A recent article in the Minneapolis Star Tribune on Sept7th was written by HJ Cummins. The article chronicles three different families and the steps that they are taking to reduce their expenses and protect their retirement assets. The article goes on to talk about gas prices having doubled since 2006, and the price of electricy and gas heat that are expected to rise 30-50 percent this winter alone. The overall CPI increase is currently increasing by 6 % this year. That more than doubles the Social Security Cost of Living adjustment of 2.3% this year.
Even for the working class the pressure is very real. I can only imagine what it would be like with no new income stream. Imagine taking money out of a portfolio that is actually decreasing this year or over the past two years. Thats the worst thing that can happen taking money out of a portfolio that has lost market value. That is a real threat to family retirement and significantly increases the risk of out living your assets. Social security won’t make up the shortfall.
These families are doing some of the right things. They are cutting back on entertainment, cutting some surplus out of the grocery budget, looking at more energy efficient heating and cooling systems. All of these are good steps.
Is there something else they could be doing? YES I believe there is more that they can do. Where do they have their savings and checking accounts? Are they getting a fair return on their money? In many cases the answer is NO! If your emergency money is earning less than about 3% you are cheating yourself! There are alternatives but your local banker is not going to tell you about it. If you have assets invested what is the rate of return you have seen over the last one year and two year periods? If you are in bank CD’s earning 3-4.5% you are wasting assets. If you are invested in the market or have a 401K have you lost money over the past 1,2 or 10 year periods? Why are you continuing to put up with that? Do you know that there are financial products that will currently earn a guaranteed rate of 6 or as much as 7.2% per year in your income account value. This is the worst you can do over a ten year or longer period of time. 7.2% per year doubles your assets in 10 year and quadruples your assets in 20 years. If your financial advisors are not telling you about these products ask your self whose interest are they looking out for? If its time for you look out for your interests first then maybe you should contact me. Would you like to add some diversification among your assets with some products protected form downside markt risk?
Furthermore if a homeowner or couple is over age 62 there is another option as well that can significantly improve their cash flow. Have you considered a HUD guaranteed HECM Reverse Mortgage? These are not the reverse mortgages of 15-20 years ago where you get thrown out of you house in ten years. These new products guarantee you can live in your house as long as you want to, are well enough to do so or until the last surviving spouse over age 62 dies. You cash flow increases dramatically for two reasons. First you stop mortgage payments. That is an immediate increase in cash flow. Second, you can actually access some of the equity in your home further increasing your cash flow.
There are other cash flow management technigues we could consider on you behalf as well.
There are products that will guarantee you a lifetime income that you cannot outlive.
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