A lot of people use the term “financial plan” to refer to “a savings and investment plan.”
I always wince.
I’ve yet to meet someone who says, “My life goal is to save and invest money.” What people tell me is, “I want to save and invest money so that one day I can …” (then they finish the sentence in all sorts of interesting ways).
That’s really what we want: to have enough income—once we stop working—to live a certain kind of life.
In other words, it’s not simply assets, it’s income that we need in retirement—a regular money stream to replace the paychecks we’re earning now in our working lives. In short, we need is a “retirement income plan.”
Too many people enter retirement with a nice nest egg—but no retirement plan. Then they get indigestion as they watch their portfolio values rise and fall in today’s volatile markets. Their “financial plan” only focused on growing their assets; it didn’t go the final step of providing a strategy for steady, guaranteed income.
Lots of those retirees discover—the painful way—that spending too much, living a long time, or facing a long market downturn eventually puts them at risk running out of money!
There’s another way. It’s a plan that takes your assets and arranges for guaranteed income and a guaranteed legacy. Those guarantees are made by insurance companies.
In simple terms you want to a retirement plan that offers the following results:
- If you live a long life, you have guaranteed income you cannot outlive.
- Even if the financial markets are like a roller coaster during your retirement, your income is unaffected, because it is guaranteed for life.
- If you die before you retire, insurance gives your family gets the retirement funds you would have earned during your working life.
- At your death, the insurance part of your plan gives your family a tax-free benefit to replace the money you spent during retirement.
How can you create such a plan? By combining the strengths of your investments with insurance.
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