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Over the past three decades, almost every business entity in America has replaced its defined benefit pension plan with a 401(k) or similar defined contribution plan. It is safe to assume that a large reason for this massive change was simply that business leaders realized it was a lot cheaper to provide a 401(k) matching fund than it was to fund a true pension plan that provided a lifetime of guaranteed retirement income.

This move no doubt retained billions in corporate profits, but at the price of sending a great many loyal employees down a path in which they will have only a fraction of what they will need at retirement.

According to the Employee Benefits Research Institute (EBRI), the average person approaching retirement today has a total balance in his 401(k) and other retirement plans of only about three times his annual salary.

Without any other savings and only the additional income from Social Security, most baby boomers’ meager 401(k) balances will be completely exhausted in just seven or eight years following retirement.

What then?

I devoted an entire chapter to this problem in my book The Synergy Effect – The Advisor’s Guide.

Tony Robbins referenced The Synergy Effect in his #1 New York Times Bestseller titled MONEY, Master the Game.

In The Synergy Effect (published 2014) I show how combining vehicles like annuities, indexed universal life insurance and other forms of life insurance, Roth IRAs and reverse mortgages can provide much greater results then traditional retirement planning.

In an article published Oct 17, 2017 Nobel laureate and MIT Sloan professor Robert Merton takes this concept much further (in my opinion) by proposing the use of reverse mortgages to fund annuities.

What Strategies Do You Use?

Annuities and reverse mortgages are two products that can help clients deal with the 401k disaster. What products and strategies do you use to help your clients?

Let me know in the comments below!