Decker Retirement Planning Articles

We believe there are at least 3 reasons why you should take the lump sum and just one for taking the pension.

We want to warn people about certain annuities. The variable annuity, for example, is something we hope nobody ever buys. The variable annuity is where the broker makes about 8% commission up front, he gets paid every year you own it, the insurance company gets paid every year you own it, and the mutual fund companies get paid every year you own it. Three layers of fees that usually add up to 5% to 7% before you make a dime. Variable annuities under-perform in up markets, due to high fees, and typically lose more money than market indexes in a down market due to high fees. The way these are sold is the agent tells you that variable annuities offer an opportunity to invest in the markets with a guarantee. What they fail to tell you is that you have to die to get that guarantee. The guarantee doesn’t help you while you live. There is a saying that, “variable annuities aren’t bought; they are sold” meaning that if anyone actually knew about all these fees they would never buy one.

Here are a few options for long-term care that we believe you should know.

We use tax minimization in our planning. Typically, there are 4 parts:

Don’t let the fee tail wag the dog. Here is what we mean; if you gave your friend $1 and he gave you $1.10 back a year later and you gave another friend $3 and he gave you $6 back a year later, who are you most happy with? Obviously, the $3 friend who returned you $6. The friend who gave you $1.10 back reminds you that the $6 friend is three times more expensive. You, of course, know that it is all about net of fee returns. Hypothetically, if we were to let the fee tail wag the dog for our risk money, we would have all of our clients investing in the S&P 500 ETF. The S&P index performance beats about 85% of money managers and mutual funds each year and the cost of the ETF is less than the Vanguard 500 fund. So, “efficient”, right? Well, let’s see. If you had invested $100K in the S&P 500 ETF since January 1^st, 2000 to June 1^st 2016, you would have about $188K with dividends reinvested. Also, hypothetically, if you had paid the fees to use the risk models we are using now, your $100K starting at January 1^st, 2000 would have grown to over $900K by June 1^st 2016, net of all fees.