Ken Himmler.com

As I sat at my desk today and watched the crazy tumble of the Dow Jones it really reinforced the difference between accumulation and distribution. Everyday I meet with retirees or people about to retire and see the stress and the worry on their faces. Their worries are more founded lately because of this massive recession that we are in. In many of their cases I can understand why they are worried. Their entire future is dependent on the outcome of the stock market and they go up and down like a slinky. If you are twenty years old then you should by all means be invested in the stock market and probably 100% in. If you are in your sixties or in your seventies and you are dependent on at least 3% to 4% coming to you in a distribution and you are more than 40% in the stock market then you should be worried. Is this because I think the stock market wont come back – no, it is because I don’t think it will come back and grow for at least another two to three years. If you think I am crazy look at the business cycle. Just now the main street businesses are starting to go out of business. I know main stream financial media says that we are coming out of this recession but all the economic factors point the other way. Just yesterday Warren Buffett stated that this recession will last even longer than he originally anticipated. Lets look at the oil crisis. The oil supply has not kept up with the demand and therefore the sellers of oil have the market ability to increase prices and the world must pay it. If you think that this isn’t true just look at what is happening in Dubai. They expect to get over 1.7 trillion in profits over the next two years. They have at least 70% of the worlds tall cranes in one city – for building high rises. To add insult to injury now they are building another mall with another inside ski slope. This sudden increase in demand cannot be met in a short term. It will take a period of time for alternative fuel sources, alternative energy (solar), alternative transportation (hybrid and hydrogen cars) to not only be designed but produced. Once this happens then the oil produces don’t have as much power as they do now. What this means for people trying to plan their retirement income is that they may have a hard time living in today with inflation above 4%.  The real question is how can a person possibly feel comfortable with their retirement income when they don’t have a good asset allocation plan in place that includes a way to get an income from a fixed – no risk investment over the next two to four years. Let me know what are your thoughts and guesstimates of what will happen in the next few years in regards to the economy?

What is cash value?

Term insurance charges an increasing premium (annually or in bands) to reflect the fact that the insured is aging and, each year, more likely to die. Cash value life insurance has a level premium that is larger than necessary in the early years of the policy to offset the increased costs of insuring the individual in the later years. This excess premium is invested and kept in an account known as the cash value account. In the event that you surrender the policy before death, this excess premium and its earnings are returned to you.
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