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If you’re like many Americans, you may have seen 30, 40 or 50% losses on the value of your 401(k)s or IRAs in the last few years. But I predict the worst hit is yet to come — and it’s not what you think.
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Obama and Three Choices for Your Money
Did you miss this week’s show? Doug Andrew discussed the following:
Attend our one hour event live over the internet on Tuesday at 11:00 am or 6:00 pm Pacific: Don’t miss your chance to understand how to protect your money during this economic crisis and get competitive rates of returns during the good years. This strategy is called indexing and you need to know all about it. Call 888-76-Radio (888-767-2346) to register for either event on Tuesday. You can also register here on the web.
Rather than listening to what President Obama says, watch what he does over the next few months and the next couple of years. They are not congruent! As many politicians do, he says whatever he needs to say to appease the audience he is addressing. We’re in for a ten ring circus the next couple of years, with many more wild initiatives to come.
Take control and ownership of your future. Don’t rely on having the government provide your retirement or health care. It’s when we take ownership of anything that we take better care of it. When is the last time you washed a rental car? Do take better care of your home if you own it?
Three choices for your money: 1) Fixed Rate Instruments – Your money is put into relatively conservative financial instruments that generally have lower rates of return. 2) Variable Products – These are products that allow you to have great returns of 20-30% during the good years but during economic hard times you can also lose 30% or more. 3) Indexed Products (the middle ground) – This type of financial product gives you returns that are greater than the rate of inflation during good years but keeps your money safe so you don’t lose a dime when the market goes down.
FREE Missed Fortune E-book: Baby Boomer Blunders. THE PROBLEM? The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download at www.babyboomerblunders.com
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Last week, I published an article explaining why IRAs and 401(k)s are proving not to be best for a secure retirement, with many people seeing up to 50 percent in losses on their accounts the last few years.
Recovering from losses can be tough when money is left in the market. Realize that when an account loses 50 percent of its value, the account has to experience a 100 percent gain just to get back to the break-even point. That could take years in this volatile economy.
This last April I took the opportunity to get in some spring skiing. Nearly everyone I sat with on the chair lift that day was from out of state, and while getting acquainted, most asked me what I did.
After telling them I was an author and financial strategist, they would say, “Oh, I’ll bet you’re having a tough go of it this year!” They were shocked when I said, “Actually, we’re having a great year, primarily because the people who followed the strategies that I explain in my books and on my radio show did not lose any money during the last two years!”
This is in contrast to people we’ve all heard about who have lost thousands, hundreds of thousands-even millions of dollars-in their traditional investments.
As an author, speaker and radio show host, I visit about 48 major cities each year. I have been overwhelmed by numerous people who have expressed gratitude for the advice they followed that protected them from suffering losses on their assets last year.
For years I have been recommending that people place their serious cash (such as money earmarked for retirement or their home equity) and keep it in investments that are liquid, safe, and earn a tax-free rate of return.
I choose to put my serious cash in maximum-funded, tax-advantaged (MFTA) life insurance contracts because they are the only investments that, when properly structured and funded, allow an investor to: 1) accumulate money safely, tax-free, 2) withdraw the money later tax-free, and 3) transfer money tax-free at death.
For the last 12 years, I have used a strategy called “indexing.” With this, your principal is protected and you don’t lose when the market goes down.
When the market goes up, you are credited whatever the index of your choice earns (like the S&P 500 Index)-up to a cap-without your money actually at risk in the market (averaging 7 – 8 percent).
Some investors who had $100,000 in the S&P 500 during the last 10 years saw their money grow, but then dissipate to $68,000. Had they used indexing, they could have had a current account value of $178,000.
Proper use of such indexing strategies can help you get your future back!
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If you’re like many Americans, you may have seen 30, 40 or 50 percent losses on the value of your 401(k)s or IRAs in the last few years. But I predict the worst hit is yet to come-and it’s not what you think.
As it is, recovering from losses can be tough. For example, when an account loses 50 percent of its value, the account has to experience a 100 percent gain just to get back to the break even point.
Say you had $100,000 in a 401(k) two years ago that is now worth $50,000. Your account would need to double to get back to its original value. In this volatile economy, that could take years.
Also, retirement accounts that were once worth twice as much and generated interest income of 7, 8 or 9 percent, are now worth half as much and are only generating 2, 3 or 4 percent.
But that’s not all to be worried about.
Despite all the recent losses, I predict it will pale in comparison to the tax hit retirees will experience the day they begin withdrawing their money from their qualified retirement plans.
I had a school teacher who came to me several years ago for financial planning. She knew she would only be receiving 60 percent of the income she had when she was teaching (2 percent for every year of 30 years of service).
Thus, she had socked away money faithfully in the state’s 401(k), 403(b), and in tax sheltered annuities (TSAs) to supplement her retirement.
But when she retired, she found herself in the highest tax bracket she had ever been in, even though she was not working.
Why? Her house was paid off; she was not contributing to these accounts anymore; and she had no dependents. Her tax deductions were all gone.
On top of her pension and social security, at age 70½ she was forced to withdraw the minimum distribution from her tax-deferred accounts. Her taxable income was $80,000 a year, with hardly any deductions.
All that money she had saved in taxes during her 30 years of contributions-she essentially paid it back to Uncle Sam during the first two years of retirement, and every two years thereafter!
You see, the government has a permanent tax lien on your IRAs and 401(k)s.
One thing is certain: Future taxes will be going up. For this reason, I don’t own an IRA or 401(k)-never have, never will! There are better ways to save and have tax-free income in retirement.
If you’re feeling confused and powerless because your IRAs or 401(k)s lost 20-50 percent during the last couple of years, leaving you frustrated-even feeling paralyzed-there are safe strategies and solutions that will help you get unstuck and get your future back!
Doug Andrew
Photo by mujitra
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Podcast: Download (23.0MB)
Is Your 401(k) now a 201(k)?
Did you miss this week’s show? Doug Andrew discussed the following:
We have four goals for each of you listening to Missed Fortune Radio. 1) Increase your money supply. 2) Create more and better benefits for you. 3) Eliminate unnecessary tax. 4) Be able to do all of this without increasing your cash outlay one dime.
How many of you saw your qualified plans go down in value these last couple of years? These plans for retirement use investment vehicles such as 401(k)s, IRAs, 457s, pension plans, profit sharing, 403(b)s, and tax sheltered annuities. Many of these plans are now half the value that they once were.
Traditional financial planning is giving the same old advice and strategies that they always have and we all know the kind of “results” this advice has produced.
Attend our Weekly Internet Seminar/Webinar: Don’t miss your chance to understand how to protect your money during economic crisis but get competitive rate of returns during the good years. This strategy is called indexing and you need to know all about it. Call 888-76-Radio (888-767-2346) to register for either our 11am or 6pm Pacific event.
New FREE Missed Fortune E-book: Baby Boomer Blunders. THE PROBLEM? The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download at www.babyboomerblunders.com
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Where do you put your money and still have it safe during economic downturns?
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The economic crisis around us has created a massive tidal wave of wreckage. Among those that have been impacted, the wallets and retirement plans of the American public has been some of the hardest hit.
While the major discussion among those following “conservative” advice is “How much have you lost?” or “Should I pull my money out of the market or leave it”, our conservative advice is the same as it has always been: Put your savings away in a specifically designed account, a maximum-funded, properly-structured insurance contract.
This type of policy can be one of the best ways to save for retirement and rainy days, as evidenced by how these policies have performed during this down economy. There is no 40-60% loss!
Can you miss and hit a target at the exact same time? Yes, if we’re talking about a recent article called “It Doesn’t Have to Hurt“, published in Newsweek.
The author, Richard Thaler, hits the mark about consumer spending habits but misses the mark regarding cash accumulation vehicles for retirement.
With easy access to credit and undisciplined habits, the savings rate of the American public has dropped like a ton of bricks. Consumer debt is at a 50 year all time high and savings accounts are at a 50 year all time low.
“It wasn’t so long ago that Americans were good savers. From 1950 to the early 1980s the saving rate was a satisfactory 8 to 10 percent. But even then, Americans never showed much willpower to stashing away cash. The most important ways households saved were in pensions, cash-value life insurance, and by paying off their home mortgage. What these have in common is that the saving occurs automatically and effortlessly.”
For years we’ve experienced these benefits with our clients. Once an insurance policy is in place, a simple automatic draft can be set up to transfer funds from checking or savings accounts directly to your insurance account.
This savings habit becomes out of sight and out of mind as money each month is allocated toward cash accumulation and retirement savings.
Richard Thaler’s article goes wrong as he begins to focus on retirement investment vehicles. As he gives his opinion how American’s can get back on track, he gives the following advice.
“In getting us back on the savings track there are two basic principles of behavioral economics to remember. First, make savings automatic. Second, put savings away in a specially designed account, such as an IRA or 401(k).”
To his first point, we agree whole heartily. Creating budgets and a habit of saving is monumental to long-term financial success. His second point however, does not ring true, and we’re not the only ones.
Just take a quick look at the comments that have been left on the Newsweek website about this article.
Many American’s who have followed the typical investment advice have lost anywhere from 40-60% of their savings. Maybe all these big rich executives and investment companies don’t get it.
YOUR CLIENTS LOST 40-60%!
As we said in Missed Fortune 101 before these economic downturns ever reared their ugly face, “all the dogs are barking up the wrong tree doesn’t make it the right one!”
The advice in this article and promoted by so many other “experts” is to “save more so you can invest more, so you can have more.” Instead of a formula for success it has really been a recipe for disaster.
It could be written “save more so you can invest more, so you can lose a lot.”
The tragedy is that if the vehicle for cash accumulation would have been a properly structured maximum funded insurance contract, the many that have had their retirement savings cut in half, would still have their retirement monies.
Our advice is the same as it has always been. Put your serious cash away in a specifically designed account, a maximum funded insurance contract that is properly structured. This type of policy can be one of the best ways to save for retirement and rainy days.
Oh, and by the way, our clients, who have followed these strategies, haven’t lost one dime in their insurance contracts due to this economic crisis. Stop rolling the dice with your retirement funds and instead put a solution in place, a conservative one.
Photo by kokuziu
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Podcast: Download (23.0MB)
Strategies and solutions for economic storms. We have turned into a global economy. The problems with American car manufacturing started 10-15 years ago with the quality of cars being produced.
I guarantee that taxes are going to go up in the future. We need a separation from government and capitalism. It’s not about retirement planning, it’s about desirement planning. Retirement means to put out of use.
All about avoiding the Baby Boomer Blunders. Insulate yourself from the blunders our government is making right now.
Free consultation and analysis with Missed Fortune. Call 888-76-Radio. Get a free 60 page customized report and experience clarity and new direction. Call for your free copy of Millionaire by Thirty or Last Chance Millionaire.
New FREE Missed Fortune E-book: Baby Boomer Blunders. THE PROBLEM? The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download at www.babyboomerblunders.com
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A popular investment company recently sent out a newsletter claiming good and sound retirement guidance. They asked a good basic question. “Has the economy changed your retirement plans?”
They ask this question because they want to get you to come in to get your retirement goals back on track. This company is not alone. Many of popular investment companies are advertising for new clients right now.
The sad part about these efforts is that the vehicles they will suggest you use in your “planning” are traditional tools. Savings accounts for minimal risk and short range goals, for longer time periods, diversify your portfolio among various stocks and mutual funds within your 401(k) and IRA.
Hasn’t everyone woke up to the fact that these products have failed. Saving accounts have trouble competing with inflation, especially with fears about inflation due to devaluing of the dollar.
Many economists are screaming that you can’t print a trillion dollars and infuse it into the economy without consequences, one of which is inflation.
401(k)s and IRAs have also failed miserably because of lack of safety. It’s not uncommon to speak with clients who have lost 40%, 50% or even 60% of their retirement savings.
The sad part is that they did exactly what so many “experts” said to do. Save, save, save, and put your money into specific products that would give great returns and be there for your “rainy days” of retirement.
Well folks, the rain has come, and the money was washed away. I don’t know about you, but I’m thinking, this didn’t work out so well.
The Missed Fortune strategies were created on this premise. Rains come! And when they come you need safety of principal.
In other words, your serious money needs to be put in safe places, but also have a potential of a good return when the market is up.
This is exactly why we like Equity Indexed Universal Life, when structured the right way. When the market is good, you can participate. When the market is bad, you don’t participate (at least not at the level as everyone else).
I like having my cake and eating it too – good returns potential, much more than CDs or savings accounts, and lower risk, much less than the popular investments.
Right now, those who had baked a cake based on traditional advice have found it was cooked with rotten eggs.
Photo by laughlin
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