Five Points to Consider

1) Fixed annuities:

  • are insurance products offered by major insurance companies; it is a contract purchased using a premium
  • earn interest based on the insurance company’s earnings or the positive performance of a market index.
  • has no “downside market risk” because they do not directly participate in any market.
  • provide tax deferred growth because taxes are not assessed until withdrawals are made.

2) What type of risks do you have in “The Red Danger Zone” (six years prior to and six years after retirement)?

  • Sequence of returns in withdrawals risk – a couple of bad years of returns in the market could seriously drain your assets.
  • Market risk – we have been on a very long bull run in the market – how long will it continue to last?
  • Inflation risk – the silent killer of cash flow – the most valuable dollars are the ones in the pocket today!
  • Health care risk – Fidelity reports that an average retired couple age 65 in 2020 may need approximately $295,000 to cover medical expenses in retirement.
  • Longevity risk – people are simply living longer – will your money last as long as you do?

3) The final stimulus package is here and is over $1.9 trillion. How will the government pay for all these stimulus packages? It has been reported that there are 125 million American taxpayers from a U.S. population of 330 million. That means 40% of the population is paying 100% of the taxes. Additionally, 85% of the tax revenue comes from the 26 million who make more than $75,000 per year. Are you prepared for substantial tax increases?

4) Tax Terms

  • “Estate tax” versus “income tax” – income tax is the one you still live to complain about.
  • “Tax audit” versus “tax examination” – there is no difference they both are lousy. You want to avoid these at all costs.
  • “Tax avoidance” versus “tax evasion” – tax avoidance keeps you out of jail and money in your pocket – tax evasion puts you in jail and gifts your money to the government.

5) Strategy – A Thought – The financial world is filled with people and institutions touting that their product is superior to their competitors. There are many good financial institutions and financial products. There are no perfect products that suit every situation. Financial success is determined by developing strategies that focuses on a process, not a product. Strategies need to be developed to handle both expected and unexpected events. They must work under all conditions, regardless of economic or political conditions. Once strategies are in place, products can be chosen that align with that course of action. Our role is to take our knowledge, apply it, and develop successful strategies that make our clients’ money more efficient.

Recommendation: Secure an advisor, understand these concepts, and let him or her guide you to a worry free and successful retirement!