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270 Don’t Make Me Say I Told You So

this money should go into funds that are made up of large-cap
stocks that pay a meaningful dividend. Large-cap funds tend to

be less volatile than a fund of mid-cap or small-cap stocks.

Additionally, funds that pay dividends can provide increasing
income over time, while reinvested dividends can increase the
number of shares owned, and can really benefit a portfolio

by buying more shares when prices are down. In fact, market

drops can add a significant amount of money to your portfolio
over time.

Because investing for growth involves volatility, it may cause
significant problems for someone who is in the distribution
phase of retirement. Taking income from a portfolio that is

dropping in value can speed up the decline in value of that

portfolio. I addressed this subject when explaining the “sequence
of returns.

For that reason, it may make sense to investigate annuities,
which can provide the opportunity for growth while guaranteeing

a lifetime income. This combination of possible growth and a
predictable, possibly increasing income over time has made

annuities, particularly variable annuities, attractive to many
investors who are retired or who are approaching retirement.

Annuities are complex investments, so it’s important to do your
homework before making an investment in one.

Chapter 6: Your Action Plan