Are your investments safe?

Many retirees have turned to bonds to create an income stream during retirement. Bonds have historically been considered a safe asset; however, over the last several years, we have seen many large companies file for bankruptcy, potentially leaving their bond-holders floating in the wind. While the default risk is what most investors are concerned with, interest rate risk can be just as big of an issue, especially in this low interest rate environment. Inflation is one of the primary factors causing interest rate risk. For example, if you buy a bond in today’s marketplace, with a low interest rate environment, you can only receive a low interest rate on the bond you purchase. If interest rates rise and companies start offering bonds at higher rates, you have two choices: You either hold onto your existing bond and continue to earn a low interest rate or you sell it. Or, If you sell it, the next buyer will give you less value for your bond because they could buy a new bond today at a higher interest rate. U.S. News posted an article on this topic titled “How to Lose Money Investing in Bonds.” Read this article and give me a call. There may be a better option to give you more retirement income with less risk.