The Losing Retirement Equation: The 4% That Will Turn Your $1M into $1

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If you’re like most Americans who are contemplating retirement, you’re probably wondering how much you need to have saved up to retire. You want to be able to live comfortably in retirement, and to not have to constantly be worrying about whether you’re withdrawing your savings too fast. These fears are understandable, but if you listen to Wall Street’s advice, you’re bound to back yourself into a very dark financial corner from which there is no escape. Let’s explore what’s wrong with the losing retirement equation that Wall Street urges you to plan your retirement goals around:

  • The average baby boomer will live 20 years in retirement: Although the average baby boomer will live 20 years in retirement, this is an average – you really don’t know if you’ll live much longer. The problem is that this real-life uncertainty does not fit neatly into the statistical models that Wall Street uses to promote its traditional retirement equation.
  • A baby boomer who lives 20 years can safely withdraw 4%: Wall Street firms love to use a retirement planning technique known as the Monte Carlo simulation to set a retirement withdrawal strategy for retirees. If the average retiree lives 20 years in retirement, the Monte Carlo simulation predicts that for that retiree to have a 100% probability that he won’t run out of money prior to his death, he can afford to withdraw 4% of his retirement savings every year.
  • If you have $1 million, 4% is $40,000 a year: Since most Americans seem to set $1 million as their retirement savings goal, the Monte Carlo simulation tells the average retiree that he can safely withdraw $40,000 a year, which is 4% of $1 million. Of course, $40,000 doesn’t seem like a lot to live on, nor does it account for the fact that you, as an individual, may not live the average 20 years in retirement.
  • You will be left with $1 when you die: Even if you are the average American who lives exactly 20 years in retirement and even if you withdraw just 4% of your retirement savings each year, you still will be left with nothing when you die. You will not be able to pass on an inheritance to loved ones, including those who may have taken care of you and given you great joy in the final years of your life.

It’s no wonder that Wall Street wants you to plan your retirement withdrawal strategy around oversimplified predictions and average lifespans – it’s far easier for Wall Street to dole out the same financial advice to everyone than it is for Wall Street to consider that everyone’s circumstances are actually quite varied and unique. You need to stop listening to the nonsense that Wall Street is feeding you, as your goal shouldn’t be to be left with nothing when you die – or worse, to be living off Social Security and the generous charity of loved ones.

For more information about why you need to radically rethink your retirement strategy, visit Infinite Wealth: A Different Kind of Retirement.

Your Funding Source: The Worst Kind of Controlling Relationship

pagare14Throughout our lives, we depend on traditional banks as our main funding source. Banks provide us with loans to pay for our cars, our homes, our college tuition bills, and, when necessary, our credit card bills. They loan us money for life’s major expenses, and they are a financial lifeblood for business loans and home equity lines of credit. The problem with traditional banks is that they are not on our side; they are all out to make a lot of money on us, even as they call all of the shots regarding repayment of our loans. Let’s explore why using traditional banks as our funding source is the worst kind of controlling relationship imaginable:

  • Traditional banks determine your credit worthiness: If you’ve ever been denied a loan or been told you qualify for less credit than you need, you know the total control that banks have over your financial future. Most of us believe that banks are the only way to get loans, and thus we become beholden to banks for all of our funding needs.
  • Traditional banks determine all of the repayment terms: When you receive a loan from a traditional bank, you don’t get to set any of the repayment terms. Your bank drafts up all of the terms and forces you to affix your signature to those terms before you get a single dollar.
  • Traditional banks determine your interest rate: When traditional banks loan you money, they see only dollar signs. No matter how good your credit is, you will always pay for the cost of your loan via interest payments. Anyone who has ever held a mortgage understands that these interest payments add up to enormous sums over the life of the loan.
  • Traditional banks determine your privacy (or lack thereof!): When you take out a loan from a bank, you can be assured that your every move will be recorded in a detailed file and reported to credit monitoring agencies and Uncle Sam. In other words, you have no financial privacy when you rely on traditional banks to loan you money.

The good news is that you don’t have to be beholden to traditional banks for your money. When you invest in a whole life insurance policy, you become your own bank, accessing the cash value of your policy at any time as a loan to yourself. With a whole life insurance policy, there is no third-party bank determining your credit worthiness, your repayment terms, your interest rate, and your (lack of) financial privacy.

For more information on how you can use a whole life insurance policy to become your own bank, visit Paradigm Life’s article, The Whole Truth about Whole Life Insurance.

Sorry, Baby Boomers: Your Life Expectancy is Outgrowing Your Financial Plan

contentWhen you started saving for retirement, you probably did some rough math and sought advice from Wall Street financial advisers. You figured out how much money you’ll need to withdraw per year, how many years you expect to live in retirement, and how much you need to set aside during your working years to hit your magic number. The only problem? Average life expectancy is constantly creeping up, and the longer you live when you’re in your 80s, the more likely you are to stay alive for a few more years. Let’s break down this financial conundrum that weighs heavily on so many Baby Boomers today:

  • You can’t rely on Wall Street to tell you how much you need to save: Wall Street uses simple algorithms that are based on average life expectancy, but you are an individual, not a statistic or an average. The number of years that you live in retirement may fall way outside of these predictions.
  • Traditional projections will leave you penniless at death: Wall Street’s financial planning tools are typically based on the assumption that you will have just enough money to live on until you die. Even if you live to exactly the age you’re projected to live, you will be left with nothing when you die. This hardly seems like a reasonable way to financially plan for the final years of your life.
  • You deserve to be able to pass on your wealth to loved ones: If your life happens to align perfectly with the financial trajectory that Wall Street has set out for you, you won’t be able to pass on any of your wealth to loved ones – for the simple reason that it will be all gone. You will die knowing that everything you’ve worked for has been spent.
  • You need a wealth-building plan that does not leave you penniless: To die with financial dignity, you cannot count on dying at any particular age – and you need a wealth-building strategy that complements this reality. With a whole life insurance policy, you can achieve the financial dignity that you desire; this unique investment allows you to access the cash value of your policy at any time to help fund your retirement years. You have total control over your cash flow, and best of all, a whole life insurance policy will not leave you penniless when you die.

No one wants to outlive their retirement savings, but if you’ve relied too much on traditional projections touted by Wall Street, you are making yourself vulnerable to exactly that fate. With a whole life insurance policy, you can get out of Wall Street’s retirement mentality and put yourself on a path to meaningful wealth-building that will financially protect you and all of those who mean so much to you.

For more information on setting up a retirement strategy that protects your financial dignity, visit Paradigm Life’s  Planning for Your Complete Retirement Journey.

3 Things That Have Baby Boomers Shaking In Their Bonnets

Portrait senior stressed man working on laptop sitting at table isolated on gray wall backgroundBaby Boomers have benefitted handsomely from dramatic increases in their home equity over the decades and generous pension plans. But that does not mean they’re riding comfortably into the retirement sunset. Quite to the contrary, Baby Boomers feel the same financial fears as the rest of the population – except for them, they’re already retired or approaching an age where they can no longer work. Let’s review the three main reasons that Baby Boomers are shaking in their bonnets about their uncertain financial futures:

  • They fear running out of money before they die: Baby Boomers have worked hard all of their lives to save for retirement, and done their best to reach very lofty savings goal. But was their savings goal the right goal? Will they have enough to comfortably live on for the rest of their lives? These fears keep them up at night, especially given the volatility of the financial markets and fears about steep inflationary forces eroding their nest eggs.
  • They fear unexpected healthcare costs: The politics surrounding healthcare remain as intense as ever before, and the costs of healthcare just keep rising. Where does that leave the average Baby Boomer who counted on being able to receive high-quality, affordable healthcare coverage for the rest of their lives? No one can say for certain what the future of the U.S. healthcare system will look like – or how much insurance will cost 10 or 20 years down the road.
  • They fear losing their financial independence: Baby Boomers are a fiercely independent generation that worked hard all their lives to secure their financial future without becoming a burden on their children. But with so much uncertainty in the financial markets and fears about rising inflation, most Baby Boomers do not feel financially secure, and thus worry about losing their ability to live comfortably and with financial independence.

Despite everything they’ve done to prepare for retirement, Baby Boomers have no reason to breathe easy about their financial standing in the final years of their lives. They fear running out of money, unexpected healthcare costs, and losing their financial independence – and worst of all, most Baby Boomers believe it’s too late to reverse their fortunes.

The good news is that there is still hope for Baby Boomers, and it starts with radically rethinking your wealth-building strategy. To learn how you can achieve financial freedom at any age, visit Paradigm Life’s  Optimizing Retirement Income.

Getting Old Is Taxing Enough without Having Your Retirement Taxed

3d image of tax bombWhen most people think about retirement, they think about freedom, leisure … and a fixed income. Although we all look forward to the day that we hang up our hat for the last time, retirement also comes with the very scary prospect that our income will be fixed for the rest of our lives. Perhaps you think you’ve saved enough to live comfortably, but perhaps you’re also worried that inflationary forces, skyrocketing healthcare costs and unexpected expenses will erode your nest egg. On top of all of these worries, you also need to think about how your retirement savings will get taxed. Let’s explore how Uncle Sam will come calling for his share of your retirement nest egg as you age:

  • You will never stop paying taxes: During our working lives, we don’t think much about the heavy tax burden we pay – because we have money constantly flowing in. But the taxes we pay on almost all of our purchases start to feel like much more of a financial strain when we’re living on a fixed income. Unfortunately, sales taxes are not determined by the amount of income we have coming in; everyone pays the same percentage.
  • You must pay taxes on your tax-deferred retirement savings plans: If you’ve been squirreling away a portion of your income in a 401(k) or similar tax-deferred retirement savings plan, Uncle Sam is going to come calling as soon as you start withdrawing that money. You will be hit with heavy taxes as you withdraw that money; there are no two ways around it.
  • The more you withdraw, the more you will be taxed: Tax-deferred retirement savings plans are designed to be accessed gradually, which gives us some control over our tax burden. But what happens if you have an emergency or unexpected expenses that require you to access big chunks of your tax-deferred income all at once? Unfortunately, the answer is that the more money you withdraw, the higher your tax bracket.
  • Uncle Sam doesn’t care if you outlive your retirement savings: Most of us plan for our financial futures by estimating how many years we’ll live in retirement, then withdrawing from our retirement savings accordingly. But when you outlive your retirement savings, guess what – Uncle Sam doesn’t care. You won’t get any special tax treatment just because you’re running low on money.

The last thing anyone wants to worry about as they grow old is seeing their nest egg eroded by taxes. Fortunately, there is an alternative way to build wealth for retirement: Investing in a whole life insurance policy. With a properly structured whole life insurance policy, you can borrow against your policy’s cash value to create a steady cash flow that will last you the rest of your life. And best of all, Uncle Sam has limited ability to interfere, as you’re entering into a private contract with a mutually owned life insurance company.

For more information about how to lower your tax liability in your retirement years, visit Paradigm Life to learn more about how traditional retirement strategies are hanging you out to dry.

Perpetual Motion for Perpetual Wealth? It Doesn’t Work on Wall Street, but There Is Another Way

Gear wheels on dollar bill revealing the path to successThe ultra-wealthy and corporations build significant wealth by keeping their money perpetually in motion. How do they do this? By keeping their money moving through multiple investments at the same time. The problem is that ordinary Americans looking to secure their financial futures don’t realize they too can keep their money perpetually in motion to build perpetual wealth. In this post, we will explore why money doesn’t stay in perpetual motion on Wall Street and why you need help from a whole life insurance policy to achieve that goal.

  • Wall Street teaches you a linear investing strategy: When you think in linear investing terms, you put your money into one investment and then sick back and hope you earn a steady rate of return. This is exactly what Wall Street expects you to do with your money, and its stocks, mutual funds and other financial products are all set up to get you to invest linearly.
  • You need to think in circular investing terms: Linear investing forces you to put all of your eggs into one basket and then let professional financial managers essentially gamble with your hard-earned dollars. With a circular investing strategy, you keep your money moving through multiple investments – and you can earn a steady rate of return on each one.
  • A whole life insurance policy is the foundation of circular investing: When you invest in a whole life insurance policy, you can access the policy’s cash value at any time to fund other investments, such as real estate or commodities. This is the essence of circular investing; you are keeping your money perpetually in motion.
  • You want a steady cash flow, not cash accumulation: Wall Street teaches you to focus on the total dollar value of your investments, but you cannot grow that value if you never spend it, and you cannot live off what you do not spend. That’s why the superior philosophy is to focus on attaining a steady cash flow that comes from accessing the cash value of a whole life insurance policy.

Keeping your money perpetually in motion is the only way to build perpetual wealth. It starts by recognizing that Wall Street won’t keep your money perpetually in motion. Next, you need to think in circular investing terms, which will allow you to recognize the value of a whole life insurance policy for creating a steady cash flow.

For more information about keeping your money perpetually in motion with a whole life insurance policy, visit Paradigm Life’s Powerful Cash Management Strategies.

Why Limit Your Wealth?

Financial success problem and investment stress symbol as a growing tree breaking due to the excess weight of growth income as a group of golden nest eggs pushing the plant down.No one consciously decides to limit their wealth, but most of us believe that the limitations on our wealth are largely determined by the hand we were dealt in life. Perhaps we will need to use our money to repay hefty college loans, or to take care of aging parents and other loved ones, or to cover unexpected illness and financially devastating catastrophes. No matter what your financial situation, there are steps you can take to increase your wealth. Let’s explore some of the key ways that you can free yourself of the constraints that are holding you back from meaningful wealth-building:

  • Take your investments out of the financial markets: One surefire way to limit your wealth-building capacity is to invest in the financial markets, which go through endless cycles of ups and downs that, in the end, don’t meaningfully build wealth. When you recognize that you’re gambling away your savings on Wall Street, you can rid yourself of the traditional investing mindset.
  • Stop paying so much of your income to Uncle Sam: As you earn more and more money, the government takes more and more from you in taxes. The only way to stop this cycle is to put your money into tax shelters that can minimize or eliminate your tax liability.
  • Learn how to keep your money moving through investments: When you invest your money in traditional places like Wall Street, you must select one investment product and then sit back and hope you made the right choice. But corporations and the ultra-wealthy don’t invest like that – they have learned to keep their money moving through multiple investments, each one earning a steady rate of return.
  • Take out a whole life insurance policy: A whole life insurance policy is not just a death policy; it has important financial advantages as an investment product. First, it acts as a tax shelter; the government is limited in its ability to tax a private contract with a mutually owned life insurance company. Second, you can access the cash value of your policy at any time to fund other investments, making it a conduit through which you can keep your money in motion.

There’s no reason to let factors that are fully within your control limit your wealth-building capacity. The keys are to recognize that you don’t need to invest on Wall Street, you can shelter your money legally from the IRS, you can keep your money moving through investments, and you can take out a whole life insurance policy as the foundation of your wealth-building strategy.

For more information about freeing yourself of the limitations on your wealth-building potential, visit Paradigm Life’s section on Infinite Wealth.

7 Steps to Better Manage Your Personal Finances

Closeup of businessman walking his fingers up wooden steps. Conceptual of business vision, progress and success.No matter how much you earn, no matter how disciplined you think you are with money, there’s always room for improving your personal finances. You simply cannot anticipate every major expense in your future, and once you’ve spent money, it’s gone forever. On that note, here are the seven essential steps you need to know to better manage your personal finances:

  • Recognize that you have enormous expenses: You’re probably deeper in debt than you think, even if you don’t think of it that way. You’ve got a mortgage, a retirement date to save for, and perhaps college tuition bills for your kids. When you think of yourself as having major debts, it alters how you view your spending habits.
  • Expose how much you’re really spending: Even if you’re generally happy with your income in and expenses out, you should create an itemized list of all of your spending, to identify exactly where your money is really going. This list can spur frank conversations with loved ones about spending priorities and savings goals.
  • Be cognizant your income is going to drop: Unless you intend to work until the day you die, you need to recognize your income is going to drop off precipitously when you retire. To ease that transition, you should aim to cut back now, so you can live a lifestyle that’s closer to how you’ll need to live in retirement.
  • Pre-allocate for recurring big-ticket expenses: One of the hardest aspects to manage about your finances is unevenness in spending. You might feel poor after paying for big-ticket items, like college tuition bills or Christmas gifts for all of your loved ones, and more free-wheeling during months when your bills are light. You should aim to smooth out this unevenness by pre-allocating funding for recurring big-ticket expenses.
  • Divest from Wall Street: The financial markets have never offered stability or security, and they never will. You should aim to stop blindly dumping so much of your savings into Wall Street – you’re essentially letting professional financial managers gamble with your money.
  • Reduce your tax liability: The more money you make, the more Uncle Sam will take from you in taxes. Hence, your goal should be to choose investments that offer a tax shelter for your money, such as real estate or a whole life insurance policy.
  • Keep your money moving through investments: A traditional linear investing strategy involves putting your money into one investment and then sitting back, hoping for a steady rate of return. But if you keep your money moving through investments – known as circular investing – you can leverage your money and make it work for you again and again.

Taking control of your personal finances now is the only way you can create a secure long-term future for yourself. Fortunately, all it takes is a shift in how you think about spending and income, a commitment to separate yourself from the financial volatility of Wall Street, and creative ways to keep your money moving through investments and out of Uncle Sam’s reach.

For more information about achieving long-term financial security, visit Paradigm Life’s section on Getting Ready to Retire at Any Age.

10 Wealth Building Strategies to Start Now if You’re Over 50

Game of chess. Man making a move.It’s never too late to start planning for retirement. Although you want to start building your wealth as early as possible, you can make a meaningful impact on your wealth no matter what your age, even if you’re approaching retirement. Here are the 10 wealth-building strategies you can implement now, even if you’re over 50:

  • Reduce your spending immediately: You won’t be making the same income once you retire, so you need to cut back for two reasons: You want to ease your financial transition to retirement, and you want to start saving more for the day you’re no longer working.
  • Factor in inflation and unexpected expenditures: When you’re trying to build wealth, you must consider how much less that wealth will be worth as inflationary forces and unexpected major expenditures take their toll. Health care costs, especially, could spin out of control, or you could be hit with a major home emergency.
  • Stop trying to hit a magic retirement savings goal: With so many financial factors out of your control, including knowing how long you’ll live, it’s naïve and insufficient to try to hit a magic number for your retirement savings, such as $1 million. The real key is to develop a comprehensive wealth-building strategy.
  • Divest from Wall Street: Wall Street’s never-ending financial volatility only means one thing for your financial portfolio: Continued uncertainty and the possibility of dramatic losses. You cannot afford to put all of your financial eggs into Wall Street’s basket.
  • Reduce your tax liability: The more money you make, the more money Uncle Sam will take from you in taxes. Therefore, you should identify opportunities to put more of your wealth into tax shelters, such as real estate or a whole life insurance policy.
  • Adopt a circular investing strategy: With a linear investing strategy, you put your money into a single investment product and then sit back and hope it earns you a steady rate of return. By contrast, a circular investing strategy keeps your money moving through multiple investment products.
  • Use whole life insurance as the foundation of circular investing: The foundation of a circular investing strategy is one that provides full liquidity and security for your investment. A whole life insurance policy meets both of those criteria.
  • Access the cash value of whole life insurance: Not only does whole life insurance pay steady dividend payments, but a whole life insurance policy also has a cash value that you can access in full at any time to fund your other investments. In this way, you are moving money through your policy.
  • Consider alternate investments: Commodities range from precious metals like gold and silver to agricultural products, oil and building materials. Collectibles range from fine art to fine wine to rare coins. These alternatives to the volatility of the financial markets are important for a diverse portfolio.
  • Invest in real estate: Real estate investments act as a tax shelter, as you can write off the costs associated with your investment gradually over multiple decades. All the while, you’re collecting rental income and building equity.

Building wealth is not the same thing as saving money. To provide yourself financial security in retirement, you need to implement a range of important strategies, ranging from reining in your spending to divesting from Wall Street to adopting a circular investing strategy.

For more information about building wealth regardless of age, read about Planning for a Successful Retirement.

The #1 Way You Don’t Know You’re Losing Money

Money fall out from a hole in jeans pocketIf you’ve been saving money all your life, you’re probably thinking, “There’s no way I’m losing money – I’m making money!” Maybe you’re managing to gradually grow your total savings, but if you’re like most Americans, you’re actually losing money left and right. First, you are losing buying power due to inflation, both now and into the future. Second, if you have money in the financial markets, you’re losing money to market volatility and transaction fees and broker charges. And third, if you’re earning more and more income each year, you’re actually losing more and more of it in taxes under our progressive tax system.

The underlying problem most Americans face is that they don’t know how to invest their money in a way that keeps their money moving through investments. This method is known as circular investing, and it’s exactly the opposite of the linear investing strategy that most of us use: We park our money in one place (most commonly on Wall Street) and sit back and wait for a strong rate of return. This ubiquitous linear investing strategy we’ve all adopted is the No. 1 way that most of us don’t realize we’re losing money. Let’s explore the drawbacks of linear investing in more detail:

  • Linear investing doesn’t build wealth reliably: With linear investing, you count on some external force outside your control to earn you a steady rate of return. And you don’t do anything with your money in the meantime, so if your investment strategy fails, all of your money is wiped out.
  • Linear investing teaches you to focus on cash accumulation: If you’re investing on Wall Street and other traditional investment products, your mindset is to grow the total dollar value of your investments – this is the essence of Wall Street’s business model. The problem is that the only way to grow this sum total is to never spend any of it. And that, of course, is just insane: How can you live off money if you convince yourself you can’t spend it?
  • You live off your liquid cash: Because linear investing does not set you up to withdraw your money and spend it on a regular basis, you tend to not have liquid cash. Of course, liquid cash is what you live off of, so to tie up all of your money in a linear investing strategy simply makes no sense – you’re really losing money if you aren’t using it.
  • You need a circular investing strategy: With a circular investing strategy, you learn to view investments as vehicles to move your money through, where each investment offers you a steady rate of return – and where you’re never allowing your money to sit idle. A whole life insurance policy is the foundation of a circular investing strategy, as it allows you to access the policy’s cash value whenever you want and use that cash value to fund other investments.

When you refuse to let your money sit untouched in a single investment product, you are just saying no to the biggest drain on your hard-earned dollars: A linear investing strategy. The secret to retaining more of your money is to recognize that linear investing does not allow you to build wealth reliably, and causes you to focus too much on the irrelevant goal of total cash accumulation. In reality, you live off your liquid cash and need to use a circular investing strategy to keep your money flowing to you.

For more information about how a whole life insurance policy can become the foundation of your circular investing strategy, check out our infographic on Cash Value Insurance.