Avoid the Wonder Years

Michele Zeiler
Aug 31, 2018 · 6 min read

We all look forward to retirement. We work our prime years to enjoy the remaining time we have on this earth. We imagine vacations, family time, hobbies, spending time with our spouse or in some cases finding ways to spend time away from our spouses (tee hee). We save during our working years and end up with a little nest egg for our retirement. What does that nest egg account represent — 35–45 years of blood, sweat and tears. That account is made up of birthdays and anniversaries missed, late nights with early mornings, holidays and weekends worked, and horrible bosses and challenging co-workers. It’s a lifetime of activity that we bank on to carry us through the wonderful years of retirement.

Longevity is the Biggest Variable to the Vitality of Your Nest Egg

According to the Social Security Administration, the average 65 year old man today can expect to live to 84.3 — that is just over 19 years in retirement. The average 65 year old woman can expect to live to 86.7 — nearly 22 years in retirement. But — that is the average. 25% of today’s 65 year olds will live to 90, 10% will live past 95. Your retirement can be 40 years — or more! Longevity is a huge unknown — that being said how do you know how to spend your money if you do not know how long you need to have it available?

Scrimping, Saving, Wondering, Stress

According to AARP, the greatest fear among retirees is not death. The greatest fear of retirees is outliving their income. My Grandfather retired at the age of 55 due to a physical disability. He worked for just over 35 years. I really only remember my Grandparents in retirement mode. In the early years they kept themselves busy with friends and family. Their city had a strong program for their seniors with outings, card games, bingo and more. They thoroughly enjoyed this time, but their activity was always close to home. Looking back on it now, I see they always wondered about the nest egg they built. I recall shopping trips to Aldi’s stocking up on canned goods that were on special, freezing leftovers from dinners out to eat at a later date. Their Saturday night dinner out was always early to take advantage of the early bird special. The most vivid memories I have is their final 10 years of retirement. Grandma had a series of strokes at 79, her short term memory was destroyed. The time has come for long term care. They were able to stay in their home, having a care giver initially stopping by daily and eventually there 24 hours. There was so much stress put on the finances and family because of the caregivers, doctors appointments, prescriptions and more. Grandma died at the age of 84, at home. Grandpa was on his own now and declining fast. This was the time that I became painfully aware of the true cost of wonderment. My parents and aunt worried every single day how they would afford to care for my grandfather if he ran out of money. This worry and stress not only took a physical toll, but none of them enjoyed the time in Grandpa’s final years. Grandpa died nearly 2 years to the day after Grandma. These last two years of emotional turmoil are the memories I have most. This is not how my Grandparents would want to be remembered, it is not how I want to remember my Grandparents. The saddest part of hindsight, there was enough money left when they passed away. Since no one knows their expiration date, there was no way for anyone to tell that money left would be the outcome. Instead they lived their early retirement in “just in case” mode and spent little and then ended their retirement in “am I going to make it” mode and were stressed out every single day.

The Avoidable Wonder Years

Our retirement years should be wonderful years, but for too many they are the wonder years. They wonder how much to pull out every month, they wonder if the market will perform well enough to keep the rate of return high enough to outpace inflation. You have 20–40 years of retirement — how would you like to spend it? What about your final years when your children take over your care? Do you want them to enjoy them or to worry? Memories of my grandfathers final two years are burned into my brain — the stress clearly visible rather than enjoying the time we had left with him. There is so much regret because this is avoidable.

Guaranteed Life Time Income

There is a solution to the greatest fear of retirees and it is guaranteed life time income available through life insurance products. Your IRA, 401k, bank accounts or your mattress cannot guarantee that you will not outlive your income. To try to “bullet proof” retirement, some experts recommend a withdrawal rate of 2–3% and others recommend just living off the interest. There are two product types that can provide the peace of mind of guaranteed life time income, both are available only in the insurance industry. Annuities and some permanent life insurance products have the ability to provide income you cannot outlive. For example, a 65 year old couple can purchase an annuity with a $265,000 premium. This annuity will provide the couple a $1,200 a month “paycheck” for the rest of their lives with a minimum of 20 years of payments. If something happens to both spouses before the 20 year mark, the remaining “paychecks” will be paid to the beneficiary. The math on that works out like this — $1,200 x 12 = $14,400 annually x 20 years = $288,800. The minimum guaranteed “paycheck” is more than their premium paid. What comes with the guaranteed “paycheck”? They can count on having $1,200 a month for as long as they live. At the same account value of $265,000 with a $1,200 a month withdrawal, a 2% annual return, you are guaranteed to be out of money by the age of 86 and 90 with a 3% rate of return. You have a 25% chance of living to 90, 10% living to 95. Would you rather have wonderful years or wonder years? An annuity takes all the wonder and stress out of that equation. An annuity is a leg in the retirement stool that you control, replacing the pensions that companies no longer provide.

If you are younger, there are life insurance products with life time income riders available that will allow you to build up your nest egg over time, have the certainty of a death benefit if you should die too soon, the certainty of living benefits to help you financially should you become seriously ill and if neither of those tragedies happen — you have life time income.

Know Your Options

For decades, Life Insurance agents have been on the endangered species list with declining numbers because trading stocks became the sexier profession in the 1970s. Over the past several years the industry has worked on a rebirth with recruiting. More agents mean more people to tell the story of products available to help protect your financial future. Seek out an agent to help educate you on the options available to help you make an informed decision about your financial future.


Until next time…

Be MoneySmart, Leave a Legacy of a Life Well Planned and Lived

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I am a licensed life insurance agent residing in Illinois. I hold licenses in Illinois, Indiana, Minnesota, Texas and Wisconsin. Concepts and products explained in this blog may not be applicable to your specific situation. Seek the counsel of a licensed life insurance professional to understand which strategies and products may be suitable for your goals. I am happy to refer you to an agent in your area.

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I teach people to play defense with their money and have guaranteed life time income, all while being an entrepreneur

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