Is Investing for Retirement Safe?

When you’re investing for retirement, you need to be able to decide on how you’re going to use the money you’ve been putting away.

Are you going to use that investment or are you planning on just living off of the interest?

While living off of the interest sounds like the way to go, especially if you have a sizable investment, there are some shortcomings with that plan.

The first shortcoming is that your retirement investment is subject to the ups and downs of the stock market.

Recently, many people who took a strictly traditional path to investing for retirement and were planning on living off of the interest of their funds suddenly found that their investment had lost up to half of its value in a short period of time.

The result was that the money they were receiving in interest was also reduced by nearly half. Suddenly they no longer had the amount of income that they needed to pay the bills. They were forced to either return to work or withdraw some of their investments.

While returning to the workforce may not be a desirable option, it’s certainly better than withdrawing from the money you have invested for retirement. By withdrawing the principle from your investments you’ll be further reducing the amount you’re able to withdraw.

It’s a snowball that takes you to financial ruin. The more you withdraw today, the more you’ll need to withdraw in the future. Even if the stock market recovers, there’s no way to put that money back into your retirement fund.

The second shortcoming of living off of the interest is that you’re basically putting yourself on a fixed income. When you’re no longer investing for retirement, and are relying on interest paying investments, the amount you receive each month will not change much.

Because you're taking the interest out of the investment, and are not putting anything back to grow the principle, the amount of your investment will not change.

As Americans continue to live longer you need to be prepared to live for 20 years or more on your retirement investments. That means your monthly payments will remain nearly the same for those 20+ years.

The fly in the ointment here is a little thing called "cost of living." In a typical year the cost of living increases by about 3%. What that means for a person on a fixed income is that $1,000 today will only be worth a little more than $500 in 20 years.

You may be living well when you first retire, but over the ensuing years your buying power will begin to decrease.

Additionally, I’m discussing the conventional thinking here. What about the fact that the US economy is tanking fast? What about the threat of hyperinflation we all face as a possibility in our future? Good luck with that fixed income in a hyperinflation scenario.

So how do you get around that? There are 2 ways.

The first is to have an investment that is large enough that you can live off a portion of the interest while reinvesting the rest, or find ways to keep money coming in so you are not having to use all of the interest (and reinvesting).

Chances are you’re not overly excited about going back to work for additional income, so you may need to get creative in how you build streams of income. There are ways…you just need to look around until you find something that appeals to you.

My recommendation is that you begin educating yourself as soon as possible in some or all of the following areas:

• The Internet: Look into building niche websites where you discuss one of your passions and then offer products in that niche that can earn you income


• Real Estate: A few good investments here can set you up for many years of residual income later on


• Network Marketing/MLM: An opportunity in this field can be both fun and profitable as you meet new people


• Option Trading: A bit more difficult but there are some excellent courses that teach this area of the stock market

We live in changing times. Those people who rely on the old paradigm of working 30 years for one employer and then retiring on a nice, big pension are going away. Those who continue to plan only through traditional methods do so at their own peril.

I recommend highly that you begin adding in additional streams of income right now. If you want to slow down eventually, then investing for retirement is something you’re going to have to look at carefully…including doing more than simply investing through a buy and hold strategy.