Did you ever think about what would happen to your retirement nest egg if you happened to retire during a down market? Everyone knows the cardinal rule: never do a double negative. Never take money out of your investment account during a down year. But where does that money come from if it’s not coming from your investments? Stick around to the end of this blog to find out.
Will you be retiring in a down market? Keep this in mind. Since 2009, the market’s been only down once, and that was 2018 when the market was down about a little over 4%. Now, the average bull market lasts seven years. But here we are 13 years later and the market’s still chugging along. So the question again is, will you be retiring in a down market? Now, conventional wisdom tells you to either invest in safe assets if you’re concerned about a down market or to balance your portfolio. Maybe 40% bonds and 60% stocks or 60% bonds and 40% stocks. But they don’t tell you what happens if the bond market is down at the same time the stock market is down.
Here’s a question, where is it written that you have to lose 50, 60, 70% of your portfolio in order to earn money? Why not choose an asset that’s not correlated to the stock or bond market? So that you’ll get a reasonable rate of return and you’ll have liquidity, use, and control of that money so you could access the cash to supplement your retirement income when there’s a down market giving your portfolio a chance to regenerate or to regrow itself without having the double negative of a market loss and an annual withdrawal.
The point is that conventional portfolio solutions have downsides, and those downsides can be detrimental to your nest egg. A better solution may be using a specially designed whole life insurance policy as a volatility buffer to protect your nest egg so you don’t have to make a withdrawal in a down year ever again. It allows your portfolio to regenerate itself, to grow back, and it still gives you the income you need in retirement.
We’re going to take a look at why you would want to utilize cash value life insurance as a volatility buffer to supplement your portfolio. Let’s say you have a hundred-dollar portfolio and your portfolio loses 20%. Well, now you’re down to $80. But did you ever think how hard you have to work on that $80 in order to get back to even? You lost 20%, but you got to earn 25% of the $80 in order to get back to $100.
Now, let’s throw in taking money out of the portfolio to supplement your retirement. You have the same hundred-dollar portfolio, the same 20% loss. Now you’re down to $80, but you take out $10 to supplement your retirement income. Now you’re down to $70. You have to earn 42% on the $70 just to get back to even. As you could see your money has to work that much harder just to get back to even or else you’re going to run out of money faster. Here’s the key, make sure your money is working smarter, not harder. Using a specially designed whole life insurance policy as a volatility buffer is a great way to get the most out of your retirement savings.
If you’d like to get started with a specially designed full life insurance policy for accumulation as a volatility buffer in your situation, be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.