A Sure Thing, or a Maybe? (Part 1)

08/03/2017 12:19 pm ET Updated Aug 16, 2017

Will allegiance to your “tribe” limit your choices and keep you in doubt about your future financial picture?

We are all steeped in the thinking and beliefs of our families, friends, and confidants. We tend to live within the limits of what is approved by the groups that matter to us. It’s in our nature. We all have a need to be accepted and loved.

Do you drive cars based on what Dad always preferred, or based on the choices of friends in your circle? Do you perceive aging, and all that entails, in accordance with what your family members have experienced? How about your finances - do you follow a path of long held beliefs? The truth is, our thoughts and choices are limitless, yet most often we see far fewer options due to our cultural bandwidth.

What does all this have to do with your financial future? The choices you make may be based on bias. And that bias may limit you. Seeking advice from financial experts can be very confusing. Pick up a Kiplinger’s or Forbes and you can find experts of every opinion. A quote from John Rekenthaler, the long-time Morningstar analyst, comes to mind frequently. “All financial advice is conflicted. The business model exerts its effects.” The advisor who earns fees based on your assets under management is biased against commission-based products – like annuities. The advisor who earns commissions is biased in favor of what they sell – like annuities. Sound familiar? Stay protected. It’s in our nature.

If one side believes their way is right, and the other does, too, the truth probably lies somewhere in the middle. When planning for retirement income, we all want a sure thing, not a maybe. The annuity proponent confidently points to the guaranteed income you can’t outlive. Cover your living expenses by supplementing Social Security with an annuity and you’re all set – right? But the investment advisor says, “not so fast” and points out that annuity income won’t keep pace with inflation. You need the stock market for the best hedge against inflation.

Wouldn’t it be ideal to have guaranteed income AND a hedge against inflation? Social Security, supplemented with annuities gives you a base of guaranteed income you can’t outlive. Keeping a portion of your savings in the market to stay ahead of inflation may provide for the cost-of-living increases most annuities lack.

If this makes sense, the question becomes, what blend is right for you? The answer is, “That depends.” This should be determined individually based on an analysis of your objectives, needs, and resources. For your own protection, keep an open mind and consider all your options, instead of going down a path considered sound by others, including your tribe.

That’s all for now. In Part 2 of “A Sure Thing, or a Maybe”, I will dig into the details a bit more to help create a process you can follow to “get there from here” without making a career out of it.

About the Author

Bill Borton, managing principal of W.R. Borton & Associates LLC, founded his firm in 2011 to ensure that his clients live better, longer. He serves high net-worth clients as their Retirement Risk Management specialist. In collaboration with their financial advisors, he designs strategies to minimize the financial risks that longevity, healthcare and long-term care pose to their retirement.

Connect with Bill via Twitter, Facebook, LinkedIn, or either of these more traditional routes (bill@wrborton.com or 856.817.6100). Bill’s website has even more information.

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