3 Key Ways You’re Underestimating Your Retirement Costs

Take a moment and think about how much savings you’ll need in retirement.

Write that number down.

Now here’s a reality check: That number is probably low.

Not because of your math skills, but because most people underestimate what their costs will be in three critical ways.

A new study found that 37% of retirees say their overall retirement cost estimates turned out to be low.

And when it comes to healthcare, 44% of retirees said they’re facing higherx costs than they expected. (Source: 2018 Retirement Confidence Survey by Employee Benefit Research Institute)

Three Ways You’re Probably Underestimating Your Retirement Expenses…

#1. Assuming you’ll spend less in retirement than when working

The majority of people have never really sat down and calculated what they’ll need every month. You need to be comprehensive in listing out all expenses. And keep in mind you’ll typically spend more in the early years of retirement when you’re likely to be more active.

Would you like to travel? Enjoy hobbies? Visit grandkids? Add those costs in, too, because you aren’t working hard all your life to have to scrimp and sacrifice in retirement, are you?

Then throw in those major and often unexpected expenses that most people forget to account for, like a car repair, major dental work, a home remodel, needing to help out a child, a roof or major appliance that needs to be replaced… the list goes on and on, doesn’t it?

#2. Underestimating the impact of inflation

We’ve been the beneficiaries of historically low inflation rates in recent years. It’s easy to forget that inflation has been a lot higher over the years – in some years it’s been 10% a year and even higher.

But even low rates of inflation eat away at the value of your savings.

From 1913 to 2013, inflation averaged 3.22% a year, so factor in at least 3% inflation per year – 4% if you want to be on the safe side. (And that’s the government’s “official” calculation, which many believe to be low.)

Scary fact: If inflation averages just 3% per year, it will swallow more than $117,000 of the average Social Security benefit over 20 years, according to the LIMRA Secure Retirement Institute!

#3: Underestimating health care expenses in retirement

Out-of-pocket medical expenses in retirement is an area where many people are significantly underestimating their costs. And many assume most costs will be covered by Medicare, which is not true.

A 65-year-old couple retiring now will need $275,000 to cover out-of-pocket health care costs during retirement, according to a study by Fidelity.

And that number does not include the cost of nursing home or home health care.

At least 70% of people over age 65 will require long-term care services, and more than 40% will need nursing home care, according to the U.S. Department of Health and Human Services.

If you or your spouse require a stay in a nursing home, you would need over $250,000 to cover the typical average stay. And Medicare does not cover these expenses.

What Steps Should You Take if You’ve Underestimated Your Costs in Retirement?

There are several steps you can take to make up a retirement savings shortfall…

Is There a Way to Have True Lifetime Financial Security?

There is when you Bank On Yourself.

With the Bank On Yourself safe wealth-building strategy, you’ll know the guaranteed minimum value of your plan on the day you need to tap into it… and at every point along the way.

You’ll enjoy liquidity, control, numerous tax advantages, and a competitive return without the risk or volatility of stocks and other investments.

And you’ll receive some built-in protection against inflation because a Bank On Yourself policy grows by a guaranteed and annually increasing amount.

To find out what your bottom-line numbers and results could be if you added Bank On Yourself to your financial plan, request your free Analysis here.

You’ll get a referral to one of only 200 advisors in the U.S. and Canada who have met the rigorous training and requirements to be an Authorized Advisor and who can answer your questions and design a plan custom tailored to your unique situation, goals and dreams.

If you take this step today, you could soon be enjoying an unprecedented level of financial security and peace of mind:

Is There A Good Alternative for Retirement Savings? See What These Bank On Yourself Reviews Say

Navy Commander … physician … salesman … retired NFL record-holder … what do they all have in common?

They are all happily using the Bank On Yourself safe wealth-building method to either beef up or even serve as the foundation of their retirement savings plans. And these are just four of the hundreds of thousands of satisfied Bank On Yourselfers.

The Bank On Yourself strategy uses specially-designed dividend-paying whole life insurance to create a secure savings plan. The policies grow by a guaranteed and pre-set amount every year. The growth is exponential, meaning it gets more efficient every year the policy is held, providing peak growth at the time many people need it most – retirement.

And what’s not to like about Bank On Yourself? Guaranteed growth … accounts that never go down in value … incomparable tax benefits … and no government restrictions on putting money in or taking money out. Read on for the straight truth from actual Bank On Yourself clients …

Bank On Yourself Reviews, in Their Own Words

Here are the stories of Bob Chambers (Navy commander), Dr. Bryan Kuns (physician), Lowell Warner (sales professional), and Glyn Milburn (retired football star) …

Bank On Yourself Retirement Planning Is About More Than Money … It’s About Financial Independence … Lifestyle … and Legacy

[Read more…] “Is There A Good Alternative for Retirement Savings? See What These Bank On Yourself Reviews Say”

Wall Street Journal Study: 40% of Pre-Retirees Will Have to Reduce Their Lifestyle

A new study by the Wall Street Journal confirms it: Many Americans will have to trade their “golden years” for a retirement filled with scrimping and sacrifice.

Pre-retirees aged 55 through 70 today are the first generation that was “left on their own” to prepare for retirement, according to Alicia Munnell, Director of the Boston College Center for Retirement Research.

As pension plans that provide a guaranteed income for life disappeared, 401(k)s, 403(b)s, IRAs and similar government and employer-sponsored plans replaced them.

It’s an experiment that has failed many. According to the Wall Street Journal, for Americans approaching retirement age…

“Their median incomes, including Social Security and retirement fund receipts, haven’t risen in years, they have high debt, are often paying off children’s educations and are dipping into savings for aging parents.

“Their paltry 401(k) retirement funds will bring in a median income of under $8,000 a year for a household of two.” [Read more…] “Wall Street Journal Study: 40% of Pre-Retirees Will Have to Reduce Their Lifestyle”

See Testimonials and Reviews About Bank On Yourself on Our YouTube Playlist

In their own personal YouTube reviews of Bank On Yourself, actual users of the Bank On Yourself strategy describe the different ways they use this flexible tried-and-true financial resource. We’ve collected some of these reviews in our YouTube Bank On Yourself Reviews Playlist.

Perhaps you want to be able to seize an unexpected opportunity that requires ready cash, or pay off student and credit card debt, take a once-in-a-lifetime vacation, finance the purchase of an automobile, or even underwrite the crowdsourcing of a church major fundraising campaign. These Bank On Yourself reviewers tell you how they did it.

And just as they did, you’ll find that borrowing against the cash value of your permanent life insurance policy is a quick, affordable, and simple way to get the cash you need in just a few short days, with no questions asked.

Bank On Yourself Reviewer Uses a Policy Loan to Help Fund a Last-Minute Adoption

[Read more…] “See Testimonials and Reviews About Bank On Yourself on Our YouTube Playlist”

Four Years after Publication, This New York Times Best-Seller on Bank On Yourself Still Generates Rave Reviews on Amazon

Picture of the Bank On Yourself Revolution book cover

Pamela Yellen’s book, The Bank On Yourself Revolution, hit the bookstores in 2014. It was an overnight sensation, landing on the bestseller lists of The New York Times, Amazon.com (where it was a #1 bestseller), and USA Today.

Picture of the Bank On Yourself Revolution book cover

Shoppers on the world’s largest bookstore, Amazon.com, have consistently praised all of Pamela Yellen’s books … and this one is no exception.

And in fact, nearly 80% of reviewers have given Pamela Yellen’s Bank On Yourself Revolution a 4-star or 5-star review. Many also used glowing terms to describe their personal experiences with the Bank On Yourself concept.

Why is the Bank On Yourself concept receiving so much positive attention from Americans interested in a secure financial future? We’ve sifted through Amazon’s book reviews to find the answers. (All reviews are quoted verbatim, except for spelling and grammatical corrections and minor edits for clarity.)

According to Amazon Reviewer “Valentine,” Bank On Yourself Is “The Best Lifelong Safe and Guaranteed Wealth-Building Strategy Everyone Can Employ”

[Read more…] “Four Years after Publication, This New York Times Best-Seller on Bank On Yourself Still Generates Rave Reviews on Amazon”

The Stock Market Never Goes Down Any More? (Really?!?)

What was until recently an unloved bull market has now reached the point of “euphoria,” and investors are “having a hard time imagining a decline,” according to Morgan Stanley.

After all, what’s not to love about a bull market that has only two directions – up… and up faster?

It’s being called a “market melt-up,” and the main fear people now have is of missing out.

Those caught up in the euphoria – and the fear of missing out – might want to consider the following:

  • The S&P 500 is trading at 2.3 times its companies’ sales – a smidgen below its dot-com peak
  • Price-earnings ratios have only been higher for 1% of the stock index’s history
  • The cyclically adjusted price-earnings ratio is higher than before the crash of 1929, and higher than at any moment in history except right before the dot-com crash

Those of us who experienced the pain of the dot-com meltdown in 2002 and the financial crash of 2008 hope that the market will never become that irrationally exuberant again.

Back then, people justified their exuberance with the mantra that “this time it’s different.” [Read more…] “The Stock Market Never Goes Down Any More? (Really?!?)”

Savings Rate Falls to 10-Year Low

Americans are saving much less and spending more – even though their real disposable incomes are unchanged.

The savings rate just fell to a 10-year low of 3.1%, according to the Commerce Department.

What’s most worrisome to economists is that savings rates below 4% occurred before the last two major market crashes, as people felt what turned out to be a false sense of security, due to rising stock prices and/or home values.

Looks like it’s déjà vu all over again…

I recently wrote how the current bull market is the second longest in modern history. If it manages to last until summer, it will become the longest-running bull market at 9½ years.

A bull market has never made it to its 10th birthday.

In addition, historically, the longer a bull market lasts, the harder and deeper it crashes.

Which indicates the optimism that’s caused Americans to save less and spend more is misplaced. And, to take a line from the movie Grease, that means a lot of people are cruisin’ for a bruisin’.

The vast majority of Americans have little or no savings outside their retirement accounts, according to the latest Federal Reserve Survey of Consumer Finances. [Read more…] “Savings Rate Falls to 10-Year Low”

Nobel Economist Warns of Irrational Exuberance in the Stock Market

Richard Thaler, who won the Nobel Prize in economics in October of 2017, observed…

We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.”

Thaler has made a career of studying irrational and temptation-driven economic behaviors.

The current bull market is the second longest in modern history. If it manages to last until August 22, it will become the longest running bull market, at 9½ years.

No bull market has ever made it to its 10th birthday.

Which brings me to a very simple, but profound question…

What Happens When a Bull Market Ends?

[Read more…] “Nobel Economist Warns of Irrational Exuberance in the Stock Market”

Older Folks Say it's Not Fun Getting Old When You're Worried About Running Out Of Money

Record numbers of Americans older than 65 are working today, and millions are doing it by need, not by choice.

Too often, the work these folks find involves back-breaking, menial labor.

Many people are entering their golden years with alarmingly fragile finances, according to a recent article in The Washington Post.

And polls routinely show that most older people are more worried about running out of money than they are of dying. They lament it’s not fun getting old.

Thanks to a massive shift from guaranteed lifetime pensions to you’re-on-your-own-good-luck-with-that 401(k)s and IRAs…

People are forced to guess how long they might live and budget accordingly, knowing that one big health problem or a year in a nursing home could wipe it all out.”

[Read more…] “Older Folks Say it's Not Fun Getting Old When You're Worried About Running Out Of Money”

Five Retirement Investment Alternatives to Your 401(k) Plan

With something as vitally important as your retirement security, you need to be aware of 401(k) problems. And you have to ask yourself, “Do I really want to have to deal with all this? Are there good alternatives to 401(k)s?”

Let’s take a look at the drawbacks to 401(k)s and good alternatives to them. The 401(k) drawbacks include:

  • Unpredictable market performance, which means the very real possibility of losing a significant portion of your nest egg
  • Rules and limitations which can cripple your options and lock your money in a virtual prison
  • Fees, both visible and hidden, which can devour one-third or more of your hard-earned money in the plan
  • Tax deferral, which can siphon off another one-third or more of your income during your retirement years

Four Major Issues You Face When Planning for Retirement: Safety, Restrictions, Fees, and Taxes

Safety comes down to risk versus reward. Great potential gain brings with it great potential loss.

Investopedia sums up risk and reward this way: “Investing requires a degree of risk, and the bigger that risk, the higher the gain should be.”

The bigger that risk, the higher the potential gain should be—and the greater the potential loss will be.

What will you do if you don’t have enough to live on because of lackluster performance, restrictions, enormous fee, taxes on your income—or a major crash just before you planned to retire?

Will you work until you’re too ill to work, or you need to quit to take care of a relative, or you’re replaced by some kid one-third your age? (Nearly half of all retirees are forced to retire sooner than planned for just these reasons, according to the Employee Benefit Research Institute.)

Will you go on welfare or be shuttled back and forth between your children? Will you live under a bridge?

You can’t afford to lose your retirement nest egg, any more than you can afford to lose your next paycheck. And if you can’t afford to lose it, you can’t afford to risk it.

Yet government-controlled plans assume you want to invest your money in some endeavor with the hopes of making a profit. But investing, by its very definition, includes the concept of risk.

And the investment doesn’t need to be sketchy to involve risk! Investments in companies as “solid” as Blockbuster Video … Borders Books … Pan Am Airlines … Sharper Image … Enron … Polaroid … even Bethlehem Steel … have led to the downfall of millions of investors who thought they were being cautious, wise, and conservative.

Trillions of dollars have evaporated from 401(k) plans due to market fluctuations alone.

The U.S. Securities and Exchange Commission is blunt about the risks of investing:

All investments involve some degree of risk. If you intend to purchase securities—such as stocks, bonds, or mutual funds—it’s important that you understand before you invest that you could lose some or all of your money. Unlike deposits at FDIC-insured banks and NCUA-insured credit unions, the money you invest in securities typically is not federally insured. You could lose your principal, which is the amount you’ve invested. That’s true even if you purchase your investments through a bank.”

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Rules and Regulations That Strangle Your Access to Your 401(k) Money

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Government-approved retirement plans have more strings attached than Pinocchio before he became a real boy. It’s like your money is locked up in a maximum-security prison where someone else calls the shots—and you barely get visitation rights!

Contribute to a 401(k) plan and you’re contributing to a plan that tells you the maximum amount you can put in.

Your plan will also dictate what you can and cannot invest in.

You’ll learn that you can only borrow a relatively small amount, and you must pay it back on a strict schedule—or you can’t borrow at all.

These restrictions may seem normal, but not if you know the alternatives.

The government tells you how long you must wait to access your 401(k) plan money—your own money! You’ll pay penalties for taking virtually any distributions before you’re 59½.

Uncle Sam will tell you when you must access your money, and how much you must withdraw (and pay taxes on) each year. You’re forced to start taking distributions when you reach 70½—whether you want to or not.

Don’t get suckered into believing you control the money in your 401(k). Your plan is only tax-deferred because the government created it that way. And what the government created, the government controls.

The government can—and does!—change the rules any time it wants! The prison warden has your money under lock and key, and while your money’s in the slammer, he can impose any new restrictions or regulations he comes up with—and you have no recourse.

Do all retirement planning strategies come with those kinds of rules and restrictions? No! There are alternatives that we’ll discuss soon.

The Fees You Pay with a 401(k) Plan Compound Against You

Virtually every investment plan and most savings plans have fees or potential fees of one kind or another.

In 401(k) plans the compounding of fees works against you. It doesn’t matter whether you win or lose in the stock market, your stockbroker or the advisor managing your money will still get paid.

The impact of 401(k) fees is colossal. According to an exposé on 60 Minutes, fees “can eat up half the income in some 401(k) plans over a thirty-year span.” Yikes!

You really do need to know in advance exactly what effect fees will have on your balance. But just try to find out from your plan administrator or financial planner!

The Truth About 401(k) Plan Tax Deferral

Whoever talked you into starting your 401(k) probably told you what a great advantage tax-deferral is. “You can deduct the money you put into your 401(k), and it grows tax-deferred. You don’t have to pay taxes on your growth each year!”

If you bought into that, you’re in good company. An overwhelming number of Americans—and Canadians, with their registered retirement savings plans (RRSPs)—are in the same boat you’re in.

Many folks haven’t stopped to consider that when they retire—or when they’re forced by the government to start withdrawing from their 401(k) plan—they’ll pay income tax at the going rate on every single dollar they withdraw.

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They’ll pay tax on the money they originally contributed, because the government let them deduct that money from their taxable income. Now Uncle Sam is holding his hand out, palm up. And in his other hand, he’s holding a club.

And when folks withdraw from their 401(k) plan, they will also have to pay taxes on their earnings.

All those taxes were deferred—postponed—not cancelled!

Here’s what that could mean to you:

Let’s assume you’ve retired and you need $70,000 in retirement income annually to maintain your lifestyle and do some traveling.

If that income is from a 401(k) plan and you pay an average tax rate of 25%, your retirement plan will have to throw off $93,333—not $70,000—every year. You’ll need that extra $23,333 every year just to pay the taxes on your 401(k) income.

But tell me this: if your retirement plan could throw off $93,333 per year, wouldn’t you rather spend that extra $23,333 enjoying life more, rather than feeding Uncle Sam?

Why not pay your taxes up front while you know what they are, and then have income with no taxes due in retirement?

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A Review of Some 401(K) Plan Alternatives

If you don’t like heavy-handed government-controlled plans, broaden your horizons. There are methods of saving for retirement that don’t depend on unpredictable market performance … that have very few, if any, government restrictions … that tell you in advance what your minimum account will be at retirement (and any point along the way)—after fees … and that don’t have any of the pitfalls of the tax-deferral trap.

Not every 401(k) alternative offers every one of these advantages. But there is one that does. It actually offers more advantages, as you’ll see. Let’s look at the five common 401(k) alternatives.

#1 IRAs and Roth IRAs as a 401(k) alternative

IRAs are like other government-controlled plans, with one exception: Roth IRAs. You fund a Roth with after-tax money (unlike traditional IRAs), and you can withdraw money from your plan in retirement without paying taxes, subject to various regulations and controls.

#2 Municipal Bonds as a 401(k) alternative

Municipal bonds are debt securities issued by government entities to fund day-to-day obligations and finance capital projects such as building schools and highways. Generally, the interest on municipal bonds is exempt from federal income tax.

#3 Gold, silver, and other commodities as a 401(k) alternative

Commodities are basic goods used in commerce. Examples are gold, beef, oil, lumber, natural gas, iron ore, crude oil, salt, etc.

#4 Real estate as a 401(k) alternative

Real estate may be raw land, or it may be improved with buildings, farms, homes, and so forth. You receive income from renting or leasing the property, and you may realize a gain when you sell it.

#5 Dividend-paying high cash value whole life insurance as a 401(k) alternative

Using life insurance as an alternative to a 401(k) plan may seem odd. But it’s not to the hundreds of thousands of individuals, families, and businesses, who are doing it every day. The cash value component of a dividend-paying whole life insurance policy can be used during the insured’s life to provide a guaranteed, predictable retirement income, and for other purposes.

Which 401(k) alternative is best?

What’s the best 401(k) alternative? The comparison chart below will help you decide.

Comparing 401(k) Plans with Alternatives

Does the plan …
401(k)s & 403(b)s
IRAs & Roth IRAs
Muni-cipal Bonds
Gold & Silver
Real Estate
Dividend-paying whole life insurance
Give you guaranteed, predictable growth? N N N N N Y
Lock in your principal and growth, even when the market crashes? N N N N N Y
Give you control of your money or asset without government restrictions and penalties? N N Y Y Y Y
Give you tax-free retirement income? N Only Roths Y N N Y
Let you use your money or asset without penalties or the possibility of incurring a loss, however and whenever you want? N N N N N Y
Let you use your money or asset, yet still have it grow as though you didn’t touch it? N N N N N Y
Allow you to fund your plan every year, without limits imposed by the government? N N Y Y Y Y
Finish funding itself if you die prematurely? N N N N N Y
Tell you the minimum guaranteed value of the plan or asset on the day you expect to tap into it, and at any point along the way? N N N N N Y

 

To learn more about a properly-designed dividend-paying whole life insurance strategy as a 401(k) plan alternative, and to find out what it can do for you, request a FREE Analysis. You’ll receive a referral to an Authorized Advisor (a life insurance agent with advanced training on this concept) who will prepare your Analysis and answer all your questions about the concept.