Retirement Income Planning Amidst Market Concerns | SafeMone

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Explore safe money alternatives for retirement income planning. Learn how to navigate market uncertainties and secure your financial future today. Everyone breathed a sigh of relief when the government shutdown ended this month. As InvestmentNews noted, bond yields are in flux, and the shutdown could have made things worse. But while that ship has sailed, other risks still loom on the horizon. Industry analysts point to changing rates overseas, inflation, and predicted Fed rate hikes at home as potential bond market movers. A report from Deutsche Bank lists them, among other concerns, as 30 market risks to watch in 2018. And what’s at the top of that report list? “U.S. inflation moving higher in 2018 Q2.” What’s the Cause for Concern? Why should bond investors be concerned? Here’s something to consider. It’s well known that inflation is the enemy of the bond investor. Inflation erodes the value of a bond’s fixed interest payment, resulting in one of the key risks investors can face… interest rate risk. Industry analysts believe the bond market had priced in too-low expectations for Federal Reserve rate hikes in 2018. America’s strong economic backdrop and rising oil prices could translate into inflationary pressures, they report. For many bond holders or bond-fund investors, this risk threatens the fixed-income portion of their portfolio. When you buy bonds, you must wait until they mature for the guaranteed payout. Investors, of course, are banking on the supposition that bond yields will be high—or sufficiently high enough—when they buy new bonds in the future. Bond Values’ Impact on Retirement Income Objectives Investors should heed how these pressures on bond values may affect retirement income objectives. One respected market scholar argues that bond funds don’t belong in retirement portfolios. Wade D. Pfau, Ph.D., CFA , a professor of retirement income in the Ph.D. program in financial services and retirement planning at The American College in Bryn Mawr, PA, has pointed out bond funds are volatile and subject to sequence risk. “For a retiree meeting spending needs with portfolio withdrawals, bond funds might have to be sold at a loss if interest rates rise,” he has said. “Income annuitie