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Reflections

Every day as I leave the house for work a gracefully aging, white-bearded fellow smiles pleasantly out at me from my front hall mirror – and then my wife calls out: “Have a great day old man!” So much for “graceful”…

Time affects us all in different ways and mirrors can be friend or foe. With any luck, the only thing on your mind might be a coloring agent or hair restorative at the pharmacy. But unfortunately for many other folks, any kind of deep look in the mirror might raise a different haunting refrain: “Man, am I way behind on my retirement savings!”

Once you achieve middle age, grey or thinning hair doesn’t matter much; being light on your retirement savings matters a lot. Whether you were a disciplined saver but suffered financial hardship, or you put all your money into your kids’ college fund, or perhaps you simply overspent, your problem is the same: you have lost the magic ingredient of retirement planning success: time. And not just a little. If you are in your 50’s, that’s roughly three decades of lost time and time is generally what makes most investing successful and less risky.

What to do if you find yourself in this situation? Online financial calculators merrily inform you that “all you have to do” is begin saving now and you should be fine - oh, and by the way, given the time you have left, the right amount to save is 20% of your monthly income. Those engines certainly don’t have mortgages or kids who insist on eating every day. For many people, meeting that kind of savings nut would require a major rearrangement of lifestyle.

Another option is to become more aggressive with your investments. A higher return might make up for lost time, but how aggressive can you afford to be? Pursuing higher returns requires the assumption of greater risk.

How much risk do you really have the stomach for? These days, people find they don’t have much. In a recent article in U. S. News and World Reports, author Rachel Koning Beals points out that: “Many investors still feel stung from the stock market ups and downs of the past few years. Between October 2007 and March 2009 (the worst stretch of the Great Recession and credit crisis) the S&P 500 shed 55 percent of its value. Since then, it has since regained about half of that drop.” (1)

But taking no risk may not be much of an option either. "Investors can't likely reach the portfolio size they want without the growth that comes from stocks," said accountant Mike Piperin in the same article. The crash of 2008 and 2009 reminded investors that the short-term risk of owning stocks is real but some also overreacted and sold out of stocks altogether. Stocks are considered appropriate for investors under age 50 and some advisors recommend that people over 50 set their stock percentage equal to 100 minus their age (55-year-old person would have no more than 45% of their savings in stocks).

Okay then, what if you are 50 years of age with an under-funded retirement, the stock market terrifies you, and you don’t have enough time or the risk tolerance to go through another market downturn and recovery cycle. What to do? Ordinary folks have a real problem. However, if you happen to be the plaintiff in a personal injury case, you have a remarkable second chance to set things right thanks to the classic tax-free and guaranteed Section 104 structured settlement.

I had the opportunity recently to speak with a 53-year-old woman who had been injured in an accident. She is married and has two children out of college. She told me she had not saved nearly as much as she should have, so she planned on putting the settlement proceeds “away for retirement” after paying down some credit cards. We had a good discussion about the options available to her. What little savings she had in her 401k had been hit hard in the last few years. This caused her to be very reluctant to put any of the money at risk in the equities markets. I mentioned the benefits a structured settlement provides. She liked the idea of paying no taxes but expressed concerns about being in a low interest rate environment.

I asked her what was more important to her at this point in her life: casting about (vainly) hoping to somehow “find” a higher interest rate; or finally actually establishing a guaranteed retirement income she can never outlive. I pointed out how current recipients of structured settlements have avoided market turmoil altogether, their payments simply arriving on time every month. She eventually came to realize that suffering a serious injury had actually provided her with a remarkable opportunity. She may have been “late to the game”, but the structured settlement we designed for her equated to a grand slam in the bottom of her financial “ninth”.

In the current financial climate, no one should underestimate the power this benefit brings to the table. You have the ability to resolve one of a mature person’s greatest stresses just by presenting them with a structured settlement proposal designed to make classic pension-like payments. Remember this strategy whenever the situation calls for it and you will be pleased you did.

Do you have a case involving an injured baby boomer who is disturbed by their financial “reflections”? Want to show them a brighter future? Call Frank C. Kilcoyne, CSSC at 800-544-5533, I am here to help.

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(1) Beals, Rachel Koning. "Late to the Game? How to Ramp Up Retirement Investing in Your 40s and 50s" US News & World Reports, April 25, 2012. 10 <http://money.usnews.com >