Just like success, retirement is not a destination. We’re all on a trek of a lifetime. It’s filled with many different obstacles. We each climb our own mountain, and our survival is determined by our willingness to prepare and execute the plan. If your eyes are set on the peak of Mount Everest, you are required to prepare for the climb and the descent.
First, you will have to conquer a few mountains before even attempting Everest, because getting to the top isn’t the toughest part, it’s getting down. This is why having a properly designed retirement nest egg is so important. You save, but when it comes time to spending, you’re afraid to run out. It doesn’t have to be that way. There are ways to guarantee you will never run out.
“That’s actually a common rule in climbing that more people die coming down than going up,” says Fields. “You’re spent getting to the top. You get tired, you’re exhausted.”R. Douglas Fields, at the National Institutes of Health (NIH), tells ScientificAmerican.com
So how do we do prepare for the climb? First, we need to define our own mountain. How do we get to the other side? We need to plan with the end in mind. If you’re not ready to get down the mountain, don’t attempt such a tall mountain. This is exactly what frightens people, and they quit before even setting out. This causes many people to quit or aim lower than they initially dreamed.
The Monte Carlo shows that you can’t take out more than 3% out of your portfolio, or else you risk running out of money. The greatest fear is running out. It’s not the last day you spend that last dollar, it’s all those days you spend stressing out about running out. Thats why guarantees are so important. That’s what gives you the freedom to enjoy your hard earned dollars.
Lets say you needed a bucket of $1M. A married couple can purchase a 1M whole life insurance policy, with the first to die provision. When one of them dies, which is most likely the man, the other spouse would then receive the $1M and replenish the account. Now this would allow them to spend the money in the portfolio and also have the peace of mind knowing that they will replenish the account on the death of the other spouse, and the spouse would still be well off and able to carry on.
This right here is one of the most valuable assets you can have, a guarantee. Stocks wont do that. Bonds cant offer you that. And it’s tax free. Thats why it’s crucial to cover your fixed costs and your longevity risk.