After reading the Wall StreetJournal’s article "As Stock Prices Keep Rising Should Investors Moveto Cash?” I was stunned to find that investors fall for such
black-and-white thinking.
I understand the perspective of those investors who are either
approaching or are already in retirement. With little time to recover from a
significant market loss, their viewpoint makes sense. However, these are not
the only two choices people have.
It's one thing to consider cashing out of the market. It's an entirely
different thing to let that cash sit in the bank earning less than one-tenth of
a percent. However, due to low interest rates, we are seeing some of the lowest
returns in history.
Another conservative option would be to invest in a fixed indexed annuity. This option would allow you to get a better return than
CD's and money market accounts without sacrificing principle. Your gains would
be locked in rather than your retirement being gambled away in the stock
market. This strategy also allows you to create a tax-free retirement income.
Investors looking for a guarantee alongside some level of liquidity
may want to consider dividend-paying whole life. The returns are quite
conservative, but you can still maintain access to a portion of your cash via
tax-free policy loans. The downside to this strategy is that you sacrifice the
ability to earn higher returns in exchange for more guarantees.
The strategy that has the most upside potential is indexed universal life.
Although it has the least amount of guarantees, it has historically
out-performed the other two strategies by a minimum of 2 points. This strategy
has a guaranteed minimum return of 0% to 2% (depending on the insurance
company). Because this is the most versatile strategy available, it is
essential to work with a financial planner who is experienced in designing and
managing this type of strategy. This strategy also allows you to access a
portion of your cash through tax-free policy loans. It will typically produce
the highest potential retirement income.
If you are approaching retirement or are already in retirement, these
strategies could help you eliminate the uncertainty of market volatility and
provide you with a tax-free retirement income. To learn more about any one of
these strategies you can attend one of our free one-hour private financial
education workshops in Southern California. To check for availability call
1-800-546-2499 or click on the link below.
