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S&P

How Older Parents Can Assure Their Children a Secure Retirement

June 11, 2009

As an older parent (I’m now age 57), I’m grateful that my children still listen to their dad’s advice.

universal life insurance How Older Parents Can Assure Their Children a Secure Retirement I’ve always counseled my children to prepare for the future financially by maximum-funding a tax-advantaged life insurance contract on themselves.

It’s the only investment vehicle that accumulates money tax-free,  then allows you to access your money tax-free, and when you ultimately die, it even blossoms in value and transfers income-tax free.

No other investment does that. I own several universal life insurance contracts (both indexed and fixed), and I have received an average internal rate of return of 7-8 percent on most (that’s cash on cash -after the cost of the insurance is deducted).

Sure, some years I have only been credited the minimum guaranteed interest rate of 1, 2, 3 or 4 percent. But other years, I have earned as much as 21 percent, as the interest rate credited was linked to whatever the S&P 500 did that year — without my money at risk in the market.

Recently I’ve begun to teach my children they can take this strategy a step farther — and I can help.

Let me tell you of the advice that I’m now giving my children.

“Kids, what if I could tell you which two teams would be playing in the Super Bowl next year, and what the final score will be? While I can’t predict that, I can predict something else with fairly good accuracy: 80% of  us will live to age 65; 60% to age 75; but only 30% to age 85; and less than 10% of us will live beyond age 90.”

Average life expectancy for a 60-yr old is about 22 years.

In facing the reality of the years I have left, I’ve come upon a revolutionary way to help my children assure their own financial security — especially down the road when I “check out.”

In doing the math, it became obvious that if my middle-age children were the owners and beneficiaries of a life insurance policy on my life for, let’s say $1 million, it would be better for them to deposit premiums of $500 a month into that policy, rather than into a Roth IRA or 401(k).

Why? Because an IRA or 401(k) would need to earn an average yearly rate of return of 9.4% for 30 years for $500 invested per month to grow to $1 million.

But, if I “go” anytime in the next 30 years or so, by using a life insurance policy, they would immediately receive a nice $1 million tax-free nest egg!

Hence, I’m insisting each of my children own a life insurance policy on my life as part of their overall retirement planning process.

The miracle of compound interest and tax-favored accumulation of money is great. But nothing beats the power of safe, positive leverage. I’m thrilled I can leverage my life to leave a legacy for my kids. You might consider the same.

Doug Andrew

photo by Leonid Mamchenkov

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Some People Did Not Suffer Any Losses the Last 2 Years! Why?

June 5, 2009

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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