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Some thoughts on retirement financial planning…
Yesterday I found out that one of my coworkers sells insurance on the side. He gave me a thorough breakdown on Indexed Life Insurance (IUL) and how he bought policies for both his kids. The two of us have had lengthy conversations about IRA’s and 401(k) in the past. He knows I got a retirement plan going and other than my company 401(k) I manage them all on my own.I don’t think IUL’s are for me.
He did bring up one good point though about those who put their money in some retirement plan and never look at it again. Blindly expecting their portfolio manager to set them up with a perfect retirement fund. The problem with this is that the stock market (economy) will crash. It always has. No human can stop this. I then realized that my retirement plan mostly relies on the stock market. I do have an employer pension but who knows how long I’ll be with them. When I worked in Tokyo for a couple years most of us Expats had offshore pension plans. It was one of those attractive benefits employers threw in. When I purchased my home it was an investment decision and thankfully the value has gone up.
So what can we do to not let the economy destroy our retirement funds? Do we have the time to monitor the stock market, so we can sell and buy at the right time? I know I don’t. And this is why it is always stressed to have a balanced portfolio. IRA’s, 401(k), pension and the other options out there. But the key is to be diversified and not put all your eggs in one basket. Take some risk with your 401(k) but make sure to throw bonds and safe bets in there.
What do you all think? What is the best way to recession proof your retirement fund? If it’s even possible to fully secure it.
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Thanks for mentioning my blog! I appreciate it a lot.
Michelle recently posted..Can it just be Saturday forever?
My pleasure!
John recently posted..10 Amazing and Unheard of Uses for WD-40
Thanks for the mention as always John. Have a great rest of the weekend!
John S @ Frugal Rules recently posted..Shout Out Saturday #4
You too John!
John recently posted..My 5 Shopping Strategies for Online Savings | $500 Cash Giveaway
John, thanks so much for the shout out. I really appreciate it. As for retirement, I stopped trying to figure it out a while ago and put my long term investments in Vanguard TSMI fund. Have a great weekend, man!
Tony@YouOnlyDoThisOnce recently posted..Embrace Repetition
You’re welcome! I hear you, Tony. There’s so much to know that using a trusted brokerage can be good and more beneficial.
John recently posted..Valentine’s Day Date-Getting Ahead Planning The Perfect Valentine Date
Thanks for adding me to your line up John. Universal Life Insurance is a pretty cool product depending on a couple of factors. First it all depends on the cap. If the cap is 8% or higher it’s not to bad because you can get a fairly decent return from your account. However anything over the cap will be the insurance companies gain. On the other hand the lowest return you can get is 0% which means you won’t lose any money.
The other thing I’ve noticed as well is insurance companies will use the S&P 500 in most cases as their index but they won’t typically allow you to keep any of the dividends earned from those accounts. I hope this helps.
Anyways good luck and have a good weekend.
Chris @ Stumble Forward recently posted..Weekly Mentions – Vote For Stumble Forward For Top Personal Finance Blog Of 2012
Chris, thanks for articulating that perfectly. It does sound like a pretty good deal but important to research! I’ll have to balance it against my current funds and see if I need it.
John recently posted..16 Legendary Guys Night Out Ideas | Dust off the Low Rider and Rally Up
I don’t think there is any real way to be bulletproof, but having as much diversity as you can helps. Most financial gurus will tell you that universal life is a bad deal because of the high fees in the first several years, but I also know many people who swear by this type of investment. I guess it is whatever you feel comfortable with. Thanks for the mention.
Kim@Eyesonthedollar recently posted..Eyes on the Dollar 20/20 Roundup #25-Vote For Me!
I agree Kim! And like anything research is important. A universal life sales person will promote all the good parts. I’m always a little skeptical at first so we’ll see.
John recently posted..Starting a Legacy That Will Last a Lifetime and Beyond
While they’re really complicated and certainly not for everyone…IULs are fairly intriguing to me. The fact that you can never lose money is very enticing WHILE also having the potential for returns to be capped at 12% is pretty good considering you have no downside.
The hard part is making sure the loans work when you “start drawing income” or whatever it is you want to call it. That’s a little complicated and could be where people run into problems if there were decent returns over the years.
Jason @ WorkSaveLive recently posted..Best Online Tax Preparation Software – H&R Block, TurboTax, TaxACT, FreeTaxUSA
Good point Jason! I thought the best ones apped at 8% so 12% isn’t bad. The one my coworker was trying to sell me capped at 7%. I don’t fully understand the “drawing income” part yet and I believe it does get taxed. More research to do.
John recently posted..Starting a Legacy That Will Last a Lifetime and Beyond
Thank you kindly for the mention. I really appreciate it. I don’t think there really is any way to recession proof your retirement. All you can do is be vigilant with monitoring and changing around your strategy to stave off issues.
Grayson @ Debt RoundUp recently posted..The Best No Annual Fee Credit Cards of 2013
Grayson, I agree! And it seems to be the consensus that there isn’t a way to recession proof. Best is to do reserach and monitor.
John recently posted..10 Amazing and Unheard of Uses for WD-40
Thanks for the mention, as always. Especially considering how bad the selections can be in 401(k)’s, I’m not sure there is a way to really economy-proof a retirement account. I know there was a period of time that the best performing option in my wife’s 401(k) was the cash! And that period of time would basically be 2007-2010. :/
Edward Antrobus recently posted..Meet the 2013 $3K Challengers
I remember those years, especially 2009. Many struggled through them and took big hits. One thing we can do is learn from that. I took a 40% hit in one and have gained about 20% back. Now I try to at least have it set to auto sell at a certain price. Many sold too late when they really should have left it in by that time, because the stock eventually went back up to regain what was lost. Definitely not easy managing retirement funds.
Thank you for the mention! I believe the best thing you can do to recession proof your retirement fund is financial education.