To identify with real life experience
Printed with permission of my clients Roberta and Marty. Here are their comments:
In the summer of 2007 and early in 2008 Gordon warned us several times that a market crash was coming in 2008 or 2009 and wanted us to invest in these new Guaranteed Minimum Withdrawal Balance segregated funds. He said they would help us avoid the major cost of a market downturn.
We were dealing with other advisers and wanted to think things over before we shifted our business to Gordon. By the time we got our funds moved into these new GMWB products the crash had actually taken place. Ouch! We wish we had acted sooner.
We were dealing with advisers at two different banks and a mutual fund company before we shifted to the GMWB funds. What we find hard to believe is why didn't any of those advisers see this coming?
In any event these GMWB funds guarantee a 5% annual increase to your retirement portfolio. In 2010 our funds grew well over the 5% so our adviser was able to manually reset our funds into a new contract. Now your guarantee is over 6% annually if you calculate back to when we first invested. The reason for the higher rate is not a change in the GMWB product, rather it is due to the reset to the higher amount arranged by our adviser. Where else can you get a 6% guarantee annual increase in your retirement portfolio?
That ends their comments.
There is no better time to get involved with Guaranteed Minimum Withdrawal Balance (GMWB) funds that today. They work to save your investment in down markets and are also a great tool to increase wealth during rising markets.
Another client, Bob, did move before the downturn for safety sake, but stayed invested in equities. His funds dropped nearly 20% in 2008 but his Withdrawal Balance increased by 5% in 2008, 2009, and 2010. He wants to retire this year. Even though his investments are only back to the value they were in early 2008 he will get 5% of the higher amount guaranteed for life. Let's look at actual figures:
June 2008 funds $100,000 which dropped to $80,000 in the fall of 2008. They are now back to $100,000 three years later. That is the way equity funds work. But Bob's withdrawal balance has grown to $115,000 (5% per year) so he is now guaranteed a minimum of $5,575 per year for the rest of his life even if his funds run out his income will never run out.
Bob is happy, as he knows if markets rise enough his income will also rise. Every increase he gets will be guaranteed for life. It takes the financial worries out of retirement and the fear of outliving his money is gone.
