You have to squint to see the interest rates paid by bankers; stocks up big one day and down big the next; dividends from blue chip stocks are not guaranteed and neither is their favorable tax treatment; safe bonds pay tiny returns; investment real estate is for the brave; gold, silver and other precious metals are a crap shoot; get rich quick schemes are crazy if you want your money back. We judge our retirement money by how big it is (how much) rather than how long it is (years it will last). Rather than focusing on “how big” let’s think about “how long”.

The greatest fear of most retirees is running out of money before they draw a last breath. This is called longevity risk and is probably the most overlooked aspect of retirement. We faithfully save during our working years (401k, IRAs, investment accounts, etc.) yet we have no idea how much money we’ll have on the day of our planned retirement. What’s more, if we did know the exact amount we’d have at retirement, how much lifetime income it would buy would be a mystery. Furthermore, even if we knew the lifetime income there is no guarantee it would last as long as we do. This riddle is faced by someone every 7.5 seconds because that’s how rapidly baby boomers are turning 65 from now through 2030.

If you’re interested in a guaranteed income for life that you cannot outlive regardless of what happens to the stock market, interest rates or real estate prices, the insurance industry has come to your rescue. I would like to encourage you to watch two videos that can be obtained free on-line and both are great strategies to avoid outliving your money. The first is called “PayCheck for Life” and is about eight minutes in length. The video explains how you can get a guaranteed paycheck for life by putting some of your retirement money in a fixed index-linked annuity – no maybes, no guessing and no hoping. There is a companion twelve minute video entitled “Retain Your Gains” that explains in detail how fixed index-linked annuities offer you the advantages of stock market investing without the downside risks. Both videos explain the guaranteed lifetime income option that is available. While fixed index linked annuities and guaranteed lifetime income are not for everyone, every serious retirement-minded person should at least investigate the possibilities. Both of these videos are also currently available at

Retirees and working adults are increasingly responsible for making and understanding sophisticated financial decisions involving investments, diversification, retirement and money management. Many lack the basic knowledge to assume these responsibilities, placing their financial wellbeing and retirement lifestyle in jeopardy. It is generally a mistake to take your retirement money as a lump-sum and then “invest” it without professional help – the results are oftentimes disastrous and lead to the fulfillment of your greatest fear: running out of money in retirement either because you lost it by taking unsuitable risk or earned little by being too risk adverse. Similarly, it is important to understand the suitability of financial and investment advice given by those who advice you; therefore, make it a goal to raise your financial literacy so that your financial decisions in retirement are suitable for your circumstances. A good starting point is to watch the aforementioned videos and if locking up a guaranteed lifetime income [which may or may not be a high yielding investment as your longevity is uncertain] find and engage the service of a professional that knows annuities. The videos will give you the knowledge needed to determine if annuities are for you.

Shelby J. Smith, Ph.D.
August 2012

  • Share/Bookmark