Reducing Expections for Company Stock

Part of our retirement savings are stock options which were awarded when I was working.  When I retired in October 2007, I conservatively estimated my company's stock price would grow 6% annually, yielding a 33% gain by October 2012.   That would have provided a savings to salary ratio of 25.   Unfortunately, the stock is down 11% which resulted in a savings to salary ratio of only 17. 

With the remaining stock options expiring in 2-5 years, I can no longer expect a 33% return :-( So I am reducing my expectations to a maximum of a 11% total return at 5 years, or about 2% annually.   Even then, I believe it may be difficult to achieve this return given the global economy and the business situation for my company.  In fact there may be more downside risk than upside potential.

Currently, I still expect a market decline in the next few months given the due to the EU sovereign debt and US fiscal cliff issues.   So I will start selling the oldest options, which start expiring in early 2014.   This will minimize the loss of option value should the market decline significantly in the next few months.

In addition, I will begin working on a strategy to develop more stable sources of retirement income from our savings, since CDs are paying very low interest rates.   I have already started looking a higher dividend paying stocks.  Annuities are another option.  Finally, rental real estate, which my sister and I will be inheriting, is a third option.
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This is not financial or retirement advice. Please consult a professional advisor.

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