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Retirement Planning > Retirement Investing

Retirement advice: With strings attached

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You’ve probably heard that the best marketing strategy involves entering into the conversation that your prospect is already having in their head. Just imagine! If you knew the prospect well enough to anticipate their concerns before they even raised them, you’d be unstoppable! What you may not realize is that this is a superpower that you already possess, and can harness, if you’ll  simply take the time to think through your planning process.

We’ve all heard (and used) many messages that imply that we don’t trust the message being communicated to us. Do these sound familiar? “It sounds too good to be true.” “Read the fine print.” “What are the strings attached?”

As professionals who aspire to truly help our clients meet their deepest needs and achieve their biggest goals, hearing these concerns can be frustrating, to say the least.

What if we were proactive in discussing the strings attached to the products and services we offer? What if we knew what objections were brewing in the minds of our clients and addressed them head on and with integrity? Do you think that would lead to a higher trust relationship?

Yes. I can say from experience that it does. I am going to share with you a few examples that I use with clients to not only build trust with them, but to highlight that we’re not in the too-good-to-be-true business. In fact, everything we offer has trade-offs and those are the very attributes that we manage when building successful retirement plans.

1. Stocks: long-term growth

Over long periods of time, stocks tend to outperform most other investments, allowing wealth creation to occur. Additionally, owning stocks allows immediate liquidity. That means you can get access to your money when you want it, without contractual penalty.

…with strings attached

A bearish stock market can easily wipe away many of the gains you’ve experienced. The stock market decline of 1966 took 16 years before the market returned to the level where it left off. In contrast, the 2008 crash took just 5 years to recover. By the way, the 1929 crash required 25 years to return to its pre-crash level! If you needed money during those periods of time, you had access but you paid stiff costs to “sell low.” This is especially painful for retirees who may need income to pay for necessities.

2. Bonds: consistent income

Loaning money to companies and municipalities in the form of bonds allows investors to receive interest income and also receive their initial investment back when the bond matures. Bonds also receive preference over stocks when companies fail and go out of business.

…with strings attached

Bonds pay a stated interest rate to their owner. As interest rates in the economy rise over time, the value of a lower-paying bond drops commensurate with the rise in interest rates. This means bond holders who must sell their bonds before maturity may not receive their entire initial investment back. The longer the maturity of the bond, the greater the price reduction when interest rates rise. Since we are in historically low interest times, bonds and bond mutual funds are at great risk of losses.

3. CD’s and Bank Savings:  safety and access

The ability to access your money quickly is a wonderful attribute of bank savings, making banks tough to beat for emergency fund money and shorter-term expenses. Additionally, the guarantee offered by the FDIC means you don’t have to risk losing the money during difficult economic times.

…with strings attached

Immediate access to money means interest earned is quite low. Money needs time if it is to grow. Reduce the time horizon for investment, and growth is minimized.

4. Annuities: guaranteed protection and income

There are many different types of annuities: fixed, fixed index, and variable, just to name a few. Most annuities are designed to generate income for their owners. By exchanging a lump sum of cash, the annuity owner receives a stream of income payments. This risk exchange allows the owner to generate income to meet retirement income needs that may far exceed the original deposit, regardless of conditions in the economy and the stock market. Think of annuity income much like receiving Social Security and Pension checks.

…with strings attached

For insurance companies to accept the risk that you may outlive your deposit and the interest it has earned and receive a lifetime of income payments, they need a commitment of time. That is, when the owner takes too much money out of the annuity too soon, the money was not able to work as long. The insurance company must charge a fee to the owner called a surrender charge.

As you can see from these examples, every investment and financial product has benefits and costs, pros and cons. Knowing what they are, you’re able to build a plan that takes advantage of the best attributes while minimizing the effect of the strings attached.

When we proactively address these areas of investment “with strings attached”, it has the potential to allow us to work in a very safe place with our clients, free from skepticism and rich in collaboration.  Doesn’t that sound like an incredible place to be with those who we are hired to serve? Let us not fear the objections, but embrace the realities of the planning we do. It’s a refreshing approach that pays great dividends for all involved.


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