The market took a slide yesterday, leaving lots of people with retirement planning anxiety.
Do we keep going along for the ride -- or is now the right time to pull our retirement money out of the markets and put it under the mattress?
I think Lowell Herr, a retired high school physics physics teacher who now edits a blog called Investment Trend Analysts (ITA) Wealth Management, has some smart advice.
Herr says if you're really nervous, you might consider annuities. He makes the case that they can drop the risk of running out of money significantly, even in cases where the risk doesn't seem very great. For instance, he does the math on the probability of a 66-year-old man running out of money if he's pulling $1,000 a month from a $150,000 nest egg until the likely date of his death, which according to Social Security mortality tables is 78.5.
On the surface, it doesn't seem like much of a risk, but Herr's calculations show that by the time this man is 78, the odds of running out of money is 50/50. Pretty shocking, huh?
On one hand, if you buy an annuity, that $1,000 or whatever the insurance company is paying this month -- undoubtedly less than it was before the market went haywire -- will be there for life, as long as the insurance company doesn't go belly up. And even then, virtually every state will guarantee an annuity that is worth $150,000.
If you're annuity averse, Herr advises discipline, diversity across asset classes, and exposure to international markets. But in these uncertain times, even that kind of sensible advice can be stomach-churning to follow.