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Money Management in Retirement

In an interview with perspective clients James and Sophia, I came to a quick realization that retirement and managing money were two foreign ideas to them.They have worked since college, raised kids, paid the mortgage and other bills associated with having a family. The kids are now adults with their own children and growing families. James and Sophia’s combined income gave them a comfortable but not a lavish lifestyle. Retirement plans, such as a 401(k), was used to the maximum allowable ever since the last child left the house some years ago.The real quandary comes in on how to live with what they have, after so many years of having a steady, safe, periodic income they enjoyed while working. The crucial point-converting financial asset to income is far more complicated than stopping at the ATM machine for some cash. This loss of liquidity is a major issue and a real challenge in providing that safe, steady and dependable income stream that they were used to.As with other clients, James and Sophia wanted to protect their nest egg from the ravages of the market place. Their initial thought was to invest the money into certificates of deposit (CDs) or into a mix of fixed income investments. They believe that by investing conservatively, they solve the liquidity issue and protect their assets at the same time. How many of you have heard of this, or practice this today? Aren’t CD rates just great?Times have changed and it is past the point for people to understand that while protecting assets is a big part of retirement planning, the overall issue is now, how do we protect your overall retirement lifestyle? An overly narrow view on asset protection can leave retirees vulnerable to unexpected, serious or catastrophic erosion of their retirement income. I reviewed these types of risk in the past. The first is a risk of living too long and the second is the risk of inflation.A speaker for a large insurance company was eloquent and funny at the same time in explaining how insurance companies look at longevity. His point was that the mortality tables are averages of the general population. We have some people that live upstanding lives, take great care of themselves, see their doctor once per year and are dead at age 62. We then have those people who are crack addicts, smoke three packs of cigarettes per day, drink heavily and show up with Willard Scott for their 100th birthday on the Smucker’s Jelly Jar! Can you plan on living the “average” life span of the mortality tables? Probably not. What I am trying to get at though is that we are living longer. Will you be concerned about outliving your assets? The bottom line is that the greatest risk you face is outliving your money, not losing it.More next month!Donnell Services, LLC719-886-3377Registered RepresentativeSecurities America, Inc. & Securities America AdvisorsMember NASD, SIPCwww.alexdonnell1.sarep.comDonnell Services, LLC, Securities America, Inc and Securities America Advisors are independent companies.1) A hypothetical couple, representing common concerns faced by other clients that I have met.2) CDs may be insured through the federal government

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