The hard truth is that your 401(k) is not only inadequate for generating enough retirement money; it’s stuck there like a Lamborghini in a traffic jam. There is a vehicle out there allows you to grow your wealth and have access to your money at the same time. This holy grail of savings could help you avoid the huge opportunity costs of keeping retirement savings locked up—and we would love to share it with you.
It involves whole life insurance, but a plain vanilla whole life policy will not get you where you want to be. You need to construct the policy with a cash addition that allows you to save, invest, and prepare for retirement all at the same time.
The Right Policy Can Make Money for You
First, let’s explore growing your retirement savings. A 401(k) has special rules attached to it. Well, the right permanent life insurance policy has rules too—rules that allow you to accumulate cash value much more quickly and on a potentially tax-free basis. See, as you pay a premium into the policy it generates cash value. That cash value is equity, literally a cash balance that can be distributed, cashed out, or leveraged as it accrues.
Your cash value is also compounded through interest and the dividends paid each year by the insurance company. If it’s done right you can grow upwards of 4% to 7% over time without fees, costs, or commissions. How? Because these types of insurance companies are conservatively positioned and they rely on actuarial science (i.e. life expectancy/mortality rate) as opposed to market performance. The facts about these policies are:
- • They’ve paid dividends for over 100 consecutive years.
- • They are used by some of the most successful investors, individuals, and institutions.
- • They work on a small, medium, and large scale with success.
Simply put, you grow money comparable to the average 401(k), but without the risk and volatility. So, there you have a steady, competitive, and tax deferred (potentially tax free) compounding growth without the ebbs and flows of the market. Now let’s talk about accessing it while you’re alive. That’s what we call a “living benefit” and that makes this policy anything but “plain vanilla.”
The Right Policy is Liquid
What happens when you can access your cash value? You regain that nasty opportunity cost of stagnant money. You can borrow against your cash value as it accumulates without affecting the growth of your cash value.
For example, if my policy had a cash value balance of $100,000, and I borrowed $25,000 against it, unlike the 401(k), my total cash value balance would not be reduced by the loan amount. I would continue to earn interest and dividends on the entire $100,000 cash value balance regardless of the policy loan.
We know it sounds crazy, but it’s true because the insurance company loans me the $25,000 from its General Fund. My funds never actually leave my policy. My $100,000 cash value balance allows me to be in two places at once–I’m compounding my $100,000 over time just as if I had taken no policy loan, and I can use that $25,000 for whatever purpose I choose.
What if I use that $25,000 as a down payment on a rental property? In that case, I’m compounding my $100,000 and I’ve created a stream of passive income at the same time. Now I can use the rental income to flow back into the policy to repay the loan with zero impact to my monthly budget. And that’s just the beginning of what you can do with liquid money.
But wait, could you ever do this with a 401(k)? Well, you could take a 401(k) loan for $25,000 and purchase the rental property, but again, you’ll take a hit and only make a return on the remaining $75,000, and you’re forced to repay the 401(k) loan with very little flexibility. And if your portfolio takes a 10% hit this year instead of growing? You’ll rely on the market to dig you out of that hole.
The 401(k) is and always will be a shaky retirement vehicle with no real opportunity to borrow and repay your savings. It was never intended to help you avoid opportunity cost. In fact, you’re frowned on for borrowing from yourself prior to retirement. Let us tell you more about how to structure an insurance policy where you can grow money at a rate comparable to that of a 401(k) without volatility and without giving up access your stash of cash.
If these strategies sound good to you or too good to be true you should take a more in-depth look at how they work in our FREE downloadable eBook by William A. Street called, In Search of the Best Way.
These financial strategies lets you grow your wealth, access income, and leave a financial legacy for your family. Financial education is our priority, and we are excited to invite you to take 2 minutes to sign up for a FREE, extensive eCourse called Perpetual Wealth 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal financial strategy and start changing your wealth paradigm!
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