IRA income stress is very common among retirees but it doesn’t have to be! You can set up your income to go up with inflation, be guaranteed, and never go down. I had a fairly new retiree, let’s call him Mr. Jones, in my office the other day that had only been retired about 7 years. He wanted me to look over his investment strategies and see if any changes needed to be made. What started out as a fairly normal appointment turned into a heartfelt confession.
The Setup
His investments were mainly in equity or market investments. His broker had recommended a good conservative stock and mutual fund portfolio. Since the market had been up his investments were doing quite well. I told everything looked good, well diversified and relatively safe for market investments. It’s kind of rare to find a portfolio that doesn’t really “need” any changes. To my surprise, when I delivered the good news, he was visibly disappointed.
The Source Of His Stress
To put a twist on a phrase from one of my favorite TV shows I said, “Tell what you don’t like about your investments Mr. Jones.” He proceeded to tell about how his investments dropped and recovered over the last few years and the same thing happened just before he retired during the 2000 bubble burst market drop. His investments had always come back but the stress was getting to him.
I asked how much he thought about his IRA income and whether he would have enough. I also asked how often he worried about his investments going down and not being able to provide for himself and his wife. He told the truth. He worried about it almost every day a few times per day. He was concerned about the ups and downs but more concerned about the “split splat” and what a market drop would do to his IRA income.
Mr. Jones had always been the provider for his family. And now he felt helpless and like he was completely dependent on whether the market performed well enough to take his income out without dipping into his principal each year. He was no longer a provider and independent but a dependent that had no control over how well his investments performed.
His investing style had become more risk adverse than it had been throughout his working years. His worries and fears are well founded. If the market was down when he needed income it would be very likely he would be using part of his principle which dilutes the ability to earn in the future. He was subject to the general market conditions of the world and subject to his broker’s ability to predict the future, evaluate, and manage his portfolio. Maybe has a great broker but maybe not. Unfortunately, there is no broker report card to be able to tell and a great personality and friend doesn’t always mean a great broker either.
My Recommendation For Mr. Jones
I am a big fan of securing your IRA Income producing assets and this is the recommendation I gave to Mr. Jones. Let’s say you had $700,000 in IRA Income assets and other non-IRA assets. You might only need $500,000 to produce your IRA income needs. The idea is to set that $500,000 up to be guaranteed, to never go down, to create inflation protected income, and to provide a stable and secure income stream. Then he could invest the $200,000 into market investments if he wants market investments along with his guarantees.
An assortment of fixed indexed annuities, fixed interest annuities, and immediate annuities can be used to set the program up. Once it is set up then Mr. Jones will never have to worry about his IRA income stream ever again. Imagine the relief he will feel when it is all set up. He will never have to worry about his IRA income or how he is going to be able to take care of his family ever again! He is going to free up time as well and very likely live longer because he is not worrying and stressing about his money.
You might be like Mr. Jones and if you are then there is hope. Take action today.
Disclaimer: Always seek individual advice from a licensed professional. This article is for general information purposes only and is not a substitute for personal advice.
Keith Dennis works exclusively with small business owners to help them create tax-free income streams for retirement. Business owners are often stuck in the tax-deferred investment trap. They get a small break now and then end up paying much higher taxes later because they lose their business deductions. Then on top of that, their income is usually 100% taxable!
With tax-free investing you can literally have twice the income in retirement saving the same amount of money, retire sooner, or even save about half as much versus tax-deferred investments.
Get it touch with Keith today to learn how it works through the Small Business Retirement Group's Fan Page.