Why Your Efforts to Grow a Retirement Nest Egg in the Stock Market May Disappoint You

You’re not reckless. You don’t like to take unnecessary risk. But you don’t want to run out of money in retirement. And your financial representative says you must invest in the market to provide for a secure retirement.

Do you really have to take those risks? What if I told you that hundreds of thousands of people are building their retirement nest egg without even going near the stock market … or the real estate market … or precious metals?

When people think of “the stock market,” they often equate it with the Dow Jones Industrial Average (DJIA) they see quoted everywhere.

The Dow is the most recognized market index in the world, and looking at its performance can help answer the question: Does your financial rep’s advice make any sense?

The Dow has gone up over time – but has it gone up enough to make it worth the risk?

Only you can decide if it was worth the risk to you. But to make an intelligent decision, you first need the answers to two questions:

1. How much has the Dow gone up?
2. What were the risks?

Only then can you decide if it was worth it.

The Dow Jones Industrial Average first broke through 11,000, closing at 11,015, on May 3, 1999. We’ll start there to answer the question, “How much has the Dow gone up?”

Nearly 18 years later, on December 20, 2016, the Dow hit another high, closing at 19,975. That’s our ending point. In about 18 years, the Dow rose 8,960 points.

Was that rise in the market worth the risk?

There are three types of risk we’ll look at:

1. Market Risk: How much could you lose due to market fluctuations? Hint: The Dow has lost 50% (or more!) of its value – twice – just since 2000
2. Inflation Risk: What is the possibility that the money you invest today might not buy as much in the future?
3. Opportunity Risk: What if you could have done as well or better, with less risk, investing in something else, but you missed that opportunity because your money was in the market?

The Dow Results and Their Effect on Your Retirement Savings

Has the Dow kept up with inflation? Yes … if all you wanted was to put away grocery money in 1999 and have it be worth enough to buy the same amount of groceries today. If that was your goal, then the Dow did that, plus a bit more.

But that’s only because of the market’s historic run-up in 2016, related to the presidential election. If you’d put your grocery money into a Dow Jones Index fund in 1999 and needed to take it out on February 11 last year instead of waiting until December 20, the value of your money would have decreased. The market gained, but not enough to keep up with inflation.

That’s like trying to swim upstream and wondering why you’re not making progress. That’s your inflation risk.

From November 2013 to February 2016 – a period of more than two years – the Dow actually lost ground, dropping 414 points. That’s your market risk.

If your money were in a bank during those 2+ years instead of in the market – shucks, if your money had been under the mattress – you would have been better off. But who could know? The loss you incurred by being in the market – which kept you from putting your money in the bank or somewhere else – that’s your opportunity risk.

A Real World Stock Market Reality Check

From the date of its high of in 1999 to the high it reached in 2016, the Dow gained 8,960 points. So what was its growth rate?

Over that period of nearly 18 years, the Dow had a compound annual growth rate of only 3.43%.

What were you hoping for? Eight percent? … Five percent? If you believe radio broadcaster Dave Ramsey, you might have expected 12%, since Ramsey always claims you can get 12% in the market.

But the Dow’s annual growth was only 3.43%! Was that paltry growth worth the stress and the stomach-churning, nail-biting ups and downs of the market for nearly two decades?

Most people we’ve surveyed say 5% annual growth is the absolute minimum return they would accept, to put up with all that unpredictability and stress.

If you had “bought the Dow” on May 3, 1999, our starting benchmark date, the Dow would need to be at 26,099 today, to have gained 5% per year.

Of course, the fees and expenses associated with your investment (and you always pay fees and expenses– even in so-called no load funds) would have eaten into your profit, so you actually would have needed to reach something higher than 26,099, to net you 5% per year.

But that’s only part of it, because to keep up with inflation and grow 5% annually, the Dow would need to be at 37,900 – almost 38,000 – today. That’s a full 90% higher than its high in December. (And again, don’t forget to subtract your fees, including trading fees, maintenance fees, advertising fees and other costs, and plan fees, if you’re investing inside a 401(k) or IRA.)

Those Are Your Three Risks. What’s the Solution?

The solution is a concept – a strategy – I call Bank On Yourself.

Bank On Yourself is not an investment in the Dow Jones Industrial Average, or the stock market, or real estate, or precious metals. It’s not any kind of speculative investment. Bank On Yourself is based on a special kind of whole life insurance that many financially successful people have used for decades, but most people have never heard of.

This is a very different type of whole life insurance from the kind most financial “gurus” like Suze Orman and Dave Ramsey talk about. With this variation, you don’t have to die to “win.” It requires a dividend-paying whole life insurance policy with some features added on to it that maybe one in 1,000 financial representatives understands.

Bank On Yourself allows you build a sizable nest egg with guaranteed results

Here’s how Bank On Yourself fares against the three investing risks we discussed:

1. Market Risk

There is no market risk with Bank On Yourself, because you’re not invested in the market. Your cash value is locked in and guaranteed to grow by an ever-increasing dollar amount, year after year after year.

Unlike the stock market, you can know the minimum guaranteed value of your retirement savings on the day you plan to tap into your account, and at any point along the way.

2. Inflation Risk

No one can tell you what the inflation rate will be two, ten, or twenty years from now. But it’s good to know that the insurance companies recommended by Bank On Yourself Professionals have much of their assets in long-term investment-grade fixed-income assets like corporate bonds.

When inflation drives up interest rates, the rates on new bonds typically follow suit, which can increase policy dividends as well. This helps offset the effects of inflation for policyholders. This is precisely what has happened during high-inflation periods in the past. (Dividends are not guaranteed, but have been paid every year for more than 100 years by the companies preferred by the Bank On Yourself Professionals.)

3. Opportunity Risk

There is no opportunity risk with Bank On Yourself. Once you’ve set up your plan, if you ever do find a money-making or investment strategy you want to take advantage of, you can simply borrow against your policy and invest in that strategy. And the money in your policy can continue growing, just as if you’d never touched a dime of it – if your policy is from one of the handful of companies that offer this feature.