Monday, June 21, 2010

A CRITICAL Retirement Lesson from BP’s Oil Spill

A CRITICAL Retirement Lesson from BP’s Oil Spill

Unless you’ve literally been living under a rock, you have already heard plenty about the politics/PR aspects related to the horrific BP oil disaster in the Gulf of Mexico. However, buried amid all the media coverage of this story is a very important lesson that investors, perhaps like yourself, who may be planning for retirement (as well as their financial counselors) should and must heed.

According to a Bloomberg report, BP’s shares have slumped 45 percent since April 20, the day the rig exploded, effectively wiping out roughly $81 billion of the company’s value.

Also this week, Yahoo! News reported that after agreeing to cough up a $20 billion relief fund – for starters – as well as another $100 million to pay out-of-work employees, “BP said in a statement it would cut three-quarters of dividends, significantly reduce its investment program and sell $10 billion of assets to create the fund.” The company “would cancel the first-quarter dividend due for payment on June 21 and would not declare interim dividends for the second and third quarters of 2010. The payouts were expected to be about $2.6 billion per quarter, in line with recent quarters.”

The Hidden Lesson?

Those dividends are paid to shareholders of BP, some of whom are individual investors just like you, folks who are retired and seriously count on receiving the income from those checks. Based on the reported estimates, $2.6 billion per quarter, aggregated across three quarters, comes out to $7.8 billion of income that will not be paid to those investors – again, some of whom are retired.

What Are They Supposed to Do NOW?

Unfortunately, the most honest answer I can offer is that they’ll simply have to suck it up and suffer in the meantime. And remember, this could very well be just the beginning, as most reports point out that these cost estimates appear low – which mean we just don’t know how bad things could get for those depending on BP’s dividend checks.

For the life of me, I don’t understand how any financial professional could think it’s okay to put any portion of their clients’ retirement income at the mercy of unpredictable dividends or stock prices. In my opinion, this is simply imprudent planning.

I can honestly say that not a single one of our clients will ever face such a predicament, because we never gamble – even slightly – with their retirement incomes. You see, we understand – as should everyone – that no matter how “solid” a company like BP has been in the past, or may look today, ACCIDENTS HAPPEN. And because accidents happen in real life, you and your financial counselor need to answer this question: Are you at risk of losing any portion of your retirement income if something unforeseen were to occur?

And as you digest that answer, remember that your bills do not stop just because an accident has happened. Please do yourself a very big favor and make sure that your retirement strategy is solid and realistic.

Schedule your complimentary session today and find out how to safeguard your retirement income against unforeseen events. Call us at 301.949.4449 or visit us on the Web at


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