Spotlight

Spotlight

How an 'advance-and-protect strategy' is vital in your retirement plan

Posted May 21, 2020 5:00 a.m. EDT
Updated May 28, 2020 5:00 a.m. EDT

Playing the market can be risky, especially when it's the method for funding your retirement plan.

This article was written for our sponsor, Capital Financial USA.

Playing the market can be risky, especially when it's the method for funding your retirement plan.

In fact, the stock market averages negative returns around one out of every four years. When time is on your side, those odds aren't bad, but as years go by, there is less opportunity to recover from a rough financial year. Take the wrong risk, and you may have to push retirement off for a few more years to recuperate what was lost.

How can you take advantage of the highs of the market without making your investment vulnerable to lows? An advance-and-protect strategy. This investment method allows you to lock in gains before suffering losses and ensures you have a safe, risk-free nest egg once retirement comes along.

While the money used for the advance-and-protect strategy isn't in the market, it's still tied to market performance. If the market performs well, then the strategy puts a stake in the ground, securing the gain without suffering the loss.

"Think of these gains like football. In football, when a team gets the lead, they don't continue to throw the ball all the way down the field. They hand it to the running back, and he goes forward three or four yards — they advance it, and he's got the ball protected," said fiduciary planner Pete J. D'Arruda. D'Arruda, who is best known as Coach Pete, is a Master Registered Financial Consultant who works with a large client base of retired people and those getting ready to retire, and is president of Capital Financial USA, a financial advisory and consulting firm headquartered in Apex.

He continued, "If they're down and losing, then they try desperate maneuvers, and they get beat even worse. That's what's happening right now with people that don't have a real plan established — they're just like a team throwing the ball too far down the field and getting intercepted."

Through the advance-and-protect strategy, D'Arruda and his team of financial advisors hope to get people's finances into a position where they're always gaining ground and never losing yardage. To achieve this, plans and strategies are individually customized based on each clients' unique financial situation, then closely monitored.

This type of retirement planning is beneficial at every age, but once people start reaching the "financial Red Zone" — ages 52 and above — it becomes all the more important to have protected retirement savings.

Many people approaching retirement age already have a nest egg set aside, whether through a 401k, money in the stock market, or a number of other methods. However, they're nearing a period where they're less able to absorb a hit to market conditions without serious financial repercussions.

By pulling that money out and placing it into a protected piece of your portfolio through the advance-and-protect strategy, those finances are able to grow and compound without risk of loss. Then, when it comes time to be pulled as a source of income, it's readily available and free of surprises.

"We want our retirement income to come from the most reliable, predictable place that we possibly can," said Marty Hensely, a retirement and wealth strategist at Capital Financial. "We believe the most reliable, predictable place is an investment where it's protected against any loss of principal from the overall market."

At Capital Financial, D'Arruda, Hensely and their colleagues utilize hybrid annuities to accomplish this reliable, predictable strategy. In doing so, they're able to leverage gains in the market without suffering losses.

Since the staff at the firm is made up of fiduciaries, they are held to high ethical standards, always acting in the best interests of the clients. In other words, they don't take commission out of advance-and-protect profits, meaning more total savings for those who use the strategy.

"Life isn't all about the stock market, and you should meet with a planning team who understands that," D'Arruda said. "The market is great to grow your money, but once you have a gain, it is important to lock it in. I always say, 'You aren't up until you are out.' In other words, it doesn't matter how much you've made in the market on paper, those gains can quickly be wiped out if you don't have an advance-and-protect strategy in place."

This article was written for our sponsor, Capital Financial USA.

Our commenting policy has changed. If you would like to comment, please share on social media using the icons below and comment there.