Everyone might plan on calling it quits with their work at some point. But what about “unretiring” and going back to work again after leaving the workforce?
Well, you have probably heard of some of the more glamorous instances of unretirement: Tom Brady’s comeback. That cringe-worthy commercial featuring NFL legends Dan Marino, Emmitt Smith, Randy Moss, and Jerry Rice. Even in the entertainment world, where long-time actors like Cameron Diaz are returning to the big screen and other acting work.
Of course, unretirement isn’t just for sports stars and celebrities trying to extend their glory days. In the real world, it’s a growing trend where, for various reasons, people find themselves back in the workforce after saying farewell to the daily grind. Sometimes unretirement is a freely made choice. In other cases, it’s forced or necessary.
Do you find yourself thinking about unretiring? In this article, we will dive into why some people are dragged into it while others choose to unretire for a second-act career, financial necessity, or drive to start a business. If you happen to find yourself in a situation of unretirement, there are steps that you can take to put your best foot forward. We will also talk about what those options can look like.
When economic and market conditions seem uncertain, it’s natural for people to look for places to protect their money from losses. Some places are pretty low risk and let your money earn interest. You can find many of these options at banks: certificates of deposit, savings accounts, money market accounts, and high-yield savings and checking accounts, to name a few.
If you are looking to park retirement money somewhere, a fixed index annuity may also be an option to explore. A fixed index annuity shields your money from losses due to market declines. It gives limited opportunity to earn interest based on a market index’s performance. That being said, in exchange for the guaranteed protection of your money, that growth potential is limited.
Bank products will grow your money with interest over time, and they are backed by FDIC coverage. You can also use bank accounts as a source of liquidity for your money. But over time, a fixed index annuity can let you “beat the bank” with its potential for index-linked interest earnings. If you plan to use that money for retirement, the annuity can also pay you a guaranteed income stream for as long as you need it.
In this article, we will go over more on fixed index annuities, their potential for “beating the bank,” and some pros and cons for each option that are good to keep in mind.
Are you thinking about an annuity for some of your retirement savings? Are you worried about fees? The good news is that many annuities don’t have fees, but it also depends on the annuity type you are talking about. There are five kinds: variable, immediate, fixed, multi-year guarantee, and fixed index annuities.
Variable annuities offer the most growth potential, but they also have the risk of market losses and tend to be fee heavy. The other four kinds fall into the fixed column.
Fixed annuities and multi-year guarantee annuities have guaranteed rates for a set period. Fixed index annuities can earn interest based on a market index’s performance, but the growth potential is limited. Immediate annuities start paying you income right away, while with these other fixed-type annuities you usually start income payments some years down the road.
Let’s go back to our overall fixed annuity focus. Most fixed annuities don’t have fees. Fixed index annuities don’t have upfront fees, but some add-ons to a base contract may have fees. It depends on whether you would like those add-on benefits on top of what a base contract gives you.
What about surrender charges and things like that? All annuities are long-term vehicles, and they have maturity periods. If you wish to take advantage of the benefits, then keep your money in the annuity until it matures. Otherwise, there might be a surrender charge. It’s a way for the insurance company to manage risk and keep its promises to you and many other customers.
In this article, we will go over why fixed annuities don’t have fees and how they work.
Does your financial plan cover the three phases of retirement? Once you have retired, it’s quite different from your career years. Now is the time to live off the fruits of your work and enjoy life on your own terms. You don’t want to leave your retirement lifestyle up to guesswork or chance. Your plan should make you confident that you will be able to retire well and then stay retired.
All of that said, retirement is a moving target, and it comes with distinct phases. These phases of retirement are:
The go-go years
The slow-go years
The no-go years
The go-go years are when retirees are in good health and able to do what they enjoy. That can be travel or physical activities such as pickleball or golf. The slow-go years are when retirees can still pursue those activities, but their level of involvement slows down a bit. Finally, the no-go years are when retirees have aged and their health has changed. They tend to need more long-term care support and other healthcare supports at this stage.
It’s hard to estimate how long each phase of retirement might last. That will depend on a retiree’s personal health, family history, history of taking care of himself or herself, and more. In this article, we will go over these three phases of retirement, what they might look like for how you spend your money and time, and things to keep in mind as you plan ahead.
Financially speaking, are you on track for retirement? Can you do more to reach your goals? These questions matter, and certain retirement rules of thumb can help you see where you are. But first, what is a retirement rule of thumb, and how does it work?
Quick sum-up. A rule of thumb is a general principle to help you make money decisions. For example, the Rule of 100 is a guideline for balancing risk in your asset holdings. We will discuss it more later, but you take your age and subtract it from 100 for an idea of what percentage of your portfolio might be in growth-oriented assets, such as stocks.
Building on that concept, a retirement rule of thumb is a quick way for assessing your progress in retirement planning. In this article, we will go over six retirement rules of thumb that you can use in different ways, including:
How inflation can affect your income in retirement
How much retirement money you might need
Again, these retirement rules of thumb are meant only as a starting point, like on a map. Your financial destination is your own, and a custom-tailored plan will help you get there.
Are annuity surrender charges a good or bad thing? If you want a predictable income steam in retirement, only annuities can provide you with guaranteed payments for life or for a set period. No other financial product can truly do this.
On the other hand, a surrender charge can be a hold-up for someone who might otherwise be interested in an annuity for its guaranteed benefits. Annuities are contracts between someone and a life insurance company.
They are a long-term commitment, and if someone wanted to take out more money than is permitted or exit the contract prematurely, a surrender charge would apply. Of course, surrender charges also help insurance companies maintain their long-term promises to policyholders as well.
So, are annuity surrender charges good, bad, or indifferent? How do they work, and in what specific ways do they work for you? Are there other upsides to annuity surrender charges beyond the obvious benefit of helping the life insurance company?
The truth is, they are more of a necessary feature than a judgment of goodness or badness. In some respects, you can say they are a neutral thing. Let’s break them down into some simpler terms.
Dave Ramsey is well known in the personal finance space, but at times he gives bad money advice. Sometimes his financial advice is, frankly, out of touch with reality. Such was the case on one of his November 2023 broadcasts, when he served up some bad math on retirement withdrawal rates that would virtually guarantee people will run out of money.
During the show, Dave Ramsey said that retirees could safely withdraw 8% from their portfolios each year and never touch their principal. That is assuming that you see 12% returns per year, have 100% of your assets invested in “good mutual funds,” and keep 4% in your portfolio for inflation. Inflation has averaged 4% for the last 80 years, according to Ramsey.
Apart from unrealistic numbers, the real downside is how Ramsey completely overlooks the danger of sequence of returns risk. What is sequence of returns risk? It’s the possibility of suffering investment losses during a crucial period: in the years just before or in early retirement.
During retirement, you will count on your assets to generate income for you. Average returns don’t matter, but rather the order of your returns. If your assets take a hit in the time just before or early into when you are retired, your window for recovery isn’t what it was during your working years.
Even worse, what if you are withdrawing money during a down year? Your investments will have compounding losses – whatever initial drop they had, snowballed by the money you took out of your account.
In this article, we will go over why Dave Ramsey is completely wrong on his 8% withdrawal rate rule – and why other retirement withdrawal rates, and withdrawal strategies for that matter, might be worth a look for lasting financial security.
Are you wanting reliable income in retirement? Annuities are one option that you might turn to. An annuity pays you an ongoing income stream and lets you avoid running out of money. It’s the only thing besides Social Security that will generate guaranteed income for life. But of course, annuities have pros and cons, just as everything does.
When you start an annuity, you own a ‘money for life’ contract between you and a life insurance company. The insurer promises to give you regular payments for a set period or the rest of your life. Insurance companies have a strong record of meeting these commitments in all sorts of economic conditions and stock market cycles.
Annuities come in a variety of flavors. Some annuities are just base contracts, while other annuities offer add-on benefits that offer a lifetime income stream and liquidity. In other words, you have many choices and ways to customize an annuity to your personal goals, needs, and financial situation. It’s a matter of finding the right annuity for you.
In this article, we will go over the pros and cons of annuities for retirement income. As a guaranteed income source, annuities are a great way to maximize your money, but they aren’t for everyone. We will also talk about situations in which they can really make a difference.
How can you make the most of your income in retirement? People are living longer, and that adds up to more years of spending that they need to plan for. To ensure your money lasts as long as you need it, you might explore these different retirement withdrawal strategies to see if any might be right for you.
These retirement withdrawal strategies vary in their approach and flexibility. Sometimes a withdrawal strategy may work well in certain economic and market conditions than in others. For example, one withdrawal strategy uses a percentage-based rule, which works well when investment markets are posting gains and retirement investments rising in value.
Over your career, you may have built up funds in your 401(k) (or another workplace retirement plan). In retirement, the matter of deciding how to manage savings largely falls on our shoulders. What makes this even trickier is that investing for retirement is completely different from retirement income planning. In that case, you have to figure out how to turn your nest egg into reliable income that lasts for the rest of your lifetime.
Use these retirement withdrawal strategies as a starting point in your income planning. By seeing each one’s upsides and downsides, you can see how you can make the most of your money for as long as you need it. Read More
Do you have a retirement plan set for your financial future? How often should you review your retirement plan in case you might need to adjust anything? Life changes or other things outside of our control can take our financial journey in a new direction. Your retirement plan should let you be able to pivot and change course as such things happen.
It’s good to have routine reviews of all aspects of your retirement plan so that you stay on point. Life is dynamic, and those unexpected events can otherwise have a big impact on your financial well-being. If your retirement plan is still on track, that is good news. If it isn’t, your financial professional can help you make corrections that steer you back in the right direction.
Since retirement planning is a moving target, we will go over a few things to keep in mind for your retirement plan review meetings in this article. That will include how often to review your plan, how to evaluate your plan, and when re-evaluation might be a good idea. Whether you are starting to plan for retirement in mid-career or you want to make sure that your current plan is on the right path, this guide will help you evaluate your financial progress.
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