Why You Must Protect Yourself Now

Warning: This article contains graphic descriptions that might be unsettling.

The smell of Fall is in the air.  There’s nothing like it.

The sun is bright, and the brown, orange, and yellow leaves are falling.

It’s 3:30 on a Saturday afternoon and you’re driving home from your granddaughter’s soccer game so proud of her for scoring the winning goal.

There’s nothing quite like the screams of an excited group of 9 year old girls.

As you’re driving along, you have the Notre Dame football game playing on your radio, but you’re not listening very carefully because you’re still caught up in the buzz of your granddaughter’s soccer game and the beautiful Fall foliage.

Pulling into your neighborhood, you catch the tail end of a breaking news sports update about the Patriots.

Unable to hear it clearly, you reach down to turn up the volume so you can hear the announcement more clearly.

At that very same instant, some neighborhood children are playing soccer in their yard.  As your car approaches, the soccer ball rolls out into the middle of the street where you’re driving and one of the kids chases after it in full speed forgetting to look both ways to see if a car is coming.

Just as you’re reaching for the volume knob on your radio, in the corner of your eye, you see him run out from behind that parked car, so you instinctively jam on your brakes.

But, it’s too late.  You hear the sound you prayed you’d never hear, and he’s now lying on the ground motionless in front of your car.

As the paramedics arrive, the good news is the little boy is still breathing.

The bad news is that he’s not moving as they struggle to keep his body still and place him on the stretcher.

After what seems like an eternity, he’s taken in the ambulance to the hospital and you are left there to talk with the police about what just happened.

Two detectives are snapping pictures of the car and measuring your skid marks in the street.

2 Weeks Later

A few weeks have now passed.  The shock of what happened has not gone away, but it has come into perspective.

The boy has just returned home from the hospital.  Several bones in his body were broken, and after 3 separate surgeries, the doctors are confident that he’ll be able to walk just fine after a good 6 months of physical therapy.

However, the permanent damage done to his right leg may prevent him from playing competitive sports for the rest of his life.

What Does This Mean For You?

As if dealing with the emotional torment of accidentally injuring a young boy wasn’t enough, now comes the worst part.  The police reports come back concluding that you were driving 36 miles an hour in a 30 mile an hour zone.  And, because of that, you’re considered to be 100% at fault for negligence.

You didn’t mean to hit the child.  You’re a careful driver.  You’ve never had an accident in your life.  Your driving record proves it.

But, all of that doesn’t matter right now because unfortunately, you’re going to be at the wrong end of a very expensive lawsuit.  You can expect that within a few weeks, you will be summoned by an aggressive attorney requesting, among other things, a listing of all your income and assets.

And, the only form of compensation the attorney will get from the case will be from receiving a percentage of the damages collected from you.

And, it probably won’t be a small number.

Where Will This Money Come From?

The question for you is where will this money come from to pay for you to hire an attorney and to pay the eventual damages that will be brought against you?

It’s taken 40 years to build up enough money for you to be able to retire.  You’ve given up so much in order to save for your future.

And, now, you’re finally reaping the rewards of your lifetime of hard work and disciplined savings.  You’re retired and enjoying life like never before.

But now, everything you’ve worked your entire lifetime to save could be taken from you in an instant.

This Week’s “Strategy”

This is a horrible story that I hope never happens to you. And, I would prefer not to have to share it with you.

However, as you can see, it can happen to anybody, so I’m telling it to you to motivate you to protect yourself.

The strategy and solution in most circumstances is to have the highest liability limits on your auto insurance possible.  But, even more importantly, because potential damages could easily exceed the limits on your auto insurance, is to have a separate Personal Catastrophe Insurance Policy, otherwise known as an “Umbrella” Policy, also known in small circles as Lawsuit Insurance.

In most cases, if you have a quality policy with a quality insurance company, the combination of these 2 policies can protect you from the financial devastation of this horrible occurrence.

It won’t help in dealing with the emotional toll of injuring someone, but it can save you from the financial fallout, and preserve what you’ve taken your entire lifetime to accumulate.

And, the good news is that it’s inexpensive.  Each million dollars of umbrella liability coverage costs only about $250 per year.

That’s a small price to pay for the peace of mind it can provide for you in case this ever happened to you.

Visit with your property and casualty insurance agent today and coordinate your homeowners, auto, and umbrella liability insurance.  Discuss precisely what each policy covers and what it doesn’t.

This may take only 30 minutes but it could turn out to be the most important 30 minutes you’ve ever spent on your finances.

Happy Anniversary!

We’re going to take a short break in the action in order to wish you an emphatic HAPPY ANNIVERSARY!

I’m serious.

There’s actually a spectular strategic lesson imbedded in it so it’s not all celebration.

What anniversary are we celebrating you may be asking?

Well, unlike you or I forgetting our wedding anniversaries and getting into hot water with our spouses, if THIS anniversary doesn’t immediately pop into your head, that’s a good thing.

Five years ago, Sunday, March 9, 2009, marked “the bottom”.

On that day, the value of the broad stock market index, the S&P 500, hit its bottom during the housing crisis led market “crash”.

To be specific, after the collapse of Lehman Brothers in early September, 2008, the value of the largest companies in the world (as measured by the S&P 500 Index) fell to 752 on November 20, 2008.

(If you’ve been a Relaxing Retirement member for a while, you may recall our Fall 2008 “Let’s Make a Deal” Member Event at The Marriott starring me as Monte Hall right in the middle of the crisis.)

Right after the event, the value of the S&P Index proceeded to climb back to 903 to close out 2008, only to plummet back down again and hit bottom at 677 on March 9, 2009.

Do you remember what was splattered all over the news back then?

As you may recall, it was nothing but second-by-second chaos and predictions of the world as we had known it up until that moment ending.

Try and remember exactly how you felt back then.

Did they scare you enough to get you to fold your tent and sell your carefully orchestrated ownership of the great companies of the world as it did for millions of retirees across America?

The reason I ask is that if you fast forward five years to last Friday, March 7, 2014, the value of the same S&P 500 Index stood at 1,878! (Remember that the price back on March 9, 2009 was 677)

That represents a price increase of 177% over that five year span.  And, this doesn’t include the dividends you would have received for maintaining ownership during those years which represented approximately 2% more in return per year.

Over that same time frame, the small cap Russell 2000 Index grew 250%.

Now, this is not about rubbing salt into wounds or about saying “I told you so”.

There’s a lesson and a very important strategy involved that is critical to you experiencing the relaxing retirement you desire and deserve.

The key lesson and strategy is that if (and only if) you’ve done your homework and prepared properly, then you have the structure in place to weather a storm like the events that led up to March 9, 2009, and maintain your financial confidence, i.e. confidently spend and invest.

Now, what does it mean to have “done your homework and prepared properly”?  What this means is:

  1. 1.    you’ve determined the amount of money you need to withdraw from your Retirement Bucket™ each year for your spending needs,
  2. you’ve calculated the investment rate of return you need to earn to produce the lifestyle sustaining income you need to withdraw without running out of money,
  3. you’ve set aside funds in short term instruments to satisfy your withdrawal needs for several years so you’re not forced to sell at inopportune times because you “need” the money to support your cash flow needs.
  4. you’ve carefully selected ‘which’ accounts you’re going to draw from so you pay the least amount of income taxes you’re legally obligated to pay,
  5. you’ve strategically allocated and diversified your long term holdings among a carefully orchestrated mix of asset classes with full knowledge that they will each perform differently during various market conditions over your lifetime,
  6. you’ve strategically planned ‘where’ you’re going to hold your various investment holdings to take advantage of lower capital gains tax rates vs. higher ordinary income tax rates, and
  7. you assess the allocation of your holdings on a strict timetable and objectively rebalance with the full understanding that market price corrections have always been and will continue to be a normal and regular occurrence in your investment lifetime.

If you follow and adhere to this Relaxing Retirement Formula, then the ugly events that took place leading up to March 9, 2009 are a short term annoyance, but not something that causes you to abandon and dismantle your ownership of what you’ve carefully planned to provide the lifestyle sustaining income you need for the rest of your life.

You simply go to step 7 (above) and take advantage of the opportunity to own more inflation fighting investments at bargain prices.

Now THAT’S something worth celebrating!