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Retirement Income Planning

Posted December 13, 2019

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Complexity is not your friend

Choosing the right investments to get you through your retirement years successfully can be an overwhelming experience. There are stocks, bonds, mutual funds, ETFs, CDs, money market funds, deferred annuities (fixed, indexed, and variable), immediate annuities, life insurance, real estate, and I’m sure a couple more that I forget about. The point is, if you’re retiring, you know you have to pick the right investments to ensure that you don’t run out of money in retirement. This can be daunting, and it can be easy to avoid the problem and not do anything by staying in cash. No one has ever lost money by staying in cash, right?

The most common fear about investing during retirement is a bear market and losing all your money. While this is certainly a terrifying event, the number one risk during retirement is not the market going down. The number one risk is the constantly increasing cost of goods and services. We are talking about inflation, the silent killer. Think back twenty years and what the price of gasoline was. I was 16 years old, and a gallon of gas cost $0.89/gallon. Now that gallon of gas is $2.50. While this is a bit bigger of an increase than CPI at 54%, it’s still a great example of how retirees are subjected to inflation and how being too conservative during retirement can have disastrous results.1

By investing in stocks, retirees can purchase assets whose total return (capital gain and dividends) have historically outpaced inflation by a significant margin. This provides retirees the greatest chance of maintaining their standard of living and having their money outlive them. Now I’m not saying that every retiree should go out and put 100% of their money in the market if they have a low-risk tolerance, but they should probably have a higher level of exposure to stocks than they think.

You must also guard against the sales pitch for indexed or variable annuities to guard against inflation. Despite their “promises” and how they are sold, these deferred annuities won’t keep up with inflation once you start taking distributions out of them because of the high fees and performance caps the insurance companies put on them.2 This means that you’ll find your money being able to buy less and less every year when you get the same payment 30 years later. These deferred annuities can also cause taxation issues regarding distributions and inheritance issues if purchased with non-qualified money (not an IRA), but that’s a different story. This isn’t to say that all annuities are bad, but complex investments need to be implemented very carefully into a portfolio and tend to be sold inappropriately.

When working with retirees, my goal is to have an easily understandable, transparent, low-cost retirement income plan that keeps up with inflation. If you want impartial and fiduciary advice, talk to me, a fee-only financial advisor that doesn’t get paid on the sale of investment and insurance products.


Thayer Financial, L.L.C. (“Thayer Financial”) is a registered investment adviser offering advisory services in the State of North Carolina and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. This website’s presence on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Thayer Financial in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or according to an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Thayer Financial, L.L.C., unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

  1. https://www.officialdata.org/1989-dollars-in-2018?amount=1000
  2. https://www.consumerreports.org/retirement-planning/why-indexed-annuities-may-promise-more-than-they-deliver

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