THE #1 FEAR AMONG THOSE RETIRING TODAY IS RUNNING OUT OF MONEY.

THE #2 FEAR … DEATH.

Courtesy Social Security Tax Pros, Salt Lake City LIVING WELL Magazine

How did we get to a place in our retirement planning where Americans fear running out of money more than death? With all the financial gurus out there willing and eager to tell you what to do with your money, how is it that so many Americans find themselves unprepared and fearful of what lies ahead in their golden years? Even those that have saved a sizeable nest egg aren’t sure how much they can spend, they don’t know what the stock market will do, they don’t know how long they will live, they don’t know if health problems will erode their savings quicker than they plan. Millions have fled the stock market to safer havens such as money market accounts and CDs. But with interest rates paying essentially nothing, inflation looms large. Health care costs continue to rise at an alarming rate. Understanding how to take income at retirement entails MUCH more than many money managers would have you believe. Reallocating stocks to bonds sounds simple enough, but navigat- ing the 20–30 years of retirement requires far more attention to detail.

This article will explore some of the reasons why stock market based retirement planning has failed millions of Americans.

REASON #1—A Shift from Defined Benefit Plans to Defined Contribution Plans

The Three Legged Stool

Before 1981 most Americans worked at the same job for 35 years, retired, received a gold watch and a pension. A pension was a promise by the em- ployer to pay a check to the retired employee for the rest of their lives. The employee had no risk of running out of money, because the Defined Benefit Plan had been designed to guarantee a check to the employee for the rest of their lives. Retirees lived on what has been referred to as the “three legged stool”: #1 a company pension, #2 Social Security,

and #3 personal savings. For the most part, retirement planning was working.

Wall Street Gets Involved in Retirement Planning

Wall Street saw the enormous opportunity to capture retirement dollars. In 1981, the 401(K) plan was passed. 401(k)s and IRAs DO NOT give the promise to the employee of receiving a guaranteed check for life. Instead, 401(K)s sacrificed the benefit of receiving a guaranteed check for life in an effort to chase the prospect of higher rates of return that the stock market could potentially provide. This movement away from built-in guar- antees for a portion of an individual’s retirement income has left millions of Americans worried about running out of money.

In 1980, 38% of Americans had a Pension Plan, by 2006, only 3.5%.

REASON #2—Americans rely too much on Stock Market growth to make up for their lack of savings.

In 1981 Americans were saving 12% of their income. As the stock market soared from 1981- 1999 the saving rates plummeted to 2%. Why did savings rates decline? We were saving less because the stock market was doing all the work. Why did the stock market soar? Remember, 1981 was the year that 401(K) passed, in 1981 only 5.7% of U.S households owned a mutual fund, by 2011 the percentage of mutual fund ownership had climbed to 43%. The stock market was soaring for two rea- sons: people were saving less and spending more and retirement dollars were flooding the stock market.

Question: Who accounted for trillions of dollars to flood into the stock market?

Answer: The Baby Boomers. Individuals born between 1946–1964 were employed, buying televisions and new cars, building homes, going to Disneyland, and of course, contributing to their com- pany 401(K) or other stock-market-based qualified retirement plans. The stock market was rising on a wave of 78 million baby boomers that were buying goods and services, while at the same time allocating trillions of dollars to their retirement accounts that funded stocks. It was a Wall Street and stock broker’s dream!

Baby Boomers Begin to Retire

The wave of 78 million baby boomers working has begun to come down. The first of the baby boom- ers turned 65 on January 1, 2011. A wave of 78 million people are about to start retiring. 78 mil- lion that no longer like the prospect of risking their money in the stock market. 78 million that will begin drawing on their social security benefits, and for the most part 78 million people that DO NOT have a guaranteed check in the form of a pension plan. On top of all of this, 78 million that have the majority of their retirement money in the stock market, a stock market that over the past 10 years has not given them a penny of return. From 2000 to early 2003 the stock market (as measured by the S&P 500) lost 41% of its value. Then, after making a recovery and reaching record highs, the market lost 51% of its value. That loss occurred in a span of only 17 months from October 2007 to February 2009. Right at the very moment baby boomers needed to start taking income from their 401(k)s, IRAs, SEPs, and other mutual fund based retire- ment plans, the markets wiped away $2 trillion dollars from retirement accounts. Stock-market- based retirement planning has failed Americans.

What had been $100,000 in January of 2000 is now $78,038 in 2011.

The “Three Legged Stool” Is Broken

Fear has set in. Only 3.5% of individuals have a Defined Benefit Plan, one which would promise them a guaranteed check for life. Questions about the solvency of Social Security threatens the promise of receiving a check from the government. Personal Savings in 401ks and IRAs have been decimated. For most Americans today, the “three legged stool” looks more like a pogo stick.

Why Would I Call Social Security Tax Pros for Help?

Social Security Tax Pros does not chase rates of return, we build retirement income plans.

• We can help you build your “Three Legged Stool” by showing you how to: – Take a portion of your 401(k), IRA, SEP, or other

stock market based qualified plan and create a personally owned Defined Benefit Plan. This plan will give you Guaranteed Income for Life. It is simple and easy to create. No cost to you.

- Protect your savings from future Stock Market loss.

- Protect against inflation.

• Teach you when to take Social Security and how it is taxed.

- If your income is above $25,000 a year, then you may be paying taxes on your Social Security Benefit and may be able to reduce or eliminate that tax with one easy adjustment to your retirement income plan.

• We care about creating retirement income plans that will eliminate the fear associated with retiring. This means helping our clients discover what is most important, and helping them achieve the peace of mind they desire.

Minimize Taxes. Maximize Income. Preserve Your Legacy.

To Learn More or to schedule a FREE CONSULTATION with one of our consultants call us.

call 1-800-401-1378

www.SocialSecurityTaxPros.com