Despite What Stock Brokers Say, Diversify Your Portfolio
The effects of the retirement crisis in the United States are being felt by more than just those approaching retirement age. Because older citizens are holding on to their jobs for as long as they can to ensure that they’ll have enough money to live comfortably once they retire, younger Americans are not able to move up into those positions and maintain lower ones, and this cycle continues down the line so that it is more difficult now for young adults to find suitable employment after college. One of the biggest reasons older Americans are not financially prepared for retirement is poor diversification.
According to a press release on PR Newswire from the Indexed Annuity Leadership Council, only 9% of Americans are focused on having a diversified portfolio, and 22% of Americans are not familiar at all with common retirement investments that could help them create a diverse portfolio, like certificates of deposits, mutual funds, and fixed annuities, all generally considered low-risk investments appropriate for a retirement fund. Further, about 20% of Americans think that simply contributing regularly to a 401(k) will ensure they receive regular payments during retirement, but 401(k)s are still subject to market forces, even if to a lesser degree than the stock market. The IALC recommends putting money into fixed indexed annuities because it is the only way to guarantee payments throughout retirement, even during a major market crash. These annuities always guarantee a minimum interest amount, but may gain more if the market is doing well, and they will always guarantee that none of the principal is lost.
Of course, this press release was put out by a group composed of life insurance companies that are the ones that benefit from handing out these annuities, so there is bound to be inherent bias even if the IALC claims they exist solely to put out educational materials for consumers, industry professionals, and the media. These annuities are very attractive since the financial crisis of 2008 that destroyed the finances of so many Americans is still a fresh wound, but the goal is diversification. For younger Americans, a more aggressive or slightly riskier plan of investment in the stock market may be a better idea, since over the course of decades the market is likely to experience overall growth. Even here you can diversify further, and if brokers or financial advisors talk you out of diversifying and you lose money because of it, they can be sued by stock broker misconduct lawyers for neglect.
Even with this protection in place, neglect can be difficult to prove in such a volatile market, so being as knowledgeable as possible about all of your options can only help to make sure you’re making the right decisions. It is never too early or too late to better your financial position through diversification, whether that is with a safe option like a fixed annuity offered by a life insurance company, or something a little more risky.