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Missed Fortune – Why Your Your Money Should Outlive You

Posted on | November 20, 2011

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The Question that Keeps the Boomers Awake at Night

One of the biggest questions on the minds of those who are saving for retirement is whether they will outlive the money they’ve saved for retirement.

Where once they were earning rates of return around 8-9%, lately they’ve seen returns of more like 1-3%.   The losses of the last decade have proven difficult to overcome and many soon-to-be retirees are looking at the very real possibility of outliving their money.

You need growth on your money in order to have income for your retirement.

For your money to grow, you must have liquidity, safety and a solid rate of return.  These are the three key elements of any successful retirement savings plan.

In a nutshell, you need to be able to get your money back when you need it back.  Your money must be safe and either insured or guaranteed to protect you against loss of principal.  Finally, you must have a rate of return that allows your nest egg to grow faster than the rate of inflation or rising taxes.

These are essential strategic considerations for anyone who recognizes the effects of inflation and taxes and the corresponding need to protect and grow their serious cash for the future.

Those who have their nest eggs tied up in a tax-deferred environment like a 401(k) or an IRA are especially at risk to the tax and inflation power curve.  Even with a $1 million nest egg, you’re at significant risk.

Federal and state taxes are likely to take at least a third of your money in taxes the moment you begin to access it.  The Congressional Budget Office estimates that, with increasing federal spending, many Americans will be paying nearly 40-50% taxes in order to cover federal deficit spending as well as government debt.

Many investments are not liquid, safe, or earn a predictable rate of return.  They fail what is referred to as the LSRR (laser) test that measures how well an investment satisfies these qualities.

Tax-deferred vehicles leave your money vulnerable to higher tax rates because most people, at retirement, no longer have children living at home and their homes are paid off.   This lack of deductions, coupled with the prospect of Congress hiking tax rates means that many retirees find themselves in their highest tax bracket yet.

Add to this the effect of rising inflation and its relentless decrease in the purchasing power of each dollar, and it’s easy to understand how even a $1 million dollar nest egg can be drained within a remarkably short time.

Shielding Your Nest Egg Against Taxes, Inflation & Market Volatility

These effects can be successfully countered with Missed Fortune strategies that place your serious cash in a tax-free environment where it can grow, be accessed and ultimately transferred tax-free.  This is a perfectly legal maneuver under certain grandfathered sections of the IRS code.

Linking your returns to those things that inflate will allow your money to grow safely ahead of the rate of inflation.

And Indexing strategies provide all the benefit of linking your return to the performance of certain market indexes without the risk of putting your money directly into the market.

Those who know and implement these Missed Fortune strategies can effectively protect their serious retirement money and avoid the fear of outliving their nest eggs.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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