The Roadmap - Point "A" to Point "B"

The beauty of indexing is that you never have to make up for a loss. Recent history is a case in point. The market went down roughly 20% in 2022. Yet all the impressive 25% gains of 2023 did nothing more than restore the losses of 2022.

The bar graph below shows how difficult it is to recover from a loss:

In travel planning, a map and compass are not so helpful without knowing your current location.

In retirement planning, plotting point “A” is simply a matter of walking through your current net worth and it is likely we accomplished this on our first call together.

Planning Your Future

Most people spend more time planning their vacations than they do planning for their retirement!

The irony is many of us dream that retirement is one long, glorious vacation. 

This happens because planning a vacation is enjoyable, while planning for retirement is filled with uncertainty and confusion.

While I don't promise to make retirement planning enjoyable, I'm sure I can provide direction and a clear understanding of what needs to be done.

I think planning for a vacation is a great analogy for planning a retirement. So let’s begin to plan our retirement journey just as we would plan a vacation. This does not have to be complicated – decide where you want to go and then figure out how to get there! Logistically, this is as simple as plotting a course on a map from where you are now, point “A” to where you want to end up, point “B”.

Now we need to plot the "B" point...where are we going? We can create a tailor made plan or start with a rule of thumb guideline to get us in the vicinity of where we want to be. That guideline is called the Rule of 80% whereby it is generally accepted that you will have a comfortable retirement if your retirement income equals 80% of your pre-retirement pay. 

​See how simple we can make this? In less than a half hour, we have plotted our course on the retirement roadmap. The hard part is factoring in all the variables that could go wrong along the way. Just as our vacation could be impacted by bad weather, a mechanical breakdown, or sickness; our retirement could be derailed by a stock market decline, inflation, or a critical or chronic illness. 

The longer the vacation or retirement, the more likely and expensive these risks become. Since the expense can sometimes be too large a burden to handle on your own, it is prudent to insure against some of them. 

In vacation planning, this might entail travel insurance. In retirement planning it might mean anything from indexed annuities to life insurance or Long Term Care plans.

In the years right before retirement, stock market losses are the most common way a retirement plan gets derailed...this is where becoming too comfortable in employer 401k type stock funds can be dangerous. 

We need to achieve both growth AND safety...a rather impossible task in the very limited fund offerings. Therefore, for many, I recommend diversification via a tax free transfer of some portion of retirement accounts into some sort of indexed plan either through investment banks in the form of Structured Notes or Market Linked CDs, or in the format of indexed annuities offered by insurance companies.

If you want to visualize the whole concept of an indexing in one photo, it would be the chart below.

The red line is the S&P 500 since 2000 - I think it looks like a "roller coaster ride". The blue line shows how an indexed annuity might look over the same period - to me this looks more like a "staircase".

This challenging math never happens with indexed plans. Balances either step up to a higher level each session or they don't move at all. 

Please click the tabs at the top of this page to review specifics on some of the various options and plans in the marketplace. The "CD" tab will profile the Investment Bank version of indexing. The "FIA" tab will dig deep into the various insurance company indexed plans. Some portion of a balanced portfolio will stay directly invested in stocks and to hedge against potential losses a portion of a portfolio should be in a gold and silver IRA, so click the ":Gold" tab for more details. One potential loss that could be even more devastating than a market loss would be the risk of needing Long Term Care. Click the "LTC" tab to read more. 

During our next call I will answer your questions and if you like the concept I can help narrow down the options to the ones that fit your situation the best.

Additionally, here are some additional resources I thought you might enjoy:

FIA Video   - the password is TSP2021 

Top Ten IRA Mistakes eBook

Federal Pension eBook​   - A must read for my Federal Employee clients

Best States to Retire