The first Sunday in March had some bigger-than-normal news to report. NFL legend, Peyton Manning, announced his retirement. Nancy Reagan, devoted wife to President Ronald Reagan, passed away the day before. These two great individuals remind us of the inevitable: all of us will at some point, “shuffle off this mortal coil,” as Shakespeare said in Hamlet, and there will come a day—no matter how good we are or how much we love what we do—when we are no longer willing or able to work.
The Wall Street Journal, as it commented on both events, also had a two page spread in their “Investing in Funds & ETFS” (exchange-traded funds) section titled “How to Retire in a Bear Market.” The article talks about something I have been telling my clients for years: when the market is down and you are taking withdrawals from your retirement, you’re taking a double whammy. It’s called “sequence of returns” risk.
The Journal gave some standard advice to equity investors to avoid the devastation sequence of returns can cause: downsize, cut costs, shop carefully, and “consider a ROTH conversion.” But it also gave some not-so standard recommendations: exit the stock market completely and thereby “lock in” your income by holding your retirement in the bank; shop carefully and don’t panic. But it also talked about tapping a “buffer” asset—equity in a home or a life-insurance policy.
Equity in a home can be accessed through a reverse mortgage and that’s what the article concentrated on. It said nothing else about life insurance.
What a shame. Life insurance is an asset class that’s not just for the “just in case” moments when the market is low. Permanent life insurance, when it is properly structured, can do so much more than just tide a person over in a bear market. Life insurance is not just about the death benefit any more. It can give a stream of income that can last far longer than a qualified plan account, and the tax advantages (like income-free policy loans) are worth looking into.
The stock market is a scary place to have money—especially retirement money. Why risk it? For as Peyton Manning said in his farewell to football: “Life is not shrinking for me, it’s morphing into a whole new world of possibilities.”
Retirement should not be constant worry about whether or not you’re spending too much money at the grocery store or whether or not your money is going to run out before you make your final departure. It’s taking a page from Peyton’s playbook and realizing that the end of one career is “just the beginning of something