The Retirement Solution: What You Should Know

When people ask me about “the retirement solution,” I usually pause and ask them a question back: “Which one?” Because here’s what I’ve learned after years of helping families plan for their financial future—there isn’t just one retirement solution. In fact, what most people have been told is “the solution” (max out your 401k, maybe add a Roth IRA, and hope for the best) might not be enough to create the retirement lifestyle they actually want.

For a complete overview, see learn more about the MPI strategy.

My parents raised five boys in the Chicago suburbs, ran multiple businesses, and worked hard to give us a great life. They made good money, but like many families, they didn’t save early—and when they tried to catch up with real estate rentals and the stock market, 2008 wiped them out. Watching them lose their properties, their savings, and their retirement plans changed the way I looked at the traditional system. It made me realize that maybe we need to rethink what “the retirement solution” actually looks like.

The Problem with the Traditional “Retirement Solution”

Most retirement strategies people follow today were built decades ago in a completely different world, and they’re quietly failing millions of people. That outdated system may no longer be enough to create the retirement lifestyle you hope for and deserve.

Let’s be honest about what the conventional retirement solution actually delivers. Say you’ve been diligent. You’ve maxed out your 401k for years, maybe contributed to a Roth IRA, and you’ve managed to accumulate $1 million by age 65. Sounds pretty good, right?

Here’s where reality hits: Using the 4% rule—which is what most advisors recommend as a safe withdrawal rate—that gives you $40,000 a year before taxes. After federal and state taxes, you’re looking at maybe $32,000 take-home. That’s about $2,700 a month to live on in retirement.

Is that really the retirement solution we’ve been working toward our whole lives?

Why the 4% Rule Limits Your Retirement Income

The 4% rule exists for a reason, and it’s not a good one. It’s designed to protect you from something called “sequence of returns risk”—the danger that a market crash early in your retirement could wipe out your savings when you need them most.

Think about it: if the market drops 30% in your first year of retirement and you’re withdrawing money to live on, you’re selling investments at a loss. Your account balance drops, and now you have less money to recover when the market eventually bounces back. This is why financial advisors tell you to withdraw only 4%—and some are now saying 3%.

But here’s what really bothers me about this approach: you spend 40 years building an account balance, but the system wasn’t actually designed to produce reliable income. What good is saving your whole life to build a retirement account if it wasn’t designed to produce a good income and could leave you living month to month in retirement?

The Real Retirement Solution: Focus on Income, Not Just Account Balance

I’ve come to believe that the real retirement solution isn’t about reaching a certain account balance—it’s about creating reliable, tax-advantaged income that you can’t outlive.

Most people focus on their “net worth number”—how much money they have. But what actually matters is their “financial freedom number”—how much secure, spendable income their net worth produces. These are two very different things.

Many financial advisors get paid on how much is in your retirement account and nothing to do with your retirement income. If they were paid on the success of your retirement plan producing income, things would change very quickly.

Understanding the Target Date Fund Trap

Here’s something else that doesn’t make sense about the traditional retirement solution: just when you need your money to work hardest (when your account is largest), the system tells you to move it to the most conservative investments.

It’s called the Target Date Fund approach:

• Age 25-40: Aggressive investments (seeking 10%+ returns)
• Age 40-55: Moderate investments (seeking 7-8% returns)
• Age 55-65: Conservative investments (seeking 4-5% returns)
• Age 65+: Very conservative investments (seeking 2-3% returns)

This is backwards. You need your best returns when your account balance is at its peak—in retirement. But the traditional system gives you your worst returns at that critical time. It’s like training for a marathon and then deciding to walk the last mile.

Alternative Retirement Solutions to Consider

So what does a better retirement solution look like? In my experience, it usually involves diversifying beyond just traditional retirement accounts. Here are some approaches I’ve seen work:

Tax Diversification Strategy

Instead of putting everything in tax-deferred accounts (401k, traditional IRA), consider spreading your retirement savings across different tax treatments:

• Tax-deferred (traditional 401k/IRA): You get a deduction now, pay taxes later
• Tax-free growth (Roth IRA): You pay taxes now, withdraw tax-free later
• Tax-advantaged vehicles (properly structured life insurance): Potential for tax-free growth and tax-advantaged distributions

The MPI Strategy Approach

One alternative I’ve been studying extensively is something called the MPI (Maximum Premium Indexing) strategy. It uses a properly designed, max-funded Indexed Universal Life policy to potentially create retirement income.

Here’s what makes it interesting: instead of facing the 4% withdrawal limitation of traditional accounts, a properly implemented MPI strategy might allow for withdrawal rates of 8-10% or even higher, and those distributions could potentially be tax-free through policy loans.

Going back to our $1 million example: instead of $2,700 per month after taxes, you might be looking at $8,300+ per month in tax-advantaged income. That’s a dramatically different retirement lifestyle.

The key features that make this possible include:

• A 0% floor that protects against market losses
• Index-linked growth potential (historically 7-8% average)
• The ability to access cash value through policy loans
• Tax-advantaged treatment of distributions
• No required minimum distributions

Real Estate Investment Strategy

Some people build retirement income through real estate—rental properties, REITs, or real estate crowdfunding platforms. The advantage is potential for both appreciation and monthly cash flow. The disadvantage is that it requires active management and comes with market risk.

Business Ownership and Passive Income

Building a business that can eventually generate passive income is another path. This might be the most challenging approach, but it can also be the most rewarding for those who succeed.

The Compound Cycles Concept

No matter which retirement solution you choose, there’s one mathematical principle that applies to all of them: compound cycles. This is the most important concept most people never learn.

A compound cycle is simply the period during which money doubles. You can calculate it using the Rule of 72: divide 72 by your rate of return to see how long it takes your money to double.

• At 8% return: 72 ÷ 8 = 9 years per compound cycle
• At 10% return: 72 ÷ 10 = 7.2 years per compound cycle

Here’s why this matters: the majority of your wealth gets created in the later compound cycles, when your account balance is largest and the doubling amounts are huge. This is why starting early and never interrupting the compounding process is so critical.

Every year you wait costs you compound cycles, and every compound cycle you lose costs you significant retirement income.

What Makes a Retirement Solution Right for You

The right retirement solution depends on several factors:

Your time horizon: The younger you are, the more options you have. If you’re 25, you have time to recover from mistakes. If you’re 55, you need more certainty.

Your risk tolerance: Some people sleep better knowing their principal is protected, even if it means potentially lower returns. Others are comfortable with market volatility if it means higher growth potential.

Your tax situation: If you’re in a high tax bracket now, tax-deferred accounts might make sense. If you expect to be in a higher tax bracket in retirement, tax-free growth strategies might be better.

Your income needs: Do you need your retirement savings to last 20 years or 40 years? Will you have other income sources like pensions or rental properties?

Your legacy goals: Do you want to leave money to your children, or are you planning to spend it all during your lifetime?

The Importance of Starting Now

Here’s something that shocked me when I first learned it: waiting just one year to start your retirement solution can cost you tens of thousands of dollars in retirement income.

For example, a 31-year-old contributing $1,000 per month until age 55 might have projected retirement income of $111,240 per year. Start at age 32 instead (just one year later), and that projected income drops to $100,920 per year. That’s $10,320 less per year, every year, for the rest of their life.

The cost of waiting one year: potentially over $300,000 in lifetime retirement income.

Time is the irreplaceable ingredient in any retirement solution. You can always earn more money, but you can’t buy more time.

Questions to Ask About Any Retirement Solution

Before committing to any retirement strategy, ask these questions:

1. Income focus: How much spendable income will this create in retirement, not just account value?

2. Tax treatment: What will I actually take home after taxes?

3. Market risk: What happens to my income if there’s a market crash in early retirement?

4. Flexibility: Can I access this money before age 59½ if needed?

5. Required distributions: Will I be forced to withdraw money whether I need it or not?

6. Legacy planning: What happens to this money when I die?

7. Fees and costs: What are the total costs, and how do they impact my net returns?

The Real Retirement Solution: Education and Action

After working with hundreds of families on their retirement planning, I’ve come to believe that the real retirement solution isn’t any single product or strategy—it’s education combined with action.

Most people know they need to save for retirement, but they don’t understand the mathematical principles that make the difference between a comfortable retirement and just getting by. They don’t understand compound cycles, tax diversification, or the sequence of returns risk.

Once you understand these concepts, you can make informed decisions about which retirement solutions make sense for your situation. But understanding alone isn’t enough—you have to take action while you still have time on your side.

Getting Started with Your Retirement Solution

If you’re reading this and realize you need to rethink your retirement strategy, here’s what I’d suggest:

1. Calculate your Financial Freedom Number: How much monthly income do you actually need in retirement? Multiply that by 12 to get your annual need.

2. Evaluate your current path: Based on your current savings rate and investment returns, what monthly income is your current strategy projected to provide?

3. Identify the gap: If there’s a shortfall between what you need and what you’re on track to have, you need to either save more, get better returns, or find more tax-efficient strategies.

4. Consider alternatives: Don’t put all your eggs in one basket. Look at tax diversification, alternative vehicles like properly structured life insurance, or other income-producing assets.

5. Start now: Every month you delay costs you compound interest and future retirement income.

The retirement solution that’s right for you might be different from what’s right for your neighbor, your coworker, or even your financial advisor. But one thing is universal: the sooner you start, and the more educated you become about your options, the better your outcome is likely to be.

Life insurance and retirement planning are complex topics, and there’s no one-size-fits-all solution. I help families explore their options and find strategies that align with their goals, timeline, and comfort level with different types of accounts and approaches.

Related Reading

• LIRP Life Insurance: What You Should Know
• MPI Investment: What You Should Know
• Retirement Income Solutions: What You Should Know
• Indexed Universal Life Insurance Pros and Cons

Ready to explore your retirement options? Reach out for a consultation and let’s discuss what “the retirement solution” might look like for your specific situation.