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Moving your retirement savings from stocks to bonds feels safer. But what happens when both fall at the same time? · Bitesize Retirement

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  SPEAKER_00: You spend decades building your retirement portfolio.
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  SPEAKER_00: And as retirement gets closer, you start moving money from stocks into bonds.
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  SPEAKER_00: Because that's what we've always been told, right?
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  SPEAKER_00: Stocks are for growth, bonds are for safety.
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  SPEAKER_00: But here's something that might surprise you.
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  SPEAKER_00: In 2022, the US aggregate bond market lost roughly 13%.
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  SPEAKER_00: Imagine being 65 years old,
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  SPEAKER_00: finally retiring,
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  SPEAKER_00: and discovering that the part of your portfolio you thought was supposed
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  SPEAKER_00: to protect you is losing value too.
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  SPEAKER_00: Now, does that mean bonds are bad investments?
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  SPEAKER_00: Absolutely not.
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  SPEAKER_00: Bonds still play an important role in retirement portfolios.
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  SPEAKER_00: They can provide interest, income, diversification, and stability under many market conditions.
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  SPEAKER_00: But there's a distinction that becomes incredibly important once you retire.
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  SPEAKER_00: A relatively conservative investment is not the same thing as a guaranteed retirement paycheck.
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  SPEAKER_00: Let's say you have $2 million in your 401k.
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  SPEAKER_00: You need $8,000 a month to maintain your lifestyle.
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  SPEAKER_00: Social Security covers $4,000.
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  SPEAKER_00: That leaves another $4,000 every month that needs to come from somewhere.
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  SPEAKER_00: You could withdraw that money from your investment portfolio.
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  SPEAKER_00: And that might work perfectly well.
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  SPEAKER_00: But what happens when stocks fall?
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  SPEAKER_00: What happens when bonds fall at the same time?
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  SPEAKER_00: You're still paying the mortgage.
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  SPEAKER_00: You're still buying groceries.
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  SPEAKER_00: You're still paying for health care.
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  SPEAKER_00: Your expenses don't stop just because the market is having a bad year.
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  SPEAKER_00: This is where retirement income planning becomes different from investment planning.
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  SPEAKER_00: Instead of asking only how much your portfolio might grow, consider another question.
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  SPEAKER_00: How much of your monthly income do you want to depend on market performance?
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  SPEAKER_00: For some retirees,
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  SPEAKER_00: maintaining a diversified investment portfolio and
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  SPEAKER_00: a disciplined withdrawal strategy makes sense.
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  SPEAKER_00: For others,
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  SPEAKER_00: creating an additional layer of predictable lifetime income through
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  SPEAKER_00: an annuity may be worth considering.
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  SPEAKER_00: Annuities are not all the same.
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  SPEAKER_00: Their guarantees, costs, liquidity restrictions, and income features vary considerably.
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  SPEAKER_00: And any guarantee depends on the financial strength of the issuing insurance company.
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  SPEAKER_00: The objective isn't necessarily to replace your bonds
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  SPEAKER_00: or move your entire retirement portfolio into an annuity.
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  SPEAKER_00: It's to understand which part of your retirement needs to remain invested for growth
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  SPEAKER_00: and which part you would prefer to have supported by predictable income.
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  SPEAKER_00: Because having a $2 million portfolio is one thing.
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  SPEAKER_00: Knowing how next month's bills will be paid, regardless of what the market does, is another.
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  SPEAKER_00: And that difference is worth understanding before you retire.