Smart talk plans

The problem with most financial plans

Many people use the term “financial plan” to refer to “a savings and investment plan”.

I still grimace.

I have yet to meet someone who says, “My purpose in life is to save and invest money. What people tell me is, “I want to save and invest money so that one day I can…” (and then they end the sentence in all sorts of interesting ways).

That’s really what we want: to have enough income — once we stop working — to live a certain kind of life.

In other words, it’s not just assets, it’s income we need in retirement – ​​a steady stream of cash to replace the paychecks we now earn in our working lives. In short, we need a “retirement income plan”.

Too many people enter retirement with a good nest egg, but no retirement plan. Then they get indigestion as they watch the value of their portfolio rise and fall in today’s volatile markets. Their “financial plan” focused solely on growing their assets; it hasn’t taken the final step of providing a stable and guaranteed income strategy.

Many of these retirees discover – painfully – that spending too much, living a long life, or facing a long market downturn ultimately puts them at risk of running out of money!

There is another way. It is a plan that takes your assets and arranges guaranteed income and a guaranteed inheritance. These guarantees are provided by insurance companies.

Simply put, you want a retirement plan that delivers the following results:

  • If you live long, you have a guaranteed income that you cannot outlive.
  • Even if the financial markets are like a roller coaster during your retirement, your income is not affected because it is guaranteed for life.
  • If you die before you retire, the insurance gives your family the retirement funds you would have earned during your working life.
  • When you die, the insurance component of your plan provides your family with a tax-free benefit to replace the money you spent in retirement.

How can you create such a plan? By combining the advantages of your investments with insurance.

Smart investments will help you grow your assets during your working years. Most of us get that part.

But then, insurance offers us a way to effectively spend those accumulated assets in retirement. This is the part that isn’t always obvious (until it’s too late).

Insurance companies do two things. They bring together a large number of policyholders, some living longer than expected and others dying prematurely. And they invest all these premiums that we pay. This gives them the ability to offer retirees products that guarantee lifetime income and bequest benefits upon death.

Without the benefit of this insurance component, a retiree’s best plan is to hope that their various investments can grow enough to last a lifetime.

As a financial advisor for 30 years, I find that different people have an affinity for one over the other…a preference for investments or insurance.

The truth is that they are not in competition with each other. They are (or should be) complementary.

Their fine balance is what will give you the best kind of “financial plan”, a real retirement income plan that will allow you to live the kind of life you want.

To help you think through the aspects of creating your own retirement income plan, I’ve written an e-book called “How to Put Money Worries in Your Rearview Mirror – The Roadmap to Financial Freedom”. The book is free if you want a copy. Just email me at [email protected], and I’ll get it to you right away.

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