Legacy Planning for Generational Wealth Transfer

Taking care of family through legacy planning is a big concern these days. But how can you create reliable retirement income and not run out of money, while still leaving money behind for your loved ones? We’re not eating grandma’s cookies anymore, so to speak, like back in the day in the 1970s when interest rates were 18, 19, or even 20%, and you knew you could take out 5% from your retirement assets and still have money left over for your loved ones when you were gone. The economy is much different today.

I talk with a lot of people who want to live their retirement lifestyle, not be dependent on anyone or run out of money, but still leave a legacy to their wife, their children, or their grandkids. Those are three tough things to master, even with a lifetime of saving money, because the interest rates being paid out are so low.

And if you don’t have a plan in place and you haven’t thought about it, you could be set up for failure. Maybe you’re thinking, “I’m just going to wing it and see what happens.” My analogy is that you are setting yourself up to try to make an 80-foot putt to win instead of a more reasonable chance at making a 15-foot putt on a regular basis through planning. (You might make that 80-foot putt every once in a while, but not very often.)

It’s like playing the stock market in my opinion. It’s like someone gave you a putter and made you promises. Make the first 80-foot putt and you get to play in the Masters for the next five years and get a $10,000 bonus each time. But miss that first time and you’re out; you’ll never play golf again.

Which option are you going to take? That one chance at 80 feet, or steady putting at 15 feet? It’s the choice between taking one big risk versus having a large measure of certainty.

The market’s been doing very well over the last several years. It’s had a couple of hiccups here and there, but what if we have another correction? What if we have another 9-11, or a crisis like 2008, or 1992, or something worse, and the bull market bursts and changes to a bear, and flips everything. A market correction will mean you will have to change the way you take your retirement money out.

Furthermore, if markets drop and you live a long life, you might become dependent on your family later on with your loved ones taking care of you rather than you being able to leave them money later on after you pass.

De-Risking Your Portfolio

I often help my retirement clients by restructuring a part of their portfolio into strategies that offer protection against stock market risk, but with the opportunity for growth when markets are trending upwards. A lot of people have never really explored annuities for retirement income, but once they’ve investigated them more thoroughly, they can see the benefits for themselves. Some annuities even have a built-in insurance/death benefit component, or offer it as a rider. Or depending on your income needs, you can also use any excess annuity income to purchase life insurance, which almost always goes to your beneficiaries tax-free.

Let’s say you have $500,000 in a portfolio. If you use the 4% rule, you can take out approximately $20,000 that first year, with adjustments for inflation in upcoming years. But the rest of your money will still be at risk in the stock market. And with sequence of returns risk, you could literally run out of money someday if markets drop and you keep taking money out. (I saw a lot of this in 2008.)

I show people how they could potentially reallocate that same $500,000 and receive $30,000 annually with an annuity instead (this is just a hypothetical; call me for real numbers). And remember, some annuities (the only ones I suggest) offer protection from market risk provided by contractual guarantees from insurance companies.

I have heard the negatives from people, like, “I don’t like insurance.” But they see the value of having insurance on their property, like a car or on their house. Or insurance on their own body as with health insurance. Or life insurance on loved ones. You realize the value when your car gets whacked, your house gets hit by lightning, someone gets sick, or a family member suddenly passes away unexpectedly.

Imagine have an insurance company guaranteeing your money instead of relying on the whims of the stock market! I see people in my office whose lightbulbs go off at this thought, and they start to “get it” when they consider the possibility.

Everyone has different goals for their own retirement, different lifestyle needs, and their own legacy desires for their families. And at Clear Income Strategies Group, we will help you take all of that into account during retirement, because we offer these strategies that stock brokers don’t. In fact, we often work with clients who use us for retirement, but use other brokers for portfolio management of their money at risk in the stock market.

Take opportunity to get on the calendar with Clear Income Strategy Group. Located in the Charlotte area, we work with clients in many states, and we welcome the chance to talk about the possibility of combining annuities and life insurance as part of your strategy. Not as a transaction, or a chart of stocks and bonds, but as a lifelong relationship that you may come to value more and more the older you get.

This is about building what is going to be the plan for your future. We will ask you questions like, “How old is your wife, your spouse, or your significant other? How old are your children? What are their goals? Where do they live? What state you live in? What are your state taxes? What is your income? What is your cost of living? Who drinks Starbucks, buys shoes, or plays golf all the time, and what is the budget for those? (Those are indispensable costs, by the way.) How many pets do you have?

I mean, this is where having the full plan laid out can deliver you a real difference. It’s not a one size fits all at the end of the day, it’s not just stocks and bonds. It’s a real plan.

Keep in mind, that when it comes to using annuities, they are not all the same. They can hurt you if you choose the wrong type. That is why we are independent with access to hundreds of different kinds of annuities from dozens of insurance companies. And that’s why I took the time to become a Certified Annuity Advisor^SM, because I think it’s important to deeply understand how they are constructed and how they differ.