Will the 2008 Bear Be Back?
Many Americans have a lot of their financial eggs in one financial basket, the Stock Market Basket. Consider your own retirement account(s). If the market experienced an extended loss and entered into a market “correction”, how would you react?
Damage Control: Seasoned investors know the No. 1 Rule: Always cut your losses short. Establishing a loss threshold i.g.7-8% would enable a person to cut the losses and regroup. But for many, mastering the No.1 Rule is difficult to do. Cutting market losses sooner than later could prevent a devastating loss. If 50% market loss happened, it would take a 100% return to regain your lost principal. How many stocks do you think have made a100% gain in any one year? (Additionally, the interest that could have been earned on the lost principal is also lost.)
In February 2020, thanks to COVID-19, there was a powerful 34% loss in the market. Many thought it would bring about a prolonged Bear Market. It appeared much like a Black Swan event. How would you have reacted if the COVID-19 correction had developed into a real correction? Would you hold’em and ride it out or fold’em? For those that stayed, it would take over a 51% return to offset the principal loss of 34%. The market rebounded. The big question is how much loss would it take for you to fold’em?
Afraid to Look?
Psychologists say that most people feel the pain associated with a market loss more than the joy associated with a market gain. So, when a market loss occurs, they tend to hold on to the “losers” fearing that if they sell the losers, and the market comes back, they will have lost the chance to make their money back.
Why Not Take The STRESS Out?
This is not a trick question. Americans insure everything they consider of value against financial loss, but not their company sponsored retirement plans. Wouldn’t it make financial sense to insure a part of the very account(s) that you would depend on to maintain your retirement lifestyle for the next 25-30years?
I Hate Annuities
Why? For years, ads ran in many publications titled “I Hate Annuities and Why You Should Too. Annuities are not for everyone; but, it was obvious that the author of the article wanted to downplay all annuities to persuade individuals to invest in his company’s assets under management programs.
Another reason that people trashed the idea or concept of annuities is due to what I would call “Dad’s pension”. When Dad got ready to retire after many years on-the-job, he was offered a pension that had different payout options. The highest payout option was the single-life option. Often this was the option of choice. While it had the biggest lifetime payout option, it also carried a future problem. When Dad, the pensioner, died, the annuity payments stopped and the remaining balance was kept by the company. Mom was left out. This fact
Annuities are the only financial product that can contractually guarantee an income stream you can never outlive. The word annuity derives its name from the Latin “annuas” or payments. Originally, they were a gift to Roman soldiers and their families. A single premium immediate annuity of today would resemble the original Roman annuity.
Annuities and Social Security?
Annuities are a life insurance product and are the only financial product that can contractually solve for the longevity risk of outliving your money by providing an income stream you can never outlive. Social Security also provides a lifetime income stream you can never outlive. So it would be logical to say that Social Security income payments are for all practical purposes an annuity.
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Annuities are not for everyone. Find out more about annuities. Get the free informational Annuity Guide, and learn more about the pros and cons of various annuities. Discover why the right annuity, together with Social Security, and a pension, why people want to insure their retirement and not run out of money!
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