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It’s important that you understand how we think and approach the issues of retirement planning. Be sure to read thru to the end to see how we seek to get the best bang for your buck. We’ll start at the top.
In the world of safe money and fixed income, the primary options are:
- Bonds (with varying degrees of safety, including credit rating and interest rate risk);
- Cash (with nil to minimal yield);
- Annuities (with a giant range of options)
In the retirement income world, we are focused on converting assets into income. The most common solutions are:
- Systematic portfolio withdrawal (With allocations and market-based probability of failure)
- Pensions (a dying breed- great if you have them)
- Social Security (Hope for the best that the USA can afford to keep its promises….)
- Annuities (again, a giant range of options)
In planning retirement income, you must be aware of certain risks that are different from risks you face while purely investing and saving. They are:
- Longevity Risk
- Demographic Risk
- Market Volatility
- Sequence Of Returns Risk
- Inflation Risk.
We focus on creating Guaranteed Income, as the most effective way to optimize a portfolio and counter the risks in retirement. When using Guaranteed Income…
- You eliminate sequence of return risk;
- You remove the risk of market volatility affecting your day to day quality of life;
- You increase your ability to counter inflation by allowing remaining assets to be invested for growth;
- You remove longevity risk – the risk of outliving your assets- if you structure your income foundation properly;
- You can safely afford to take investment risk with remaining assets by locking in income with a portion of your portfolio;
- Portfolio wide safety increases, even if stock market allocation percentage increases, after locking in income;
- You help mitigate demographic and Governmental risk by reducing your reliance on unreliable subsidies and handouts.
To Build An Optimal Plan, You Must:
- Cover baseline expenses with guaranteed income, first,
- Address the risks, especially Longevity
- Build in Safety And Flexibility whenever possible
- Seek the highest Profitability you can without compromising safety
Now, outside of Social Security and Pensions, the only viable sources of truly guaranteed income to solve the issues above are annuities. They will come up in almost any conversation about retirement income planning.
Using Annuities, Understand That…
- Annuities are Insurance products that offer a guaranteed Outcome – income, lump sum, or some sort of financial protection.
- Insurance WILL have a cost.
- With the insurance you purchase, one or more risk factors, such as volatility, longevity, and portfolio failure, are transferred to the insurance carrier, in exchange for your premium investment..
- What you buy is an insured outcome, contractually guaranteed by the carrier.
So we can see that the insured result of buying an annuity can produce a guarantee you can count on.
But there are SOOOO many types of annuities! How do you choose?
How To Properly Consider Annuities:
- First, decide on the outcome you desire.
- Second, use a true professional as a guide, to navigate the blizzard of options and contractual provisions and get you to the point of an informed decision.
- Finally, act on your knowledge and make an informed decision.
This is our approach- we value guarantees as a floor to a solid portfolio, and only annuities offer that floor.
What sort of floor you need depends, well, on you.