Events Calendar
In This Section
Matsos bottling a dressing that’s selling in 25 states
Economic survey: Job losses to bottom out in first quarter
Ohio gas up 12 cents from last week
SCORE offers wide variety of workshops
After 30 years at the helm of Akron Children's, Considine still looks to future
New version of Mozilla Thunderbird landing soon
Most Read Stories
Police accuse bank robbery suspect of gobbling up note (with dashcam video)
Victim of beating in Kent last week is declared dead at Akron hospital
Can DNA tests free ex-Akron captain?
Dad accused of forcing son into field, killing him
Man found dead in North Akron home is identified
Does it work? Test team returns to try out new products advertised on television
Blogs:
Pets:
Cat-loving chihuahua suckles seven abandoned kittens
The Heldenfiles:
Sunday Notebook
Patrick McManamon:
Browns sick after sick loss in Detroit
Akron Zips:
Zips advance to Sweet Sixteen
Tribe Matters:
Seven players added to Tribe’s 40-man roster
Cleveland Browns:
Post-game defensive quotes
Kent State Sports:
Kent State defeats Rochester College, 63-44
Cleveland Cavaliers:
Gameblog: Cavs vs. Philadelphia 76ers
Buckeye Blogging:
OSU – Michigan college football rivals meet in Baghdad
Varsity Letters:
Four area football teams play tonight
All Da King's Men:
The Sunday Sanity Challenge
Blog of Mass Destruction:
Will Health Care Reform Pass?
Akron Law Café:
Health Care Financing Reform: (69) The Brookings Institute Study on "Bending the Curve" – Four General Strategies
See Jane Style:
Vintage Chic
Car Chase:
TIME TO GET YOUR COLLECTOR CARS WINTERIZED
Let's Talk Real Estate:
Faye Dunaway to be Evicted?
Ohio Travels with Betty:
George is looking for a Thanksgiving buffet in Akron.
Sound Check:
Steely Dan Plays "The Royal Scam" at E.J. Thomas Hall
HRLite House:
Personal Rant – You are All Wrong About Jobs, or the Lack of Jobs, Being the Reason People Do Not Live in NEO
Akron Gamer:
Nintendo's Mario endures even as games come and go
It's not possible for one product or strategy to do it all, plus needs different depending on person
Published on Sunday, Nov 04, 2007
I have confused you.
Whenever I discuss a way to manage money in retirement, many of you see it as a recommendation. How can I be in favor of something one week and something else the next, you ask.
One thing I clearly don't advocate is trying to live simply off the interest from your savings, without touching principal. Unless you are super rich, live a Spartan life or plan to die soon, I don't see how this strategy can generate an adequate income that keeps up with inflation during a retirement that could last 30 years or more. Maybe you can do it with stock dividends that rise regularly, but the risks and uncertainties are too high.
But how about these strategies?
Repeatedly creating ''income ladders'' with part of your savings while investing the rest for growth. By receiving income and liquidating principal from fixed-income investments, you might be able to cover your expenses for, say, the next 10 years. By then, your other investments might have grown enough to set up a new income ladder. This strategy requires a fair amount of money to implement and does not eliminate risk of loss.
Putting all your money in a diversified portfolio of stocks, bonds and other asset classes and making ''systematic withdrawals'' for living expenses. Aside from the risk of loss, if you withdraw too much too soon, you might run out of money. If you are too cautious and withdraw too little, you'll miss out on things you could afford.
Using new types of mutual funds that manage the withdrawals for you. Last week, I wrote about low-cost, widely diversified funds from Fidelity and Vanguard designed to pay out fairly predictable monthly income with the potential to keep up with inflation. Projected payouts are based on reasonable expectations, but there are no guarantees and you could lose money.
Buying an immediate annuity from a financially strong insurance company that, in return from your lump-sum premium, guarantees you (or you and your spouse) a monthly income for life, either fixed or rising each year to counteract inflation. You won't outlive your money but will forever give up access to your principal or at least seriously limit such access.
Investing in a deferred variable annuity that, for a fee, guarantees that you (or you and your spouse) can withdraw at least a minimum amount each year for life, no matter how your investments perform. (Immediate income annuities that pay a set income for life and deferred variable annuities with mutual-fund-like investment ''sub-accounts'' are different products. More than 100 reader e-mails suggest many of you incorrectly think the two are the same.)
My recommendation? Discarding the impractical don't-touch-the-principal strategy, it would be ''any, some, all or perhaps none of the above,'' depending on each person's circumstances. This might seem like a copout, but no one product or strategy can do it all, and needs are different for different people, emphasize Boyce Greer and Jon Skillman, two Fidelity Investments executives.
Their comments are appropriate, because Fidelity is the only financial services firm I know that offers brokerage services and low-cost, direct-marketed funds and immediate and variable annuities that can be used for all the strategies I mentioned.
Fidelity's new ''Growth and Guaranteed Income'' deferred variable annuity guarantees minimum lifetime withdrawals at substantially lower fees than other annuities offering similar guarantees. If you go online to http://www.fidelity.com and type income products in the search box, you will find admittedly promotional, but nevertheless highly educational materials and useful tools to compare the pros and cons of different products and strategies.
Send questions or comments to Humberto Cruz at AskHumberto@aol.com or by mail to Tribune Media Services, 2225 Kenmore Ave., Buffalo, N.Y. 14207. Personal replies are not possible.
I have confused you.
Get the full article here.
