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Jim Lentini: There are not many individuals and businesses that haven’t seen their incomes and retir

Posted: January 26, 2009 9:09 p.m.
Updated: January 27, 2009 4:55 a.m.

Jim Lentini

 
There are not many individuals and businesses that haven't seen their incomes and retirement plans shrinking due to our current crisis.

Most of American investors in or near retirement have watched their house values plummet along with their retirement plans, jeopardizing backup plans to tap home equity should their retirement savings come up short.

But younger workers, with decades to go before they retire may look back on the shortcomings of 2008 as an opportunity to help their finances.

By continuing to contribute to their retirement plans, they can purchase mutual fund shares at bargain prices. And, because of the shrinking values in home prices, many may finally be able to afford a home that was previously out of reach.

But if you are age 50 or older, you have cause to be more concerned.

You may have to work a few years longer than you had planned, especially if you are not covered by a traditional pension (most baby boomers are not).

Working longer will give you the time to build back your retirement savings, and delaying your Social Security benefits until they are worth more at an older age will give you a greater income.

It will also give your current investments a chance to recover from the biggest market decline since the Great Depression.

If you are already retired, you need to address whether to reduce the withdrawal from your retirement funds to be sure you do not outlive your savings.

Most financial planners recommend that retirees concerned about running out of money reduce withdrawals from their portfolios, if possible, or at least skip the annual inflation adjustment until the market rebounds.

As noted previously, recommendations of 4 percent withdrawals help assure that your portfolio will last at least 25 years.

The biggest threat to your savings is withdrawing too much from a declining balance since you may not have enough left to benefit from rising stock prices when the market finally turns around.

As always, I recommend some portion of retirement assets in a variable annuity with a Guarantee Income Rider. The Rider offers features such as; the principal invested is guaranteed, the step up feature allows you to take advantage of market upturns, and principal protection from down markets now and in the future.

Also, deferred growth has an attractive rate of return, and lifetime income is guaranteed when you are ready to retire, usually anytime after age 60.

Be sure to discuss variable annuities with your financial advisor, as annuities vary from one company to another, understand their restrictions, and evaluate if their benefits and features meet your needs and desires.

Remember, there are only a few of the larger companies that can guarantee the benefits offered by the GWB (Guarantee Withdrawal Benefit) Rider.

Jim Lentini is president of Lentini Insurance & Investments Inc. in Santa Clarita. His column reflects his own views and not necessarily those of The Signal.

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