How will your Retirement Savings Perform if we have Another Lost Decade?
Written By: Jeremy Smith at Amerishield
Let’s say you believe that the next decade will be more volatile than the last decade. If you choose to stay the course and not educate yourself on other viable options, you could very well experience some of the same previous damaging effects of “just breaking even” over the last 10-12 years. Many people’s retirement savings have been lucky to break even over the last 12 years, and many believe that the end of the financial crisis is nowhere in sight.
Long-term financial growth that is able to somehow regain all of your previous losses bringing you back to even could be a huge misconception. This misperception may cause people to forget about the factor of triple compounding interest. If you fail to earn any interest over a decade, you also delay reaching your goal by at least 10 or more year. Your principle didn’t lose value in this example; however, it didn’t gain any value either. That’s why the last decade is called the “lost decade.”
When you factor in the loss of interest, there are plenty of facts that emphasize the reason why you can’t afford another lost decade. If all you do is break even over a 10-12 year period, it’s as if those years never existed. Albert Einstein created The Rule of 72. This says that if you divide 72 by the expected interest rate it will tell you how many years it will take to double your money. Well, if you divide 72 by ZERO interest in a lost decade, you will never double your money…this is the result of just breaking even.
Is the next 10-12 years is going to be financially volatile? If you compare stock market volatility to a concept known as annual reset, there is no comparison. Annual reset wins hands down when you are looking at principle guarantees. Most retired people just don’t have 30-50 years to allow the stock market to return promising results, especially with zero guarantees in a volatile market.
So how is an annual reset a viable alternative? Annual reset is the core concept that allows you to earn a portion of the market gains while eliminating all of the market downsides. Insurance companies are able to provide annual resets in a product called a fixed indexed annuity. These indexed annuities have guarantees that your principal will never lose its value and you can exempt all future market while taking advantage of market upside gains. The insurance company absorbs all the risk with their investments while providing you contractual guarantees on the money in your annuity. Take the time to educate yourself on products that offer principle guarantees and annual reset to enhance your retirement savings.
AmeriShield agents discuss your complete insurance and risk tolerance as well as your goals for retirement and what you plan for your insurance products to do for you and your family before they discuss any products with you. They fully educate you on the differences in the types of fixed and indexed annuities that meet your specific situation and offer you “The Power of Choice” to achieve your goals.
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