The Melting Ice Cube Syndrome


Michael Feuer wrote in 2014 about the Melting Ice Cube Syndrome and how limited a product’s future would be.  The rapid movement in technology in our world can easily make a product obsolete faster than ever.

His point was simple: organizations have a limited amount of time before a product becomes obsolete or out of date.  A simple example would be a typewriter, once the absolute necessity of the business world has now become so obsolete almost no business in the modern world would even consider its use.  The same example can be used in many more industries – medicine, construction, and automotive, to name a few.

Think of an ice cube left at room temperature. Eventually the ice cube will cease to exist and be replace by a puddle of water.  Most of our modern economy is faced with the same dilemma, how do you remain relevant as time moves on?

When considering the syndrome and the investment world, a Melting Ice Cube is an investment with a declining value.  At some future date, the value will be less than it once was. The investment faces not a quick death, but a slow and lengthy one.

The bible of retirement investing was once based on what percentage of an account could be removed annually and still maintain the original account value. In 1993, investment consultant Bill Bergen conceived the idea of the 4% solution.  His calculations recommended that removing 4% from a retirement account annually would provide a never ending source of funds.  He used the concept himself in his own consulting practice and taught other advisors how to use the same tool.  The 4% creation became the norm for retirement planning.

Over time, other experts began to poke holes in the concept basing their forecasts over 30 year plus time periods.  It was not feasible for the concept to be dependable given the ups and downs of world markets, world interest rates and the dependable interest rate of US Treasuries. Those using and depending on removing 4% of the value of a retirement account began to see the ebb and flow of the overall value.  It just didn’t hold up. Why?  Because noting in life is guaranteed and nothing in life is simple.  Change happens and change will occur.

Bergen’s 4% solution had evolved to the Melting Ice Cube Syndrome, it wouldn’t last. What evolved from the 4% solution was the need for active and honest retirement account management.  If the account had years where it did not grow, less money was withdrawn.  In years the account grew more than expected, more money could be available.

What is wrong with that reasoning?  Humans.  Humans are not a formula, they are not a syndrome.  They are people, living real lives. People who need actual retirement money and must depend on a specific income to maintain lifestyle and to help with life’s unknown demands such as health care expenses.  The 4% solution and the management of it has for many people become a stressful nightmare.

How does anyone make nearly permanent plans for retirement?  With the knowledge that change is inevitable, what should one do?

The answer is actually quite simple, you can buy income.  Insurance companies will sell you an income stream for literally any time period you want.  By outsourcing this responsibility to a third party (insurance company) and using their vehicle (annuities) you can guarantee your income without concern over 4% changes, without concern over safety and security and without concern that your monthly check might not arrive.

Guarantees backed up by more guarantees.  Using this system, it is possible to have the retirement you desire free from stress of worry about living too long and free from worrying about your check arriving.


The questions you will obviously ask are:

“How can an insurance company provide this benefit?” 

A huge misconception about insurance companies is they do not want your money, they want to HOLD your money.  The longer they can hold your money, the longer they can make money from your money.  In return, they offer benefits such as guaranteed income for any time period.

“What happens to the money if I die prematurely, does the insurance company keep it?”

The old wives’ tale about insurance companies benefiting from your death is just that, a tale. If a premature death is experienced, the full unused account is inherited by your named beneficiary.  Remember, the insurance company does NOT want your money, they only want to hold it.

“What happens to my money should the insurance company fail and go bankrupt?”

In the business world, there is no industry more highly regulated and watched than the insurance industry.  Over the past 100 years there have been a few failures and NO ONE has ever lost a dime because of it.  Backing up the insurance regulators and the company’s guarantee is a second guarantee much like the one that backs up your deposits in a bank.  It is called the State Guarantee Fund. 

The amount it guarantees per person is based on your state of residence, here is a link that will explain more:  https://www.nolhga.com/policyholderinfo/main.cfm

You can also call your local state department of insurance and request information and details directly from them.

Using an annuity as a guaranteed portion of your important retirement planning will mean the Melted Ice Cube Syndrome doesn’t affect you.  Ice cubes in annuities don’t melt.


Is an annuity right for you? It all depends.  It depends on your overall financial picture and your specific goals.  Annuities provide numerous benefits but they do require a longer time commitment. For many people, safety and security have become the forefront of retirement planning, if that is your situation, look at these products and maybe they might make sense for you.