The markets have given investors much to cheer about over the last 2 years recording 20% plus gains for the first time since the late 1990's. The problem is last time we had this happen we shortly followed it with a lost decade in stock performance. The last 5 years of the 1990s the S&P 500 returns were 34%,20%,31%, 27%, and 20%. The next 3 years were down for a total of 46%!
Those doing retirement plans were expecting a much different future for their nest eggs in 1999 and for those that were too aggressive in their assumptions it was disastrous. The good news was then just like now interest rates were at high enough level that a very nice income could be created using bonds, divided paying stocks, and annuities. Locking in guaranteed lifetime income and supplementing it with the other legs of the stool Social Security, Pensions, interest payments took the pressure off the stock portfolio so it could be left alone while recovering from the bear market. Value stocks actually performed very well and had positive returns even in a very negative overall market.
The question is how investors make a game plan for the new year with policy changes, valuations, inflation questions, geopolitical risks all coming to a head at one time. Take a page from the playbook of 1999 when I was planning for retirees from local companies giving buyout offers for older employees.
Look at taking 25% of nest egg and buying guaranteed lifetime income
Invest in a wide range of income producing investments for passive income
Reduce exposure to higher risk stocks and buy dividend paying companies
This is a great time to sit down and look at your nest egg and put a plan in place to provide that security of predictable income streams and some downside protection!
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