Retirement breakthrough: a core retirement income plan
By Dick Duff
Editor’s Note: This series of articles is based on Duff’s consumer-friendly book, "Retirement Breakthrough, The Safe, Secure Way to a Guaranteed Income You Can't Outlive." In this article, he looks at the concerns and issues that are relevant for those committed to a core retirement income plan.
Let's say you have a serious income client or prospect. He or she could be in their 40s, with 20 or so years to accumulate a retirement nest egg. More likely, they will be in their 60s or 70s, on the edge of retirement.
Your client is frightened and somewhat in a muddle. CDs don't pay much. Equities could collapse anytime: There might be a terror attack; someone may push the wrong button; the national debt might bring things down; even the U.S. could go broke. There may not be time to withstand any more hits to the brokerage account.
Where can my retirement money be safe?
You listen carefully. There's more.
Could a foreclosure take everything? Could my lender claim my other assets, too? Can my adviser "creditor-proof" my retirement savings? Can I trust anyone with my money?
Is day-trading an answer? Can they terminate my Social Security? What's an RMD from an IRA? Can I take money from my life insurance and not cancel the policy? If I buy an annuity, are the rates terrible? Can anyone give me a definition of annuity? Will the carrier claim my money if I die? Is gold or platinum the right thing?
How about a reverse mortgage or selling my house to the kids? Perhaps a private annuity between them and me?
If I live too long, will I run out of money? Will my assets last until I reach age 105? Should I spend some now and others later? The Internet says I can "ladder" my income streams. What does that mean? Why does my 401(k) want me to cash-in the account?
If my money runs out, what do I do? Move in with my kids? Sponge off my friends? Go under the viaduct? Perhaps I should just leave things up to Social Security, Medicare and Medicaid.
If I die, will the lawyers and bankers take it all? Could my disgruntled children sue each other? Are they actually entitled to an inheritance, anyway? Will my former spouse make a claim? Could my present spouse give the money to a paramour?
Should I just go it alone until everything is gone? Maybe get a new job until I get sick? Do others have the same problems? How can I calm down when I've worked so hard to get what I do have? Finally, does all this really matter? Perhaps I should just forget about it!
Here's my view: All this really does matter. Some of it may involve legal advice or a psychologist; you can still listen here and bring an adviser network to the picture.
When it comes to financial advice, your job is to assure people that there is hope. No matter how bad it gets out there, it's always possible to be one step ahead. Your passion is helping them navigate their retirement income options. You do that constantly and scour the Internet for updates. Tell them it's possible to feel good about finances and sleep well at night. You'll take the pressure off and be their partner in the process. You really do care.
In most cases, here's the plan: You and your client will close the door, shut off the TV and disregard bad news in the newspaper.
Together, you'll create a rock-solid plan that is safe, secure and guaranteed. It gives a core retirement income paid to his or her checking account. The check comes every time, on time, and anywhere in the world. The amount may vary. It might be $1,000 from a $5,000 monthly goal, or it could be the whole $5,000. It pays the bills automatically and eliminates late charges and past due notices.
There is always a tax advantage, state-specific creditor and lawsuit protection, and an income lasting a lifetime or lifetimes. This will be an extension of Social Security. Call it “Private Security," or "Personal Security," if you prefer. When the foundation is there, it's okay to assume some market risk.
Where do you find safety, guarantees, tax advantages, protection from claimants and the system and an income that can't be outlived?
You can't get such features in CDs or personally-owned mutual funds or securities, and not in gold or precious metals. Never! These might be add-ons after the core is in place.
To build this core plan, you must look to cash value life insurance, annuities, IRAs/401(k) s, and personal residences. Each has a tax advantage, measured claimant protection and the capacity to pay lifetime income streams. There is no other way to have this core income in retirement. You'll explain how and will assure implementation. Later, your client can add risk.
In future articles, I'll outline some easy income math that simplifies things and makes planning fun. We'll look seriously at "claimant-proofing" one's assets. I will explain how to manage longevity in retirement. I'll even share some strategies that will improve our national retirement income "systems." In the next two or three columns, we will focus on how to have an income that can't be outlived.