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Jerry Citarella: Where can you find retirement income now?

Financial Truth

Posted: August 14, 2012 2:00 a.m.
Updated: August 14, 2012 2:00 a.m.
 

There’s long been a tradition in our country of working hard for most of our adult lives. We accumulate as much savings as we can; possibly get some type of retirement benefits from our employers, and then retire on income generated from a few different sources. If we saved more, we’d have a bit more income and if our employers were generous we might have even more income through a hefty pension plan. Nevertheless, we would have some income. This plan of action was understood and fairly reliable using traditional means. Well, not anymore.

As of late, finding reliable and suitable income is becoming more difficult. Many employers are continuing to do away with traditional pension plans. This is a whole other story. Based on current economic conditions and life expectancies, the promise required to fulfill a plan like that has become too unrealistic. Many companies can no longer take on the hugely unknown commitments.

Another piece of retirement income comes from Social Security. This system is still intact, but its future is unknown. The retirement age has been pushed back and some formulas show the system failing in the foreseeable future. This would be devastating, as so many people have come to rely heavily on this income.

The last piece of the puzzle and my main topic today is income created by savings. This is probably where most people should focus to become self-reliant. It’s the only piece many people can truly count on. At the same time, it’s getting harder and harder to create enough reliable income from it. This could obviously change for the better in the future, but it doesn’t look like there will be an obvious answer any time soon.

Typically, to create income during retirement, many people simply put a portion of their saved assets in bank instruments, such as CDs or they may use bond investments. These options are still available, but currently the rates of return are so low that many people simply can’t survive on what they’ll receive. There are two options to address this problem. One is to save more. However, that’s not possible if you’re already retired. The other option is to find ways to create more income. The trick is finding where to go and determining how much risk you’ll need to accept to be comfortable financially.

As usual, I can’t give specific advice here, but I want to tell you of a few options you might want to explore if you’re unfamiliar with them. The first is one is very popular right now and being used quite a bit. It’s a reasonable solution for some people approaching retirement years, but I personally believe it’s being used a bit more often than appropriate. It’s using an income option attached to an annuity product. There are many variations of these and they’re all designed a bit differently. Each can offer a future income guaranteed at some level.

Some of the other options are alternative investments designed to produce income.

These products will typically use real estate or some other income-generating vehicle to Achieve their goals. The drawback is a lack of liquidity, although this is fairly typical for many income-generating vehicles. There are also some very successful, managed portfolios that don’t simply rely on the return of a specific investment. Instead they manage the investments tactically for better returns. Some of these can be fairly aggressive however others are simply designed to create a consistent income with minimal risk.

Unfortunately the job of retiring with a good income is getting more and more difficult, but you don’t have to give up. You just need to be a bit more open minded. I’ve only mentioned a few of the solutions above. There are many other strategies available to achieve your income goals. Take a look or ask someone qualified to guide you. Also be sure to save as much as you can before you get to retirement. It makes it all a whole lot easier.

Jerry Citarella is the owner of Infinity Wealth Management www.InfinityGoals.com. 23734 Valencia Blvd., Suite 301, Valencia, 661-255-9555, ext. 11. He is also the author of The Truth Helps Series of financial planning books. Mr. Citarella’s column reflects his own views and not necessarily those of The Signal. Submit questions to: jcitarella@nextfinancial.com. Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Infinity Wealth Management is not an affiliate of NEXT Financial Group Inc.

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