It’s What You Keep that Counts

By Kyler RedderFOXBusiness

When meeting with a client who is planning for retirement, I commonly pose the question: “Are you more concerned with what you EARN, or what you KEEP?” You may wonder why this question is relevant and what options are available. Let’s discuss further, below.

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Stock Market

Fact or Fiction? Over a long period of time, the stock market with always go up. It was very true from 1970-2000. This 30-year period looks like one steady climb up. Times have changed and the last 12 years look like a roller coaster with many peaks and many valleys. In my opinion, this is the new normal.

A large number of our clients have money from IRAs, 401(k)s, and personal brokerage accounts invested in the stock market. The stock market can produce high potential returns and dividends. Another positive is long-term gains from the market can be taxed at a lower income tax level.

The stock market can also produce high potential losses that can take years to recover. Your money can be subject to taxable dividends and high commission and management fees, as well.

SUMMARY: The stock market can produce great returns, but it is important to remember that a high return is only a realized gain if you sell. If you don’t sell, any gains are only unrealized and is fully exposed to market volatility and potential future losses.

Bank and CDs

Banks can offer options in Certificates of Deposit (CDs), money market accounts, and interest bearing savings and checking accounts. The bank can offer benefits of liquidity and easy access to your cash at a local branch. FDIC insurance can also give peace of mind that your money is safe.

At the same time, current bank rates are incredibly low and any interest earned from CDs and other accounts is taxed at regular income tax rates. In other words, you are paying the bank to keep your money. An increase in nationwide bank instability has also increased risk at the bank.

SUMMARY: Outside of some protection and safety, the extremely low interest rates make it almost impossible for your money to grow effectively, especially if we see an increase in inflation and cost of living.

Fixed Index Annuity

How many of you have ever heard of a Fixed Index Annuity (FIA)? Not many of you, right? A large percentage of our retirement clients use FIAs as a piece of their retirement plan, because an FIA allows you to participate in the market and capture gains when the market does well and eliminates downside when the market is down and losing. The worst-case scenario in a down year is a 0% return and you never gamble or risk the gains from previous years. FIAs have no sales charge, management fees, or expense charges, and gains remain tax deferred while kept in a qualified status (IRA and 401k rollover). By the way, it is VERY common for individuals to rollover their IRAs and 401ks into a Fixed Index Annuity.

FIAs don’t risk your principal and still offer high potential returns. Tax-deferred growth is another big plus and can save you significant amounts of tax dollars. Law requires the companies we work with, to keep dollar for dollar reserves on hand.

FIAs do require a time commitment (similar to a CD) and if you withdraw more than the 10% penalty free amount, you could face an early withdrawal penalty. Because the FIA eliminates your market risk, you do not receive all of the index gains and no dividends are attached.

SUMMARY: FIAs offer opportunity for growth and accumulation while eliminating risk of potential market loss. It is very common for individuals to rollover their IRAs and 401(k)s into a safe FIA.

Several of my clients had their IRAs and 401(k)s fully exposed in the stock market and saw great returns from 2003 to 2007, but very few of them sold at the peak and locked in their gains. In fact, when the mortgage bubble burst in 2008 and the market tanked, most of them sold some or all of their funds when the market was down and locked in their losses. On the other hand, several of my clients had an FIA from 2003 to 2007 and locked in their gains every year. When 2008 hit, guess how much they lost. ZERO.

Today’s stock market can be compared to a casino, because casinos are famous for making a lot of money and causing a lot of people to lose theirs. Over the past five years, trillions of dollars have been lost in retirement accounts. It isn’t worth losing money that you’ve worked so hard for and that has been specifically set aside to allow you to enjoy your retirement years. REMEMBER, it’s not just what you earn, it’s what you keep that counts!

Bowen Redder specializes in Safe Money retirement planning and serves clients of all demographics. For more information on how our strategies can benefit you and your future, please visit or call us today 208.878.8118.