From a consumer’s perspective, it might appear that the only distinction among the many institutions that offer retirement planning services is their marketing slogans. But the carefully crafted phrases and slick brochures may obscure significant differences in retirement philosophies and processes.
If a group of people are asked to observe and evaluate the same situation, their responses will inevitably be influenced by many factors, both conscious and unconscious. One of the more intriguing elements in this evaluation process is how individual responses are affected by the opinions of others. The power of “groupthink” can sometimes make us accept perspectives that from our own experience seem contradictory or illogical.
Saving is an essential ingredient for long-term financial satisfaction, but the endgame isn’t accumulation. It’s spending. And spending isn’t just a retirement issue: There can be plenty of reasons to spend before retirement. A fully articulated financial program always has an eye on spending well.
From the Levittown communities of the 1950s to no-doc lending in the 2000s, home ownership has been an essential element of the American dream for the past 70 years. And typically, it hasn’t been just one home, but a series of homes, with each new property standing as a milestone of financial progress. But today, demographics and changing financial realities are altering both the track to home ownership and its financial viability. Buying a series of homes may no longer be a default wealth-building transaction.
Since its introduction four decades ago, Universal Life policies have often been presented as “lower-cost” permanent life insurance. But remember, actual life insurance costs are fairly uniform across the industry. Lower premiums don’t mean a reduction in those costs, they still have to be paid. And if future costs exceed current assumptions, the burden is on the UL policyholder to meet that overrun, or forfeit the coverage. In contrast, a Whole Life policy’s guaranteed premium structure limits the policy owner’s risk, even if future insurance costs should exceed the company’s guarantees.
It might seem like retirement income products and strategies are constantly changing, but most “new” items are just modifications or reconfigurations of time-tested applications. A good example is annuities. Each annuity contract is designed to meet the same fundamental objective: Delivering a steady income for a defined period, even the rest of one’s life. And because the financial factors necessary to providing a lifetime income have remained pretty much the same, “old” versions of annuities often reappear. Like tontine annuities.