4 “What Ifs” Your Financial Plan Should Answer

4 What Ifs Your Financial Plan Should Answer

Originally aired 6/16/2021



Your financial future can bring up a lot of questions. On this episode of the Get Ready For The Future Show, we’re talking through four “what ifs” your financial plan should answer.

You’ll learn:
– Key risks your plan should address
– How to tell if you’re on track for the future you deserve


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What if…

  • The average person has over 6,000 thoughts per day! We’d venture to guess a good number of those start with “What if?”
  • Especially when it comes to our money, it’s good to plan ahead.
    • On today’s show, we’re talking through 4 “what ifs” your financial plan should address!
  • #1: What if the stock market tanks in the first 5 years of retirement?
    • Let’s talk about James and Joe.
      • James and Joe shared a lot in common. They both worked for the same company, and coincidentally they arrived at their respective retirement dates with exactly the same amount of money in their 401k plans, which happened to be $500,000. 
      • They both withdrew 5 percent of their balance at retirement from each of their accounts to create an income for each of their families to live on.
      • In fact, the only difference between James and Joe was the year in which they retired.
      • See, James is 10 years older than Joe.  That means James retired in 1966 and Joe followed along 10 years later and retired in 1976.
      • Now, with everything, other than their retirement dates, in common, do you think James and Joe had similar outcomes to their retirement?
      • James and Joe both invested in a mix of stocks and bonds, represented here by the S&P 500 and 10-year treasuries. By the way, both men increased their income according to the inflation rates each year to keep up with the rising cost of living. 
      • James started with $500,000 in 1966- 18 years later in 1982, James was completely out of money.
      • Joe started with $500,000 in 1976- and because of the returns he encountered during his retirement, Joe had actually grown his money to over 1.2 Million dollars 18 years later in 1992.
      • DISCLOSURE: This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing. Indices are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.
    • Neither Joe nor James could have predicted how things were going to play out. And frankly, most people think they will do better than the average investor when it comes to their investments.
  • This example points out why we believe that the simplistic approach of investing in a mix of stocks and bonds and taking a systematic withdrawal can subject you to a risk that you can’t recover from during your retirement.
    • Transfer the risk of market volatility that can cause a reduction or elimination of your income.
      • Buckets
  • Are you on track for a successful retirement?
  • Click here to get a free checkup and find out now!

Live Long and Prosper?

  • #2: What if I live longer than expected?
    • Life expectancy is increasing
    • Factors that can potentially lower withdrawal rates:
      • Low risk tolerance and too little growth potential in retirement portfolio
      • Few other sources of income and wealth
      • Emotional investing habits (buying at market tops and selling at the bottom, etc.)
      • Longer expected retirement span or younger retirement age.
    • Factors that can potentially increase withdrawal rates:
      • Moderate risk tolerance and equity exposure
      • Other wealth and/or flexible income needs
      • Disciplined investing and adherence to long-term strategy
      • Shorter-expected retirement span or older retirement age
  • Annuity basics:
    • Fixed annuities
      • Stream of fixed payments determined in advance
      • Investors set amount and number of payments
    • Variable annuities
      • Payments determined by performance of underlying investments
    • Immediate annuities
      • Payments begin soon after purchasing the annuity
    • Deferred Annuities
      • Payments begin at some point in the future, allowing the annuity to accumulate value
    • There are benefits and drawbacks to everything, and annuities are no different.
      • Potential advantages
        • Set up a stream of payments over time and guaranteed income
        • Can help reduce the risk of running out of money in retirement
        • No income limits
        • Investment grows tax-deferred
      • Potential disadvantages
        • Can be expensive when features are added
        • Subject to early withdrawal penalties and fees
        • Guaranteed only by the claims-paying ability of the insurance company
        • Variable annuities can lose money in down markets

I Need Somebody (Help!) Not Just Anybody

  • #3: What if my spouse or I have major healthcare needs?
    • According to DHHS, half of Americans turning 65 today will develop a condition severe enough to require long-term care – that means it’s highly likely that at least one person of a couple will need this type of help.
    • Qualifying for LTC means you must not be able to perform 2 of the 6 activities of daily living and/or you must need substantial supervision due to severe cognitive impairments (i.e. Alzheimer’s disease, dementia).
      • 6 activities of daily living:
        • Bathing
        • Transferring
        • Continence
        • Dressing
        • Toileting
        • Eating
    • If you do need long-term care, the costs can add up quickly.
      • Costs average:
        • Assisted Living – $48,000 / year
        • Home health aides – more than $52,000 / year
        • Private nursing home care costs – over $100,000 / year.
          • *2019 GenWorth Cost of Care Survey
    • These expenses could tank your retirement and drain anything you’ve saved for the purpose of passing down.
    • The point of LTC insurance is to cover your chronic healthcare expenses without having to spend the money your family is living on.
    • In thinking about how much money you need when you retire, you should go ahead and include the premiums for a long-term care policy.
    • There are 4 ways to pay for long-term care:
      • Self insure
      • Medicaid
      • Traditional long-term care
      • Life insurance with chronic illness rider

Money Money Money, Ain’t it Funny?

  • The threat of inflation is a major risk to retirement.
  • Even during low periods of inflation, the effects of rising prices erode the purchasing power of your money.
    • As an example, take a cup of coffee that costs 2 dollars today. The effect of a 3 percent inflation rate would have that same cup of coffee cost $3.81 in 20 years (nearly double the cost.)
  • The chances of higher inflation in the future have grown with the current economic conditions and the stimulus spending of the government.
  • A reduction of your purchasing power by as much as 50% over your lifetime in retirement is truly a loss that you can’t recover from.
  • Equities and real estate are the only two asset classes that have historically stayed ahead of inflation.
    • The short-term risk of loss is very real.
      • The S&P 500 historically on a rolling one-year period has demonstrated a 75% chance of showing a positive return and a 25% chance of a negative return.
    • But, equities are long-term investments. To that point:
      • Go out 10 years and you see that history shows the threat of a negative return on a 10-year rolling basis is less than 6%
      • 16 years: History indicates that there has never been a 16 year rolling period of negative returns on the S&P 500.
      • We would point out that this time period encompasses the Great Recession of 2007-2008 and the dramatic downturn of the COVID 19 pandemic.
    • Our strategy
      • As we said, equities are long-term investments. You should use them accordingly.
      • There is a place for low-risk investments, it’s just not for all of your money.
      • The bucket strategy we mentioned earlier in the show addresses inflation as well as volatility.
  • Bonus Question: What’s the Plan?
    • The GenWealth Ready to Retire Process addresses all these questions and more.
    • Retirement planning and Education by trusted advisors. Advice specifically Designed for You and your legacy.
    • 7 key areas:
      • Investment strategy
      • Social Security Maximization
      • Creating guaranteed income to meet your basic needs
      • Protect against inflation and providing for lifestyle income
      • Address long-term care needs
      • Reducing taxes during retirement
      • All documented in a written plan (on paper, on purpose)
    • Without a plan, the future just happens to you.
      • The future can’t be what you want without planning for it. In some ways you can’t have a future without a plan; because all you really have is what you’re doing now and a hope that it all works out.



  • 4 “what ifs” your financial plan should address:
    • What if the stock market tanks in the first 5 years of retirement?
    • What if I live longer than expected?
    • What if my spouse or I have major healthcare needs?
    • What if prices rise in retirement?
  • You can’t go back and change the past. 
    • Sitting around and asking “what if” about the past does nothing to get you closer to the future you want (and deserve). 
    • You are where you are now, and that’s okay! You just need a plan to help you address the “what ifs” of your future.
  • Get a free retirement checkup and learn your probability of success.
    • Click here to get your free 15-minute retirement checkup.