An Income Stream You Can’t Outlive

The Holy Grail of Retirement Planning

This content is excerpted from our book, Momma’s Secret Recipe for Retirement Success,” by Dan Ahmad, Jim Files, and Jack Canfield. The book is also full of valuable contributions from other leading professionals from around the world, including the below from Robert M. Ryerson, CFP, CITRMS, CLTC. He tells a tale of three very different investors, with the very same problem… and the safe and sound solution for all of them.

Every retiree and pre-retiree worries that they could run out of money during retirement. Most people literally fear there could be a day in their future when their income stops, and they end up poor. During my 35 years as a financial planner, the most common and pressing questions clients ask me are:

  • How can I retire and stay retired?
  • How can I guarantee I will avoid running out of money during retirement?

People know there are many factors that can cause their assets to run out and their income to stop before they die, such as large stock market losses or a chronic illness—they just don’t know how to protect themselves against such catastrophic events. The good news is that there are solutions available today for all of these risks and potential problems.

Do you have these same types of fears and worries? Probably so. Do you ask the same Big Retirement Questions? Probably so. To help you understand how you can possibly be helped in terms of eliminating your fears and worries about running out of money, we will discuss three different hypothetical situations in which powerful solutions were formulated to help people who did not have success using traditional investments and income planning. The solutions in these case studies are based on using ‘the secret ingredient’ of Momma’s Secret Recipe for Retirement Success: Fixed Index Annuities with income riders.

Agnes and Howard – They Have the CD Blues.

The first story is about Agnes and Howard, who are in their mid-seventies, and who have been very conservative “certificate of deposit and bank accounts only” investors for the past 35 years. They had managed to accumulate about $600,000 in various bank accounts and had a CD portfolio of around $550,000 that had served them well, in terms of income, for many years. That is until the Federal Reserved instituted their “Zero Interest Rate Policy” (ZIRP) in 2009, after the crisis of 2008.

By 2011, they realized they were in trouble. They had previously counted on the interest on their CDs or other bank account holdings for income, and when interest rates were in the 5-7% range for these types of holdings, they could count on perhaps $2,500-3,500 per month of reliable income coming in. They assumed that they could count on this income from the bank, with these guaranteed principal vehicles, for as long as they lived.

However, when interest rates collapsed to near zero after the 2008 crisis and stayed there, they began to realize that not only were they losing the long-term battle against rising costs of living if their CD rates didn’t keep increasing, but they were experiencing a huge drop in their ongoing interest income streams.

Their $550,000 “safe money” CD portfolio with an average yield of 5% had been producing a much-needed $27,500 of interest for them every year, or about $2,292 per month. But now that same portfolio of CD’s, with the average yield now around 1%, produced only $5,500 per year of interest, which was $458 per month. Where were they going to get the missing $22,000 per year, or $1,834 per month, of income that they needed? Savings accounts and checking accounts were even worse choices, by the way, with yields closer to 0.10%.

Agnes and Howard wanted three main things:

  1. A higher level of monthly income—at least the $2,292 to which they were accustomed.
  2. Safety of principal against all stock or bond market losses.
  3. A guarantee that the $2,292 of monthly income would be paid for as long as they both lived.

Agnes and Howard realized that the bank, where “their money is safe in that brick building on the corner,” no longer provided them with the income they needed to survive—interest rates were just too low. The simple solution for Agnes and Howard was to purchase fixed index annuities with income riders for $550,000. With this plan, their $550,000 was guaranteed against all stock market losses, and they would receive the needed $2,292 per month, guaranteed for as long as they both lived.

SEE ALSO: How Do You Set Up a Fixed Index Annuity? (And What Do You Get Back?)

Dolores – Dividends Going, Going, Gone!

The second case study is about Dolores, a single 65-year-old middle management professional who recently retired from IBM. Dolores had concerns about the great longevity in her family, and her desire to not become a burden to family members if she developed a chronic illness or cognitive impairment in her old age. She had managed to accumulate just over $1,000,000 in IBM stock over her long career there, and she was pleased to consider the roughly $48,000 per year in cash dividends a safe and reliable supplement to her other retirement income.

The problem was that stock dividends are never guaranteed and that IBM itself was a prime example of what could happen to dividend income. She had almost forgotten about the long rough-patch IBM had years ago, because she was busy at work, and not paying too much attention to the dividend aspect of the shares at that time.

In March of 1993, IBM made a huge 55% cut to their dividend, and it took 13 years for that dividend to get back to the 1993 level! But IBM was not alone in cutting dividends. There was a 43% cut that Eastman Kodak made in 2003, and a full elimination of the dividend that Citigroup shareholders suffered in the ’08 crisis, and more recently a 50% cut that GE made on 11/13/17. The dividend cuts that Citigroup, GM, Wachovia Bank, Kodak, and a host of others made were never restored, and often were a precursor to further trouble.

With the aging of the population, and with the current bull market now over ten years old without experiencing any serious corrections, it is likely that more people with very concentrated risk in one stock will come to be reminded that dividends do not provide income that you can depend on for as long as you live. In Dolores’s case, she was able to create $48,000 of guaranteed lifetime income using fixed index annuities with income riders. She also received chronic illness benefit riders within those contracts.

SEE ALSO: Annuities 101

Joe and Susie – Real Estate Barons?

The third case study is about Joe and Susie, in their late 50s, who were big believers in, and far more comfortable with, rental real estate than they were with stocks, bonds, and mutual funds. While real estate investing is certainly another logical way to build wealth and future income for retirement, it is also not without risks. In addition to the risk of the tenants doing damage to the property, there is also the risk of the tenants not paying the rent, and defaulting on the lease, as well as decreasing property values, and higher than expected taxes and maintenance costs.

Evicting people can be difficult, expensive, time-consuming and frustrating. Joe and Susie had been through damaged apartments and eviction battles previously, but more recently, they even had a tenant go to jail for a couple of years, and they had to fight the court to regain access to their own property while receiving no rental income during the whole process.

So, needless to say, they realized they needed to make some changes and do some different planning as they headed toward retirement. After doing some soul-searching, they realized they were tired of being landlords, admitted that their total returns were not what they had expected, and wanted a steady income that they didn’t have to work so hard to earn.

Joe and Susie sold one of their real estate properties, from which they were receiving $40,000 in net-after-expenses annual income, and they netted $1,000,000 from the sale. They used these funds to purchase fixed index annuities which, at age 62, would provide them with over $75,000 in annual income, guaranteed for as long as they both lived. So, think about that – they nearly doubled their income, and never had to deal with tenant issues again!

In Summary

As retirement income planners, we very often need to point out to our clients that none of the traditional investment vehicles or portfolios that we used in our three hypothetical case studies can actually create income streams that can be [guaranteed] for as long as they live—not stocks… not bonds… not CDs… not real estate… not options and not trading systems either.

In all these circumstances, one of the most powerful solutions to guarantee principal against all stock and bond market losses, and just as importantly provide lifetime income guarantees, is a fixed index annuity with an income rider. If the right contracts are chosen, they may even have the opportunity for increased income on an annual basis.

Would you like to know more creating an income stream you can’t outlive? Contact us today to schedule an introductory conversation and to learn more about the services we offer at Peak Financial Freedom Group. We look forward to hearing from you!

Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661

DISCLOSURE:

All of the information presented here is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any financial product. None of the information presented is intended to give you specific tax, investment, real estate, legal, estate, or financial advice but rather to serve as an educational platform to deliver information. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views on Peak Financial Freedom Group, LLC. Every detail in this website is subject to change without notice. Seminar, radio shows, TV productions, book releases, magazine and book promotions are sponsored, promoted and paid for by Peak Financial Freedom Group, LLC.


2nd Opinion Package available to Qualified Retirees and Soon-To-Be-Retirees may include free consultations, a free retirement income plan, risk analysis, and fee analysis. In addition, a comprehensive written retirement income plan may be provided to those who complete the entire process. Qualified Retirees and Soon-To-Be Retirees must have a minimum of $1,000,000 of investible assets such as IRA’s, 401K’s from past employers, stocks, bonds, mutual funds, bank accounts, money markets, CD’s, etc., but DOES NOT include real estate, businesses, limited partnerships, 401K/retirement plans that can’t be moved to another plan, and other illiquid type assets.


All investments involve risk, can involve the loss of principal, and unless otherwise stated, are not guaranteed. Past performance is no indication of future performance and such information cannot be relied upon regarding future potential gains. Nothing is directly or indirectly guaranteed by this information. The planning and ideas presented herein are not suitable for all individuals or situations. Hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is not a guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher. Consult your financial professional before making any investment decision. Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of any other asset including an annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. Different assets can be complex and carry fees, costs, and surrender charges. If you place assets under management with Fiduciary Solutions
LLC, we are paid an advisory fee from Fiduciary Solutions LLC and if you purchase an annuity through us, we are paid commissions from an insurance company.


2019(1), 2020(2), 2021(3), and 2022(4) Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, 2021, and 2022 Five Star Wealth Manager Awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate the quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to https://fivestarprofessional.com.


Investment advisory services are offered through Fiduciary Solutions, LLC, a California Registered Investment Advisor. Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA Insurance License #0N14013). Peak Financial Freedom Group LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control.


Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD #1620449) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0732913).

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