Month: October 2016

The Employee Benefit Research Institute’s (EBRI’s) 26th annual retirement confidence survey – the longest-running survey of its kind in the U.S. – has found that American workers are still confident in their ability to achieve a comfortable retirement.

According to the 2016 survey, titled “Worker Confidence Stable, Retiree Confidence Continues to Increase,” more than 20% of workers are “very confident” that they have enough money for a comfortable retirement. That’s up from record lows during the period between 2009 and 2013. (It was 13% in 2013.)

The details of the study indicate an even more positive situation: 43% of workers are “very confident” that they can pay for basic expenses in retirement (up from 37% in 2015); 22% of workers are “very confident” in their ability to pay for medical expenses; and 16% are “very confident” in their ability to pay for long-term care.

But may this expressed confidence be misplaced? Are workers creating this renewed confidence by actually putting money aside for their retirement?

In fact, while confidence numbers are inching up, the EBRI study indicates that many workers are not taking significant enough steps to prepare for retirement. While 69% of workers say they or their spouses have saved for retirement, many have very little to show for it; 26% have less than $1,000 saved.

Are you concerned about your ability to maintain a comfortable retirement? If so, you may want to discuss your options with your adviser, who is familiar with your individual circumstances and can help you get back on track with an appropriate investing plan.

Financial advisers often recommend that their clients maintain some of their savings in stocks, even after retirement. But is the risk worth it?

Retirees living comfortably on income from Social Security, pensions, and bonds may think it’s crazy to take on the anxiety that comes with fluctuating stock prices for a little more growth. That’s understandable: after the recent financial crisis, it’s easy to believe the market may nosedive and destroy the value of your nest egg.

If you’re certain you can live comfortably the rest of your life on your Social Security, pensions, and bonds without dipping too deeply into your retirement savings, you have a good case for avoiding stocks.

If, for example, you have $500,000 in savings, and plan to withdraw 3% ($15,000) in the first year of retirement, increasing subsequent annual draws for inflation, there’s a 90% probability that your nest egg will last at least thirty years, even if invested in 50% cash and 50% bonds, says global asset management firm T. Rowe Price.

But what about unforeseen circumstances? Your daily living expenses could go up by more than anticipated. You could decide to travel or indulge in expensive hobbies. Or you could experience a costly medical crisis or a lawsuit.

Say, with $500,000 in savings, invested in 50% cash and 50% bonds, you now want to withdraw 4% ($20,000) in the first year of retirement, and withdrawals will increase annually to compensate for inflation. As T. Rowe Price’s research indicates, this change from 3% to 4% means there’s less than a 50% probability that your nest egg will last for more than thirty years.

If this possibility concerns you, you may want a cushion to absorb unexpected expenses, and the growth potential of stocks may appeal. However, they may not be right for you. Your adviser, who understands your individual circumstances, can help you decide.