How Did Your 401(k) Fair in 2008?

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retirement womanNot long after graduating from college I got a job at one of the nation’s largest brokerage firms. I worked on retirement accounts for doctors, nurses, teachers and other employees from organizations that offered 403(b)s – which are the non-profit’s equivalent to 401(k)s.

These professionals commonly followed the advice to: work hard, get a job with good benefits, and save for retirement.

Pardon me for saying so, but most working individuals today do not understand the ins and outs of qualified plans. In my opinion, qualified plans have become so popular because people buy into the idea that they are receiving “free money” by their employer matches a percentage of what they contribute annually. In reality, this causes people to focus only on accumulation – if they have accumulated “enough” in time for retirement, then they will be okay financially.

However, accumulation alone will generally not provide for a secure and ample retirement. This is mostly because employer-sponsored plans fail to consider the effects of inflation and fees that erode the account balance well before the individual ever has the ability to access the money. Not to mention the tax consequences they are subject to once they finally do begin to take distributions; and then there is the market risk.

One day, as I was consulting with a client, and getting to know her situation, I asked her a question that I’d asked other clients hundreds of times before. “When do you plan on retiring?”

“I’ll retire when I die,” she said.

I chuckled, thinking that she was just joking. She continued, “I’ve seen such a hit to my retirement account that I just don’t see the day that I’ll be able to retire.”

I get that some people who make a comment like that do so because they enjoy their work and believe there is value in working while retired. In her case, she wasn’t stating that she was going to continue working because she wanted to – she was going to continue working because she felt that she didn’t have any other choice.

Though I am sympathetic to anyone who loses retirement funds because of stock market fluctuation, the conversation with this client hit me extra hard. Market loss not only affects a person’s account balance, but sadly their happiness as well – especially this baby boomer client.

I had a front row seat to the market losses happening from 2005 to 2009, and saw first-hand the frantic individuals that faced the reality of risk that comes with stock market investing – risk that occurs very dramatically, with little or no warning. As I watched the market drop, I couldn’t help but think, “There has to be a better way!”

When it comes to retirement, using a qualified plan that relies on the success of the market is risky. One of the major shifts that we have seen is that there is little or no distinction between saving and investing. People are investing their savings dollars – and they are doing so at the peril of the retirement accounts.

The recession was ultimately the catalyst for me entering the life insurance industry. I saw very quickly how safe Whole Life Insurance was for retirement and wealth building. Instead of worrying about loss from the market, my clients can focus on the opportunities that whole life insurance provides their money. They experience safety, growth, and liquidity.

Whole Life Insurance is an excellent vehicle that allows individuals and families to minimize the inherent risks of other investments – including the stock market. If you are interested in the amazing benefits that permanent life insurance offers, I invite you to meet with a Paradigm Life Agent who will show you how permanent life insurance can accelerate any investment strategy.

Michael Bonny

Read: Annuities and How They Can Help Your Retirement

Listen: Life Insurance As It Pertains to Your Family

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