The  Retirement  Planning  Pyramid - Investment Options towards your Retirement portfolio


The economic turbulence of the past several years has forced America’s 78 million Baby Boomers to re examine and redefine their retirement savings strategies. According to the Center for Retirement Research at Boston College, more than half of American households are “at risk” of being unable to maintain their pre-retirement standard of living in retirement.

To help raise public awareness of the need to comprehensively plan for retirement, the Insured Retirement Institute (IRI), the leading member of the National Retirement Planning Coalition, released its Retirement Planning Pyramid, specifically designed for use by consumers and financial advisors alike.

“Retirement planning and preparedness are at critically inadequate levels, with studies showing the majority of Americans lack any kind of retirement savings strategy,” said Insured Retirement Institute President and CEO Cathy Weatherford. “IRI developed the Retirement Pyramid to serve as a visual guide to help them build a sound financial roadmap. While no one retirement plan will meet the needs of every consumer, a weighted mix of long-term assets, guaranteed income, insurance and investments can help ensure that retirement funds are well positioned. And with growing interest by both consumers and the Obama administration to secure lifetime income, the value of guaranteed investment strategies has never been more essential.”

Making up the large base of the pyramid are guaranteed income streams, such as annuities, which have continued to grow in popularity during the economic downturn. President Barack Obama has touted annuities as vehicles to reduce concerns that “retirees will outlive their savings.” And as the certainty of Social Security may seem tenuous to younger investors, annuities may prove valuable alternatives.

On the next level of the pyramid are longer-term investments that need time to mature and grow. Examples include traditional 401(k)s, IRAs, real estate holdings and some annuities as well. As 401(k)s and IRAs offer a wide selection of investments, they also provide some stability against the frequent fluctuations that can affect a company’s single stock.

Insurance is critical, too. While the bulk of your asset base should not be overly invested in this group, investors should not ignore the importance of a good mixture of life insurance with long-term care, medical coverage and Medicare.

At the top of the Retirement Pyramid are CDs, mutual funds, stocks and bonds. With the wild swing of the stock market over the past two years, advisers may want to dilute some of these more volatile investments with something more stable, such as IRAs, and more guaranteed income streams, such as annuities. A smattering of these in your retirement plan is a wise choice.

A healthy financial diet will include all four basic groups-guaranteed income, long-term assets, insurance and investments.

The IRI Retirement Planning Pyramid is a visually simple, but powerful tool that can conceptualize how to balance financial priorities. And while no two people will have exactly the same retirement plan, using a financial fitness pyramid can offer possibilities of how to balance investments.

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