they're at their cheapest, just to meet living expenses.

"Safe money" vehicles. As you approach retirement, consider how much risk you're willing to take. If the thought of a 30 to 50% stock market crash within the next couple of years is worrying to you, it may be time to increase your allocation to safe money vehicles like these:

Fixed Annuities. In their most basic form, fixed annuities are just guaranteed income vehicles. You contribute premium to an insurance company; in return, the insurer guarantees you a specific income for your lifetime, or for the joint lifetimes of you and your spouse. The insurance company will pay the income promised in the contract no matter what the stock market does. Many planners suggest calculating your minimum acceptable income each month or year, and then buying an annuity that will guarantee at least this income, no matter how the stock market performs. 

Permanent life insurance. Life insurance allows your premiums to grow tax -deferred, while simultaneously providing a tax free death benefit to your heirs. You can also use your life insurance policies accumulated cash value to supplement your income in retirement. 

Cash, CDs and Money Markets. These are generally considered risk free investment vehicles. However, returns are very low and may not keep up with inflation. If you are nearing retirement, or just want to be prepared for inevitable stock market volatility, call us. We can help you assess your risk exposure, calculate your expected income needs, and help protect your retirement income against the threat of a devastating stock market crash. Contact us today.