When the AARP conducted a nationwide phone survey in October 2008, asking working Americans aged 45 and older how the turbulent U.S. economy is affecting them personally, 65% said they will have to delay retirement and work longer to compensate for losses. That's grim news for a populace eager to reap the rewards for decades of keeping their nose to the grindstone. And, it's just one more bit of proof that we are facing serious times filled with serious financial challenges.

Unfortunately, retired people and those within arm's reach of their Golden Years are experiencing a perfect storm: fuel prices have been at record highs, driving the price of everything from gas to eggs through the roof. Investment earnings are also down...way down. We've been financing a war, picking up the pieces from natural disasters both here and abroad, watching the housing market disintegrate, and facing the worst economic crisis since the Great Depression. Dual-income, working households are struggling, but quite probably those hit hardest are the Americans trying to get by on fixed incomes that simply do not stretch as far.

 

Reality Check

So, what can you do if you're at or near retirement age? For starters, you can rethink when you retire. Delaying retirement by a few years, or even just one year, may help you save more and offset market losses. It may not be what any soon-to-retire worker wants to hear, but keeping your job for a while longer is probably the best way to add new money into your retirement savings.

Consider holding off on retirement account withdrawals as long as possible. The longer you can let them work (and hopefully grow), the better off you'll be. If you have already retired but are able-bodied and so inclined, you may consider getting a part-time job doing something that interests you. The money you make can replace the income you would otherwise take from your retirement accounts - but be conscious of how much you earn as it may trigger a decrease in your social security benefits.

Making Savings Last

Experts usually suggest retirees withdraw 4% of their investment savings in the first year of retirement and then increase it each year to account for inflation. This model gives reasonable assurance - though no guarantees - that a person's nest egg should last 30 years or more. The 4% strategy is also an effective way to ensure that a big market hiccup during the early years of retirement will not be impossible to overcome.

Annuities Can Offer a Port in the Storm

If an annuity contract has been part of your overall financial strategy, you may be in better shape than most since one of the strongest selling points of annuities are their guarantees. Depending on the type of annuity you hold, it may have a guaranteed income benefit and/or a guaranteed withdrawal benefit, in which case your payments would remain level regardless of market swings. That's because annuity guaranteed annual payments are based on the amount of money used to fund the initial account balance, which can go up if the market performs well, but which cannot decrease due to poor market performance. In volatile times, annuities can provide a reliable income stream no matter what's going on around them.

Don't Panic

You may be scared. You may be mad. But, the one thing you should not do right now is pull all your money out of the market and stuff it under your mattress. Diversification is still a prudent investment strategy for the long term. If the ups and downs lately are too much to handle, consider slowly moving some...not all...of your money into lower risk investments such as bonds, CD's, or annuities, but do not opt for safety at the expense of losing out on significant growth should the markets steady themselves. Even if you are 65, you do not need all of your retirement savings immediately. Some of it will not be accessed for a decade or two, which is why a big picture investment mix is best, helping protect what's there now AND helping make gains down the road. For help understanding the current market and how it impacts your investment plan and retirement horizon, be sure to contact your financial professional.

Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the tax payer. The tax information was written to support the promotion or marketing of the transaction(s) or matters(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor. AXA Advisors, LLC and AXA Network, LLC do not provide tax or legal advice.

This article is provided by Muzette L. Charles. Please be advised that it is not intended as legal or tax advice. Muzette offers securities, annuities and insurance products through AXA Advisors, LLC (member FINRA, SIPC) and its affiliate, AXA Network, LLC and its subsidiaries. Contact her for a no-obligation review on Retirement, Investment, Life & Long-Term Care Insurance Planning for Individual or Employer Group Plans & Seminar Speaker at 201-592-2501 or www.muzettecharles.com