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Have You Fallen Victim to Retirement Osmosis?

Written By: Cal Burgess | Retirement Servicing Group

Today the market just announced that manufacturing activity has contracted to a 3 year high. This means that US manufacturing activity has dropped to its lowest level in 3 years. However, investors remain optimistic. They realize that the worse the economy looks the more likely the Fed is to pump another round of Quantitative Easement. This in turn will cause the market to rally which will allow investors to temporarily offset short term losses. That is, until the market starts to go south like it has over the last 4 Federal stimulus injections. Then the cycle starts over with the hopes that the Fed will intervene with additional Stimulus. Sound familiar? This is the reality of today’s market. Love it or hate it is here to stay. This is why traditional retirement planning is failing in this environment. Without analyzing the facts and adapting to these times, most retirement plans are in serious jeopardy.

Have you ever felt like some of the financial advice you have received over the last few years has come across as scripted? How many times have you heard “Invest money into a 401k if you want to be able to retire on time”? Or maybe you have heard that in tough times you need to stay the course. To me, staying the course means always moving forward. It also means to analyze and adapt to the environment. In other words don’t put up what you are not willing to lose. Instead focus on the long term goals when short term goals are impossible to determine. If you can ensure your future goals, now you have a foundation to build on.

Most working Americans do not have any sort of pension plan put into place. Almost all workers under the age of 50 believe if they ever do get social security, it will be nickels on the dollar. With this being said what would you say is the issue, in general, with Generation X approaching retirement? It’s a lack of income planning.

Retirement planning today is missing income planning; nothing more, nothing less. Moving forward, you’re not going to find income planning solutions through Government programs (Social Security) or employer sponsored plans. There is a reason most private employers have kicked those programs to the curb. If they cannot afford to pay the income, they’re sure as heck not going to offer it. This is why income planning is becoming a vital service to the employee, or 401k investor. Lifetime income and asset preservation is sounding more attractive to employees who do not have the luxury of a pension.

Historically, it is proven that most active retirees all planned an income stream to cover their basic living expenses. Those who knew there was a check available month in and month out naturally maintained the best quality of life within retirement. Without preparing for an income stream to replace a pension, a better quality of life is highly unlikely. Maslow’s Theory has taught us that failing to provide an income stream is in direct conflict to providing a high quality of life. This is why many future retirees are falling victim traditional retirement planning without adapting to a world of volatility and Federal Stimulus.

From the 1950s up to the early 1990s most Americans had some sort of pension that they could fall back on and receiving social security was never thought to be questioned. This made asset accumulation within financial planning a bonus to many investors. Investment funds were never thought of as a lifeline of income, only as extra spending money within retirement. Today, most deferred compensation plans will be used as a lifeline; meaning that retirement will not happen unless those funds properly perform. A problem that income planning can help bring an end to, especially if the next decade is any reflection of this past one.

Investors can protect their funds through a vehicle exempt from market conditions. Yes, a vehicle that will continue its promises despite any Federal Stimulus or volatility ahead. Guarantees backed by multibillion dollar institutions that have fronted cash reserves as an act of good faith for the strictest regulators. Fixed indexed annuities (FIAs) use annual reset in order to absorb the market risk for the investor while simultaneously providing an income stream for the rest of that investor’s life. In fact, during market up years FIAs can be set up to reflect an increase in income as well. This is helping investors to plan against inflation while preserving the value of the dollar against market volatility.

I encourage investors today to take a hard look at what guarantees they have with respect to retirement. The sooner we start to look at income planning solutions, the more equipped you will be when facing retirement.

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  • Jeremy Smith says:

    Well said Cal. A great picture of what our parents were able to accomplish with what they had available to them. I think the most important comments you wrote is that “staying the course means always moving forward”

    • Cal Burgess says:


      Thanks for your comment. With the volatility today most retirement plans are way behind schedule. One of the only ways to get back on track is to protect your money moving forward with guarantees.

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