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Retirement Plan Case Study

Assumptions are; Couple, early 60’s, no pension, no debt.  Income is mostly from Social Security and qualified retirement funds. Clients aren't concerned about leaving a legacy to their children.  We assumed a 5% rate of return in retirement, 2.5% inflation rate, and we increased their income by 2.5% annually.  We also assumed that the market went down significantly in the years just before and after retirement.

                                         

 

 Before 

  After 

Total Percent of Portfolio Subject to Management Fees 

    100% 

    23% 

Total Fees Charged Annually 

   2.5+% 

 1.50% 

Personal Risk Number (0-99, 99=highest risk) 

        n/a 

       30 

Portfolio Risk Number (0-99, 99=highest risk) 

         55 

       31 

Percent Of Potential Bear Market Portfolio Loss 

      34% 

      9% 

Projected Retirement Age  

         69 

       69 

Income Stability Ratio (% of secure income) 

      54% 

    90% 

Percent Increase In Lifetime Retirement Income (to age 95) 

        0% 

    40% 

Percent Of Portfolio Leftover At Death (at age 95) 

        0% 

    17% 

Age At Which Money Runs Out 

  Age 86

  Never

At first glance, you might wonder why this client received more secure lifetime retirement income with far less risk and management fees.  As counterintuitive as this may seem, it’s not unlike many other situations we all experience in life.  The following example may explain this:

I enjoy playing golf - - - a lot.  In my early days of learning to play this crazy game, I thought that swinging the club as hard as I could would make the ball go farther.  It wasn’t until I had lessons from a trained professional with the proper expertise that I finally learned this was not the case.  Although initially hard to accept at the time, I eventually came to understand that golf is all about strategy, patience, and skill. Hitting the ball far requires a slow, deliberate, and measured swing instead of always trying to kill the ball.  And guess what?  This same principle applies also to creating a winning retirement planning strategy. For over 30+ years, I’ve successfully used this counterintuitive thinking in my client’s retirement plans and it really works - - - every time.

If you would like to see how your numbers compare in the above “before and after” example, just call our office at 760-752-7848 to schedule a 10-15 minute get acquainted phone call so we can find out a little more about your situation and see how we might best be of service to you.

Past performance is no predictor of future results.  Results may vary.  Assumptions used in this example are not guaranteed.  Guarantees backed by the claims paying ability of highly rated life insurance companies.

ARS and its affiliates do not offer legal, tax or accounting advice.  Clients are urged to consult their own legal, tax and accounting advisors with respect to their specific situations.