One of the first questions I am asked these days when I meet with a client for the first time is how to protect retirement savings from the next stock market crash? If you’re like most people I talk to these days, you probably are feeling a bit nervous about the state of the economy and the stock market… And rightly so!
Christian Mueller-Glissmann, Managing Director of Goldman Sachs Group Inc. says that…
“With the S&P 500 close to all-time highs, stretched valuations and a lack of growth, draw-down risk appears elevated.” Read more: Goldman Sachs: Elevated Risk of Big Market Selloff
John Bogle, the founder of Vanguard, an outspoken supporter of index funds, expects stocks will return
“closer to 4%” because of current high valuations (currently 22 times earnings when the norm is 16). “We’ll be lucky to get a 4% to 5% return from balanced portfolios for the next 10 years.”
Carl Icahn, outspoken activist investor, warns that…
“the stock market has been artificially boosted by prolonged low interest rates.” Read more: Carl Icahn: Stocks Falsely Being Propped Up by Low Rates
Home Depot co-founder Ken Langone CEO of the venture capital fund Invemed Associates told CNBC…
“We are in trouble — we are in serious trouble,” “71% of our federal budget are entitlements. Interest rates are not only historically but unrealistically low,” Ken Langone: US Economy Is in ‘Serious Trouble
The bad news
Many people who suffered devastating losses in 2008 aren’t really doing anything differently today to protect themselves and their savings.
If you’re in this group, don’t worry, it’s not your fault. You just haven’t been introduced the ABC planning model yet. Most people are only in the market (the C column) because the returns offered by banks (the A column) don’t allow you to even keep up with inflation.
What if there was a middle ground? There is! It’s the B column in the ABC planning model.
The good news
There is a way that I will share with you in this article to protect your retirement lifestyle and to completely and permanently eliminate the stress and worry that comes from the stock market boom and bust cycle that seems to have become the new norm.
The Only Reason Why Boom & Bust Cycles Cause Stress
The only reason why stock market declines cause people to stress is if the decline has a direct impact on your income, your lifestyle, and your ability to pay for the things you need (present & future).
How to protect retirement savings
If you want to stop worrying about what the market and start to live a stress free retirement, secure your basic living expenses with guaranteed lifetime income.
To do this, you need to be clear about what your cost of living is and will be.
For more information on this, read How Much Retirement Income Will I Need
Once you’ve figured out your cost of living, subtract your Social Security benefit payments & corporate or government pensions (if any); this is your income gap; this is the amount that you should look to secure with guaranteed income.
Expected Cost of Living – (Social Security + Pension) = Income Gap
Enter Fixed Indexed Annuities (The B column)
Fixed Indexed Annuities combine the power of “Indexing”, a passive form of fund management that has been successful in outperforming most actively managed mutual funds (Index Fund Definition | Investopedia) with the benefits inherent to all Fixed Indexed Annuity contracts, namely protection of principal, protection of gains, and lifetime guaranteed income.
But even within the fixed indexed annuity category, there are many different kinds offered by many different companies. Picking the right one is critical and you only get one chance to get it right. Find out how by reading How to Pick the Right Fixed Indexed Annuity.
Insanity is doing the same thing over and over again but expecting a different result (Albert Einstein). In this short article, I’ve shown you one way to protect retirement savings from the next stock market crash.
If you’re open to explore a different way of how to protect retirement savings and eliminate once and for all the worry and stress that comes from market boom and bust cycles, feel free to contact me for a no-cost, no obligation 20 minute exploratory Q&A call.