Keep Your Hands Out of the Retirement Plan Cookie Jar

The need for self-control and the propensity to give in are something we all must grapple with on a daily basis. But the now well known adage to "Just Say No" applies to much more than just resisting the urge to smoke, drink too much, or indulge in other unhealthy lifestyles. For many, this includes the urge to dip into their retirement savings when things get tight.

According to a recent report in the Wall Street Journal, more Americans are now dipping into their retirement funds than ever before. And recent economic conditions make it easy to justify doing so. Part of the problem is that liquidating or borrowing even a few thousand dollars in one's 401(k) doesn't seem too harmful, particularly when families are scrambling to pay bills in the face of unemployment or unexpected medical bills. But it is harmful and even reducing one's retirement account by "just" a few thousdan dollars can have a huge impact on one's future retirement income.

Can a few thousand dollars really make that big of a difference? The answer is Yes. And the answer is even more Yes when considering that future resources for retirement income are drying up.

With pensions going the way of the dodo bird, most Americans will have to rely on their personal and retirement savings more than ever. This on top of the fact that studies show 4 out of 5 Americans aren't saving enough for retirement to begin with. Then add in rising medical care, increased longevity and the "i" word (inflation), and you're talking about adding real insult to your retirement injury!

The good news is that you can Just Say No to borrowing or spending down your retirement savings. It might require a little fiscal dieting, but the long-term prognosis for your future will be much healthier.

Income Replacement Funds - A Good Idea Finally Come Of Age

Back in the day, one of the most common problems for many who had saved well for retirement was having "too much MONEY at the end of one's life" - and thus an entire industry matured in serving the needs for estate planning, charitable giving and more. Although the need for these services is now greater than ever, an even larger problem now looming on the horizon is having "too much LIFE at the end of one's money!"

Increasing longevity is one of the major reasons that insurance and mutual fund companies are now developing new products and solutions to help provide an aging America much needed income solutions. And one of these new solutions is the income replacement fund.

As the name implies, this solution at its heart is a mutual fund and like any other, it comes in a variety of flavors. Although mutual funds are typically accumulation solutions (and the most popular investment vehicle for IRAs and K plans), income replacement funds are just the opposite - they are "decumulation" solutions. So what makes these funds unique is their feature to pay out over a specified length of time. Many of these funds now offer payout terms ranging from 7 years to 25 years or longer. The termed payout is the feature that gives these funds their name and is a new way to help one strategically spend down a portion of their retirement assets.

ADVANTAGES: The primary advantage of these funds is their simple and systematic approach in spending down or "decumulating" retirement assets. Since these are mutual funds, they are liquid and have no surrender schedule or fees. Furthermore one may turn the income feature on or off as desired unlike money that has been annuitized.

DISADVANTAGES: The disadvantages of the income replacement funds are the same as all other mutual funds. Since these are securities products that participate in the market, their values may fluctuate and there is no guarantee of principal. As a result, the payout is tied to annual investment performance, so there is no guaranteed stream of income. Depending on investment performance and account balance, payout may even be accelerated to payout the account balance by the end of the selected term.

Income replacement funds are another excellent solution now available to those nearing or already in retirement and may be used in a variety of retirement strategies. Many have found these funds to be an excellent compliment to existing annuity investments as a hybrid income solution providing the best features of both worlds including:

• Variable income (IRF) and guaranteed income (immediate annuity)
• Market participation and principal protection (available through variable annuity living benefits)
• Liquidity (IRF & partial liquidity through annuity surrender schedule)
• Insurance protection (annuity)
• Diversification & asset allocation (IRF and variable annuities)
• Laddered strategies for growth as a hedge against inflation