The commercials are great and the awareness they bring up is right on track for what people need to be thinking. Financial companies have figured out a great way to get you thinking about how much money you will need for retirement and how long you will live through retirement. I give them a huge kudo’s for their work on this.
They got it right, people are so misinformed of when and how long they can retire. What they are not getting right is what tools to use to reach these goals of retirement. These companies are showing you how easy it is to stretch the little bit of cash you have in your pocket but they can’t guarantee their method will work.
What is the difference between their method and my method?
Tax Benefits – These financial gurus are encouraging you to put your money in the market, into such things as a 401k, IRA, etc. These products are all put in before tax, so any growth on that money will be taxed at retirement. This is a good thing you say, I beg to differ. The old adage you will be in a lower tax bracket and debt free at retirement does not hold up.
First off, if you are in a lower tax bracket at retirement this means you have less income to live on. You may not have a house payment but that does not mean you will spend less, you will find something to replace that payment with. Perhaps a new car, a home in a warmer climate, a cruise –you name it. The question here is do you want to be in a lower bracket at retirement or will you have to be to make that money last.
Secondly, more people over the age of 65 have debt today than ever before. This is because they are going to college later in life and carrying student loans past 65. Parents are helping out kids longer in life and carrying some of their debt. They are also just trying to get back on their feet from the 2008 crash and even the possible loss of a job as the economy fell. Having debt over the age of 65 is realistic and should be planned for.
Security/Guarantees – Everything you save for retirement is put at risk if you are tying it to anything in the market. I did a bit of research and even the life insurance these companies are pushing is not the best option as they are pushing universal or variable life. If you didn’t experience 2008 than ask someone who did and they will tell you they lost 50% or more of their retirement. Some stories may not be as bad but a lot of them are this bad.
They can give you projections of “what if’s” but they can’t give you guarantees, your money is at the mercy of the market and you are gambling with your retirement.
Liquidity/Access to Money – Because your money is sitting in an account tied up you are not able to get to that money without a penalty. It is your money, yet if and when you need it you better be older than 59 ½ or you will be punished with a 10% penalty.
The moral of the story here is to put your money in a tool that is going to allow for tax-free or tax deferred growth,
This solution does exist and if you are interested in learning more call or email me and I will be happy to share more information with you.guaranteed growth with no possible downturn, and the ability to access and use that money today as well as during retirement.
As good as their commercials are to make you aware, it’s your job to do the research and be sure the tool you are using to meet those requirements is secure. You work far too hard for your money; you should not be risking it and having to push off retirement.