Are You Underfunding Your Retirement?

June 14, 2017

Many retirees and pre-retirees are drawn to fixed annuities and CD’s because they do not want to assume much risk. After all, there is no stock market risk involved with these fixed-return investments. Some people use them as their only vehicles for retirement planning.

But stepping out of the stock market altogether may not be such a good idea. In fact, for some it could be a serious retirement planning mistake. Here’s why.

Risk-averse investing has risks of its own. Every investment has advantages and disadvantages. Fixed-rate investments are no exception. While you eliminate market risk with a fixed annuity or CD, in a sense you are trading one kind of risk for another. You now contend with opportunity risk (or opportunity cost) and inflation risk. The fixed return you get might be far less than the return that stock market investing could bring you (in the short term and the long term). That fixed return might also fail to match the rate of inflation, leaving you with less purchasing power.  Volatility is something many of us endure in order to try for the kind of returns that may help us reach our financial goals. In the last year, the stock market has been quite volatile. But through the years, some investors have built considerable wealth through long-term stock market investment.

Do you really want to ignore the potential of the stock market? While short-term market movements may make stocks and funds seem too risky, the big risk could be the possibility of severely underfunding your retirement by clinging to fixed-rate investments. The stock market offers opportunities for considerable financial gain – and the chance of returns exceeding those of most fixed-rate investments. While there is risk involved, there also exists a potential for considerable benefit.

If you say “no” to the market’s potential, you may regret your choice later in your retirement. In fact, you may find that you need long-term stock market investment to work toward certain retirement goals.

Explore the possibilities. If you’d like to learn more about investments positioned to take advantage of the market’s potential, be sure to speak with a qualified financial advisor. He or she may be able to help you determine how much risk you’re willing to tolerate, and which investment opportunities are the closest fit with your tolerance level. What you learn might be very illuminating, and it might change your whole investment outlook.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit or call 832.585.0110.



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Copyright © 2018. HFG Wealth Management, LLC. Investment advisory services offered through HFG Wealth Management, LLC – An independent Registered Investment Advisory firm registered with the SEC. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Therefore, any information presented here should only be relied upon when coordinated with individual professional advice. [ more disclosures ]