Six scary facts affecting your finances

A number of items have come across my desk recently that should spook the living daylights out of you…

Scary Fact #1: 40 percent of all workers plan to delay retirement

61% blamed the decline in their 401(k) for this.  And a majority said they’re prepared to spend less in retirement according to a new survey by Towers Watson.

Scary Fact #2: Nation’s retirement shortfall exceeds $4.6 trillion!

A recent study revealed Boomers and Generation X’ers are coming up frighteningly short on their retirement savings.

And when nursing home and home health care costs are added in, that shortfall doubles, according to a study released this month by the Employee Benefit Research Institute (EBRI).

Nearly half of both Baby Boomers and Gen X’ers won’t have enough funds to cover living expenses, according to an EBRI report released earlier this year.

Scary Fact #3: New 401(k) disclosure rules don’t put a lid on fees

New regulations announced this month by the Department of Labor will require better disclosure of all the hidden fees you’ve been paying in your 401(k), starting in January, 2012.

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But, for all the noise on Capitol Hill about this horrifying issue, NO regulations have been proposed or even discussed to reduce the confiscatory fees you pay!

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Even a one percent higher fee can cost an employee $64,000 or more in realized savings by age 65, according to the DOL’s own estimates.

The 401(k) situation is so bad that you will probably need to get an average annual return of 8% to 10% – just to break even!

Not convinced?  Check out the shocking exposé Pulitzer Prize-nominated journalist Dean Rotbart and I recently co-wrote on this.

Scary Fact #4: Hope is not a strategy

We’re headed for a retirement train wreck, and it’s going to get really ugly over the next 15 years”
– Rob Arnott, a widely respected market strategist

In a well-researched article in this month’s Fundamentals Index Newsletter, the authors point out that the return assumptions built into pension and retirement plans today assume that “everything will go right.”  They’ve relied on unrealistic assumptions.  The authors also go on to demonstrate why returns are likely to be much lower in the future.

We’re relying on hope.  But hope is not a strategy; hope will not fund secure retirements.  We’re planning for the best and denying that worse can happen.  It makes far more sense to hope for the best, with plans for realistic outcomes – and contingency plans for worse ones.”1

Scary Fact #5: 40 percent of retirees were forced out of work early

Remember the scene from the 1983 movie classic, “The Big Chill,” where the character played by Jeff Goldblum asks…

Have you ever gone a week without a rationalization?”

Well, many boomers today are trying to rationalize away the fact that they won’t be able to retire when and how they had planned by trying to convince themselves that retirement is overrated.  They now talk about continuing to work in some capacity as long as they can.

While there’s no question that this can give you more of a sense of purpose and fulfillment and keep you from dying of boredom, the reality is that many people are being forced to retire earlier than they can afford to.  Job layoffs and health issues are the primary reasons for this.

I love what I do, and I hope to be doing it for a long time.  But shouldn’t the decision to retire – or not – be a matter of choice, not necessity?

The reality is that you may not have a choice.  Nearly four in ten retirees say they were forced out of work earlier than they’d planned because of layoffs, poor health or the need to take care of a loved one, according to EBRI.

Scary Fact #6: All Bank On Yourself policy owners received a guaranteed increase and a dividend – again

I was just checking to see if you were paying attention! That’s not a scary fact (unless you’ve been procrastinating on starting to Bank On Yourself).

Halloween CashWhole life insurance is an asset class that has increased in value during every stock market decline and every period of economic boom and bust for more than a century.

A dividend-paying whole life policy grows by a guaranteed and pre-set amount every year.  In addition, the growth is exponential, meaning it gets better every single year with no luck, skill, or guesswork required to make that happen.

This gives you some protection against inflation and provides peak growth when you need it most (retirement).

A Bank On Yourself-type policy includes an option that turbo-charges the growth of your cash value in the policy.

You can know (rather than hope) the minimum guaranteed income you can take from the policy in retirement.

And, you can access the money in retirement with little or no tax consequences, under current tax law.

You can also have access to capital when you want it and for whatever you want.  No nosey credit apps or pledging your first born.

So, if you haven’t added Bank On Yourself to your financial plan yet, doesn’t it make sense to request a free Analysis and find out what your bottom-line numbers and results could be?

There’s no obligation, it’s not scary, and no one’s going to twist your arm!  If you haven’t already started to Bank On Yourself, please take the first step today and take back control of your financial future!

1. “Hope is Not a Strategy,” Fundamentals Index Newsletter, October 2010 Issue


    • It’s not necessary for you to be in the insured on your policy. What is important is that you own the policy, which puts you in control of the money in the policy. You could have someone else you have an “insurable interest” in be the insured, typically a family member or business associate.

      In addition, some people rule themselves out for health reasons, when they might still qualify. Don’t rule yourself out, request an Analysis and find out.

  1. Pamela,

    A question for you. With a Bank on Yourself policy, how do you determine the minimum guaranteed income you can take from the policy in retirement?

  2. Please tell me and anyone else who sees this what rate your plans pay and what fees they have! You seem to spout lots of “facts” about everything else, but never rates or fee structures of your plans. I know they have never lost money. Neither has my 0.15 % savings account, until you figure in inflation. And why should I believe that insurance companies are safe? A disaster can take one down overnight. And I do NOT want to request a free analysis to get this simple information. I get enough spam and junk phone calls already.

  3. It will be interesting to see how my message is “moderated”. If that means screening for profanity, I have no issue with it. But if that means editing for the purpose of distorting what I said, or removing the questions you don’t want to answer, then please just delete my comment, and remove me from your mailing list!
    If that is not the case, then I really look forward to your answers, and I still have interest in your plan.
    Thank you!

  4. When will these be “moderated”?
    It would be nice if people could actually read comments when they read your article.
    Is this just bad planning on your part or is there something more sinister going on here?

  5. From the link you provided, I found these quotes:

    “And the answer is that you would have to get a 7 – 8% annual return in a taxable account to equal the average net return in a typical and properly designed Bank On Yourself-type policy (assuming you’re in the 35% tax bracket).”

    Why won’t you give a straight answer to the question? You are incinuating a 4.5 to 5% tax free return. Why won’t you just say so? And how many of these policies end up being non typical or improperly designed? Also, there are many folks not in the 35% tax bracket that might be looking at this. Is it only worth looking at if you are in the 35% tax bracket?

    “Let’s assume your money increases by 100% the first year, and then goes down by 50% in the second year. But you do really well in the third year, because your money increases by 100% again. Unfortunately, however, you take a 50% hit in the fourth year.
    If you add those four annual percentages together and divide by four, you have a 25% annual return.”

    Anyone that computes annual return that way is an idiot. Please don’t talk to investors as if they are idiots. This is what concerns me about your “plan”. You do not want to speak to us as if we are intelligent.

    And your second link spoke of where to get the money to fund your plan. It said nothing about fees or costs associated with your plan. Why so deceptive?

    • Actually, more than 99% of investors surveyed don’t understand how the “annual rate of return” can mislead. That’s why John Bogle (Founder of Vanguard Mutual Funds) wrote an expose about it.

      And you’ll find the answer to the costs and fees associated with Bank On Yourself under the subhead “How much does it cost?” at the second link I gave you.

      A mentor of mine often noted that some people are just “waiting to be offended.” Are you one of them?

  6. And the moderation goes on….and on…..
    Could it be that you do not allow any comments that you cannot twist in your favor?
    I wonder how many of these comments never see the light of day just because they don’t suit your purpose.

  7. To the contrary, a financial planner that is good is not going to sell you a particular product in order to make a commission.

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