Time Horizons and Risk

When planning for retirement, an important concept to keep in mind is TIME HORIZONS. What this refers to simply is that your need for income may change at various times due to changes along life's journey due to medical needs, inflation, changes in housing or other unforeseen events.

You've been trained to believe that you can and should take a little more risk with money you won't need for many years. Interestingly though, if you were to sit down and do some simple math you would find that the power of compound interest works very much in your favor when you determine specific time horizons for using segments of your retirement assets.

Albert Einstein famously said that the most powerful force in the universe is compound interest! Yet, many financial institutions and investment bankers want you to believe that it's worth the risk to get higher average rates of returns if you leave your money in the market over long periods of time. Math doesn't lie. The ever expanding increase of wealth using compound interest is a powerful retirement tool.

It's true. Financial tools like mutual funds, stocks, bonds, annuities, bank certificates and the like have no intrinsic value in and of themselves. Their value is derived in knowing how to use them. That's what we love to do!

Before you buy the lie that you should be willing to take more risk than you are comfortable with because you'll have time to recover over a long time horizon, work out the math using compound interest. The results may surprise you!

Working Longer To Make Up Losses

Long before this mess and recession even hit the air waves, many individuals should have seriously thought about working past the average retirement age of 63 because we are living much longer. Sadly, the huge hits to the average 401(k) in 2008, has made retirement prospects even worse.

If we look at the average 40-year-old today who has a 401(k) savings rate of 7 percent, they will most likely have to work one more year or save an additional 1 percent of pay per year until age 65 just to make up for the 2008 market losses. People closer to retirement age will have an even tougher time replenishing depleted retirement accounts. A typical 55-year-old employee with a 401(k) savings rate averaging 10 percent of pay will need to save an additional 12 percent each year until age 65, or work for two more years.

Other research has found similarly large numbers. The Employee Benefit Research Institute calculated in December that employees with between 20 and 29 years on the job will have to work an extra 1 year and 9 months to recoup stock market losses. If workers pull their remaining cash out of the stock market it will take even longer to recover … approximately 2 years and 1 month.

Check out our next article on Six Ways To Make Your Retirement Accounts Last Longer.

The Power of Being Your Own Banker

If all middle-America had been educated on how to recapture the interest they were paying to banks and other financial institutions for all of the major items they desperately need throughout their lifetime … right now … all along life would have been so much simpler, profitable and not upside down.

Do you ever wonder how banks stay in business whether interest rates go up or down? If I told you that you could use dividend-paying whole life insurance the same way, would you believe me? Probably not. The banks don’t want you to know either because they would lose their power over you.

Think about it though. If you could generate money that you could count on and not do anything to earn it, wouldn’t you want somebody to be honest and tell you about it? Well, I will. If you think this is a get rich quick plan … don’t read on because it isn’t. I can give you a thousand links that will lead to those empty promises. However, I will educate you on a few systems that will provide you with substantial financial security over a given period of time that absolutely, positively work. I’ll probably make enemies divulging this information but, you know what, I can sleep nights and still like the reflection I see looking back at me each morning before I begin my day taking care of my clients.

Every one needs to supplement their 9-5 with another means of securing their financial stability and creating an additional stream of income.

Will Rogers once said, “The problem with America is not so much what people don’t know; it’s what they think they do and it just ain’t so.” I will go even one step further. In light of the tragic collapse of today’s market, it’s also what banks and financial leaders didn’t want you to know in the first place.

You can and will “Become Your Own Banker” through my series being provided here on Life’s Journey. If you aren’t the kind of person who wants to learn the process and an individual who just wants to keep their feet wet and jump in, we’ll still educate you along the way because knowledge is power.

To begin right away, just give us a call on our toll free line.

Creating A Bank Like Those You Know

What is one thing which has been constant in your life and has never changed from the time you began purchasing?

The answer quite frankly is you finance everything you buy. You always pay out interest to someone else and borrow from them … never paying anything to yourself … always doing it over and over again. Why? Because we’ve been trained to think that is the way of life.

Most people also think that putting $50-$100 per month into a life insurance premium will make them insurance poor. However, none of us think anything about going to a dealer to buy a car with a loan from a bank or finance company. Here’s a little known secret. Whenever we borrow money (be it banks or finance companies) we are simply customers of other people who have already borrowed the same money first in blocks, added fees and additional interest and then loaned the same money to you and me to buy cars major appliances, and even our homes. Naturally, we think nothing of paying $250-$500 per month for 4 years including interest on a car loan. Why? Because we don’t have access to that first block of money ourselves! In other words, we can’t borrow at wholesale!

If you took just $300 and paid it directly to a life insurance company in the form of premiums for around four years, you could take out a policy loan and pay cash for the automobile. Of course if you were your own “honest banker”, you would have to pay it back but, you are paying it back to yourself. You own the policy … not the insurance company. They are just the administrator and must collect the premiums and MUST lend money out or make investments of one kind or another in order to be able to pay the death claims that were promised. As the owner of the policy, YOU are always first in line to borrow money against your policy. Think of it this way, your bank would not allow your neighbor who has no home equity to borrow against your home equity. But you can borrow against your home – only if you promise and have the ability to pay it back. If you borrow against your life insurance policy, you have a choice, but an “honest banker” will always pay back the loan! The insurance company might lend money to other institutions – even the government in the form of government bonds, but as the owner of your policy, the beautiful truth is that YOU are ALWAYS first in line – no questions asked! How’s THAT for financial freedom!

We have become so infatuated with living for today that the importance of saving and creating capital is not even an after thought any more. People are paying through the nose, getting poorer by the year while those in charge of creating capital keep getting richer.

How do you start building your own banking system? Series Three will explain exactly how.

The Process of Banking

So many of us are ignorant when it comes to how banking works. Please know I use the word ignorant not to reference an extreme lack of manners but true lack of knowledge. If you do not know how it interacts within your life and how it can affect your well being, your financial security will never be attainable.

Banking is the magic of leverage; and for them it is a wow factor. What I mean by leverage is this example … when you want to buy a home, banks will lend you the money because they think you can make payments based on all the personal information you provide them at the time of application.

When you borrow their money, you are also paying interest on that borrowed money over an extended period of time. You will only attain some semblance of small wealth if you try and sell the property after some time passes … that is, if your house has appreciated in value over the years. If you did build equity, did you really make a profit? NO. You gave up all that interest you paid to the bank over the years. That’s leverage and to the bank it is simply wonderful! Who really made out here? Do you think your house will increase in value higher than the interest you paid out to the bank? You never bought a home to begin with. It was the banks all along. It’s never yours until you pay it off.

The same applies if you buy a car, finance new furniture or use credit cards for major appliance purchases. Divide the amount you paid out into the interest and you will see that nearly 85% of every dollar goes to the cost of financing.

Wouldn’t you rather take the control away from that very small arena of people who control our economy? Banking is the one most important business in the world. Without it, the world would come to a screeching halt … and we are experiencing the biggest traffic jam ever in history right now. When they pass out money to any one any where, it always flows back to them. That flow of currency comes from one general source of control and can be managed by a number of institutions: banks, insurance companies, corporations and investors. When they get greedy and make bad judgments it is you who suffers by paying higher interest rates, higher costs on inventory, higher fuel prices, programs being eliminated, benefits being cut and jobs being decreased.

How much of that function you control as it relates to your personal needs is what we have always given up on. You can control the financial environment in which you live and operate, and it will be the most profitable thing that you can do over your lifetime by taking the power away from the controllers themselves.

College Planning

Time does not creep along slowly … it passes quickly before our eyes no matter how much we wish to bridle it and make it stand still. One day you have a newborn nestled in your arms, and then they are scooting across the floor chasing the family pet, stepping up into a school bus for their first day at kindergarten or, dressing to the hilt for their senior prom.

The thought of college is always in the foreground of our minds. We know it is issue that will need addressing in the very near future. It’s just human nature to put that thought aside for a later date, because we truly believe we still have plenty of time. There is that four letter word again … TIME. Well, we have already established that Father Time waits for no man. And because of it, the cost of college continues on the rise. According to the US Department of Agriculture’s 2006 report Expenditures on Children by Families, a family living in the northeast with a household income over $64,000 will spend $348,418 to raise and educate just one child. That includes the cost of education at an average public university. What a shuddering thought!

Before the thought of raising pets instead of children consumes you, know this. No matter what stage your family is in with a child preparing for college, there is always some thing you can do to help offset these costs. You hear a lot now about a college savings plan known as a 529 plan, however, it is not the only safeguard and truly may not be the best option for you. A Roth IRA works more to your advantage without the fear of penalty if something else comes up and the remarkable value of life insurance, particularly, Cash Value Life Insurance is a fantastic avenue for such a purpose.

They are great savings vehicles if you start early, however, every family’s situation is different and it is extremely important to sit down with a professional first to understand the advantages, coverage and restrictions and what other opportunities are available to you and your particular circumstances. We'd love to discuss them with you ~ give us a call today.

Is Our Middle Class Fading?

We all worry as to whether or, not, the $700 billion stimulus package is going to be our country’s salvation. No one wants to be a skeptic as to how that money will truly be spent.

Sadly the mess we are in as a nation began long before its arrival with declining wages and rising expenses continually chipping away at the little bit middle income families were making. Mom and dads, single households tried to adjust working a second job, longer hours, depleting savings and creating more debt to simply get by.

The strongest class that once was, is no longer because they find themselves crushed by debt and rampant job loss is making the problem even worse. Our financial system can not be made stable without strengthening families. If they continue to choke on debt they cannot pay and the blocks will continue to tumble.

Communities are deteriorating at a rapid rate and the middle class is at a pivoting point. The outcome will prove either one of two ways when all is said is done: middle-America will become stronger and wiser, reducing their debt and creating a stronger safety net not just on their own, but through stronger government regulations OR, it will disappear altogether.

No one wants to be part of a class that lives paycheck-to-paycheck but, right now, we are. One of the hardest lessons this crisis has taught is that taking on debt is dangerous for individual families. For decades, families have been doing it knowing it would catch up with them … and sometimes because lower wages and rising costs meant it was simply the only way they could live the most basic life.

What can middle folk do to bring some sense of financial security into their lives now? Do not take on any more credit card debt … it is only exasperating the problem. Pay off whatever short term debt you may have, then tackle the car loan, and then finally chip away at the mortgage.

We'd like to show you how you can save thousands of dollars by shortening the length of your mortgage and paying down all of your debt. It requires no change in your daily spending habits and it will not even increase the monthly payment you are making now.

There is hope … and will be here every step of the way to help you get through it. Give us a call today and find out how.