Mixing Investments May Raise Retirement Confidence

A lot of people these days seem to be concerned about outliving their retirement savings. They see stock market volatility, and they get all kinds of agita when they think about having to rely on their portfolio for retirement income.

Well, here’s a little good news for you: some new research suggests that by adding a mixture of different types of retirement assets to your portfolio, beyond just your 401(k) contributions, you may have a greater level of confidence in how long your portfolio will last.

Dr. Michael Finke, the dean and chief academic officer of American College, used statistical analysis to simulate the financial experiences of several thousand retirees in various hypothetical situations. Each one of these simulations made the assumption that the persons were age 65 at retirement with $2 million in taxable and non-taxable retirement assets. They then withdrew 4% of those assets, increasing the withdrawal amount each year with the rate of inflation.

So what did the research find?

Retirees who owned only traditional stock and bond investments had a 29% chance of outliving their portfolio’s assets. But when they added cash value from a permanent life insurance policy to the mix and used it to provide tax-efficient income at retirement, they lowered the likelihood of a retirement income shortfall to 21%. By also adding an income annuity, they found they were able to reduce the risk of a shortfall even further, down to just 16%.

That’s compelling stuff! They’re saying that for the right candidate, the cash value of a permanent life policy can potentially take some pressure off of their portfolio by growing over time and giving them the option of taking income from it at a later date. And by using an annuity as a base for a steady stream of income that continues for as long as one lives, the research says that a retiree would be able to slow the pace of their withdrawals from cash value life insurance, thus stretching their retirement money even further.

Plus, the research also suggests that the legacy—the amount of money available to beneficiaries—may be significantly higher with a mix of income sources when compared to the traditional investments approach.

I don’t know about you, but I feel a lot better when I know how much guaranteed income I’ll have for the rest of my life. And there are all kinds of ways to potentially make this happen. We help folks with requests like these every day here at Lucia Capital Group; all you have to do is give us a call. We’re here to help.

Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

Annuities are long-term investment products designed for retirement purposes. Guarantees are based on the claims-paying ability of the issuer subject to their terms and conditions. Early withdrawals may be subject to surrender penalties and, if taken prior to age 59½, may be subject to an additional 10% federal tax. Annuities are not FDIC insured. Certain terms and conditions apply, so please read insurance company materials carefully. Insurance product guarantees are subject to the claims-paying ability of the issuing insurance company, and are subject to their terms and conditions. Insurance products offered through Lucia Securities, LLC (CA Insurance Lic. #OH40817

Diversification does not guarantee a profit or protection from loss.

No client or prospective client should assume that the information contained herein (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from Lucia Capital Group, its investment adviser representatives, affiliates or any other investment professional.

Raymond J. Lucia Jr. is chairman of Lucia Capital Group, a registered investment advisor and CEO of its affiliated broker-dealer, Lucia Securities, LLC, member FINRA/SIPC. Advisory services offered through Lucia Capital Group. Securities offered through Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.

Start Your Strategy

Personalized investment advice and support to help grow your portfolio