Listen Up and Stop Worrying: Investments

In Romans 10:17, Paul says “Faith comes from hearing, and hearing comes from the word of God”. This week, Hans, Robby, and Tom discuss people’s biggest worries in retirement and how to confront those worries with faith and smart planning. Tom says the number one worry he’s confronted as a CFP ® Professional is the question: “Am I going to run out of money?” People thinking about retirement are concerned they won’t have enough money to live comfortably or have the financial resources when and how they need it.

Hans and Robby discuss how understanding the debate between the investment and insurance communities is crucial to confronting this fear. The debate argues whether investments or insurance is better for generating retirement income. Hans says this is largely presented as a good vs. evil issue, but, in reality, having a basic understanding of both and a good mixture of investments and insurance is ideal. His goal is to help his clients figure out which mixture of the two is best for them.

The advantage with investments is that your money is easily accessible and they can produce a huge return. However, you could also lose it all or outlive your money. Insurance products are the opposite, they’re safe, because you can’t outlive your money, but your money will be harder to access.

Hans talks about how people have become too comfortable with stock indices and this has created a problem where some people put all their money in stocks. The stock market could crash at any moment and people in this situation could lose all of their money and savings. Tom adds that the stock market can spiral down just from fear of the coming recession and widespread panic at the first sign of a downturn. In the long run, this will make the crash worse. Hans says he still recommends that a significant part of your portfolio should still be in stocks. The goal is not to convince people to avoid stocks, but to keep them informed.

Income is more important than your account balance when you retire. Most people are used to focusing solely on accumulating money, but once you retire your strategy has to change because now you’re withdrawing money in addition to needing a small return. Hans recommends diversification across life insurance, annuities, and stocks.

Next up, Hans, Robby, and Tom define some important insurance terms. Fiduciaries are financial planners that looks at each client’s information specifically and must put the client’s best interest ahead of their own. An Annuity is an amount of money placed with an insurance company and credited with interest continually. This interest can never be lost once its credited to your account and you can benefit from stock market indices without the risk. Annuities can then turn into an income that exists for the rest of your life.

Hans then talks about a 70-year-old client who wasn’t focused on investments, her retirement income, or taxes and wanted to help her properly plan. Hans eventually found out that she had a 7-year-old annuity generating very high returns along with hundreds of thousands of dollars sitting in a stock that was earning almost zero interest. This extreme example illustrates how insurance products really do have an advantage sometimes. Another advantage is that you don’t have to watch the money you put in insurance accounts like you do with stocks.

Finally, Hans discusses another woman he met who wanted to put all of her money in a risk-free retirement account. Hans helped her see that too much money in annuities wouldn’t be smart planning and was able to assist her into diversifying her accounts and minimizing her taxes in stocks, bonds, and annuities. This gave her the retirement income she wanted and now she’s living comfortably, and her income is still growing a bit. The point is, most retirees are willing to trade a high return for some basic guarantees in retirement.

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on CardinalGuide.com for free!

You can contact Hans and Cardinal by emailing  hans@cardinalguide.com  or calling 919-535-8261. Learn more at CardinalGuide.com.