6 Scary Retirement Stories

Want to start a fire on Halloween? Use an open flame to illuminate your pumpkin, and stick the pumpkin someplace wobbly and near curtains. Then leave it unattended. Actually, the American Academy of Pediatrics says to consider lighting your pumpkin with a flashlight or glow stick. If you insist on a candle, use a votive - and display it on a sturdy table away from flammable objects. Flickr/Raul Isado

Last Updated Oct 25, 2011 8:29 PM EDT

Reading the recent headlines, there's plenty to be spooked about if you're approaching your retirement years or are already in retirement. If you want to exorcise your retirement demons, however, don't turn your head away. It's best to face your fears head on by informing yourself about the facts and arming yourself with strategies to survive and maybe even make these ghoulish apparitions disappear.

Let me be clear: You should indeed be scared by some of these stories. But instead of letting your fear paralyze you, I hope these stories motivate you to take action and fight back.

Let's take a look at some of the most bloodcurdling stories about retirement. Then I'll introduce some strategies that will help you rest in peace during your retirement years. While there are no guarantees in life, you'll feel better knowing you're doing the best you can do in light of these trying times.

Scary Story #1: Interest Rates Have Departed to the Underworld
Interest rates on savings accounts, money market funds, and CDs - normally safe havens for income-seeking retirees - have nearly vanished.

If you're trying to suck more than a few drops of blood from your retirement savings, you might need to consider mutual funds that focus on longer-term bonds, dividend-paying stocks, or real estate investment trusts (REITs). You'll be taking some risk that the value of your investment might drop, but your dividend payoff significantly beats the rates on savings accounts and CDs. Here are some current yields from popular Vanguard funds, as reported by Morningstar:
  • Vanguard Intermediate-Term Bond Index (VBILX): 3.71 percent
  • Vanguard Long-Term Bond Fund (VBLTX): 4.21 percent
  • Vanguard Wellesley fund (VWINX): 3.77 percent
  • Vanguard Wellington fund (VWELX): 3.1 percent
  • Vanguard Equity income fund (VEIPX): 3.06 percent
  • Vanguard REIT Index (VGSIX): 3.77 percent
Many people are afraid now to invest in annuities or longer-term bonds, fearing that interest rates will increase in the near future. If you really believe that will happen, you should stick with cash investments now and accept minuscule interest earnings until long-term interest rates rise. To get every last drop of blood from a CD, it still pays to shop as advocated by Allan Roth.

On the other hand, we could have a long period of low interest rates -- that happened before in the 1930s. If you believe that will happen, you should be more willing to invest now in longer-term bonds or immediate annuities.

If you're a buy-and-hold investor who's focused on generating income, then you can think that you're buying a stream of income with your investments; if you're ok with the current price, then you won't have buyer's remorse if interest rates rise and the value of your investments drop. You'll still have your stream of income.

There's no doubt that decreasing interest rates have increased the price of retirement. So another option to consider is working longer, perhaps part time at your current job or at a job in an industry you might enjoy even more.

Click on the button after the link below to see the next scary retirement story.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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