retirement resources and what you can buy with that money — also known
as its purchasing power. When Teri retired at the age of 60, she was pleased
with her retirement income. She was receiving an $800-per-month pension
and $1,200 per month from money that she had invested in long-term bonds.
Her monthly expenditures amounted to about $1,500, so she was able to save
a little money for an occasional trip.
Fast-forward 15 years. Teri still receives $800 per month from her pension,
but now she gets only $900 per month of investment income, which comes
from some certificates of deposit. Teri bailed out of bonds after she lost sleep
over the sometimes roller-coaster-like price movements in the bond market.
Her monthly expenditures now amount to approximately $2,400, and she
uses some of her investment principal (original investment). She’s terrified of
outliving her money.
Teri has reason to worry. She has 100 percent of her money invested without
protection against increases in the cost of living. Although her income felt
comfortable in the beginning of her retirement, it doesn’t at age 75, and Teri
may easily live another 15 or more years.
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