Conventional Retirement Wisdom
You might be saying to yourself, “OK, I have a certain amount of funds at my disposal from my TSP. If I plan on living 30 more years, I should plan to liquidate no more than 4% of my account’s value per year. Then, hopefully, with the market consistently turning up positive returns, such as the S&P 500’s 6.5% average, I could make my funds last.” This conventional wisdom is why there is such a demand among senior citizens to become employed as greeters at Walmart. There simply is no guarantee that a TSP or 401K, if left invested in the securities market, will not run out. For those all too many people who have the misfortune of taking distributions during a down market, a new source of employment is the only way to cover their needs.
But there is a solution that “They” do not want you to know about. When we say, “They,” we mean the administrators of your qualified retirement account, and your “wealth advisers” at the big name investment advisory firm. “They” do not want you to know about it for one simple reason: if you employ this solution, less of your funds will be under their care, and their annual 1.5% fees will decrease. But you accumulated the funds in your thrift savings plans, 401k's and other retirement accounts to provide for yourself and your family, not to ensure profitable quarters for your wealth adviser or his firm.
Old Name, Modern Solution
The solution is a Fixed Indexed Annuity or an FIA. This is not your grandfather's retirement vehicles. This solution provides a combination of security, income, and longevity unmatched in any securities market anywhere in the world. How? The answer is simple.
A “fixed” product is one that guarantees principle protection, backed by the full faith and credit of the United States Government. That guarantee is of the same validity as the FDIC insurance that your bank guarantees for your money. In short, the ENTIRE value of that TSP, when rolled into a FIA, becomes principle and is therefore guaranteed to NEVER experience negative returns again.
How the FIA Provides Security
It puts these asset classes through the following 3-step process.
- Step 1: Evaluation. The asset classes’ 6-month performances are evaluated.
- Step 2: Selection. The top performers are selected.
- Step 3: Weighting. The winners are weighted by performance and the index is adjusted accordingly.
This 3-step process is repeated monthly in order to re-balance the portfolio, within which the cash value of the FIA grows. The annual performance is averaged, and based on the average performance, interest is credited to the now-principle-protected cash value. This index has averaged 6.3% annual rates of return to the S&P 500’s 6.51%, with 71% less volatility and a guaranteed minimum rate of return of 0%.
How To Make Your Retirement Savings Last Forever
Once a retiree decides to take distributions, the cash value is divided up into equal pieces. The older the annuitant is and the longer the funds have been accumulating, the larger each piece is. Based on the size of each piece, an annual payout starts coming into the annuitant’s bank account. Once the payouts start, the only way the payout stops is if the annuitant, or if he/she is married, both co-annuitants die. Even if both co-annuitants make it to the age of 120, and completely exhaust the cash value of their funds, the payouts never stop. It is still the only way that a TSP account holder can beat the market simply by living.
Each retiree is a little different. Each TSP account holder has different needs and different priorities. Each FIA can be customized to account for these differences. To find out how to structure your own FIA, click the following link and you will be connected to one of our licensed advisers.
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