Holy scare tactics Batman! Thank you for linking this dude. Dodge, they did mention the 4% rule but I thought the article was more of a commercial meant to scare you into buying annuities than it was an actual article, much less a good one.
Look, I'm not a conspiracy theorist or a sky is falling kind of guy, but this is all bullshit. I can't stand selling a product or service by scaring people into thinking it's a requirement for their own good. It's borderline fraudulent.
Just a few of my favorite scare tactic quotes from the piece:
Even if you’ve socked plenty of money away in your 401(k) plan and invested it carefully, some of your toughest decisions lie ahead. And don’t expect much help or clarity from the government or your employer.
TranslationYou were likely too spendy to save, and even if you did you don't know how to invest. Blame the government. Hire an advisor.
The drawdown phase is a piece of the U.S. retirement puzzle that’s attracted little notice until recently.
Younger workers get clear, simple advice: Save as much as you can for as long as you can. Create a diverse portfolio of investments and hold on for the ride.
That’s supposed to yield a pile of assets. When it’s time to make that pile smaller, retirees are often overwhelmed by the choices and tax consequences.
TranslationHire us.
[insert scary chart here about sequence of returns].
This is actually good information, and there are other bits of good information in the "article" as well, but they provide no context or instruction, they just scare you into thinking you will run out of money and move on to the next topic which is........
annuities. Not a coincidence. Very purposeful structure to this piece.
The government has taken a few limited steps to ease the spending-down phase of retirement. Still, John said, the U.S. lacks a “clear direction” for this phase.
The required minimum distribution rules for retirement accounts, which make retirees take taxable payouts starting after age 70 1/2, are designed to force spending and can cause problems for people who live longer than the average.
They force you to withdraw it, not spend it.
Earlier this year, the Treasury Department created a partial waiver to the required minimum distribution rules for people who purchase longevity annuities -- ones that don’t start paying out until age 80 or 85.
TranslationThe insurance lobby has paid enough money to congressman to allow this special rule, so now you don't have to pay taxes on RMD's or be forced to do what the government tells you. We won't mention that the income from annuities is also taxable.
The hottest debate among investment advisers and policy makers is over the role annuities should play, with the Government Accountability Office and the Treasury Department nudging some Americans toward the insurance.
No, we don't need the government making us take annuities, thanks.
Here’s the key question: Should retirees continue the do-it-yourself approach from their working years by switching to more conservative investments and making routine withdrawals?
Or should they turn over some of their money to an insurance company to create an income stream that will last as long as they do?
TranslationHire us.
I genuinely feel sorry for the 80+% of people out there who are uneducated about investments, risks, fees, taxes, and rules. They will read this, shit their pants, and call a financial advisor or their insurance agent.
Annuities have their place, I guess. But they are by far the most profitable commission available to a financial advisor outside of maybe a whole life policy. They are designed to take risk out of the equation for the "investor". The insurance company takes a very hefty cut, and pays a very hefty commission leaving the buyer with ~80% of the FMV of their "investment" based on life expectancy. They are a safe play, but a losing play. You won't run out of the money stream, but you will certainly not come out ahead unless you live to be 110.
[/rant]