There is a common misconception that rate changes will wreak havoc on retirement plans.  However, you can remain on track in spite of rate alterations with income diversification and prudent planning.  Let’s take a quick look at how to remain on track for a fulfilling retirement in spite of rate dynamics.

You Need Several Income Streams

Most people get used to receiving a paycheck at the same time every week or two and assuming that is all they can do to keep the lights on and food on the table.  However, retirement changes things, making it that much easier for those with numerous sources of income to segue to rewarding golden years.  Income streams ranging from owning rental properties to Social Security, part-time work, investments, dividend stocks, annuities and beyond all set the stage for a truly fulfilling retirement. 

If your sole source of income during retirement is Social Security, it is time to start adding additional sources so you can better guard against SOR risk.  This risk refers to the chance that you will be required to withdraw money when your portfolio is dropping in value.  Change your withdrawal rate as the market dips and you may still be able to retain ownership of your investments, potentially setting the stage for a lucrative market rebound.

Bonds Have More Merit Than Most Think

Bonds get a bad rap as being excessively conservative and only slightly outpacing inflation.  However, high-quality bonds have a somewhat latent value in that they offer predictable income regardless of the fluctuations in interest rates.  Fixed individual bonds present an opportunity for you to hold them until the date of maturity and receive value in the event that interest rates climb.  

General Advice Does Not Suffice

Plenty of people lack a financial strategy for their retirement.  In fact, few people even have a written retirement strategy.  Some rely on generic advice such as buying bonds in relation to their age and maintaining a diversified investment portfolio.  However, such generic investing advice is no longer as helpful as it was in years past.  

The better approach is a strategy that is goal-based, meaning the investment mix is aligned with the plan for retirement, mitigating risk even when the market proves volatile.  Seize the opportunity to fine-tune your investments, diversify your portfolio and obtain insightful guidance from a financial advisor with years or even decades of experience.  Zero in on your specific goals, whether they are retiring by 65, early retirement or shifting to part-time work by a specific date, make the appropriate investment decisions and you will be on your way toward meeting your nuanced goals.

Remain Calm and Put Your Money To Work

The moral of this story is to be patient, make strategic decisions and plan for a better future.  Though Treasury bonds and other comparably conservative assets are not yielding a significant return in the current low interest rate environment, these investment vehicles should still be considered as part of a balanced portfolio.  The right mixture of bonds, money market accounts, CDs and other investments could maintain the optimal risk level, setting the stage for your nest egg to grow regardless of alterations in rates.  Gradually reduce your risk as you near retirement, continue to let your money work on your behalf and you will have paved the way toward fulfilling golden years.


Any opinions are those of Paramount Wealth Management and not necessarily those of RJFS or Raymond James.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Investments mentioned may not be suitable for all investors.