The Biggest Mistake Retirees Are Making And
How You Can Avoid It...

As we all know, the Baby Boomers are retiring by the droves. In fact, roughly 10,000 Boomers are retiring every day for the next 19 years, and only about 15% of them have pensions; that means roughly 85% of them will need to be their own "pension managers," and unlike their parents, leaving money to their children will likely be a secondary objective.1 For the most part, we have found that the ability to maintain their lifestyle is what many seek, and lifestyle requires cash flow. Here at Statewide Retirement Planning Co., our clients don't have to worry about being their own "pension manager. "We will help you customize your own “personal pension plan,” and help you manage the structure and process.

Let's go back to 1980 and get an idea of what the typical Joe Boomer may have done with his retirement portfolio. In 1980, he's 35 years old and wants to retire at age 65. He does his research and finds out that if he invests $5,000 a year and earns an average of 10% in the market, he will have $1 million at age 65. Then, he'll take 4% withdrawals, giving him $40,000 to live on for 20 years or more in retirement. So, what happened in this very common scenario?

If you look back at the last 30 years, the market actually averaged 9.68%, so Joe Boomer almost received his anticipated 10% average, but, he's only accumulated $562,821. So, how did he only get halfway to his $1 million goal if he averaged nearly 10% over those 30 years? Unfortunately, for Joe, all positive returns happened in the first 20 years (when his account value was smaller), and the bear market hit during the final 10 years of his investing. Using this example, what would happen if you reversed the returns, incurring the negative returns in the first 10 years and the Bull Run during the last 20?

With that same 9.68% average return received by Joe Boomer, he would have gotten to his $1 million goal by simply using a different order of returns. So, what's the moral of this story? If you're relying solely on the market to reach your retirement goals, not only do you have to hope to receive a 10% return, but you also have to hope you get the returns in a specific order! That's a lot of hope that has a high potential of letting you down. You may want to try a different strategy now that doesn't rely solely on hope, but rather on a product that can guarantee* a set return and has the terms to best fit your individual financial scenario. There is one that exists that will provide all of this.

With 18 more years of 10,000 Boomers retiring every day, there are going to be countless people in this all-too-familiar situation. So, what is their thought process? Because of the prominent myth shared by investors for years, millions may still be hoping for a 10% average return from the market. Thus, you 50 year olds who are planning on working 15 more years are hoping to double your money twice in that time period, meaning if you currently have $250k, you should have roughly $1M at age 65.

Then, when you turn 65, you may plan to simply take 4% withdrawals and have $40k to live on for your retirement years. So, what is the problem? The problem is you can't predict future returns, and you certainly can't predict the order in which you'll receive them. You also can’t know how many years of retirement you need to plan for. Therefore, many of today's Boomers are simply hoping to achieve their goals-- maybe they'll reach them and maybe they won't-- and, at the end of the day, hope isn't much of a retirement strategy.

So what is an effective alternative for this particular scenario? Consider an index annuity with an income rider. In this same scenario, you can take all of the finger crossing out of the picture and be guaranteed* no less than $40k at age 65 for the rest of your life. We understand that this cash flow is the lifeblood to your lifestyle, and that is why I am telling you about this guarantee.*

This is meant to be a general educational article on issues that many seniors, retirees, and pre-retirees consider in making the decision as to whether or not they should buy an annuity, and, if they do decide to buy, which type of annuity and which annuity benefits and additional riders might be most appropriate. This educational article is not designed to be a recommendation to buy any specific financial product or service.

*Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer.

**Depending on contractual stipulations, the amount of principal withdrawn may affect the amount of the monthly income stream.

1 – 10,000 Boomers to Retire Each Day for 19 Years: http://www.newsmax.com/Newsfront/RetirementCrisis/2010/12/27/id/381191

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