wall street's cruel retirement hoax

Wall Street’s Cruel Retirement Hoax!

Will Deceptive Wall Street Math Turn Your Retirement Dream Into a

Nightmare?

WHAT IS DECEPTIVE WALL STREET MATH?

Stock and bond markets are variable, they have ups and downs. In down markets you can actually lose value.

Yet, in planning assumptions, an average rate of return (e.g. 7%) is normally used. This doesn’t account for the up and down movements of the market and hides your true risk.

Foundational Asset Management™

MANAGING RETIREMENT INCOME RISK

Portfolio volatility and the sequence of returns plays a unique role in retirement income planning. Specifically, variable returns affect a portfolio with systematic withdrawals much more negatively than one that is in the accumulation phase.

More importantly, negative returns early in retirement can create disastrous conditions from which recovery is nearly impossible if lifetime income is your goal.

So, it may make sense to transfer your investment and longevity risk to a 3rd party. Foundational Asset

Management™

RECOVERY OF LOSSES

Edward Winslow, Author of, Blind Faith,

“96% of professional money managers do worse than the S&P 500 index”.

“It will take the average household over thirty years to recover the wealth lost in 2000 and 2001 from market declines”.


PROTECTED INVESTMENT

Edward Winslow, Author of, Blind Faith,

“If unprotected against loss, an investment in stock or an equity mutual fund is nothing more than a gamble”.

“The primary objective of an intelligent investment strategy should be to preserve capital and build on it at a consistent, moderate rate in both bull and bear markets”.


VARIABLE RETURNS – ACCUMULATION PHASE

The following four slides show the impact of variable returns over a 20 year period on your money in a balanced 60% Equity – 40% fixed portfolio in the accumulation phase.

The first two slides show a Bull Market followed by a Bear Market. The next two slides show a Down Market followed by a Bull Market.

Will there be any difference in the ending values?


Impact of Average -Vs- Variable Returns

Regular Asset Allocation Model (RAAM)

Beginning Investment $300,000 Equities Bonds/CDs

$180,000 $120,000

End of Projected Annual Investment

Annual Income $0 Year S&P Return Income Balance

Equities Portion 60.00% 1 34.10% $0 $366,780

Bond/CD Portion 40.00% 2 20.30% $0 $418,056

Bond/CD Rate 6.00% 3 31.00% $0 $503,339

Tax Bracket 0.00% 4 26.70% $0 $593,034

5 19.50% $0 $673,094

Management Fee -1.00% 6 -10.10% $0 $644,420

Inflation Rate 2.50% 7 -13.00% $0 $605,755

8 -23.40% $0 $531,611

9 26.40% $0 $625,387

10 9.00% $0 $670,414

S&P 95-04 Average 12.05% $0 Actual Rate

8.37%

Accumulation Phase – 1st 10 Years


This calculator, used throughout the presentation, will show the impact of variable returns. For our example here, we will start with a beginning investment of $300,000 and illustrate what happens in both the accumulation and income phases.




$180,000 $120,000



Equities Portion 60.00% 1 34.10% $0 $366,780

Bond/CD Portion 40.00% 2 20.30% $0 $418,056

Bond/CD Rate 6.00% 3 31.00% $0 $503,339

Tax Bracket 0.00% 4 26.70% $0 $593,034

5 19.50% $0 $673,094

Management Fee -1.00% 6 -10.10% $0 $644,420

Inflation Rate 2.50% 7 -13.00% $0 $605,755

8 -23.40% $0 $531,611

9 26.40% $0 $625,387

10 9.00% $0 $670,414


8.37%

Accumulation Phase – 1st 10 Years


Here is the first 10 years of your money in a bull market while it is in the accumulation phase. Notice the difference between the average return of 12.05% and the actual rate of 8.37%.


Continuing Investment $670,414 Equities Bonds/CDs

$402,249 $268,166


Annual Income$0

Year S&P Return Income Balance

Income Change$0 11 -10.14% $0 $641,694

Equities Portion60.00% 12 -13.04% $0 $603,038

Bond/CD Portion40.00% 12 -23.37% $0 $529,335

Bond/CD Rate6.00% 14 26.38% $0 $622,646

Tax Bracket0.00% 15 8.99% $0 $667,439

16 3.00% $0 $691,467

Management Fee-1.00% 17 13.62% $0 $760,420

Inflation Rate2.50% 18 3.53% $0 $790,213

19 -34.12% $0 $642,665

20 35.00% $0 $789,192S&P 99-09

Average 0.98% $0 Actual Rate

1.64%

Impact of Average -Vs- Variable ReturnsAccumulation Phase – 2nd 10 Years


Now your money enters a 10 year period of volatility reaching some high- highs and low-lows ending with very little return to show for it. Very much like the 10 years from 1999 – 2009. Notice the ending value of $789,192.




$180,000 $120,000



Equities Portion 60.00% 1 -10.14% $0 $287,148

Bond/CD Portion 40.00% 2 -13.04% $0 $269,850

Bond/CD Rate 6.00% 3 -23.37% $0 $236,869

Tax Bracket 0.00% 4 26.38% $0 $278,624

5 8.99% $0 $298,669

Management Fee -1.00% 6 3.00% $0 $309,421

Inflation Rate 2.50% 7 13.62% $0 $340,276

8 3.53% $0 $353,608

9 -34.12% $0 $287,582

10 35.00% $0 $353,151


1.64%

Accumulation Phase – 1st 10 years


Now we have reversed the order of the up & down markets. Do you think it has any impact on the 20 year outcome? Let’s see what the next 10 years brings.



$211,891 $141,260


Annual Income$0

Year S&P Return Income Balance

Income Change$0 11 34.10% $0 $431,763

Equities Portion60.00% 12 20.30% $0 $492,123

Bond/CD Portion40.00% 12 31.00% $0 $592,516

Bond/CD Rate6.00% 14 26.70% $0 $698,103

Tax Bracket0.00% 15 19.50% $0 $792,347

16 -10.10% $0 $758,593

Management Fee-1.00% 17 -13.00% $0 $713,077

Inflation Rate2.50% 18 -23.40% $0 $625,796

19 26.40% $0 $736,187

20 9.00% $0 $789,192S&P 95-04

Average 12.05% $0 Actual Rate

8.37%

Impact of Average -Vs- Variable ReturnsAccumulation Phase – 2nd 10 Years


Remember the ending value from the first 20 years? It was $789,192 , the same as it is for this 20 years.

So you can see that the sequence or variability of returns had no impact on your money during the accumulation phase, assuming you remained fully invested.

VARIABLE RETURNS – INCOME PHASE

Again, the first slides show a Bull Market followed by a Bear Market. The next two slides show a Down Market followed by a Bull Market.


We just saw that the variability of returns had no impact during the accumulation phase. BUT, will you be so lucky when it comes to your retirement income security?

Now we will look at the impact of variable returns over a 20 year period of your money in the same 60/40 portfolio with the goal of providing you and your spouse lifetime income.

Impact of Average -Vs- Variable ReturnsRetirement Income Phase – 1st 10 Years




$473,515 $315,677

End of Year

Projected S&P Return

Annual Income

Investment BalanceAnnual Income

$35,514

Equities Portion60.00% 1 34.10% $35,514 $929,352

Bond/CD Portion40.00% 2 20.30% $36,402 $1,022,874

Bond/CD Rate6.00% 3 31.00% $37,312 $1,194,228

Tax Bracket0.00% 4 26.70% $38,245 $1,368,795

5 19.50% $39,201 $1,514,381

Management Fee-1.00% 6 -10.10% $40,181 $1,409,688

Inflation Rate2.50% 7 -13.00% $41,185 $1,283,921

8 -23.40% $42,215 $1,084,554

9 26.40% $43,270 $1,232,599

10 9.00% $44,352 $1,276,994

S&P 95-04Average 12.05% $45,461 Actual Rate

8.64%

Now, you have retired with $789,192 and you need it to provide you and your spouse an income for life. Let’s look at the impact of taking out an annual income of $35,514 growing with a 2.5% inflation rate.

This slide and the next one show you retiring into an up market followed by a down market. At the end of the first 10 years, so far so good.

Impact of Average -Vs- Variable ReturnsRetirement Income Phase – 2nd 10 Years



Continuing Investment $1,276,994 Equities Bonds/CDs

$766,197 $510,798

End of Year


Annual Income


$45,461

Income Change$0 11 -10.14% $45,461 $1,176,827

Equities Portion60.00% 12 -13.04% $46,597 $1,059,337

Bond/CD Portion40.00% 12 -23.37% $47,762 $882,103

Bond/CD Rate6.00% 14 26.38% $48,956 $988,643

Tax Bracket0.00% 15 8.99% $50,180 $1,009,586

16 3.00% $51,435 $994,496

Management Fee-1.00% 17 13.62% $52,721 $1,040,947

Inflation Rate2.50% 18 3.53% $54,039 $1,027,692

18 -34.12% $55,390 $780,412

20 35.00% $56,774 $901,571S&P 99 - 09

Average 0.98% $58,194 Actual Rate

0.71%

Now the bear market hits and while you are down from the $1,276,994 you had at the end of year 10, you still have more than the $789,192 you started with 20 years earlier.

Impact of Average -Vs- Variable ReturnsRetirement Income Phase – 1st 10 Years




$473,515 $315,677

End of Year


Annual Income


$35,514

Equities Portion60.00% 1 -10.14% $35,514 $719,869

Bond/CD Portion40.00% 2 -13.04% $36,402 $640,102

Bond/CD Rate6.00% 3 -23.37% $37,312 $524,557

Tax Bracket0.00% 4 26.38% $38,245 $578,781

5 8.99% $39,201 $581,218

Equity +/- market-1.00% 6 3.00% $40,181 $561,961

Inflation Rate2.50% 7 13.62% $41,185 $576,814

8 3.53% $42,215 $557,199

9 -34.12% $43,270 $409,888

10 35.00% $44,352 $458,991S&P 99-09


0.39%

What if you are unlucky enough to retire into a disastrous down market first, like millions of Americans did back in 1999. Notice your ending value now is down to $458,991; HOW DOES THIS MAKE YOU FEEL!

Impact of Average -Vs- Variable ReturnsRetirement Income Phase – 2nd 10 Years




$275,395 $183,596

End of Year


Annual Income


$45,461

Income Change$0 11 34.10% $45,461 $515,701


Bond/CD Portion40.00% 12 31.00% $47,762 $603,841

Bond/CD Rate6.00% 14 26.70% $48,956 $662,489

Tax Bracket0.00% 15 19.50% $50,180 $701,745

16 -10.10% $51,435 $620,416

Management Fee-1.00% 17 -13.00% $52,721 $530,470

Inflation Rate2.50% 18 -23.40% $54,039 $411,502

18 26.40% $55,390 $428,701

20 9.00% $56,774 $402,793

S&P 95-04Average 12.05% $58,194 Actual Rate

9.10%

As you can see, your future would not be so bright even with the big returns of the bull market. Your early losses in the first 10 years combined with your income withdrawals are too much to overcome.

Now left with $402,793 at the end of 20 years you will run out of money in another 6 to 9 years depending on future returns. A retirement disaster in the making! Could it have been avoided?

SWEAR OFF WALL STREET FLEE TO SAFETY THEN BACK TO MARKET



$0 $458,991

End of Year


Annual Income


$45,461

Income Change$0 11 6.00% $45,461 $441,069


Bond/CD Portion100.00% 12 6.00% $47,762 $398,430

Bond/CD Rate6.00% 14 6.00% $48,956 $373,379

Tax Bracket0.00% 15 6.00% $50,180 $345,602

16 6.00% $51,435 $314,903

Equity +/- market-1.00% 17 6.00% $52,721 $281,076

Inflation Rate2.50% 18 6.00% $54,039 $243,902

18 6.00% $55,390 $203,147

20 6.00% $56,774 $158,561Fixed


4.60%



$275,395 $183,596

End of Year


Annual Income

Investment Balance

Annual Income$45,461

Income Change$0 11 6.00% $45,461 $441,069


Bond/CD Portion40.00% 12 31.00% $47,762 $459,045

Bond/CD Rate6.00% 14 26.70% $48,956 $491,890

Tax Bracket0.00% 15 19.50% $50,180 $508,115

16 -10.10% $51,435 $435,034

Management Fee-1.00% 17 -13.00% $52,721 $356,212

Inflation Rate2.50% 18 -23.40% $54,039 $258,573

18 26.40% $55,390 $248,795

20 9.00% $56,774 $209,934Fixed then Market


5.74%

After 10 years of volatility in the market and your retirement assets depleting, Human Nature and your emotional side may cause you to swear off Deceptive Wall Street Math™ forever.

Now let’s look at 2 scenarios:

• Under the first you rush to the safety of CD’s • Under the second you rush to the safety of CD’s but then after 2 years of big market gains you jump back into the market.


SWEAR OFF WALL STREETFLEE TO SAFETY THEN BACK TO MARKET



$0 $458,991

End of Year


Annual Income


$45,461

Income Change$0 11 6.00% $45,461 $441,069


Bond/CD Portion100.00% 12 6.00% $47,762 $398,430

Bond/CD Rate6.00% 14 6.00% $48,956 $373,379

Tax Bracket0.00% 15 6.00% $50,180 $345,602

16 6.00% $51,435 $314,903

Equity +/- market-1.00% 17 6.00% $52,721 $281,076

Inflation Rate2.50% 18 6.00% $54,039 $243,902

18 6.00% $55,390 $203,147

20 6.00% $56,774 $158,561Fixed


4.60%



$275,395 $183,596

End of Year


Annual Income

Investment Balance


Income Change$0 11 6.00% $45,461 $441,069


Bond/CD Portion40.00% 12 31.00% $47,762 $459,045

Bond/CD Rate6.00% 14 26.70% $48,956 $491,890

Tax Bracket0.00% 15 19.50% $50,180 $508,115

16 -10.10% $51,435 $435,034

Management Fee-1.00% 17 -13.00% $52,721 $356,212

Inflation Rate2.50% 18 -23.40% $54,039 $258,573

18 26.40% $55,390 $248,795

20 9.00% $56,774 $209,934

Fixed then MarketAverage 7.81% $58,194 Actual Rate

5.74%

Under scenario one you have rushed to the safety of CD’s, but the early losses are to much to overcome and your retirement nightmare is a reality; you‘re broke in 3 to 4 years .


SWEAR OFF WALL STREETFLEE TO SAFETY THEN BACK TO MARKET



$0 $458,991

End of Year


Annual Income


$45,461

Income Change$0 11 6.00% $45,461 $441,069


Bond/CD Portion100.00% 12 6.00% $47,762 $398,430

Bond/CD Rate6.00% 14 6.00% $48,956 $373,379

Tax Bracket0.00% 15 6.00% $50,180 $345,602

16 6.00% $51,435 $314,903

Equity +/- market-1.00% 17 6.00% $52,721 $281,076

Inflation Rate2.50% 18 6.00% $54,039 $243,902

18 6.00% $55,390 $203,147

20 6.00% $56,774 $158,561Fixed


4.60%



$275,395 $183,596

End of Year


Annual Income

Investment Balance


Income Change$0 11 6.00% $45,461 $441,069


Bond/CD Portion40.00% 12 31.00% $47,762 $459,045

Bond/CD Rate6.00% 14 26.70% $48,956 $491,890

Tax Bracket0.00% 15 19.50% $50,180 $508,115

16 -10.10% $51,435 $435,034

Management Fee-1.00% 17 -13.00% $52,721 $356,212

Inflation Rate2.50% 18 -23.40% $54,039 $258,573

18 26.40% $55,390 $248,795

20 9.00% $56,774 $209,934Fixed then Market


5.74%

Under scenario two you rush to the safety of CD’s. Then like so many investors, after missing 2 years of big returns in the market, you decide to expose yourself to market risk once again for the hope of continued higher returns.

Congratulations, while not totally avoiding retirement disaster, this typical scenario now staved off the POOR HOUSE for 4 to 5 years.


NOW WHAT…

If this disastrous scenario were to happen to you what would you be forced to do?

Go back to work?

Reduce the amount you take out of your accounts to try and make your money last longer?

Sell your home?


Do You Have A Backup Plan; A Plan B?

DECEPTIVE MATH… WALL STREET’S CRUEL RETIREMENT HOAX

Most retirement income calculators used by Wall Street trained brokers and financial planners assume an average rate of return. As you just learned this doesn’t paint a true picture of the risk you face in retirement. You never know when the next stock or bond market crash will wipe out your retirement income security.


There is NO “do over” when it comes to your retirement income. YOU MUST Disaster-Proof Your Retirement™ so un-managed investment and longevity risk doesn’t result in you going BROKE.

To paraphrase a famous Clint Eastwood movie line,

“Ask yourself, do you feel lucky today, well do you?”

WHAT IF…

There was a way for you to position your money to minimize the devastating impact of the variability of returns and Deceptive Wall Street Math: would you want to know about it?

Has your current advisor Stress Tested your retirement income plan so you know how you would come through in another unforeseen market meltdown?

Remember, Wall Street math works fine when you are in the accumulation phase, but can be disastrous in the income phase.

When would you want to know if you were going to run out of money, NOW when you can Disaster-Proof Your Retirement™ or down the road when it may be to late?


FREE RETIREMENT INCOME STRESS TEST

We will do a retirement income check-up and stress test for you for FREE, no strings attached. You will be able to see if you are Disaster-Proof™ or at risk of running out of money in retirement.

We will also show you how to Disaster-Proof Your Retirement™ using breakthrough Anti-Risk Foundational Asset income strategies that allow you and yours to Retire and stay Retired, without the fear and worry of running out of money NO MATTER what happens to Interest Rates or the Stock Market.


DISASTER-PROOF RETIREMENT

Stock and Bond Market volatility is just one of the risks you must address if you want a Disaster-Proof Retirement.

There are many other risks you will encounter in your retirement years. There are two more major areas that you must address:

Increasing Income and Estate Taxes Major health related events

Early death of a spouse Long term disability and confinement


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Tax Strategies That Cut Uncle Sam OUTSharp, Safe, Cutting Edge

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wall street's cruel retirement hoax

Economy & Finance

impact of variable returns

impact of average

foundational asset management

variable returns income

variable returns accumulation

bull market

vs variable returnswhat

market declines