Saver vs Investor
Spectrum

Which One Are You?

Would you consider yourself an investor or a saver? Well, let’s see. Take a look at your financial history. Have you ever said anything to the affect of, “I earned 6% in the stock market last year,” meaning your stock investments rose 6% last year? If you answered yes to this question, you were thinking as an investor, and not as a saver.

This isn’t necessarily a bad thing, but it can be if you are a retiree who needs the type of regular income you are used to receiving in your working years. It is a bad thing if you are looking for asset security.

There is a lot more that goes into this that most people are unaware of, simply because it has not been brought to their attention effectively.

For example, a lot of people think bonds are “safe”. That may not be reality because there is no legally required reserves system in place for bonds. For example, it is not FDIC insured. Most think if they get 6% from a bond fund, that 6% of income is always going to be a 6% return and it’s always going to be there. That’s not true; it could drop down and even disappear depending upon what happens to the organization which issued the bonds. It is not guaranteed and protected by legal reserves.

You can have a consistent cash flow at 6% from a savings account or an annuity without having to worry if that 6% will always be there. Why, because these accounts are protected and insured by reserves, covering the obligations, that are required by law to be there

When you are retired, your money needs to be insured* with a guaranteed* cash flow for life no matter what happens- no matter if bonds default, if the stock market doesn’t perform, etc. The net cash flow has to be guaranteed.*
The following chart goes into the specifics of return, income, and cash flow. This will show you why having a consistent cash flow is more important in retirement than rate of return:

Column 1 (stock market least secure)
6% Return

You have a pot of money consisting of $1 million and you diversify it into different vehicles: stocks, mutual funds, bond funds, gold, and emerging markets. Every place you put your money goes up and down; it is never constant.
The past has shown an average of 6%. What happens if your money in that portfolio averages 6%, and you need $60k a year out of that portfolio? The market doesn’t go straight up. It goes up and it goes down. there is no predicting what it will do next.
What if your $1 million drops down to $700k in the first year, and you pull $60k out of the account? Then, in year two, if you never pull any money out, the $700k could grow back to $1,060,000, and then in year three it could go to $1.2 million.
The problem is, if you’re pulling money out while the market is going down, you don’t have $700k working for you when the market goes back up. You only have $640k, which means it wouldn’t go back to the original $1,060,000. It may only go back up to $970k, or so.
One of the biggest mistakes retirees are making today is they are pulling money out of the market while the market is going down. That is a sure way to erode your principal very fast.
- Even though you got an average of 6%, if you were to look 10 years ahead, your $1 million is only worth half a million; it’s only worth 50 cents on the dollar and you just keep eroding it faster and faster.

Column 2 (bonds & bond funds)
6% Income

This is fixed income
Fixed income could be considered a bond/bond funds, and it has the potential of doing the same thing as column 1; it could result in reverse dollar cost averaging.
Some people in this category believe in diversifying between multiple bonds and trying to get the average yield of 6%.
If you have a portfolio of $1 million and it yields 6% and those bonds mature 10 years later, you should still have $1 million. That is, as long as those companies are stable: you’re only as secure as the corporation is solvent, and as we have experienced far too much of, we know there is a lot of uncertainty today.
This column is a better route to go than column 1, because, as long as they stay strong; it is better than reverse dollar cost averaging.
You can have a bond portfolio that averages 6%: it’s better to take withdrawals out of this column than column 1.

Column 3 (Social Security & annuities most secure) 6% Cash Flow

We are going to use Social Security benefits as the example for this column: with Social Security, every single year you wait before you turn on income, your monthly benefit can increase. The same thing happens with an annuity.
When we take 6% cash flow into consideration, it is possible to get insured* vehicles that have a legally required reserves system and that give a
cash flow of 6% for life. How is that possible? Annuities make it possible.

What will cash flow for life bring you? Not only will it bring you CASH FLOW FOR LIFE, but it will help alleviate your concerns about having enough money while in retirement.

You cannot achieve the same level of peace of mind with columns 1 and 2 that you can achieve with column 3.

You cannot count on a potential 6% growth return to give you the income you need every year. Not only might it not provide you the 6% income you expect to receive, but it very well might also lose principal value.

A savings vehicle with a legally required reserves system can, however, securely provide you with the cash flow you need each and every year until the day you die. No matter what happens, your cash flow is protected. You will see more examples of this in the video.

The “new normal,” is category 1, Return: the market has been negative for the last 12 years. Just look at the 20% drop in the S&P. The S&P was once at 1500! Hard to believe now,

Following column 2, which shows Income, could be an imprudent move, as well, because interest rates are at an historical low. The 10 year treasury bonds are less than 2%. Bonds with higher interest rates are less secure the higher the interest rate.
If you follow column 3, cash flow, you will be getting the money you need to maintain your lifestyle and spend with greater confidence without sacrificing security, since your money is guaranteed and protected by legal reserves, unlike following the return and cash flow strategies of column 1 and column 2.

With the Column 3 strategy, you know that your cash flow will never change for life no matter what the world situation is, e.g. the stock market performance, the price of oil etc. That is the most important thing in retirement.
Security is the most important thing in retirement. Nothing is as important as a secure retirement. Column 1, return, is the worst place to get security. It is the worst place to take withdrawals from a portfolio if you want a secure and smooth retirement.

Column 2, income, is better than column 1, return,: true, but if you want to be promised that you will be able to cover your basic living expenses no matter what, you should be getting that money from insured* places that give a cash flow for life, and you can get this from a Fixed Indexed Annuity, for example.

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