RSS Facebook Twitter LinkedIn

Featured Advisor

Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

Click to see the full profile

Share |

Retirees Must Weigh Risk and Yield

Low-interest rates and a sluggish economy are forcing retirees to choose between financial risk and low yields.

| BY Adriana Reyneri

Retirees hold a much more pessimistic view of their current and future financial situations than do working Americans, according to a survey conducted this month by Millionaire Corner.

More than 31 percent of the 1,100 participants described themselves as better off financially now compared to a year ago, but only 20 percent of the retirees felt that way.

“Retirees are facing difficult decisions in the current economic environment,” said Catherine McBreen, president of Millionaire Corner. “Extremely low interest rates threaten fixed-income streams, while inflation fears are building. To a certain extent, it comes down to how much investment risk seniors are willing to take – or can afford to  take - to boost returns. It’s not a great place to be.”

Just about one-fourth of retirees surveyed this money expect to be better off financially in one year. Participants as a whole express greater optimism about the future, and 32 percent expect to be in a better financial position next year. Optimism is highest among younger investors. Forty percent of those age 40 and under expect to be better off in a year.

Retirees aren’t just worried about themselves, they’re also concerned about their children and grandchildren. Fewer than 19 percent believe the next generation will live better than the current generation, while more than 23 percent of working Americans believe the next generation will enjoy a better life than the current generation.

Concerns about the current economic environment make retirees more likely to seek out an advisor. More than 38 percent say that, with current stock market conditions, they will rely more on a financial professional and less on their own research. 

Sentiment among senior citizens living in the retirement haven of Florida remained at record lows in August, while consumer confidence rose among the state’s younger residents, according to the University of Florida’s Survey Research Center. Seniors remain pessimistic about the economy in both the short- and long-run, said Chris McCarty, director of the center.

Seniors may feel they are choosing between a rock and a hard place or, in financial terms, low-yielding, but safe fixed-income products, such as bank CDs and Treasuries, as opposed to higher-yielding, but riskier products, such as corporate bonds and dividend stocks. Typically, as investors age, they shift to a more and more conservative portfolio.

Investors age 65 and older expressed little appetite for risk in a March survey by Millionaire Corner. Only 14 percent of Mass Affluent investors – those with $100,000 up to $1 million – say they are willing to take on significant investment risk to earn a high return on investments. Well over half - 56 percent - said it was more important to protect principal than grow investments.