Two Retirement StrategiesFederal Reserve Chairman Ben Bernanke has reassured us that his quantitative easing (QE) efforts have been an asset for both Wall Street and Main Street. But for some odd reason, the benefits seem to be trickling upward.
Over the last four years, the S&P 500 has climbed 150%. During the same time frame, the number of Americans receiving food stamps has risen 113% to 47 million, or one-sixth of the American population.
As a broader measure, since the Great Recession began, the top one percent of earners have seen their incomes rise 31.4%, while the bottom 99% saw their earnings rise 0.4%. This translates into the top one percent capturing 95% of the total growth in American wealth during the so-called recovery.
Even those Americans who thought they planned responsibly for retirement have been caught flat-footed. Thanks to QE and artificially low interest rates, the Federal Reserve has taken “income” out of “fixed income” investments and made saving for retirement that much harder.
And with “QE Infinity” in play, it’s not going to get any easier. According to a new global study, one in eight workers say they will never be able to fully retire. It’s worse in the U.S. and the U.K., where the numbers sit at roughly 20%. (Source: “The Future of Retirement: Life after Work?,” HSBC.com, September 2013.)
On top of that, just 51% of American workers say they were “very” or “somewhat” confident that they would have enough money to live comfortably in retirement; in 1995, that number was 72%. That said, 51% actually seems a little optimistic when you consider that 57% of workers say they have less than $25,000 in savings and investments. (Source: “The 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many,” EBRI.org, March 2013.)
Whether you’re in retirement, approaching it, or it’s on the horizon, saving enough income for retirement is a major challenge for most Americans, even in the best of times. It’s become a Herculean task in light of the financial conditions that have been created since the Great Recession.
While there are a number of strategies those planning for retirement can take, there are a couple great strategies to consider right off the top.
Don’t Rush Into Retirement
Many Americans think they jumped into retirement too early; in fact, 64% of those who are semi-retired wish they’d kept their full-time employment longer.
To get the maximum Social Security benefit, you have to wait until you reach the full retirement age to claim; for those born between 1943 and 1954, it’s 66. Those who choose to claim as soon as possible (age 62) will see their benefits reduced by 25%. For every year you postpone receiving benefits between 66 and 70, your benefits rise eight percent per year.
Don’t Rely on Any One Source for Retirement Income
Social Security was never supposed to be the sole source of retirement income, but today, the majority of retired baby boomers (65%) rely on Social Security benefits; one-third (32%) say they would not be able to live comfortably in retirement without it. And thanks to artificially low interest rates, bonds and other fixed income securities are falling short on their long-held promises.
Avoid placing all your retirement income into one basket. In this low-interest economic environment, it might be a good idea to consider looking at dividend-yielding stocks that keep price with inflation and provide both capital appreciation and income. This includes stalwarts such as The Coca-Cola Company (NYSE/KO) and Wal-Mart Stores, Inc. (NYSE/WMT), as well as lesser-known but equally as interesting companies like Caseys General Stores, Inc. (NASDAQ/CASY) and Dr Pepper Snapple Group, Inc. (NYSE/DPS).
This article Two Retirement Strategies for Combating Ongoing QE was originally published at Daily Gains Letter
More Business articles from Business 2 Community: