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Financial Security for You and Your Family

Transcript of Chat With Carrie Schwab-Pomerantz and Jane Bryant Quinn

Questions from Pam: I'll be retiring soon. I'd like to keep most of my money in stocks and periodically purchase some instrument to guarantee income for a certain period of time (five to 10 years). What sort of instrument would be best for this?

CSP: Never go into retirement without seeking financial help from an expert. You mention that you are in all stocks. Because you are close to retirement, you may want to consider some more conservative investments, such as bonds and cash, so that you can weather short-term ups and downs in the market.

A financial consultant will help you assess what you will have in retirement and what you will need to make up any financial gaps. Proper asset allocation and diversification and a savings plan will protect you for what will hopefully be a very long and happy retirement.

JBQ: Carrie, I couldn't agree more. This is the wrong time to be completely in stocks. You should be diversifying already into bonds and mutual funds. There is no guaranteed income from bond funds but if interest rates rise, your bond fund income rises, too.

The only source of guaranteed income for [five to 10] years would be a CD or an insurance annuity. You are too young to be buying annuities. They also have many hidden fees you might not realize you're paying. This is the time to stay with simple things: stock mutual funds, bond mutual funds and cash.

Complicated products often do not do what you want and cost you unexpected fees.

Question from Roger: We are retired and I was wondering what you think of "immediate" annuities to have a steady income coming in.

JBQ: That's a big question for retirees. I am a big believer in immediate annuities, but not at age 65.

A married couple aged 65 faces a better than 50 percent chance that one of you will live to age 90-plus.

A lot of inflation can happen during those years, so you don't want to rely on fixed-income now. You should allocate a sufficient amount to bond funds to cover basic fixed expenses and add stock funds on top.

I also believe in holding two to three years of the income you need in cash so you can weather any market.

Think about buying a lifetime annuity when you're 75 or 80.

One alternative is something called a longevity annuity; you can buy it now and it won't click in until you're 85. It's very cheap to buy one this way and worth considering if you're from a family of healthy, long-life people.

Should Retirees Invest Directly in Individual Stocks for Yield? >>

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