Last week both the S&P 500 and the Dow moved into record high territory. The surprise move by the Bank of Japan to increase their stimulus efforts fueled the rally. What goes up must come down. It’s not a matter of if, but of when. As I stated last week, I’m too close to retirement age to be able to withstand all the ups and downs of the market. I pulled all of my assets out of the market two years ago and moved into alternative investments. My concern is watching this same cycle repeat itself and impact yet another generation of unsuspecting investors.
I remember clearly all the stories of people who lost their retirement savings when the market collapsed in 2000 to 2002 and again in 2007 to 2008. People nearing retirement age should not have all of their life savings in stocks, bonds, and mutual funds that can easily lose 30-40% of their value in any given year.
I’m sure every investor wishes they had a crystal ball that can tell them when to cash out their mutual funds and move to cash. Nobody wants to pull out of a rising market before it reaches the top. Wouldn’t it be nice if there was a way to lock in your gains to protect against a decline but yet stay in the market in case it continues to rise?
There is. Talk to a knowledgeable life insurance agent that understands to learn how an equity-indexed universal life insurance policy works. This is a permanent life insurance product that builds cash value. These policies have interest crediting strategies that allow your cash value growth to match the returns of various market indices—WHEN THE MARKETS ARE RISING.
Conversely, these products have a built in floor that PREVENTS LOSS OF PRINCIPAL due to falling markets. Your cash value may not be credited with any interest when the market collapses, but you may find yourself 30-40% ahead of your friends with their money still in mutual funds.
The key is to design a policy that maximizes the cash accumulation in the policy. The closer you are to retirement age, the more important it is to preserve your retirement nest egg. Don’t let the Wall Street roller coaster destroy your retirement. This strategy will work at any age. Don’t assume that because you may be in your 60’s or even 70’s, that you can’t afford the insurance. This strategy is all about accumulating cash and earning market-based returns with no market risk.
Lock in your gains now. Don’t get burned again. Sorry for the overused headline 🙂