Published February 22, 2012
Several surveys have found that the greatest fear for 70% of Americans is the possibility of outliving their income. On my radio show, we hear from many listeners with these same fears and no idea of how to fix what is broken with their retirement planning. At the same time, we as Americans still put our money into investment vehicles that are potentially at risk. Everything you have worked for and tried to save is being lost, while others are becoming rich on your financial mistakes. You place your financial future on the line with all-or-nothing odds and hope for the best. Why do we continue going down a path that we know is not going to work for us? Let’s be clear, and let me ease your mind: It’s Not Your Fault! The generally accepted way society teaches us to think is wrong. This path toward retirement is all most Americans know--it’s what we have been raised to believe. How many people have been told this as a child: “You better bundle up so you don’t catch a cold.” We have all heard this at one time or another, but the reality is that you don’t get sick from cold weather. You get sick from germs or a virus, not from the cold front that just moved into your area. But it’s what we were raised to believe, so we bundle up, we tell our children to bundle up, and we tell our grandchildren--keeping the cycle going from one generation to the next. Putting a stop to the myth of getting sick when it’s cold outside is easy to do: just stop saying it. Believe it or not, stopping the pattern of placing your retirement at risk is just as easy. You can change the course of your family’s financial future, and all it takes is a little bit of time to become educated on your different options. There are vehicles for your money that can provide guaranteed protection from loss, guaranteed growth toward retirement, and a guaranteed lifetime income you can count on to be there when you need it most.
Many decades ago, insurance companies came up with a plan called an annuity. Annuities were designed to insure annualized payments to the purchaser for a specified number of years. Many contract changes have come into the industry over the years, but none is more exciting than the Fixed Equity Indexed Annuity (FIA). These annuities give the promise that in most cases, you will never lose any of your principle or your gains in interest that have been credited, no matter what the stock market does--even if it crashes. Most of these FIAs will offer a start-up bonus: real money credited to your initial premium just for starting. Most FIAs offer riders that can guarantee annual interest rate gains from 3% to 10%. Some FIAs compound the interest rate, and some use simple interest. Most importantly, with these products you will be guaranteed an income for the rest of your life, and, in most cases, for your spouse’s life. You can even set up the annuity so that the balance of your unused accumulation value is passed on to your remaining heirs.
There is generally a very small fee for the riders that guarantee interest gains, ranging from 0.45% to 0.95%; you are also guaranteed that you can participate at no risk of loss to you in the Indices (S&P500, Nasdaq100, etc.) that the Insurance Companies utilize. At this point, you may be scratching your head and saying to yourself, “Well this just seems too good to be true.” Let’s look at that briefly. FIA products have been around for over fifteen years. Billions of dollars have been placed into these policies, with more clients trusting in them every day. Annuities are around us everywhere we look--we just don’t see them. Insurance Annuities are the vehicle of choice for the multi-million dollar payouts of many state lotteries. Many employee pension plans use annuities to guarantee the income payout when employees hit retirement.
It was a difficult time for many people when we experienced the stock market crash immediately after 9-11. Then in 2008-2009 the market fell again, taking losses that averaged 47-57% of investors’ portfolios with it. While all of these losses were taking place, not a single person who had their money in FIAs lost any money. With all the losses you may have experienced and all the time it will take to recoup those losses using conventional retirement strategies, it just might be the time to take a good hard look at a proven method of obtaining a lifetime income. My grandfather and my father told me, “If you have to risk everything, you would be better off risking nothing.” That was how they saw things. I suppose the insurance companies have started to see things the same way when it comes to building a plan toward a lifetime of income. The question we should all be asking ourselves now is, “Have I been making the right choice for myself and my family, or have I been traveling down the same path as everyone else and just hoping for the best?” Fortunately, with the non-conventional retirement options available to us, we have the opportunity look forward to a better future.
You can read more from Lance Hoppes at hoppesassociates.com