Here’s an interesting statistic: over the past three decades, the centenarian population in the United States has grown about 66 percent, according to the U.S. Census Bureau. To enjoy this time to the fullest — and to help prevent the possibility of outliving your financial resources — you will need to invest for income and growth throughout your retirement years.
Many retirees depend on fixed-rate investments for a good portion of their retirement income — so it’s a real challenge when interest rates are low, as they have been for the past several years. Longer-term fixed-rate vehicles may be tempting, as they typically offer higher rates than shorter-term ones, but these longer-term investments may have more price fluctuation and inflation risk than shorter-term investments. Ultimately, you’ll likely need a balance between short-, intermediate- and long-term fixed-income investments.
While it’s important to invest for income, you can’t ignore the need for growth — because you won’t want to lose purchasing power to inflation. As you know, we’ve experienced quite mild inflation recently. But over time, even a low rate of inflation can seriously erode your purchasing power. To help protect yourself against inflation risk, you should consider having at least some investments that offer growth potential, rather than only owning fixed-income vehicles. And some investment vehicles, such as dividend-paying stocks, can offer both growth potential and current income. In fact, some stocks have paid, and even increased, their dividends for many years in a row, giving you not just income, but rising income.
To determine the right mix of growth and income vehicles for your individual needs, consult with a financial advisor who is familiar with your retirement plans, your risk tolerance and your family situation. And it may well be a good idea to plan for a very long retirement. You may not live to be 100 — but it would be a good feeling to know that you could afford to do so.
• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Joseph B. Ortiz, AAMS, CRPS. Reach him at (480) 753-7664 or firstname.lastname@example.org. Accredited Asset Management Specialist and AAMS, Chartered Retirement Plans Specialist and CRPS are registered service marks of the College for Financial Planning.