Investing 101. The Truth, the Whole Truth and nothing but the Truth, so help me God.
In 1973, at a university I attended, Economics 101, the first words out of the professor’s mouth the first day of class was “Making money in the stock market is easy… You buy low and sell high.
So, I have a question for you. How can retirement investors place their retirement savings with any one of a number of so-called investment advisors into mutual funds and avoid violating this “First Rule of Investing” I call it. The short answer is they can’t.
Now maybe, it you do it yourself, you could come close, but still will likely not achieve the ultimate objective to “Buy Low and Sell High”. Why?
Because you can’t know what “High” is and what “low” is.
To say it another way, “you can’t time the market”.
But what if there was a way to do this on “Auto Pilot”.
Let’s say you have a fund/stock with a share price of $100.00
The first year it goes up 20%.
You now $120. Congratulations.
The next year it goes up 10%.
You now have $132.00, should you sell it?
You think that it’s doing pretty good and that you can’t imagine where you might move the money to that could do that good, so you stay the course.
Then in the 3rd year, it’s 2008 all over again and you lose 49%. (Remember those years?)
Where are you now?
Where if you do that math, you find yourself with less money than you started with.
$67.32. Now you’re kicking yourself because you didn’t sell when it was worth $132.00.
But how could you have known that the market was going to “hit the skids”. You couldn’t have.
How this affects someone, will be different depending on their circumstances.
If you are in your 40’ or even 50’s still contributing to a 401-K plan, a case could be made that a market decline is a good thing. After all, share prices are down and the money contributed to the plan that year will buy more shares. And when the market does come back, you should be ok.
That’s not the case for those in retirement, in fact, market decline has the Opposite effect. Now you have no new dollars going into the plan. You are in Distribution Mode only. And how do you get money out of these plans? By selling shares. And if the share price is down, you are going to have to sell more shares to receive the same income. That would mean that you would have less retirement funds going forward. Will you still have enough? Or will you be one of the 77% that run out of money during their retirement years.
This happens all the time.
But wouldn’t it be great if your gains were locked in from year to year and in those years, they lost money, you wouldn’t suffer from those negative years?
How would that change your future outcome, particularly if you are in your retirement years?
Imagine never having to worry about losing money during your retirement years.
I have a lady I’m working with right now. She has $171,000 in a mutual fund. She is now 72 years old, and her husband is going to retire so the decides to draw income out of her fund to give them additional retirement income. That is, after all, why she saved the money in the first place.
Now the question is, how much can she draw out each year?
Let’s say that 5% is considered a “safe withdrawal” rate.
That would mean that she could draw out $8,550 per year.
But what about a significant decline in the market? One has to consider this possibility, after all the market is the highest it’s ever been. What is likely to happen next?
Here is what I say. “Let’s stop all the foolishness”.
This lady can place here money with me in an Uncapped, no fee Indexed Annuity and I will guarantee there a “Lifetime” income that she can not outlive. She still has access to the accumulation left in the account should she need it, and it would leave a death benefit for her heirs at death. Let’s say her husband.
Now all of that is predicated on the market preforming like it has the last 10 years. That of course is not guaranteed.
So, let’s say that 2008 happens all over again. Well first off, there is a contractual guarantee that her account, which by the way is expressed in Dollars and Cents, not shares, can never lose money due to market decline. It’s in the contract. Her money is protected.
But let’s say she lives to age 95. There are more people living to these ages than ever before. Let’s say she is one of them.
Let’s say that she has completely exhausted her money. What them?
Well remember I say I would pay her a lifetime income, guaranteed. Well, that income does not stop because she is now 95 and out of money. It continues. 100, 105, 110. Does not matter. A deal is a deal. We continue to pay her until death.
Oh, remember the $8,550 per year she assumes she could draw out?
Well, ours is over $12,000 per year and will be paid for all the years she lives guaranteed.
Retirees get all caught up with the “sex appeal” that brokers seem to be offering. Like they should know what they are doing. But they can’t. Because they are not guaranteeing anything. They say stuff like placing 75% of your money in “growth and income accounts” because that is where the real money is made but that they are place 25% of your money in bonds (they call it laddering it with bonds) in case the market goes down. See, they are not guaranteeing you anything but want you to feel like you are diversified. Diversification is not the same as Guaranteed.
When you place your retirement saving with an investment advisor in mutual funds, ask yourself this question. “Who has their money at risk?” You do. You are the only one who is going to “take the hit” when the market tanks.
So, would you rather have $12,000 per year income, guaranteed or $8,550, maybe?
I invite you to get a free quote today. See how far your money can go guaranteed.
Complete the form at the bottom of this article.
Thaks
Dave
