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Hi Zenbro,

hi Dave, if I'm following you, you are saying that a retirement account
that is not annuitized needs to have an extra 50% set aside to protect
the individual from any market drops.

*IF* they are riding an S&P buy & hold strategy, without market timing or hedging/trading, yes.

By this same reasoning, does every company that sells annuities have a 50% set-aside for every dollar (present and future) that it is contractually obligated to pay out ?
NO... good catch.

They are required, by law, to have 100 cents set aside for every dollar
(present and future) that it is contractually obligated to pay out. The stronger companies have higher obligation-covering reserves (as an example, I posted the illustration from Allianz, and they carry something like 106% to 108% coverage reserves.)

In the fractional-reserve banking system that we live in, I seriously doubt that this is the case :-)
You're thinking banking... the fractional reserve banking system is exponentially riskier than the statutory-reserve insurance system.

There is no law prohibiting the banks, or Wall Street securities firms, from voluntarily backing accounts as strongly as the full-reserve insurance industry... but why should they? They sell tons of stocks & mutuals with the customers assuming all the risk!

Dave Donhoff
Leverage Planner
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