Keeping Retirement Simple

It seems as though over the last couple of months there are three factors that have had control over the market fluctuations. Three factors outside of your control that can have you gravely concerned about your future nest egg in a matter of seconds. First, the concerns over the Russia – Ukraine crisis. How many times has the market gained and receded based on a one or two line quote from Putin? Second, the ongoing crisis in the Middle east, particularly issues in Israel and Iraq. As much as we hate the reality of it, this crisis has been going on for centuries, it is not going to change any time soon. Lastly, the falsified security of the federal stimulus. It is almost an automatic reaction, stocks take a hit and Wall Street looks to the Federal Government for more monetary assistance (Quantitative Easement III). Remember, the more we spend now the more we pay in taxes moving forward. How many of these concerns are in your control?

Obviously none of the mentioned concerns are in your control. Yet the future of your nest egg is dependent on what happens on a daily basis in the market. It does not have to be that way. You can take control of your own destiny regardless of external events. Assuming there is an American Flag flying over our country moving forward, guarantees are possible in retirement. It is quite simple. Don't focus on a dollar amount you are trying to reach (example: “I need $1 million to retire”), instead focus on a cost of the lifestyle you want to pursue in retirement. Ask yourself how much monthly income will you need in retirement for life, regardless of how long you may live. Everyone is living month to month. Those monthly expenses do not go away in retirement, instead they hopefully go down. Nonetheless, there will be monthly bills throughout each of our lifetimes. This is my recommendation of focus.

Think of it this way... Which scenario do you think hurt an investor more with their nest egg in 2006, prior to the financial crisis? The investor who's nest egg was dependent on day to day activities in the market, or the investor who knows they will get the same result regardless of the outcome? Now ask yourself the same question in today's volatile financial arena. This is the #1 reason why many future retirees, and retirees alike, are looking for protected income results independent of external market events. With hindsight being 20/20, how many of those investors would go back and trade the daily risks of retirement for a guaranteed result? If your goals can be met without risk, why would you roll the dice? Granted, you may miss out on a huge market rally; however, you would bypass the huge market falls as well. I believe this comes down to how much stress you are willing to endure in your lifetime.

To reiterate, turmoil in the market will always be there. This is a constant phenomenon. You will rarely, if ever, have control of these events; hoping the current will take you to shore. Unfortunately, there are many still at sea who thought they would hit land long ago. This is a risk you do not have to take on. There are viable solutions that will guarantee your results of lifetime income, regardless of what the market may throw your way. It is imperative to explore these solutions that have been available now for decades. I believe the only way to eliminate the stresses approaching or within retirement is to remove yourself from the situation. On a closing note, make sure to explore these options with a trusted licensed professional who thoroughly understands the ins and outs of lifetime income solutions.   

Why You Shouldn't Have a Dollar Amount Goal For Retirement

I'm pretty sure everyone has heard the retirement analogy of how much money you need to retire. As in, what is YOUR number for retirement? In other words, how much money (the actual dollar amount) do you need to retire with. I've always had a hard time wrapping my hands around this concept. To me, that number is totally contingent upon an unpredictable market. I'm sure that if you asked the average investor that question in 2006 you would have a much different response to an investor today. Today's investor seems to have become either complacent or numb to volatility, believing that the ups and downs in the market is a new norm. Since elements of the market are out of the investors control, not much time is spent worrying about it; out of sight, out of mind. This is especially true for those who plan to retire within the next 10 years. The truth is we don't know what lies around the corner, nor do many know how or when retirement is going to be possible. So what if, instead, you didn't have to worry about a number; only a guaranteed monthly income check down the road? Not a pension, rather a strategy like a liquid pension; if one were to exist.

I read a friend's book, “Savior Retirement”, that talks about a retired pilot, who knows regardless of market conditions there was going to be a check in his mailbox (before direct deposit was the norm) every month for the rest of his life. These were the good ol' days of working for one job for life, with a gold watch and a pension at the finish line. Today pilots do not have pensions, only 401ks to count on. Today it's more like “what is YOUR number going to be for retirement?”. That belief is a misconception. With the market being at the highest its ever been, you can exchange “what YOUR number is going to be” with a check to ensure your retirement will never be disturbed, regardless of what the market throws at us. A monthly payment you can turn off and on each month like a light switch while having access to your cash value simultaneously. So, how can you do this?

You can only accomplish lifetime income through fixed indexed annuities (FIA). These products are usually backed by multi-billion dollar insurance companies, many of which funded the pensions in the past. The difference being, pensions were funded by group annuities provided through an employer, whereas a FIA is an individual annuity funded by a lump sum payment. Only an FIA will provide a lifetime payment with all the flexibility a pension fails to provide. Monthly payments within an FIA can start on the first month or on the 10^th year. Typically, the longer you wait for a monthly check the higher the payment will be. FIA's are able to do this through Income Account Values (IAV) that grow at a predetermined interest rate. IAV's grow separate and independent of the cash value and serve as a formula to determine what the monthly payment will be down the road. The IAV makes sure that your monthly payment will be guaranteed regardless of how high or low the market may go. Bottom line, the IAV does not guarantee a lump sum payout, but instead a guaranteed monthly payment. A monthly payment that you can start and stop at your discretion while having access to the cash value. The balance being, the more cash you take out with a lump sum the lower your payment for life will be adjusted respectively.

Because of the disappearing act of the pension, investors are turning to the FIA to maintain their quality of life in retirement. Investors are turning their backs to how high they can grow their portfolio, rather focusing on how much monthly income they can count on for all their retirement needs. Investors are starting to realize that the roller coaster in the market over the last several years is likely to continue, making it impossible to determine the dollar amount they need in time to retire. They want to know what they can count on when the time comes for retirement. Furthermore, that their day to day obligations and quality of life in retirement will be there for life.

When considering an FIA to meet your retirement needs, it is important to discuss your options with a licensed professional who specializes in FIAs. There are to many instances where financial professionals make the wrong recommendation to the client, meaning the recommendation was not the best for the client's needs. There are a lot of moving parts, like how the cash value accumulates interest, that need to be addressed prior to the recommendation. With the right FIA you can guarantee a monthly check for life throughout your retirement that specifically meets your needs.