I wanted to share my thoughts on something interesting that I just read…
A recent study by the Secure Retirement Institute found that more than half of Americans would be interested in guaranteed lifetime income options; even more interesting is that 64% of Generation Z and Millennials would be interested in guaranteed lifetime income options.1
I am so encouraged to see that, increasingly, people are becoming aware of what retirement security is really about – and that is CASH FLOW, not “net worth”.
In the past, people talked about retirement in terms of their monthly income, rather than assets or net worth.
Indeed, in the 1980s more than 60% of American workers had pensions.2
However, due to the cost, corporate pensions have mostly gone by the wayside, with only about 15% of workers today covered by a pension. 3
In lieu of no longer having access to pensions, Americans have had to take on more personal responsibility – and all of the risk – for planning the success of their retirement. Now you know what has happened to the “Happily Ever After” retirement – it has been replaced with a worry-filled, do it yourself retirement!
Because of this dynamic, we have been conditioned by the financial media to invest in our 401k and try to build as big of a nest egg as possible, but what I find interesting is that people rarely understand the ramifications of this course of action.
Not only is the 401k fully subject to the volatility of the equities market, but it is also 100% taxable upon withdrawal. Due to these 2 factors, they are extremely inefficient for generating retirement income.
**hypothetical example** For example, a person who has accumulated $1 Million in their 401k could safely withdraw about 3% per year ($30,000) and then must pay income tax on the distribution! If you take out more than 3% annually, chances are high that you could run out of money before death!4
Imagine that! Being a “millionaire” and having to pace yourself to live on just $2,500 per month to make sure you don’t run out of money before you die.
Do you realize that there are financial tools at your disposal that are much more efficient at generating retirement cash flow, with no market risk and some with NO income tax?
Many top-rated life insurance companies provide income annuities and whole life insurance policies with 6%+ distribution rates – meaning that you could generate the same amount of cash flow as the example above ($30,000) although you wouldn’t have needed to accumulate nearly as much money to do it. (just $500,000).
In addition, if you used a properly structured life insurance contract, you would not owe a dime in income tax – neither federal, state, or local tax – nor would it count toward the provisional income calculation for social security tax, and it wouldn’t count in the Medicare premium offset either! **hypothetical example**
So, are you investing for net worth – or cash flow?
Is having a big pile of money sitting in an account that you cannot draw on serving you – or the adviser making fees to manage it?
I am not against the stock market; I am simply against uneducated decisions where people do not have an end game/exit-strategy.
In fact, in my practice, I am compensated for giving investment advice. For many situations, it’s highly advantageous to have a portion of assets invested in the equities market in order to grow wealth and to offset the effects of inflation in a retirement income plan.
However, I see too many people try to retire without a non-correlated asset class in their arsenal, and they are 100% at the mercy of the equities market.
Many times, this results in living a “just in case retirement,” as people don’t want to spend money “just in case” something bad happens.
- What if we live for a long time?
- What if the stock market crashes?
- What if we run out of money?
Wouldn’t it be amazing to have access to programs that provide MORE after-tax spendable income, with LESS RISK, more PREDICTABILITY, and not relying on mere PROBABILITY?
What would that mean for your peace of mind to know that you are absolutely BULLETPROOF against the next virus/crisis/market crash/catastrophe/election / whatever else?
Feel free to shoot me a quick message with your thoughts, or if you are interested in learning how these strategies – combined with solid investment advice – can optimize your retirement plan.
P.S. If you haven’t checked it out yet, please stop by my mini online seminar How Retirees and Pre-Retirees Can Potentially Avoid Going Broke While Keeping Their Nest-Egg Secure! Tons of great information and bonus is it is 100% COMPLIMENTARY!
2 https://economix.blogs.nytimes.com/2009/09/03/pensions-1980-vs-today/
3 https://www.usatoday.com/story/money/2016/04/23/pensions-economy-workers/83292892/
4 https://news.morningstar.com/pdfs/blanchett_lowbondyield_1301291.pdf
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