50+ Lifestyles

Resolve for Safety and Flexibility in 2012

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

As we turn the calendar to another year, I am sure you are aware that 2011 ended up not a strong stock and mutual fund year. For a long time now, I’ve encouraged retirees and soon to be retired folks (within 10 to 15 years of retirement) to look into the safe money harbors offered with fixed and fixed index annuities. I continue to make this recommendation. Build a portfolio of safe money harbors using a combination of annuities to establish a ‘split annuity’ arrangement for those valued retirement assets.

Begin this process by resolving early this year to apply the Golden Investment Rule to your retirement assets. This simple rule results in a percentage by subtracting your age from the number 100. A person age 60 for example subtracted from 100 results in 40 percent. According to the Golden Investment Rule, that is the maximum percentage of valued retirement assets exposed to risk with stock or mutual fund investments. A person age 70 subtracted from 100 results in 30 percent as the maximum percentage of retirement assets invested in stock and mutual funds. What is your risk according to the Golden Investment Rule? Start off 2012 by taking action to take control of your situation. Don’t be a victim of the market. Take control by first applying this Golden Investment Rule to your situation. Remember this rule is a simple guideline. Individual circumstances may cause exceptions to the rule. If the result of the Golden Rule has your retirement money within these guidelines, you are in great shape. But if you are outside these guidelines, we encourage you to take action to bring your assets within the Golden Rule guidelines.

In working with clients, often I find retirement assets invested just the opposite from the Golden Investment Rule. Not too long ago, I visited with a client age 65 that had over 80 percent of assets in stock and mutual funds. The account values had taken a terrific hit over the past several years. Had this person applied the Golden Investment Rule to his nest egg earlier, a much greater portion of those assets would have been safe from market declines. My advice to readers today is to simply take a few minutes to put pencil to paper and calculate how close you come to being within the guidelines of the Golden Investment Rule. Use the fixed and fixed index annuity to protect money from the stock and
mutual fund market risk.

Most annuities allow an annual right to withdraw up to 10 percent, some offer the right to annuitize or take monthly payments after the first year with others at the end of five years. Long-term care costs are often a withdraw exception to the penalty. Death of an owner or annuitant allows passing annuity to beneficiary without penalty. Required Minimum Distributions (RMDs) for qualified are often penalty free. These exceptions create flexibility.

As you know, there are advantages and disadvantages for every financial product. The fixed and the fixed index annuity provide safety from stock and mutual fund market volatility. That’s a huge advantage. Holding periods could be a disadvantage, but a minimized disadvantage with the penalty free exceptions for withdraws. Look into the annuity to gain the larger advantage of safety and flexibility. Resolve to apply that Golden Investment Rule to your assets. Use the annuity as a safe money harbor to bring you in within that guideline.

Throughout 2012, we will continue our monthly informational meetings for folks aging into Medicare (see our ad below). Medicare 101 will be Friday, January 20 at 10 a.m. We will also continue our periodic “Choices” dinner workshop at Bennigan’s Feb 9. Call us anytime for reservations or additional details.

Happy New Year!!

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJU and Associates, Inc. He can be reached at
(563) 332-2200.