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  • Writer's pictureRon Wills

5 Essentials For a Better Retirement: #3 "Dependable Growth"

Dependable growth during the savings years and especially throughout retirement is critical! Adequate funding and growth while saving for retirement positions us to be able to retire. Then when we stop working, protecting and growing what we’ve saved is essential for us to stay retired and not run out of money. “Indexed” products like Tax Exempt Savings (TES) grow and protect money from market losses throughout both the savings and retirement years.

The 401k: A Place to Store, Not Grow Savings

Since 2000, 401ks invested in the S&P 500 had 4 years of terrific gains averaging more than 24% each year. That’s almost 100% growth in just 4 years! But market crashes in 2002 and 2008 wiped out those big gains leaving 401k investors with only about 3% annual growth the past 19 years! This growth barely beats inflation and won’t replace working income for most people.

Two Birds, One Stone

An easy way to solve the duel problem of market losses and low rates of return, is to divert part of a current 401k contribution into an “Indexed” product like TES. This one simple step diversifies some money out of stock market risk and provides a lifetime of 6% to 8% CAGR growth as well.


Indexing Delivers Growth

An index tracks the movement of the stock market but is NOT invested in the market! Historically, the market goes up about 70% of the time making it an ideal model for our indexes to follow. The odds of growing money are stacked heavily in your favor by indexing to stock market movement.

  1. An index produces a gain (up to a cap or limit) when the market ends the year higher than it started. Uncapped indexes now get most of the gains the market indices earn in the big up years.

  2. An index earns no interest if it finishes the year at 0 or negative but it has no market losses either.Indexes with a positive floor pay a guaranteed interest rate even if the index finishes at 0 or negative.


Get Additional Growth. Besides the interest credits earned by indexes, growth can also occur from:

  1. Annual Bonuses. An increasing annual cash bonus paid by the contract provider.

  2. Loan Interest. Net interest earned on money borrowed from the contract.

  3. Managing Indexes. Adjusting indexes in response to changing market conditions can improve the odds of earning more interest throughout all phases of a market cycle.

  4. Laddering. Laddering 3 or 4 Index segments throughout the year improves the odds of earning more annual interest than having all money placed in only one segment.

  5. Lock-In Feature. Interest gains automatically lock in at the end of each crediting segment.

  6. Reset Feature. Allows gains to be made from the bottom of a market crash as a new bull market begins. Buy & hold investors could wait years for the market to recoup losses following a crash.


Dependable growth plays a key role in determining the quality of retirement or whether retirement will even be possible. ”Indexed” products are intentionally designed to produce a minimum of 6% to 8% CAGR which in turn, results in much more income for our clients. This explains in part, why an “uncapped” TES can produce more than 2X the spendable income than an equally funded 401k!

Next we will be covering Essential #4, "Lower Costs". In the mean time, please feel free to contact me today to find out for yourself what Ultimate Income Advisors can do for your retirement.


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