The recession that “officially” lasted from December of 2007 through June of 2009 has been dubbed the Great Recession. Many believe it was labeled appropriately this way due to its eerie similarities to one of the worst economic times our country has ever dealt with, the Great Depression. After all, the unbelievably high unemployment rates that continue to be a drag on our “recovering” economy surpass any other episode the United States has dealt with since the Great Depression. It might also be the collapse of housing prices and the large scale number of foreclosures, two factors that exceed all other records since the Great Depression.
However blatant those factors are, I believe another factor is driving the lagging recovery: the general public’s confidence. According to TradingEconomics.com, the consumer confidence index has fallen from approximately 145 points (it’s high in January 2001) to around 55 points (the measure we currently sit at in December 2011). That fall represents an approximate 62% drop over the last 10 years.
Considering that three of the main factors that drive the U.S. economy are consumer spending, unemployment and the housing market, you can see why things haven’t really turned around for our country yet. The so-called recovery that we are experiencing is now more than 2 years old. So, I beg to ask the question: What proof have you seen that points to a true recovery?
I read a recent article on Forbes.com that provided a nice analogy of the current situation we face. It went something like this:
People tend to think our country has an illness similar to the flu. We will be sick for a few days, and then we will recover and get better. However, we have something more like diabetes and severe obesity. This type of problem isn’t easily fixed, nor quickly fixed. We are going to have to manage our health for a decade or more before we might show signs of being healthy again.
Many economists describe this recovery period as a “decade or more of long-term, low average growth.” Two years into this recovery, consumer confidence is still low. The housing market suffers from a lack of confidence from all parties (buyers, sellers, and lenders). The unemployment rate may be the largest indicator of a lack of progress.
Some of the smartest minds in the country believe that we are in for a lengthy recovery unlike anything we have seen before. In the new economy, many believe a 4-5% average return could be the new normal for stocks.
Often times, investors who focus on rate of return and timing the market get burned, not only in a recessionary time, but also when times are good. Instead of focusing on investments that might make the most money, you should be focusing on products that will keep the money you need to live off of in retirement protected. This portion of your nest egg should guarantee an income that you can rely on year in and year out.
For those of you who are in the retirement red-zone (you plan to retire within the next 10 years), or for those of you who recently retired, you are entering a brand new phase of your financial life. In the new economy, the accumulation method of investing could devastate any real chance you might have of making it through retirement without running out of money. If you need to use your accumulated savings to provide extra income during retirement, it is crucial that you protect the portion of your dollars that you simply can’t afford to lose.
I have created some excellent tools for consumers who are in that “retirement red zone” or have already retired. You can request a copy of the Consumer’s Guide to Retirement Income Planning and a free copy of my brand new book, Knock-Out Your Retirement Income Worries FOREVER, by visiting my website at www.WASmithFinancial.com .
In the Consumer’s Guide to Retirement Income Planning, there are 6 educational pamphlets, a short quiz to assess your current investment portfolio, a DVD explaining the importance of working with a retirement income specialist, and an introduction to our proprietary planning process, The Financial G.P.S. – Guided Planning System. This tool along with my book will help you get off on the right foot for retirement.
William "Bill" Smith, RFC
CEO and Founder
W.A. Smith Financial Group
For further educational information or to attend one of Bill's workshops, please call toll-free, 1-866-417-4156. You may also email us at Jarrett@WASmithFinancial.com
Investment advisory services are offered through Great Lakes Retirement, Inc., an Ohio registered investment advisor. Please consult with a qualified financial professional before acting on any investment advice given within this blog. Past results are not indication of future gains.