“The human species, according to the best theory I can form of it, is composed of two distinct races, the men who borrow, and the men who lend.”
—Charles Lamb
When most people think about investing or growing their money, their thoughts turn automatically to the stock market. Money is dropped into the machine and a bet is placed that more money can be extracted later. That strategy may work out alright or, depending on timing, it may be disastrous. Speculating on the stock market is not, however, the only way to put money to work!
“Private lending” may or may not be a familiar term, but it is the oldest, most proven form of producing interest or income from assets. Private lending is simply lending money in exchange for interest (or occasionally, a share of profits).
There are many types of private lending. Some common examples would include lending capital to help a borrower:
Purchase real estate which will then be developed, rehabbed, rented and/or refinanced.
Start or expand a business venture, perhaps with a partner or fund.
Refinance credit cards or other higher-interest debt.
Fund personal projects—from kitchen remodels to weddings—perhaps through a “peer lending” platform.
Notice that, in each case, you are playing the role of thebank. Banks provide loans for mortgages, businesses and personal projects in exchange for interest. In private lending, you assume that role and gain the associated benefits—and risks. It’s a way of cutting out the middleman, which is the bank!
People and corporations seek funds from private lenders for many reasons. Sometimes, traditional bank financing is not available for a certain type of project. A person or company may not qualify for bank financing, yet may have adequate cash flow or income to repay the loan. And there are other advantages to private funds, such as privacy, speed, or the ability to scale a project.
Have you ever considered becoming a private lender? Perhaps you have loaned money to a friend or family member, either formally—with a contract—or informally—on a handshake. (Of course, there are advantages to NOT loaning money to friends and family!)
If you have money to lend, there are many opportunities, though all are not equal. Some strategies are flawed and risky. Done right, properly structured private lending can be a safe and powerful strategy for growing assets or generating steady income.
If you wish you had started earlier building your future retirement income, this is especially for you. Here are seven reasons you may want to “be the banker” and consider smart private lending opportunities!
Reason #1: Historically proven.
Lending has been a reliable way of generating profits and cash flow for centuries. We have records of private lending agreements as early as 3,000 B.C., showing people loaning to others for defined time periods in exchange for “interest” paid in wheat, livestock, shekels of silver, or other commodities. Interest rates of 20% – 40% were common in ancient times, though extraordinarily high rates became known as “usury” and were discouraged or outlawed.
Of course, lending is a primary strategy of banks. Banks do not speculate in the stock market… they lend money!
In the Great Depression in the late 1920’s and 1930’s, the stock market crash gave investors a new reason to seek a different way to invest. At the time, the U.S. was just over 100 years old and had experienced several crashes and panics, as they were often called. However, the 22 years preceding the Wall Street crash of 1929 saw an impressive, if deceptive, bull run.
Investors such as John Powell soon learned that what goes up may go down… way down. After severe losses, Powell swore off the stock market, deciding that speculation was not for him. After all, Powell was a farmer by trade. He was used to planting crops and getting a fairly predictable result!
Powell began lending money to those who needed capital. He helped people purchase or temporarily finance properties. For the next three decades, Powell was a private lender with steady profits. He never invested in stocks again, yet he grew a tidy sum of money for his family.
Reason #2: Earn predictable income.
When you invest in the stock market, you are placing a bet that the price will go up. Of course, this is not always the case! Nobody thought that Enron would collapse or that the stock market would lose roughly half of its value in the DotCom bust and the Financial Crisis.
When you loan money as a private lender, you have a contract that specifies how much you’ll be paid and when. There is little guesswork. Properly constructed with protections, collateral and the right borrower, this delivers predictable returns. Interest is paid monthly, annually, or as otherwise specified in the agreement.
Is there risk? There is almost always risk when money leaves your pocket, although there are ways to effectively manage risk. A private lending deal should be properly vetted and constructed to guard against losses. For instance, collateral minimizes risks for private lenders and helps ensure timely payments. And as in all ventures, there should be complete transparency and no manipulation by government or corporations.
Reason #3: Receive excellent cash flow.
In addition to passing the test of time, the strategy of lending has created some of the most profitable businesses in the world. (Unfortunately, many people tend to be borrowers, not lenders!) Private lending gives you the ability to “be the bank” and get paid well.
It is normally difficult to create meaningful gains or income with banking products, bonds or any financial instrument offering guarantees. However, properly constructed private lending offers an exception to this rule. Even in this low-interest environment, you can earn many times what your bank is paying… without the roller coaster ride of the stock market.
Should interest rates go up further, this is actually good for private lenders. Interest rates would naturally rise for private lenders as well as institutional lenders. There is always a demand for lending both inside and outside of mainstream channels. When it becomes more expensive for banks to lend and borrowers have a harder time accessing capital, demand for private lending increases.
Today, investors who want more income from their existing assets can earn a healthy return by becoming private lenders. And when the return is contractually agreed upon (as we recommend), you will know exactly what growth or cash flow to expect.
Reason #4: Diversify your investments.
Not only does private lending help diversify a stock-heavy portfolio; it can also help diversify different types of real estate investments. You may want to lend on different types of properties. You might want shorter-term and longer-term contracts. You can diversify by lending money in different locations and types of neighborhoods.
Of course, it is handy to do business locally. But you might live in an area where it is difficult to earn a decent return. And even if your neighborhood is ideal, you never want to put all of your eggs in one basket!
Reason #5: Secure your cash with collateral.
If you are lending on real estate, your investment should be fully secured by the individual property itself. A first deed of trust is the gold standard, although there are different ways that private lending deals can be structured. (Be sure you’re not last in a long line to be paid!)
You’ll want an appraiser to verify that the property is worth more—hopefully a good deal more—than the amount you are lending. The lower the loan-to-value percentage, the more security you have for your investment.
Of course, not all private lending opportunities are secured by a real asset. In the case of peer lending, the borrower’s income and good credit are your “security.” Credit scores, income and other factors can be helpful predictors of risk, especially alongside collateral.
Reason #6: Use a self-directed IRA to defer taxes.
One advantage of a properly structured private lending agreement is that it can be done inside of a self-directed IRA. With an IRA, you get the benefit of a tax deferral. Gains are deferred until withdrawn from the IRA (typically in retirement).
If new money is placed in an IRA, you will receive a tax benefit in the form of a deferral. IRA contributions are deducted from your current taxable income and become taxable upon withdrawal from the IRA.
Private lending can also be done outside of an IRA environment; it is your choice.
Reason #7: Maintain Roth conversion flexibility.
With a properly constructed private lending deal, you can convert all or a portion into a Roth IRA to avoid paying taxes on future gains or interest income. You’ll have the flexibility to do so a bit at a time, which can help you avoid higher tax brackets.
The beauty of this strategy is that you can gradually move your nest egg into an environment where future income and gains will never be taxed. (Never!) This is our favorite strategy to create passive,tax-free income in retirement (or whenever you want it!)
What’s the catch!? (Not sure you need an image here or if this is too “square” but if you want one, it’s kinda cute. You could also crop off the top 2 pigs to make it wider if you wanted.)
You’ve no doubt heard the term, “buyer beware!” The same could be said about lenders. If you have cash, private lending deals may be plentiful. However, some are better than others. Some aren’t “deals” at all–especially not for novice private lenders!
With private lending, you assume the risks as well as the benefits of lending. That is why we have carefully vetted what we believe is the BEST private lending opportunity. We are working with a developer with a long track record of paying private lenders like clockwork. All capital is fully collateralized and the investment qualifies as an exempt security, which gives private lenders additional protections. Interest rates are competitive and vary according to the length of time. It is not necessary to be an accredited investor (although you can be!)
To learn more about this private lending opportunity to create profits and cash flow, here’s a short video that illustrates how private lending has helped our clients grow both their assets and income.*** No pressure… we’ll just give you the information you need to make an informed decision, then get your questions answered!
“Wars are not paid for in wartime; the bill comes later.”
While this remains true in many ways, chances are, your portfolio and your wallet have already paid a price since the military invasion of Ukraine.
However, the Russian-Ukraine conflict is only one piece of the war on your wallet. Today, we want to call attention to the various battlegrounds threatening your dollars and investments in 2022.
There’s never been a more important time to pay attention to what’s happening with your money and take a proactive stance. That’s why—after examining the war on your wallet—I’ll suggest some action steps to help you defend your dollars.
The Ukraine-Russia Conflict
As we discuss the impact of the Russian/Ukrainian conflict on your dollars, we want to begin with an acknowledgment. War is brutal. Those of us who experience the damage in dollars alone are the lucky ones. May peace come quickly, in Ukraine and elsewhere.
That said, the impact of geopolitical events on stock portfolios has been severe. If you have money in the S & P 500, you saw nearly a 13 percent drop from early January highs to recent lows. The Nasdaq fell a whopping 21 percent from early January highs to March 14.
If you were well-diversified in global equities, you may have done even worse. China’s Shanghai Index and all of the European stock indexes all fell further than the S&P 500. Russian stocks collapsed into dust, suffering more than 95 percent losses before the market was closed for 3 weeks.
While some of the losses above preceded the invasion (the result of other factors covered in this article) the deepest cuts appear to be directly influenced by the conflict.
Growth Stock Implosion
Even before the invasion of Ukraine, growth stocks such as Tesla took a beating. As money fled the technology sector in anticipation of rising interest rates, Tesla plummeted from $1200 to about $766—a stomach-turning 36 percent drop. Other companies such as Meta/Facebook, Paypal, Moderna and Etsy fell even further, reported Kiplinger.
Outside of the S&P 500, mid-cap and small-cap growth and momentum stocks have been obliterated. Many tech, solar, and other innovative growth companies have lost 70 to 80% of their value since 2021 highs. Still buying the dip? Choose wisely!
China’s Threats to Stability
China has become an economic superpower, with the largest economy in the world. Chances are, your portfolio may have shares of BABA, NIO, or other popular Chinese companies. However, many investors are not fully aware of the incredible risks of investing in China—or the impact that a volatile
China could have on the REST of your portfolio.
For starters, there is the threat of stocks being de-listed. Last year, when Didi (known as “China’s Uber”) declared its intention to de-list shortly after its IPO, Chinese stocks trading in the U.S. plunged by over $1 trillion, reported Bloomberg. Will more Chinese companies be delisted? Bloomberg thinks so, declaring in a March 15 headline, “the U.S. is moving closer to de-listing Chinese firms.”
The alignment of China and Russia and a potential invasion of Taiwan is another looming crisis. As the New York Post covered recently, China and Russia have formed a new alliance to challenge the West. Putin needs China’s cash, investments, and market for commodities and weapons. And while many countries have imposed bans on Russian oil, China continues to be a major customer.
Just weeks before the invasion of Ukraine, Vladimir Putin and Xi Jinping made their mutual loyalty official. After meeting just prior to the Beijing Olympics, a new pact was unveiled declaring a “new era” in the global order. The 5,000 work agreement vowed, “Friendship between the two States has no limits,” and “There are no ‘forbidden’ areas of cooperation.” The economic implications of this challenge to the power and influence of U.S. and NATO could be significant.
The Next Too-Big to Fail Whale?
In 2001, the collapse of Enron “shook Wall Street to its core,” reported one financial journalist. A year later, the bankruptcy of WorldCom echoed the tragedy. And who can forget the impact of the 2008 collapse of Lehman Brothers? It was, perhaps, the biggest catalyst for the destabilization of the entire financial system.
The next “too big to fail” giant, Evergrande, may be made in China. The second-largest real estate company in China and the world’s most indebted real estate developer, it has been teetering on collapse for months. The company’s struggle to repay creditors has already caused dramatic sell-offs in the global markets, and with indications pointing to Evergrande being a ticking time bomb.
Ratings agency Fitch had said that default “appears probable” while Moody’s had said, “Evergrande is out of cash and out of time.” On March 22, Evergrande investors learned that more than 2 billion in cash had been seized, cash that had been used as pledge securities. No doubt, as in 2008, investors of Evergrande and beyond will be left holding the bag wondering, “What happened?”
Rising Inflation and Commodity Prices
While inflation sometimes leads to inflated stock prices, the rise in commodity, especially oil prices, are taking a toll on many publicly-traded companies. While energy companies may benefit, skyrocketing oil prices means it’s far more expensive to transport goods to customers. Operating farm equipment and most fertilizers just got more expensive, which will only push food prices higher. Many other commodities such from lumber and industrial metals are also skyrocketing. Corporations must either hike prices or shave profits.
Many American families are feeling the impact of inflation. According to an analysis by Advisor Perspectives, consumers lost 1/10th of their buying power from January 2021 to January 2022. The calculation took into account “real” disposable income (including inflation). This could have devastating impact on both families and the economy.
Rising Interest Rates
Rising interest rates means that both consumer debt and corporate debt is becoming more expensive. In February of 2022, the Institute of International Finance reported that total global debt had risen to a new high of $303 trillion. And although the U.S. and other Western nations have spent like there was no tomorrow, over 80 percent of last year’s new debt burden came from emerging markets, where total debt now approaches $100 trillion, reported Reuters.
What do rising interest rates mean to you? While you may get a little extra interest on your bank savings, rising interest rates historically go hand-in-hand with stock market crashes and corrections.
In recent years, corporate debt has skyrocketed as companies have become addicted to nearly “free money” borrowed at next-to-nothing rates. But now the Fed is in a no-win situation: either raise rates at the risk of a stock market crash, or allow runaway inflation to destroy the dollar.
But wait—there’s more!
I didn’t even TOUCH on many of the obvious risks.
The supply chain crisis still plagues many industries and semi-conductor chips are only a part of it.
An extra 200,000 businesses or business branches closed permanently in the first year of the pandemic, estimated the Federal Reserve. Many remaining businesses struggle with labor shortages.
Could rising interest rates could trigger the next housing market crash? When the same dollars only purchase a fraction of the same home, prices will inevitably drop.
And in spite of significant recent drops, the stock market is still not priced to buy, say many analysts. Valuation measurements such as the “Buffett Indicator” (U.S. publicly traded companies divided by GDP) show U.S. equities are still historically overvalued.
Then there’s the next Covid variant which could soon lead public health officials to recommend more economy-destroying lockdowns or other mandates. (It’s already here—Omicron BA.2, the sequel.)
The way OUT of this mess!
The last 2 years have been stressful and unpredictable—to say the least! And while I’d like to assure you that it’s smooth sailing from here, I’m not going to lie to you. If your portfolio and nerves are battered, it’s time to bullet-proof them.
First, if most of your money is in the stock market, consider diversifying asset classes NOW.
All we ever hear about from the talking heads on Wall Street is about “stocks and bonds.” That’s not because stocks and bonds are necessarily the BEST vehicles for your money—it’s because that’s what Wall Street is selling!
But a diversified portfolio isn’t simply different kinds of stocks. You could be invested in Microsoft, Tesla, Etsy, and Ally Bank—very different companies. But when bad news headlines hit, they can ALL drop like a rock.
Does that mean Microsoft’s business changed from a month ago? Is Tesla’s technology is suddenly less valuable? Did Etsy or Ally’s business models change? Of course not! The only “changes” were headlines and investor sentiment.
Historically, real estate, private lending and dividend-paying life insurance provide excellent hedges for stocks. (Gold, silver and Bitcoin can provide a hedge against inflation—but they have their own volatility, too.)
Second, demand a guarantee for your money.
What!? You can put your money into something predictable—besides a savings account or CD paying anemic interest rates?
If you’re “stock heavy” like most people are, the last thing you want to do is keep buying more stocks! And bonds are not the answer. Bond values tend to fall in a rising interest rate environment.
Fortunately, there’s good news is. There ARE reliable, time-tested solutions for your dollars.
There may not be a “magic bullet” that will protect you from all risk while guaranteeing you’ll be wildly wealthy… but you CAN bulletproof yourself against the headlines and volatility.
Reach out today and schedule a time to chat.
No sales pitch, hype or opinions… just verifiable facts. (And no fee!) I’d love to help you discover strategies to protect your portfolio and set yourself up for reliable wealth building!
“Success is where preparation and opportunity meet.”
– Bobby Unser, Indianapolis 500 Champion
Do you have access to cash on demand? Or are you locking up your assets, or keeping them liquid? The answer may be influencing your prosperity more than you realize.
Most investors focus on the ROI (return on investment) of an investment or a savings vehicle. However, locking up money in investments where it is no longer liquid can actually severely limit the possibilities for lucrative returns! This is because some of the best opportunities cannot be capitalized on (literally!) without access to cash.
Cap-i-tal-ize:
(verb)
1) To provide with capital.
2) To gain advantage from.
Most accumulation vehicles lock up your dollars.
If you put money into a retirement plan, your money stays there, sometimes for decades.
If you save in an educational savings plan, that’s where your dollars remain until needed for tuition.
If you invest in a business or real estate deal, your cash is locked up there for a certain length of time, or until the investment is liquidated.
If you purchase a car with your dollars, your money is now on four wheels in a depreciating vehicle.
Usually, you have to liquidate assets or divest yourself in order to get access to use your dollars elsewhere. It’s “either/or” – you can either earn interest on your savings, earn returns on your investments, or liquidate them to spend the money, but you’ve got to make a choice.
Life Insurance: The Both/And Asset
Todd Langford of Truth Concepts financial software is fond of saying, “Most assets are either/or assets, but (whole) life insurance is a both/and asset.” This is a perfect way to describe the advantage of having an asset that can be easily used as collateral.
Cash value life insurance is a “both/and” asset. As you keep funding your life insurance policy, the cash value grows, and before you know it; you have options. Do you need money for an emergency? You’ve got it. A lucrative opportunity? Yes, you can! What about a honeymoon, a business start-up, or a down payment on a rental property? Go right ahead.
While you can simply withdraw the cash from your policy (using it as an “either/or” asset), you can also leave the cash value IN your policy – earning future dividends – and borrow against it. By accessing capital with policy loans, life insurance becomes a “both/and” asset.
Your savings continue to grow and earn while you gain access to the cash you need for an emergency, an investment, or a major purchase. Then, you can repay the loan on your own time schedule. Extra payments or a lump sum? Of course! Need to skip a couple of payments? No problem. (We do recommend that you pay your loan back diligently, as that will minimize interest and will give you access to borrow against the cash value again, should you need to.)
Financial author and speaker Nelson Nash is fond of saying, “If you have cash, an opportunity will seek you out!” Here are 5 examples of how opportunities can find you when you have access to capital:
1. Cash in on an Opportunity
Perhaps a friend wants to sell a classic car for much less than what it’s worth to generate some quick cash. The car can fetch $30k for a patient seller in the right market, but he’ll take $20k if you can get him the cash next week. Let’s say you buy the car at $20k and resell it for only $27k. You borrow the $20k against your cash value, pay 6 months of interest at an 8% annual interest rate (an additional $785), and you sell it for $27k.
You’ve just generated a $6,215 profit or an annualized return of 68.74%!
2. Be the Bank
Perhaps your business needs some new equipment, and you discover that the lease on the new machines will cost you the equivalent of a three-year loan at 21% annual interest rate! Even worse, if you prepay the lease, you’ll STILL pay the steep financing fee!
You might save thousands by being able to provide your own financing in such a situation… all because you had access to cash. In the example below, a $20,000 loan (or lease equivalent) at 21% interest will cost $27,126 while an 8% interest loan over the same time period, only $22,562:
3. Earn Cash Flow
Let’s say the business equipment scenario above isn’t your business after all, but the business of a friend or family member. Could you offer to finance the equipment at a rate of 12%? It would be a fantastic savings for them, and you could borrow cash at 8% from a policy loan (no questions asked) and earn 12%.
You’d be making 50% on your money, while saving them thousands!
Don’t mistake this strategy as a mere 4% gain – 4% being the “spread” between the cost of money at 8% and the rate at which you can lend the money, or 12%. If you bought a widget at $8 and sold it for $12, it would be a 50% profit. It is the same when buying and selling cash.
4. Create an Income
When you have access to cash, you can keep your eyes and ears open for exceptional business or real estate deals that could set you up with long-term income.
One investor used his cash value to invest in cash flowing commercial real estate that generated an income for him after he was forced into an early “retirement” with a disability. His disability rider kept the policy funded, now at no cost to him. But he took it a step further and capitalized on his whole life policy. Using policy loans and the leverage of a mortgage, he was able to fund multiple real estate deals which enabled him to continue to support his family.
Learn the details of how borrowing against a life insurance policy turned an excellent investment deal from 26% gains to a whopping 111% rate of return in an article on the TruthConcepts.com blog, “How Do I Tell if my Real Estate Deal is a Good One?”
5. Take the Opportunity of a Lifetime
Sometimes, the “return on investment” isn’t financial at all, it’s personal. Perhaps it’s taking the trip of a lifetime, or checking a major item off of your bucket list.
Network marketing entrepreneur Jordan Adler had always had a dream to “go to space.” Sounds pretty far-fetched, doesn’t it? For most, it would have been an impossible dream. But when Jordan actually got an opportunity to actually book a spot on a commercial space flight (with a six-figure price tag), he said “Yes!” He knew he could access the money with a policy loan, no questions asked, and repay it at his own timing, without disrupting his other investments.
The Cost of Cashing Out
Many people consider their 401(k)s or IRAs to be their “savings.” But qualified retirement plans aren’t liquid and make poor piggy banks. You’ll pay penalties and income tax, which can gobble up nearly half of any withdrawals! In 2010, Americans paid $5.8 billion in penalties alone by tapping $58 billion in retirement funds before they were supposed to, according to a 2014 Bloomberg article.
Borrowing 401(k) monies for allowable reasons (such as a home down payment) is also deceptively expensive due to the tax treatment. You’ll have to replace those before-tax contributions with after-tax dollars, which means you can add your tax bracket rate onto the cost of the loan!
If your dollars are locked up in typical assets, you have no liquidity.
Capitalizing with Cash Value Insurance
When you have a solid, liquid asset such as life insurance cash value, you can leave that asset intact, and easily borrow against it. This leaves you with your original savings plus access to cash for your neighbor’s car, your child’s tuition, or the investment that will pay healthy returns. Best yet, your savings will keep growing, off-setting some of the interest costs. (You may even be able to use your policy cash value to obtain a bank loan at an even lower interest rate!)
You can argue that a certificate of deposit could give you the same advantage of liquidity – after all, what bank won’t lend against their own certificate of deposit? However, here again, we discover that whole life insurance is a “both/and” asset” in the way that other savings vehicles are not.
Typically, you have to choose between investments, savings, or insurance vehicles. With whole life insurance, however, you are saving and insuring at the same time. Not only will you eventually have access to every dollar put into the policy as your cash value grows, you’ll also have protection over and above the cash value the moment your first premium is paid.
In this way, life insurance is a self-completing savings strategy. Should something happen to you, the policy can still pay for your child’s tuition or supplement your spouse’s future income.
Can You Capitalize on Opportunities?
Whole life insurance is the best place we know to store long-term cash (with a permanent self-completing savings mechanism) and the best way to build liquidity for future investments, emergencies, and opportunities.
Prepare yourself for success with greater liquidity in your personal economy. Let us run an illustration for you to show you how a whole life policy can grow cash value that can be used as collateral when you need capital. Contact us today to find out more.
All calculator illustrations from Truth Concepts software.
The name is catchy. And nobody willingly turns down safety. But here’s what’s going on so you can decide. After all, it is your money, your life, and your life insurance.
The product being promoted is Index Universal Life, IUL for short. IUL products have risks associated with them that participating whole life insurance products simply don’t have. And let’s make something clear real fast here. IUL is BASED on Wall Street performances and IS NOT beyond Wall Street.
But here are some other reasons for NOT choosing IUL for your future needs:
The owner of IUL policy(s) CAN lose money in years when the index mirrored in the policy’s non-guaranteed returns go down, trades laterally or even when it goes up marginally.
Recent news reports document how thousands of policy owners’ premiums have been increased because IUL premiums are not fixed level premiums for life like participating whole life insurance premiums are. (You can pay extra for a guaranteed level premium but that defeats the purpose.)
Regulators in all states have now had to mandate agents and insurance companies to STOP using such high rates of return on their projected values in IUL illustrations. This is because there is no certainty in future market performance. Pathetically, even these mandated rates of return are well beyond actual and compounded annualized growth rates. And so they are still misleading at best.
Every IUL policy we have ever reviewed here at Life Benefits shows the guaranteed cash values zeroing out prior to the life expectancy of the insured. That means the policy will lapse or the owner will have to continue to pay premiums even though cash values may remain at zero. This is because the cost of insurance in the renewable term insurance, the basis of all IUL policies, continues to increase over the lifetime of the insured.
Of the IUL policies we have reviewed there are multiple risks (up to 25 in some IUL contracts) that the IUL policy owner assumes. These are risks the insurance company accepts when issuing a participating whole life insurance policy. Because the owner of the IUL shoulders these risks they can lose money, lose the policy, face needless taxation, limit cash value growth and limit their access to the cash values to manage outside the policy with the Perpetual Wealth Code™. Worst case scenario: all of the above could happen.
All IUL contracts that have been reviewed by Life Benefits offer a guaranteed interest rate in attempts to offset downtrends in the index mirrored in the non-guaranteed accumulated cash values. But insurance companies that sell IUL can choose to credit this interest at will. That means they may credit it to your policy annually, every 5 to 10 years or even wait until your policy is terminated or a death claim is filed. This deferral, at the insurance company’s discretion, can be costly to the IUL policy owner due to the loss of compounding. This is simply NOT a risk worth taking when with participating whole life the compounding is guaranteed and dividends, which are paid annually, add to that compounding effect.
Finally, the insurance companies control how much gain of the index mirrored is actually shared with the policy owner. In other words, your earnings are capped and the insurance company takes the large profits and pays them to their shareholders (if they are a stock held company) or with their participating whole life policy owners if they don’t have shareholders and/or are a mutual company.
So there are 7 good reasons NOT to allow an agent to sell you an IUL instead of a participating whole life insurance product. Why should you expose yourself to all the above AND lose control over your money for 10 to 15 years while the surrender fees associated with IUL policies expire all while the agent earns 50-70% more in commissions by selling you an IUL policy? It’s your money, your life, and your policy, why allow somebody else to control it. Keep control and realize why utilizes participating whole life insurance to maximize the amount of money you get to keep. Know that having Guaranteed, Available, Manageable, Equity is the key to Winning Your Financial
GAME. And never, ever give the control of your money away to somebody else again because you now know the good the bad and the ugly about indexed universal life insurance.
Special thanks to Dr. Tom McFie
For more information please contact us through www.wealth-coach.net or call 877-858-2920
“Errors of human judgment can infect even the smartest people, thanks to overconfidence, lack of attention to details, and excessive trust in the judgments of others.” —Robert J. Shiller, Professor of Economics, Yale University
Yikes! It’s not so bad if your “error of judgment” means you picked the wrong brand of toothpaste or even the wrong resort hotel. But it’s mighty serious, indeed, if your error of judgment leaves you struggling to get by in retirement—particularly if your health (or the health of someone close to you) means you can’t go back to work.
What then?
According to AARP, those errors of judgment have left the majority of baby boomers believing they’ll be forced to postpone retirement. And half have little confidence they’ll ever be able to retire.
“But I’ve done all the right things!”
If you’ve been doing “all the right things” financially but are disappointed that you don’t have nearly enough in your retirement fund, do you think continuing along the same path will suddenly start bringing you a different outcome?
And how much is enough, anyhow? Is having $500,000 socked away going to do the trick? Even if you only need $3,000 per month to augment your Social Security check, $500,000 will be gone in about 14 years! Then what do you do? Sit home and watch reruns of I Love Lucy?
The sad truth is that most families don’t have anywhere near $500,000 in retirement savings. In fact, the Federal Reserve Survey of Consumer Finances reveals that the typical household nearing retirement—people ages 55 to 64—has only $111,000. If a couple uses their $111,000 to purchase an annuity, those assets will provide at most only $500 per month!
That’s not even enough to buy groceries these days, not to mention paying for health care, heating, transportation, insurance, and all the other expenses of daily life. And the purchasing power of that $500 will decline over time, due to inflation.
But even more frightening is the fact that this paltry $500 per month is likely to be the only source of income they’ll have to supplement Social Security because that’s all most people have.
The U.S. Senate Committee on Health, Education, Labor, and Pensions tells us just how bad the situation is: “After a lifetime of hard work, many seniors will find themselves forced to choose between putting food on the table and buying their medication.”
Government-Controlled Plans Are Not the Answer
The real problem is that 401(k) and 403(b) plans, IRAs, Roths, SEP-IRAs, and so forth, are all government-devised and government-controlled plans that in the long run don’t benefit you as much as they benefit the investment advisors who sell you the plans.
For example, tax-deferral—the holy grail of retirement planning—is not the magic bullet you may have been told it is. First, tax deferral is not the same as tax-free.
Second, just about every financial expert—and virtually everyone we meet—believes tax rates are going up. So waiting to pay your taxes until the rates go up makes about as much sense as waiting to buy a new mattress until they raise the price. Plus, if you’re successful in growing your nest egg, you’ll only be paying higher taxes on a bigger number!
Third is the issue of how you grow your money. Thanks to the multi-billion dollar lobbying efforts of Wall Street, the government makes it very difficult for you to invest your retirement funds in anything other than stocks, bonds, and mutual funds.
Before 1978, speculating in stocks was a pastime of the wealthy. Today, thanks to the explosive growth of 401(k) plans, mutual funds, and the Internet, the typical working person has bet his or her financial future on a roll of the dice in the Wall Street Casino.
But ask yourself this question: “Is the money in my retirement account money that I can afford to lose?” Of course not. Despite that fact, we’ve been told that the best way to grow a substantial retirement nest egg is to gamble our future financial security in the market.
Enter Macro Economic Planning
“I am more concerned with the return of my money than the return on my money.”
—Mark Twain
Macro Economic Planning represents a paradigm shift—a refreshing new (yet old) way of saving for retirement. Using the Macro method, the growth of your money is guaranteed. You’re not going to open your statement to find that 40% or more of the money you’ll need for retirement somehow drifted off into space based on the machinations of some greedy investment bankers whose latest monetary creation toppled the market.
Not only does the money you put into a Macro plan remain secure, but also the growth of your money is both predictable and guaranteed. You receive a guaranteed annual increase, plus you have the potential for dividends. Dividends, while not guaranteed, have been paid every single year for more than 100 years by the companies recommended by Macro planners.
Their track record is so good because these companies are masters at underpromising and over-delivering—unlike your friendly Wall Street stockbroker or hedge fund manager.
How Is This Possible?
How can anyone guarantee the growth of your money? That’s where the paradigm shift comes into play. We’re not even talking about investing in the market. To the contrary, Macro Economics Planning is based on a 160-year-old strategy that gives you a rare combination of guarantees, safety, liquidity, control, and tax advantages.
Your money grows by a guaranteed and predictable amount every year, and that growth gets better every year you have it. Macro Economics Planning is for those who want to grow their wealth consistently every day and have control of their money and finances. This strategy is so safe and so consistent that it’s actually really pretty boring.
If you need something more exciting, try your hand at pork bellies or gold futures on the commodity exchange. But if guarantees, safety, liquidity, control, and tax advantages are important to you, consider Bank On Yourself.
Macro Economics Planning lets you bypass Wall Street, beat the banks at their own game and—finally—take control of your own financial future. It can help almost anyone—regardless of age, income or financial sophistication—reach their financial goals and dreams without losing sleep.
What Is the Macro Economics Planning Method?
Macro Economics Planning uses a little-known super-charged version of an asset that has increased in value during every single market crash and in every period of economic boom and bust for more than 160 years—dividend-paying whole life insurance.
But not the kind most financial advisors talk about! Macro plans are based on dividend-paying whole life insurance policies with some features added on to them that maybe one in 1,000 financial advisors actually understands. In a Macro plan, a large portion of your premium goes into two riders or options that make your money in the policy grow significantly faster than a traditional whole life policy, while reducing the commission the agent receives by 50-70%.
Are You Planning or Gambling?
Do you know how much your retirement account will be worth in 10 years, 20 years, or on the day you hope to tap into it? If you’re like most people, you don’t have a clue! You may hope it’ll be worth a certain amount, but do you actually know?
If you can’t answer that question, you don’t have a plan! You’re gambling.
If you’re tired of gambling with your future, now is the time to look into Bank On Yourself. There’s no obligation, and I am not going to twist your arm. So take the first step and request your FREE Analysis now, while it’s fresh on your mind. To get all your questions answered, and to learn more about the ultimate retirement plan alternative, www.wealth-coach.net
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About the Ultimate Retirement Plan Alternative
“The thought-provoking film is a timely reminder of the lessons from a financial crisis which are too quickly forgotten.” ~ Patrick Durkin, Sydney Morning Herald
Hollywood Tells the Story of the Lie That Crashed the Economy
The Big Short theatrical release poster, source: Wikipedia.com
Hollywood’s big screen version of The Big Short, based on Michael Lewis’s best-selling book on the financial crash, was released on DVD in March of 2016, following a successful run in theaters. Now six years after the 2010 release of the book, which detailed the story of a handful of stock market contrarians who saw that something was rotten on Wall Street, the message remains relevant as well as entertaining.
The Big Short opens with narration by Ryan Gosling’s character (named Jared Venet in the movie, based somewhat loosely on Deustche Bank salesperson Greg Lippmann) introducing The Big Short as a story about “the giant lie at the heart of the economy.”
What was the giant lie? The fact that the post-9/11, post-tech-crash recovery was a doomed-to-fail boom cycle fueled by consumer spending based on an economic illusion… a huge housing bubble that only a few contrarians could see. As one character in the film asserts matter-of-factly, “No one can see a bubble; that’s what makes it a bubble.”
Image attribution: By Source, Fair use, Wikipedia.org
Director Adam McKay took on a seemingly impossible task: to adapt a complex financial story for box office profits while both entertaining and educating a broad audience of non-economist movie-goers. As Ryan Gosling told Vulture.com, “The film’s point of view is that the language of high finance feels alienating because it’s designed to divide you, to make you feel like you can’t understand it, so that you won’t ask too many questions. And this was like, ‘Let’s pull the curtain back on that whole machine.’”
To pull back the curtain, McKay often breaks the sacred “fourth wall” of cinema with scenes and narration in which characters (and real-life celebrities) speak directly to the viewer. Terms such as mortgage-backed securities, CDOs (collateralized debt obligations), synthetic CDOs and credit default swaps (the financial instrument created to bet against the housing market) are explained in layman’s terms:
Playing up on the “bubble” theme in a tongue-in-cheek reference to her role in The Wolf of Wall Street, Actress Margot Robbie explains why subprime mortgages are, well, subprime (she uses more colorful language) while sipping champagne in a bubble bath.
Renown chef Anthony Bourdain describes CDOs by describing how 3-day old fish is repackaged and sold as something “new” in the fish stew special of the day.
Pop star Selena Gomez partners with economist Richard H. Thaler at a gambling table in Vegas to explain how synthetic CDOs use leverage to place bets upon bets, thereby exponentially expanding the dollars put at risk by the securitization of mortgages.
Meanwhile, the four stars of the film – Ryan Gosling, Brad Pitt, Steve Carrell and Christian Bale (nominated for an Academy Award for his portrayal of Michael Burry) – carry the plot forward with flawless performances.
Particularly compelling is Christian Bale’s portrayal of Dr. Michael Burry, a research-obsessed neurologist-in-training turned money manager who predicted exactly how, why, why, and when the housing market would unravel. Meticulously based on the real-life Burry, down to the details of his glass eye, his discomfort with direct discussions, and his tendency to play drums relieve stress, Dr. Burry was perhaps the first to see the crash coming.
A host of engaging supporting actors help to detail the financial absurdities of the day:
Melissa Leo has a short but memorable part as a rating agency manager who defensively dismisses concerns that mortgage bonds are failing, only to then confess, “If we don’t give (the banks) the AAA ratings, they’ll go to Moody’s down the street!”
An ever-cheerful Florida real-estate agent tries to explain away the growing number of for-sale signs by admitting that “the market’s in an itsy bitsy little chasm right now.”
Young “garage hedge fund” founders (played by John Magaro and Finn Wittrock) embarrass themselves repeatedly, but finally, succeed in their attempts to create a winning fund.
Five Lessons to Take Away from The Big Short
The Big Short is an eye-opening story that brings with its warnings we would be wise to heed. It also succeeds in bringing an important, complex financial topic to the big screen. Here are five lessons that we should take away from the subprime tale of woe:
Leverage can hurt. Increasingly, financial corporations use leverage to multiply their potential profits, but the leverage can create tremendous pain in the markets when conditions are unfavorable. The same lesson also applies to leverage we might personally use in real estate or a brokerage account; leverage can accentuate the losses as well as the gains. But when leverage is wielded by the largest banks and institutions using derivatives, CDOs (collateralized debt obligations) and other complex securities, the result can be devastating.
A weak chain link can affect almost every aspect of the economy. Different aspects of the economy – from banking, stocks, and rating agencies to the housing market and mortgages bonds – are tightly twisted. What happens in one sector affects another.
Market optimism won’t insure against a crash. A fiscal policy built on never-ending appreciation and expansion can bring the economy on thin ice. Loosening of credit standards and lending requirements can create extra cash in the economy, but those practices also create bubbles waiting to burst. And just because a majority of investors, money managers, financial analysts and journalists don’t see a crash coming doesn’t mean there isn’t one around the corner.
Contrary to Gordon Gecko’s proclamation in another Wall Street movie, greed is not good. Every corner of the finance world – from borrowers to brokerages to rating agencies and government officials – was incentivized in some way to hide the cracks in the foundation of the economic system, even as it was crumbling. We should not rely on banking and Wall Street insiders to care more about the stability of the economy than their own bonus checks.
Investors should take care to protect themselves from risk. Too often, everyday investors seem to pay the price for the mistakes made by financial corporations as well as government regulators (and de-regulators). No matter how “sure” an investment seems, there is always a need for savings. Housing markets and stock markets rise and fall. A portion of every investor’s portfolio should be in something that grows without fail, slowly and safely, regardless o the economic climate.
The Short Scoop On The Big Short
The movie is entertaining and quite humorous at times, but it never loses sight of the story it is telling. Even as these outsiders succeeded in winning huge bets against the housing market, there are no save-the-day heroes or happy endings. Like an economic version of The Titanic, an air of tragedy and sadness pervades as the financial ship goes down, just as we know it will.
Nominated for Best Picture and Best Supporting Actor Oscars and garnering rave reviews, The Big Short is a big hit. Much more than mere entertainment, it unravels some of the mystery behind why so many homeowners, investors, business owners and employees took such a big hit when the subprime debacle crashed the economy in 2008.
Is it worth seeing? Yes, provided that its R rating (for strong language and glimpses of strip club nudity) doesn’t eliminate the movie from your viewing choices. Whether you agree or disagree with its economic analysis, it is an entertaining and thought-provoking movie.
The Big Short was released on DVD March 15, 2016, and is available through Netflix and anywhere that DVDs are rented or sold. See the film trailer on YouTube:
Where is Your Money Safe From Wall Street Excesses and Market Swings?
When a life insurance policy is issued, it is the insurance company’s responsibility to make sure that the money will be there to provide benefits and access to cash value, whether the money is needed in one year or 100 years after the policy is issued. This is a responsibility that mutual insurance companies have always taken very seriously. Unlike the stock and housing markets, some things are guaranteed.
Mutual life insurance companies are owned by the policyholders and have no pressure to please shareholders with impressive quarterly reports. On the contrary, life insurance companies have paid not only benefits to beneficiaries but also non-guaranteed dividends for over 150 years. Contact us for further information on how to save safely!
Turbo Charge Your Financial Future. In this book, you will learn about the financial challenges facing us today and the opportunities available to you using the basic principles we call Macro-Economic Planning.
The Good, The Bad and The Ugly
Yikes! It’s not so bad if your “error of judgment” means you picked the wrong brand of toothpaste or even the wrong resort hotel. But it’s mighty serious, indeed, if your error of judgment leaves you struggling to get by in retirement—particularly if your health (or the health of someone close to you) means you can’t go back to work.
Macro Economic Planning represents a paradigm shift—a refreshing new (yet old) way of saving for retirement. Using the Macro method, the growth of your money is guaranteed. You’re not going to open your statement to find that 40% or more of the money you’ll need for retirement somehow drifted off into space based on the machinations of some greedy investment bankers whose latest monetary creation toppled the market.
