Locking In Your Gains For Lifetime Income

In September of 2008, the Federal deficit just barely crossed the $10 trillion mark. Today, 5.5 years later, the deficit stands at $17.5 trillion. This is over a 70% increase to our National debt in less than 6 years. This debt is not going to pay itself off. The writing is on the wall; Federal income tax rates have nowhere to go but up. Today, the top Federal tax bracket is just over 35%; almost half the historical average since 1913. What do you think the highest Federal bracket will be in 2024?

When you take into account that the vast majority of all deferred compensation plans (401k, IRA, TSA, etc) are all taxable upon withdrawal, it goes without saying that every dollar you save for retirement needs to be working in your favor. This means you will need to have solid percentages in order to offset the additional income you stand to lose to Uncle Sam. Unfortunately, the last 13 years have been anything but solid. In fact, most investors have just been able to recoup the losses they incurred over the last several years. There has been extreme volatility due to a domestic terrorist attack and a Global recession, just to a name a few. The market has endured with the assistance of Federal Stimulus, but not without consequence. This is a long term problem we have to endure with no history lesson as a guide.

I believe the only way to plan for retirement today is consistency. A steady return that can achieve the desired income results over a specific time period. There is no way to give a guaranteed return on your cash of 7% per year. However, you can add 7% to a non cash value to determine what income you will be eligible for while exempting your cash value from volatility; an income stream you can count on for life regardless of future market performance. Furthermore, an income stream that can be stopped and started at your discretion while you still have access to the cash value.

Lifetime income is aggressively being pursued by both retirees and future retirees through an income stream that is guaranteed for life, regardless of what may lie ahead. These are guarantees that many Americans are seeking instead of rolling the dice in the market. I remember about a year ago I met with a prospect (now a client) that said “I don’t know what I have in my 401k (the current balance) because I don’t need that to live. That money is bonus money that is off limits today. All I want is to know that I can keep the lights on and enjoy the little things in life without having to go to work every day”. The fear of not having enough money in retirement is a common concern that I hear on a regular basis, especially with the terrible state that Social Security is in. The average American wants relaxation and comfort in retirement without the worry of where their check is coming from. Lifetime income provides all of this and more.

Make no mistake about it; rising taxes are just around the corner. The Federal deficit has increased by 70% over the last 5.5 years. The Federal Government is still purchasing Government bonds today at $45 billion per month with QEIII (Quantitative Easement III) to help the economy along. Without financial guarantees of lifetime income, what solution can you rely on to give you the comfort in retirement you deserve? How else can you ensure that money will be there when you need it down the road? We have all been exposed to how much money you can realistically lose in the market. Granted, the market is on a rebound; but for how long that will last is anyone’s guess. There may not be a more perfect time to lock in your gains for a guaranteed check for life.

Protecting Against the Federal Stimulus

My predictions in May of this year were correct when I said that the federal stimulus would continue and volatility would be the norm.  In September of this year the Federal Reserve announced Quantitative Easement III (QEIII), which was designed to keep pace with Mario Draghi and the ongoing Euro crisis; promising continuous monthly injections of $85 trillion in order to protect our nation from an economic collapse.  There is no way to know how long this will go on for, however; Fed Ben Bernanke stated unlimited printing.  Why?  Why not, the total known federal stimulus was at $3.6 trillion prior to QEIII.  So when additional stimulus is announced, it is then shrugged off as old news.  Investors are numb to this phenomenon, and have now become conditioned to expect Uncle Sam to cut a check.  The rules are now set in total opposition to a bull market, meaning that investors are now counting on Uncle Sam to help offset their losses.  With respect to financial preservation, the next few years are crucial and how we approach the Federal stimulus will determine what our financial fate will be. 

In September of 2013 the total Federal stimulus will exceed $5 trillion.  QEIII will add another trillion dollars to the printing press each and every year.  When you take into account that’s the cost per year for the Federal Government to run the country, the thought becomes overwhelming.  Even worse, we are at the tip of the ice burg.  Why?  Because QEIII was announced at $85 trillion per month, indefinitely, moving forward.

So the question is how do you think the market will react to this news?  My guess is it will likely react to QEIII the same way it did over the last 5 years.  We will likely see a roller coaster in a downward trend. This is where the opportunity lies.

When the market is having its ups and downs it seems pointless to try and beat the market.  This is why investors are looking to protect financial interests they can control.  Interests that will protect your money from all future market downturns with a guarantee of lifetime income.  For example, think of it as taking your 401k and knowing that even if you never added one more penny to the account you would have a secure income steam for life at any time in the future; while knowing your eligible income will increase each and every year.

We know that volatility will be the norm moving forward, especially with the continuation of QEIII.  Just like we all know of the losses due to the stimulus in the last 5 years.  The question is; if you could go back and protect all of your financial interests prior to the fall of Lehman Brothers, or the Financial Collapse of 2008, would you?  I know most, if not all of my clients would have, or did, taken action to protect their money.  Honestly, why wouldn’t you protect your money? Especially knowing $85 billion each and every month will be continuing for quite some time.  At what point will it be too late?