Brought to you by William Scott
Scott Financial Solutions
Wealth Preservation Specialist
There are literally tens, if not hundreds, of millions of Americans who are in or near retirement. With the economy still struggling, these people are beginning to wonder how they can get a guaranteed lifetime income so they don’t run out of money over the next period of life.
Many retired people look to others for help in answering these questions. However, many friends or family members aren’t as educated as they might think about investing, and some financial planners are biased. When the market crashes and the money is gone, these seniors realize that their financial situation is dire, indeed.
In addition to wanting to survive, most retirees want to thrive. They don’t just want to pay rent or mortgage and have food on the table, but they want to be able to celebrate life with their family and friends. This means keeping a higher standard of living. In addition, expenses like healthcare usually go up at some point during retirement, and it’s good to plan for these, too.
The Situation for Today's Retirees:
According to the Employee Benefit Research Institute (EBRI), 64% of Americans with low incomes will run out of money after 10 years of retirement. In the next highest income bracket, 29% of people will run out of money after 20 years. Shockingly, after the same 20 years, 13% of people in the highest bracket will also be out of money. This means that these people will be unable to cover their living expenses and medical expenses not covered by insurance.
EBRI also found that the total dollar amount of shortfall, when you add the uncovered financial needs of all of these people together, is $4.55 trillion dollars. This is referred to as the National Retirement Savings Shortfall. In the past, the government has rescued people who couldn’t cover their own expenses. However, with the huge budget deficit that the United States now carries, they will struggle to rescue anyone in the future. They may be able to help people survive, but the government won’t be able to give them the income that will let them thrive.
The EBRI isn’t the only institute coming out with figures like this. In 2007, Ernst and Young found that nearly three out of every five new retirees in the middle class would outlive their assets if they try to keep the same standard of living that they’re used to. These people will have to lower their standard of living by 24% if they want to stand any chance of not outliving their assets. People seven years away from retiring are in even worse shape. They will have to reduce their standard of living by 37% if they don’t want to run out of money. In addition, this study showed that nearly 90% of American investors who don’t have some sort of defined benefit pension plan will outlive their savings.
Old Solutions for a New Market:
In the 1980s and 1990s, the stock market was in a bull market, and many came to see that as normal. Financial planners told people to buy when the market dipped, because it would always come back. However, this advice has decimated the portfolios of many retirees over the last ten years.
The stock market simply cannot always rise. Over a 5-, 10-, or 15-year period, it could, in fact, go down or flat line. Rydex/SGI has shown that there have been long periods in US history when the market has fallen or shown very little gain.
One example of this is the period from February 1906 to June 1924. Over that 18-year period, the Dow Jones lost .24% every year. Stocks purchased at the beginning of this period would have lost more the 4% by the end of it. When you add in inflation, the loss of buying power would have been much greater than that.
Similarly, if you had purchased stocks in September 1929 and held them until November 1954 (that’s a quarter century!), you would have gained only .07% each year, or 1.69% over the whole time. Adding in inflation, you would have actually lost buying power over that 25-year period. February 1966 through October 1982 only showed a .05% gain per year, and February 2000 through December 2009 actually showed a net loss of 4.68%.
Even in recent history, this plan has not worked. Between 1999 and 2009, inflation averaged 3% per year, so money in the stock market lost more than 30% of its buying power in 10 years. If you had mutual fund fees of 1% per year and advisor fees of 1% each year, you’d have lost approximately 5% of your buying power in those 10 years. When you add this to the stock market losses, you would have lost more than 50% of your buying power.
For a retiree, this can be devastating. After all, who can reduce their living expenses by 50%? Thus, many retirees are going back to work just to pay the bills. Clearly, the old “buy and hold” method doesn’t work anymore. Unless you’re willing to wait 15 or 20 years or more for the market to go back up (and this isn’t viable for most retirees, who need their income), you need another solution.
Is There a Solution for Retirees in Our Times?
The problems facing retirees are dire. When people run out of money, it isn’t temporary, because they aren’t generating income anymore. However, there are solutions to this complex, multi-faceted problem that Americans from all walks of life are facing.
There are ways to securely invest your money that can give you the guaranteed lifetime income that you need and want. When you take steps in planning your retirement and choose low-risk investments of your money, you’re more likely to have the retirement money you need.
One of these low risk financial vehicles that we recommend for retirees and pre-retirees that can offer you a guaranteed lifetime income is a hybrid income annuity.
Some of the features we like to look for in an Annuity we would recommend include:
- 10% bonus... so if you put in $100k now, you will automatically get a 10% bonus = Start with $110k from day one
- A $100k deposit = Guaranteed income account $241,916 in 10-years
- The ability to make up to 26% per year (market upside without the downside)
- Lifetime income without losing control of the money (don't commit annuicide)
- Double your income (x2) for home health care, assisted living, and long-term care
- Low fees (less than 1%)
If you would like to get a free quote for your own financial portfolio with some annuities that have passed our tests and would be recommended for retirees and pre-retirees that have these types of benefits in place call our office at 602-750-3891 or 520-705-4596.
Click here for a FREE E-BOOK, "Secrets of a Stress Free Retirement - How to Make Sure You Don't Outlive Your Nestegg!"
To get more information, so you can make the best decision for you and your family, call:
Your Wealth Preservation Experts
602-750-3891 or 520-705-4596
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