You Can’t Win the Game If You Don’t Know the Rules

Have you ever played a game for the first time with someone who was a master at that game? Now, usually in this situation, the seasoned player will explain the rules and even assist during the game play, in order for you to have a fair chance and to have the game an actual competition. However, what are the chances of winning a game where you don’t know the rules and your opponent’s only objective is to win at all costs? What do you think your chances of a fair competition are? This is exactly what is happening every day to millions of people who are supposedly saving for their future.

The rules of retirement used to be that if you saved enough in a nest egg, you could retire and live off the interest, as well as pass on a legacy to heirs. This worked for our grandparents and even some of our parents, but this is no longer the case. Now, cash flow has to be the key to a successful retirement, not some number that we have achieved. What changed? Why is retirement being pushed off to a later date? Most importantly, how can we win with this new set of rules?

The change happened when we went off the gold standard in 1971 and our currency changed from a “Gold certificate”, backed by something with intrinsic value, to a “Note” or certificate of debt. From that point forward, inflation has eroded the dollar’s “purchasing power” almost to the point of oblivion. Add to that problem, the fact that by lowering the interest rates, it shrinks the return an individual can earn on the balance of the nest egg. What we have today is people having to stay in the work force longer or retiring with far less to spend than was anticipated.

So how can you win? First off we need to rethink retirement, especially as life expectancies have risen. When social security was originally set up in 1935, the average lifespan was 62. This means that there was a less than 50% chance anybody would work long enough to claim social security. Now, we live an average of 79 years and the chances of going on claim are over 90%! No wonder social security is running out of money. It was never intended to support the amount of people that are able to claim it.

Lastly, the typical “retirement savings” is not actually a savings at all; it’s an investment. What do I mean? When you picture a savings account, it is a place to store cash that only comes out when you make a withdrawal. The stock market is volatile and value can evaporate at any moment for any number of reasons. That is an investment. If you are “saving” for retirement, that is not money you can afford to gamble with and, therefore, would be better off in an actual savings vehicle. This brings up another problem of having no return on savings.

Now, let’s look at some possible solutions.

Find an occupation you love and never quit doing it. It has actually been proven that active people live longer. You can save money in a properly structured whole life policy or Wealth Maximization Account, as we call it here at Paradigm Life. Also, invest in assets that you are educated about. When you know the rules of the investments you make, you have a higher probability of making a profit. Invest for cash flow rather than appreciation. Once your passive cash flow is equivalent to your expenses, you are no longer required to work. At that point, your occupation can be whatever you are passionate about because it’s no longer about the paycheck. And people that work in an occupation they are passionate about tend to make more money and provide more value to those they come in contact with. It is a win/win for everybody involved.

I’d like to end with a quote from Dr. Howard Thurman. “Don’t ask what the world needs. Ask what makes you come alive. And then go and do it. Because what the world needs is people who have come alive.”

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