Michael Morrow | Financial Planner

Wealth Management Blog

Tag: retirement

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The Best Annuities for Retirement

When it comes to planning for retirement, one can never be too diligent. After all, failing to plan for a secure financial future is equivalent to planning to fail. Therefore, one should familiarize themselves with the various financial tools available in order to optimize their savings as much as possible before retirement.

One of the best means to achieving this seemingly insurmountable feat is investing in an annuity. Regardless of the various misconceptions surrounding this investment tool, annuities are one of the few methods that will provide a regular infusion of cash with little to no additional fees.

With that in mind, let us delve deeper into the topic and discover the best annuities for retirement:

Immediate annuity

As you approach the end of your time in the workforce, you hopefully have a decent amount of money stowed away in your savings or in other investment accounts. It is at this time that you should consider withdrawing that money and investing in an immediate annuity, which would not only guarantee you an instant retirement income, but some peace of mind as well.

This form of annuity is rather straightforward. All the account owner must do is put down a lump sum in exchange for monthly checks that incur little to no fees. Of course, the worth of said checks is entirely dependent on how much the lump sum is. However, this payment in conjunction with any Social Security or pension plans, could be an excellent way of ensuring you will retire comfortably.

Deferred annuity

Also known as a longevity annuity, this method is excellent for older workers whose current savings may not carry them through the rest of their days. Therefore, payments to the owner of the account do not begin until they have reached a set age — which is typically around 80 years old — thus giving the money an opportunity to grow.

Alternatively, this account can be established by young workers who have already earned a considerable amount of money and do not intend to retire for some time. However, the only downside is that this money no longer grows with the owner of the account. Additionally, said owner will have to pay a larger sum of money to open such an account so early, along with any fees that may come with the account itself.

Regardless of which form of annuity one decides to purchase — or when they choose to purchase it — they should always meet with a certified financial planner first. After all, it is much better to be safe than sorry, especially in regards to one’s life savings.

5 Reasons for Life Insurance

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Despite popular belief, life insurance policies do not serve a singular purpose. While they are primarily used to provide vital funds to families whose loved ones have passed away, these policies can also serve as an excellent addition to a personal financial portfolio, collateral for a personal or business loan, and so on.

Here are five reasons you should consider opening a life insurance policy as soon as possible:

They are guaranteed to grow. Similar to a traditional IRA, a life insurance policy’s cash value is guaranteed to grow on a tax-deferred basis and never decrease in value, no matter how dismal the economy may appear. This is because the growth of a policy’s cash value is dependent on the payments the owner makes. Therefore, a life insurance policy is an investment that can act as a safety net for your financial security.

They can be leveraged to meet greater financial goals. If you are hoping to start your own business or even foresee some financial trouble later on in life, a life insurance policy can be used to cushion the blow of — or entirely cover — either expense.

There are some stipulations to this process, however. While you may borrow against your policy without entirely cashing it in, you are held responsible for repaying that amount before the end of your lifetime. If that requirement is not met, the overall value of your policy will be decreased, leaving your family with fewer financial benefits in the event of your death.

They can aid you in paying for college tuition. Borrowing against your life insurance policy is also an excellent option for financing your child’s college education. Similar to traditional federal and private loans, you will be required to pay interest on the amount of money you borrowed. If interest goes unpaid, you run the risk of compounding your loan — or paying interest on your accrued interest. Therefore, you should ensure that you are financially secure enough to handle such payments prior to making a decision.

They are an investment, not an expense. Although starting a life insurance policy may certainly sound like an expense, seeing as you are required to make monthly payments to keep the policy, the overall benefits greatly outweigh the costs — which, frankly, may not be that high to begin with, depending on one’s coverage, provider, and physical health.

The sooner you buy, the more insurable you will be. One of the last things the majority of young individuals want to think about — let alone discuss — is preparing for anything related to the end of life. However, purchasing a life insurance policy does not need to be viewed as morbid, but as a safety net that could greatly benefit its owner in the future.

With that in mind, it would be wise of more people to purchase life insurance policies as soon as they are financially able, as they would not only have a higher likelihood of being approved, but would have the ability to lock in lower premium rates as well. This also gives them great flexibility if they decide to expand their coverage to a spouse or invest in additional benefits down the line.

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Preparing for Retirement

Saving enough money for your retirement is one of the most important things you can do for your financial future. Unfortunately, many Americans do not save enough money to support themselves during their golden years. Not only that, but a lot of people also make the mistake of leaving too much money on the table when they retire because they don’t know how to coordinate the retirement process. With the right retirement strategy, you can maximize your savings and live comfortably during retirement. Keep reading to learn more.

Social Security

There are three pillars to a successful retirement strategy: Social Security, pensions, and assets that supplement the first two pillars. In total there are 567 different ways that a married couple can claim their social security benefits. For example, if your spouse is older than you are then she might claim her social security benefits at a different time than you. On the other hand, you might choose to claim benefits during the same year even if you aren’t the same age. It all depends on your particular situation, and you should take the time to think through different scenarios before claiming your benefits.


If you have a pension, you will have to factor in how that money will affect your retirement. Some people mistakenly think that all they need to retire is their pension plan. However, even if you have a good pension plan, you could leave money on the table if you don’t consider all of your available options. To learn more about what a pension is, take a look at this article. It does a good job of answering the most popular pension questions.


During retirement, you should take advantage of assets that are appropriate for your situation. Having access to different assets will help you avoid sequence of return risk. This article I wrote in April outlines what sequence of return risk is and how you can avoid it. It’s important to avoid excessive risk during retirement. The Rule of 100 is a good rule of thumb to use. If you are 65 years old, then you should only 35 percent of your investments should be risky. The rest of your investments should be safe assets. It’s not always easy to find safe investments on your own, though, which is why you should look into using the services of a money manager. If you want to learn more about choosing a money manager, I encourage to read this post I wrote.

When it comes to securing a healthy financial situation for your retirement, there are many different factors to consider. The above paragraphs are only three pieces of the puzzle. Take the time to think carefully about your retirement strategy and reach out to a money manager who can assist you with crafting a strategy.

Michael Morrow - Learn More About Sequence of Return Risk

Learn More About Sequence of Return Risk

One of the biggest concerns that retirees have is whether their nest egg will be large enough to support them during retirement. The worst case scenario that every retiree fears is experiencing a market downturn just as he or she is ready to enter retirement. Since retirees need to draw from their retirement portfolio in order to live, they must be aware of and prepared to deal with sequence-of-returns risk.

In my article Jack Bogle Warns: Prepare for Two Massive Market Declines in The Next Decade, I wrote: “In simple terms, sequence of return risk means that in retirement, it can be more critical when you get returns than what returns you get.” Investopedia defines sequence-of-returns risk as “the risk of receiving lower or negative returns early in a period when withdrawals are made from an individual’s underlying investments. The order or the sequence of investment returns is a primary concern for retirees who are living off the income and capital of their investments” (Investopedia – Source).

While investors don’t have to worry about sequence-of-returns risk before retirement, it becomes a big issue during retirement. If you plan to retire soon and you want to limit sequence-of-returns risk, keep reading for some tips and strategies.

Limit Risk

When you make risky investments there’s always the chance of losing your money. For example, if your portfolio only includes stocks you’re at the mercy of the market. If your stocks take a beating and you continue to withdraw money from your portfolio, you make it difficult for your portfolio to recover. At Aspen Creek Wealth Strategies we recommend a “risk bucket” strategy based on the rule of 100. If you are 65 years old then 65% of your portfolio should go into a safer bucket of assets. You can put the remaining 35% into a riskier bucket. Investors can increase their chances of a successful retirement by making wise investments and avoiding unnecessary risk.

Lower Percentage of Stocks

Another strategy to consider: during the first years of your retirement your portfolio shouldn’t include a high percentage of stocks. Over time, though, you can increase the percentage depending on the risk you feel comfortable taking. The first years of retirement are the most important. If you withdraw too much money or lose too much money as a result of risky investments, you’ll make the rest of your retirement difficult.

Don’t Overspend

One of the easiest ways to protect your retirement funds is to only withdraw the amount that you actually need. Ask yourself before making a big purchase, “Is it really necessary?” Every retiree wants to enjoy their retirement, but you don’t need to carelessly spend your money to enjoy yourself. If you withdraw your money wisely you’ll help ensure it lasts you and you don’t outlast it.

Michael Morrow - The Dangers of Buy and Hold

The Dangers of Buy and Hold

In general “Buy and Hold” is an investment strategy where stocks are purchased and then held on to regardless of how the market performs. While the Buy and Hold strategy has many supporters who believe it is the best investment strategy, the reality is that the strategy has many drawbacks. The strategy is especially dangerous as a retirement strategy. Some investors who are averse to risk think that Buy and Hold will limit the risk they face. Unfortunately, this isn’t always the case. Keep reading to learn more about the disadvantages of Buy and Hold for retirees.

Market Downturns

The biggest disadvantage of Buy and Hold is dealing with market downturns. If the market crashes or there is a recession, you stand to lose a lot of money. For retirees, this is especially dangerous because they don’t necessarily have the time to “hold” as the downturn corrects itself. Imagine if the market experiences a downturn a year before you plan to retire. If all of your gains are erased, how will you make retirement work? Jack Bogle can preach Buy and Hold because he has enough money to tolerate heavy losses. However, normal investors may not have the safety net that Bogle has, so Buy and Hold isn’t the best strategy for them.

Length of Time

In order for Buy and Hold to work, an investor needs time. Yet if an investor chooses the wrong stocks and holds on to them year after year, he or she may not see any significant gains. Many Buy and Hold supporters recommend investing in index funds to avoid selecting the “wrong” stocks. However, even index funds are susceptible to events like market crashes. Today many Americans aren’t preparing for retirement soon enough. Therefore, they might not have the necessary time to employ a Buy and Hold strategy and see any meaningful returns by the time they’re ready to retire.


A large number of investors lose money due to their emotions. They either chase stocks that they believe will make them rich in the short run, or they sell when their stocks underperform. However, the Buy and Hold strategy requires an investor to ignore the urge to sell or buy whenever it strikes. Every investor finds it difficult to ignore these urges at various times. When it comes to savings for retirement, safety is the most important element. Yet if risk is managed correctly, it can be beneficial to a retiree’s investment strategy.

There are many alternative investment strategies to Buy and Hold that offer retirees more security and better returns. To learn more about the disadvantages of Buy and Hold as well as some alternatives read my article Jack Bogle Warns: Prepare for Two Massive Market Declines in The Next Decade (But Heeding His Advice Could Destroy Your Retirement).

Michael Morrow: Self-Directed IRAs vs. 401(k)s and Traditional IRAs

Self-Directed IRAs vs. 401(k)s and Traditional IRAs

When most people think about retirement savings they think of 401(k)s and IRAs. However, another option to consider are self-directed IRAs. While self-directed IRAs share a lot of similarities with 401(k)s and traditional IRAs, there are some important distinctions to consider. What sets self-directed IRAs apart from other options, though, are the variety of investment options available to you. Keep reading to learn more about the benefits of self-directed IRAs as well as some of the drawbacks of 401(k)s and traditional IRAs.

401(k) Drawbacks

  • There are numerous fees associated with 401(k)s, and most people don’t realize how much they’re even paying. Most of the time the fees aren’t even listed on your account statement. Over time these fees eat into your balance.
  • If you withdraw money from your account before the age of 59 ½, you’ll face penalties. Unfortunately, life doesn’t always go as planned. You might need to withdraw money due to divorce, job loss, or some other unforeseen circumstance. Take a look at this post to learn more about early withdrawal fees. In addition to the penalties, you will also have to deal with taxes. Any money taken out before the age of 59 ½ will be taxed as regular income.

IRA Drawbacks

  • Every IRA plan has contribution limits. If you contribute too much to your account, you will have to deal with IRS penalties. The penalties vary with age. For example, if you are under the age of fifty and you contribute too much, you’ll face a maximum penalty of $5,000. This article has more information on excess contributions.
  • When you reach the age of 70 ½, you have to withdraw funds from a traditional IRA account regardless of whether you need the money or not. Failing to withdraw the funds results in a penalty—typically a fifty percent tax on the minimum amount that was supposed to be withdrawn.

Self-Directed IRAs

A self-directed IRA is often a better option for investors. With a self-directed IRA, you can include assets like real estate rather than the traditional assets that most IRA accounts allow. Self-directed IRAs also offer tax benefits that aren’t available with traditional retirement options. As with every investment self-directed IRAs are not risk-free. However, investors who choose self-directed IRAs select assets that they understand well, so they are aware of the risks associated with the assets held in their self-directed IRAs.

Michael Morrow: 3 Conversion Strategies That Can Minimize Taxes In Retirement

3 Conversion Strategies That Can Minimize Taxes In Retirement

When it comes to being prepared for retirement, the majority of Americans are not in good shape. A recent study found that “less than one-third of Americans are saving money in their 401(k)s and other workplace retirement accounts” (Bhattarai). Even if you are prepared for retirement, you may be shocked by the amount of taxes you owe once you start using your retirement funds. To learn how you can minimize your taxes during retirement take a look at the below strategies.

IRA Conversion

One of the simplest ways to reduce your tax burden during retirement is to convert your traditional IRA or 401(k) to a Roth IRA. When you make withdraws from a Roth IRA, you do not owe taxes on the amount you take out. Although it’s possible you may owe taxes when you convert to a Roth IRA, once you’re retired and make withdraws you’ll save money on taxes. Since you generally make less money during retirement, every bit of saved money helps. Most financial advisers recommend that you convert your IRA funds over the course of a number of years rather than all at once. This way you can keep an eye on your tax bracket and make sure you don’t enter a tax bracket that’s too high.

Home Equity Conversion

Using home equity as an income source during retirement is a strategy that doesn’t receive as much attention as some other retirement strategies. Yet it’s one of the best conversions to consider as you enter your golden years. Many retirees downsize during retirement and free up cash by selling their homes. By using a home equity conversion, though, you can stay in your current home and gain access to cash. One of the best strategies to consider is a reverse mortgage. To learn more about the benefits of reverse mortgages take a look at this blog I wrote last year.

Indexed Universal Life (IUL) Conversion

In the past, I have written about the financial benefits of IUL policies. In particular, IUL conversions offer numerous tax advantages that retirees should consider. While the policy gains money you do not owe any taxes. IUL policies also help protect you from the up and down nature of the market. The policy’s gains are linked with the market, but you don’t face any market risk since your money isn’t actually tied up in the stock market. To learn more about how an IUL policy can help you minimize taxes during retirement, I encourage you to read this article.

Learn More

Here are three more useful articles that I suggest you read to learn more about minimizing taxes during retirement:

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