Retirement Investment Advice: Don't leave the DRAGON out of your calculations

Ok, I know what you're thinking, "What do Dragons have to do with investing?"  Well I just got back from the Dragon boat race in Oriental, NC (appropriately name) and I have dragons on the brain!  I ran across a quote from J.R.R. Tolkein (Author of the Hobbit & Lord of the Rings Trilogy) "It does not do to leave a live dragon out of your calculations, if you live near him." Say WHAAAT!

Well I came away from the Dragon race unscathed (probably because I didn't encounter any Dragons....this time!) But many of the folks I'm talking to are getting "eaten alive" because they've failed to plan for the losses that could be incurred from the "Dragon" that is the Stock Market. Oh, they all realize that they can lose money but they fail to realize that once you lose it YOU CAN'T GET IT BACK...IT'S GONE... PERIOD! Oh, you can make more but you can never get back what you've lost. How much more would you have had had you not lost it in the first place? I'll show you in a minute.

I spoke with a gentleman in his 60's recently. I'd spoken with him some years ago. I was trying to revisit his case and showed him how he could get 7.2% guaranteed with no risk of loss and guaranteed, secure income for life. I mailed him all my info and called to see if we could meet to review his retirement plan. He informed me that he hadn't had time to review the material I'd sent (3 weeks ago) and he'd made 18% last year and was happy with what his broker was doing for him so he wasn't going to make any changes right now. This said even though he'd lost the two years prior and was losing money this year since January!  In all his average returns for the years since I met him was less than what my guaranteed amount. How does it make sense to pass on my offer... not to mention not even look at it?  You tell me! No, I mean it leave me a post and  help me understand the rationale because I'm at a total loss to understand it except "better the "Dragon" you know than the "Dragon" you don't know!"

People with this perspective fail to understand the principal of OPPORTUNITY COST. Opportunity cost is making money on money you would normally send away in the form of a tax, a loss or a fee etc. If you avoid the tax, loss or fee, the money compounds in a tax deferred account and makes triple compounding possible. Here's the effect:  WHEN IS 3.35% HIGHER THAN 10%?

Hypothetical Returns on $100,000 Investment

Yr 1 earn 10% total $110,000
Yr 2 earn 10% total $121,000
Yr 3 lose ‐10% You now have $108,900

Or you make 3.35% for Three years

Yr 1 earn 3.35% yr end you have $103,350
Yr 2 earn 3.35%  =  $106,812
Yr 3 earn 3.35% by the end of the 3rd yra you have $110,390

IN CASE YOU JUST MISSED THAT, YOU WOULD HAVE MADE MORE WITH 3.35% THAN 10%!

In the first section we have the outcome of 2 years gaining 10% ea.yr. and then a
negative 10% in the third yr = $108,900.
In the second section we have 3 straight years at 3.3.5% yielding $110,390 – a higher
outcome than getting 10% for 2 years with a downturn of 10% in the third; 3.35%
turns out better than 10%.

I can't yell this loud enough, IT'S NOT THE RATE OF RETURN YOU GET IT'S THE AMOUNT YOU GET TO KEEP IN THE END! TRYING TO SAVE FOR RETIREMENT WITH THE TRADITIONAL BROKERAGE MODEL IS LIKE TRYING TO GO DOWN THE HIGHWAY WITH ONE FOOT ON THE BRAKE AND ONE FOOT ON THE ACCELERATOR!

It doesn't seem to matter though. I give people this information and they put their head in the sand and fail to plan for the Dragon that's just up ahead and is breathing fire. So what's your plan? I asked this poor fellow had his reply was, "Well I may consider it if things go bad with the market!" My friend, by then you're a crispy Dragon treat!

Don't procrastinate - I can show you:

* How long your money will last
* The effects of inflation to future income
* The effects of a spouse dying
* The outcome if one spouse has to go into a nursing home
* The effects of another Great Depression, 2001-03 or another 2008
* And much more

Keep these Dragons at bay and get the peace of mind you want and deserve!

Safe Savings,
Roger

PS: Someone you know NEEDS to hear this... PLEASE share it with them. You may just keep them from losing their retirement security!