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Don’t outlive your money

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These events have hit retirees, and those close to retirement, especially hard. They are being forced to sell stocks when markets are down to get money to live on. The situation is forcing many seniors back to work and causing others to delay their retirement plans altogether.

“We have an entire generation of retirees in deep trouble,” said financial educator Paul Grangaard. “I think it’s a shame that on the heels of one of the greatest bull markets this country has ever seen, so many seniors are having to scuttle their retirement plans. It didn’t have to be this way.”

So he decided, after training financial professionals for many years, that it was time to take his investment message directly to consumers. The result is his new book, “The Grangaard Strategy — Invest Right During Retirement.”

In the book, Grangaard illustrates 12 [rinciples of 21st-century retirement investing that show readers how to manage their retirement assets safely and effectively and protect themselves from the devastating consequences of what he calls “dollar price erosion,” or having to sell stocks when markets are down.

Grangaard points out that most people don’t realize that managing money during retirement (while they are spending it) is very different than managing money before retirement (while they are accumulating it) — and having to sell stocks out of fluctuating accounts is one of the biggest challenges they face in retirement.

“Prior to retirement, most people get their income from wages, and since they know they won’t need to sell investments to get money to live on, they can be much more aggressive with their retirement investments and are usually able to put more of their savings into the stock market for higher returns,” he said.

Grangaard cites data by Ibbotson Associates which shows that large company stocks provided an average annual rate of return of 11 percent in the 75 years between 1926 and 2000, while treasury bonds returned only 5.3 percent.

“That difference can have a huge impact on how much money an investor can accumulate for retirement,” he said. For example, $10,000 invested for 20 years at 5.3 percent will grow to about $28,000, while at 11 percent it will grow to over $80,000.

“Owning stocks right now can be a little unsettling, even for younger investors with a lot of time ahead of them, but remember, if you don’t need to sell any time soon, your losses are only on paper,” he said.

However, everything is different in retirement. “Now, for the first time in their lives, most people need to get both their growth and their income from the same pot of retirement assets,” said Grangaard. In other words, they need to use their investments to get the growth they need, while also using them to replace the paychecks they no longer have.

They need to use their retirement funds to provide the safe, steady, dependable income they used to get from their wages, which means they have little choice but to start selling some of their stock market investments.

But they clearly don’t want to sell stocks when markets are down — like so many retirees are being forced to do these days. In fact, choosing a good time to sell stocks to get income to live on is one of the most difficult challenges facing retirement investors, and it’s why managing a retirement portfolio, like a rollover IRA, to generate dependable income for longer and longer retirement periods is much more difficult than going to the bank to cash a paycheck.

Among the strategies laid out in Grangaard’s book to help meet these challenges are: “create dependable income for the rest of your life,” which explains how to use the unique concept of income ladders to replace your paycheck in retirement; “Be a long-term investor during retirement,” which shows how to maintain the longer-term investment horizon you need in retirement to invest safely and comfortably in stocks; and “know when to sell,” which pulls these two concepts together to demonstrate how to manage investment risk and make well-timed stock market sales decisions to increase your income in retirement.

“The primary objective for retirees,” saidGrangaard, “is to manage their portfolio in a way that lets them sleep better at night and live better during the day.”

The good news is that despite what’s happened recently, it’s never too late to start using his 12 principles of retirement investing to improve your own situation.

“You can put these principles to work immediately to take control of your financial future and start recovering today,” he said. “The Grangaard Strategy” is available in bookstores everywhere, including online booksellers such as www.amazon.com. Readers can find a list of advisors trained by Grangaard at his Web site, www.thegrangaardstrategy.com.

— Courtesy of ARA Content

Posted 7:07 pm, October 10, 2011
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