Can you still retire

In friday July 11 issue of USA Today there was a good article about retirement written by Kathy Chu. The article talks about retirement and determining if your assets are adequate to last as long as you live in retirement. Although it is a good article thare are some key points missing and we will get to them in this blog entry. Kathy makes a number of excellent points about how important the early years are in permitting the asset base to grow and the terrible detrimental effect a couple of bad early years can have on your ability to have enough money to get through many years of retirement. She also shares the traditional rule of thumb that says take out no more than 4-5% of the assests per year if you want to maximize the length of time the assets will remain. She also talks about adjustments to withdrawals in the rule of thumb during one or more bad years.

It talks about postponing retirement if your assets need more time to grow and postponing Social security to get some additional monthly income. She adds that it is important to keep assets positioned in such a way that you have the ability to out perform the inflation rate. there are a number of references to food prices, gas prices, energy costs and healthcare costs. We all know the impact that each of those is having on our budget.

She also mentions diversification of assets and asset allocation strategies. All of these are good things but nowhere does she talk about the single thing that a boomer or retiree can do that will guarantee that the retirement asset pool will never run out as long as you live. She acknowledges that inflation adjusted pensions like Social Security are a good thing but she fails to tell the readers that they can create that for themselves with their own assets. This is something everyone with assets should be doing with at least a significant percentage of their retirement assets and their general assets.

The key points in the strategy we recommend are the following. Position a majority of your assets where there is NO risk of market loss due to economic market turbulence. Lock in each years gains protecting them from downturns in subsequent years. When possible shelter your assets during the growth mode from current income taxes. Deferred income taxes allow you principal and your previous years earning growth to continue to grow without creating a tax liability that you have to pay off when you file your annual taxes. You need to insure that your assets have the opportunity to grow at a rate that can beat the rate of inflation consistently. Remember that this year the Consumer Price Index (CPI) has risen at a rate of 5%. This is the highest CPI adjustment in a number of years. The products we are talking about do usually have early surrender charges on a sliding scale. These can be 10-15% but you have control over when you take the money out. Many clients never have to pay a surrender charge at all. By timing your withdrawals to the surrender charge free withdrawal schedule you can almost always avoid paying any fees at all! You are in control! Finally do all of these things usually without a collection of annual fees and charges that typically run 2% or more of total assets per year. Remember that if you hold those types of assets for 20 or 30 years the fees continue to add up and may have generated total fees that cost you an amount equal to 40-60% of your initial contribution. These fees certainly will reduce the asset value that you get to keep or walk away with.

What single product can and has consistently met all of these criteria? The answer isn't found at your bank and isn't generally offered through your local broker. There is only one type of product that offers all of the positive things discussed and doesn't have the annual fees and charges listed above. The products we are talking about are long term saving vehicles. Only Fixed indexed Annuities do all of the positive things listed above and usually, avoid the annual fees on the downside. When you do add a rider to a fixed Indexed Annuity the maximum rider charge is usually 1/2 of 1% or less. There are currently products that will guarantee an increase in Income Account Value of up to 7.2% per year. This doubles your income every 10 years and quadruples your assets in 20 years. When you do decide to begin withdrawing income from the product you can create a Lifetime Income Stream that you cannot outlive.

We can help!

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www.columbusfinancialplanningpros.com
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