8 Tenets of Effective Whole Life Policy Management

You’ve launched an incredible financial strategy - one that has the ability to propel you toward maximized and protected multi-generational wealth when leveraged appropriately. As you move forward with the Perpetual Wealth Strategy™, there are core management tenets to start applying. Refer to them often to ensure that the primary purpose of your whole life policy is not only being met, but that it’s contributing to your overall financial strategy as intended.


Webinar: Prepare for Retirement At Any Age

Knowing the right questions to ask when planning for retirement is the first step to getting ahead in your non-working years.

Grow A Healthy Medical Practice with Life Insurance

Grow A Healthy Medical Practice with Life Insurance

It can be fiancially difficult to take over a medical practice, or maybe your business is running on a tight budget, and you need a cushion for expenses. “Infinite Banking for Doctors” will help you understand how utilizing Whole Life Insurance is a smart way to advance your practice.


Webinar: How to use Infinite Banking - A Private Insurance Contract Strategy

Join Wealth Strategist Ryan Lee on a webinar that shows the tools are only as valuable as the one who uses them.

6 Things to Know About Cash Value

6 Things to Know About Cash Value

This infographic teaches you the benefit of keeping your wealth in cash value. Cash Value offers privacy, guaranteed growth, dividends and more. Download the infographic today to get a snapshot.


Guaranteed Returns With Less Risk

Ditching typical financial advice for the road less traveled

Protecting Your Privacy in the Information Age

Protecting Your Privacy in the Information Age

Permanent Life Insurance naturally comes with many levels of protection and guarantees. Though each state has different exemption laws, typically cash value insurance is one of the few assets protected from creditors.

The Perpetual Wealth Strategy

The Perpetual Wealth Strategy

This article will show you what the Perpetual Wealth Strategy is. 


Your Personal Path of Financial Freedom

No two financial situations or stories are the same. Your path of financial freedom and the steps it entails will be unique to your life, interests, passions, and long-term goals. The Perpetual Wealth Strategy™ is designed to help you take control of your financial life and reap the benefits of the freedom that provides. The opportunities and asset classes below are only a handful of the types of decisions and investments that are possible to you through this strategy. Your financial goals may be satisfied by two alone or more than 20, but the bottom line is the same: your path is built upon a solid and reliable foundation that lets you pursue what matters most to you.

Climbing Retirement Mountain- Compare With and Without a Perpetual Wealth Strategist

Climbing Retirement Mountain- Compare With and Without a Perpetual Wealth Strategist


The majority of people don’t plan correctly for retirement - learn how to avoid the common mistakes.


Issue 3: The Most Valuable Benefit of Life Insurance for Children

"Just use the debit card," my daughter Meghan said to my wife. Like every kid, my children weren't born understanding the concept of money. To them, you swipe a card here and you swipe a card there and stuff becomes yours. "Just use the card" was a common phrase on Target runs and trips to the grocery store.

Time flies. I have one child in high school, one in middle school, and one in Kindergarten. My kids, even the youngest, are at an age where they now understand what money is. More importantly, they're starting to grasp its value, which is not in the money itself but in what creates it. Things don't show up just from swiping a card. They aren't valued at a dollar amount. They're valued in nights of babysitting jobs, chores around the house, and helping dad at the office.

There are many ways to teach children the value of money, but a Wealth Maximization Account is designed with specific characteristics to benefit your children, both now and in the future, and can be an asset for the entire family.

The Value of Life Insurance for Children

Opening up a Wealth Maximization Account (a whole life policy designed for high cash value) on your children or grandchildren is an incredible way to set them up for a secure financial future. But the life insurance policy itself isn't what changes your child's life, it's the education behind it. Using a whole life insurance policy for children to teach them the value of money is a priceless gift.

This gift to a child or grandchild is more than the cash value of an inheritance or trust fund. It's not about giving them money, although you can certainly use it that way if you wish. I use my children's life insurance policies to teach them the difference between wants and needs, the difference between good debt and bad debt, and to help them understand their intrinsic financial value.

Do children have an economic value? They absolutely do. Their potential is like a seed, ready to be nurtured and cultivated. To maximize their value as an adult, they have to learn financial responsibility at an early age. One of the most effective ways I've been able to teach sound financial practices is by letting my kids borrow against the cash value of their Wealth Maximization Accounts. It allows me to show them the economic value of their life, as well as the unique way they can use it to make purchases.

Family Banking Strategy for Kids

A Wealth Maximization Account is unique in that it allows you to borrow against its cash value while still earning guaranteed interest on the full cash value amount of the policy. You, the parent, own and control your child's life insurance policy. You're the "bank" and can allow your child to take a loan from their policy, while the actual interest in the policy itself remains protected.

Now, when my kids want things, my wife and I decide if we'll let them borrow from their policies, and it becomes their responsibility to pay it back. We call it our family bank. Our children have the opportunity to make purchases that are of value to them, but they must assume responsibility for paying back the loan. It forces them to weigh the value of their time and commit to a payment schedule.

My daughter Meghan has used her policy to buy various types of electronics and a $400 gymnastics mat, amounting to thousands of dollars cumulatively. She had to create a payback plan before she could borrow the money. She felt she could earn enough for the payments by increasing the amount of babysitting she did in the neighborhood. She also researched ways to earn bigger tips by giving better service, such as making little videos of the kids, making sure the house was cleaner than when the parents left, and leaving a handwritten note.

This experience has given Meghan an appreciation for where money comes from, what a loan is, and what interest is, all of which will benefit her in the future. Meghan is also learning the value of her time; an enormous lesson when it comes to her lifelong earning potential. The educational aspect of a Wealth Maximization Account is the most valuable benefit of life insurance for children.

What If My Child Doesn't Pay Back Their Loan?

Failure is part of the process.

When it comes to teaching children financial responsibility, failure to repay a loan can actually provide a more powerful learning opportunity. As parents and the policy's owners, we "repossess" what they bought, whether it be a phone, iPad, bike, or toy. It's far


Asset Protections in Your Whole Life Policy

We live in one of the most litigious times in history. That means that your personal, business, and family assets are at more risk of lawsuit, judgment, and seizure than ever before. Storing foundational wealth in vehicles and strategies that offer the most protection possible is a key component of the Perpetual Wealth Strategy™. While there is no such thing as absolute asset protection, the very nature of your whole life policy provides barriers to four major financial risks and liabilities, keeping as much power as possible in your hands.


The Volatility Buffer Toolkit

The Volatility Buffer strategy is a proven method for protecting and growing your wealth so you can enjoy guaranteed income for life. Register now to learn more.


Issue 8: Real Estate Investing in a Down Market

I came across a quote recently about the power of an idea.

"There is one thing stronger than all the armies in the world, and that is an idea whose time has come.”

—Victor Hugo

What are the ideas that shaped the way you viewed yourself, your career, where you live, and what you want for your life?

Entertaining New Ideas

Several years ago I had the chance to be in a few study group sessions with Rich Dad Poor Dad author Robert Kiyosaki. They were intense to say the least. After years of reflection on those experiences, I realized why the book Rich Dad Poor Dad changed the course of my life and millions of other people. It implanted a new idea, one that was contrary to ideas I had previously believed.

The funny thing is that most people who make the same claim about this book can’t even remember the primary six lessons. Additionally, Kiyosaki doesn’t even tell you what to do in the book. He challenges the dominant ideas of society that have influenced education, politics, and money. Kiyosaki is never satisfied with his current perspective of the world and is constantly challenging his beliefs and ideas by reading, studying, thinking, and exploring the ideas of others. His approach is opposite to most who are constantly finding ways to validate the ideas they already have.

I characterize the idea from Rich Dad Poor Dad that changed me as simply the belief that there was another way to achieve what I wanted, and that I desired freedom over security.

It’s Not What, It’s How

I read Rich Dad Poor Dad many years ago, right before I moved from Connecticut to Utah. In the book, Robert talks about how he turned down a steady paying job as a commercial pilot after leaving the Marine Corps, opting instead to work as a salesman for Xerox. I assume most people would much prefer a career as a pilot, something many kids dream of being when they grow up, instead of selling copiers and printers, but Robert knew that the path he chose wasn’t about what he sold, it was about learning how to sell.

A big part of sales is learning how to listen. All over our downtown Salt Lake office, we have posters on the walls with this quote:

“Most people do not listen with the intent to understand, they listen with the intent to reply.”

—Stephen R. Covey

I knew, as Robert did, that in order to be successful, I had to learn how to listen with the intent to understand. The key to being prosperous is being able to offer a product or service that fills a need, and it’s impossible to know that need if you’re not listening.

Real estate investing isn’t dissimilar to sales. It takes keeping an ear to the ground to seek out opportunities. You must anticipate growth in a particular area and look for investments that fill people’s needs in order to be profitable. How can you appeal to renters or tenants? How is the property you’re renting or leasing better suited for them than the one across the street?

Young, enthusiastic, and ambitious, I moved to Salt Lake City and was adamant about getting a sales job as I worked my way through school at the University of Utah. But, as a poor college kid, sometimes you take the job you can get, not necessarily the one you want. The first job I got in Utah was delivering room service at the Little America hotel.

My Road to Real Estate Investing

The story of Little America is an interesting one. The first Little America was built in the 1950s, not in Salt Lake, but alongside I-80 in Wyoming somewhere between Rock Springs and Green River. It was essentially a truck stop with two gas pumps, a cafe, and motel rooms. Shortly after it opened, it was bought by Robert Earl Holding, a civil engineer and fellow University of Utah alumni, who had originally moved his family to Wyoming to manage the hotel in exchange for a 10% ownership share.

The story of Earl Holding’s rise to billionaire real estate investor status is nothing short of amazing. The son of parents who survived the Great Depression, he grew up incredibly poor. Yet by the time of his death in 2013, he owned all the Little America hotels (four in total), the 5-star Grand America hotel, and three others, plus Sun Valley ski resort in Idaho, Snowbasin ski resort in Utah, and the Sinclair Oil company. He was also one of the largest landowners in the West, with 400,000 acres to his name and a net worth of $3 billion. Real estate mogul doesn’t even begin to describe what he accomplished over the 86 years of his life.

After I left Little America, I joined a non-profit call center with a mortgage arm. I worked to help people consolidate debt. I was still in school, but between Robert Kiyosaki’s philosophy and Earl Holding’s inspiring accomplishments in real estate, I decided to buy a duplex when my apartment lease came up. I still own that duplex to this day, and it’s a great source of passive income for me and my family.

Real Estate Investment Lessons From the Great Recession

After the original duplex purchase, I went on to buy seven other rentals. Then the Great Recession hit. It was an extremely challenging time to be in real estate, and I ended up having to sell some of my properties. It was a hard lesson in the right and wrong ways to invest in real estate, and realizing what I could and couldn’t manage. Many of the properties I owned needed work, which I had planned to hire out, but due to the financial crisis I didn’t have the money to do so. It became a huge hassle for me. My wife Synthia was helping manage properties, but it wasn’t where either of our focuses were—or wanted to be.

I learned that nearly anyone can get into being a real estate investor, but if real estate isn’t your main business it can become a distraction. It wasn’t my main business; at the time I was trying to keep Paradigm Life afloat. I wasn’t good at fixing things and I wasn’t good at property management. The properties I owned became a distraction and took away from what I was actually good at.

Looking back, this is where I see most real estate investors get into trouble. Long hours spent on nights and weekends trying to tackle repairs, yard maintenance, cleaning apartments between renters, and all the other responsibilities of being a property manager steal precious time that could be spent investing in yourself. It’s better to focus your time on ways to maximize your income, your human life capital, and making yourself more productive. You are your best asset, not your property or passive income stream.

If you owned property or a business in 2008-2009, you likely understand the amount of financial uncertainty that was prevalent during that time. I speak extensively to it in the beginning chapters of Heads I Win, Tails You Lose, but the gist was that I was constantly questioning whether or not I could survive one more month. In fact, I was ready to file for bankruptcy, move to Phoenix to be closer to my wife’s family, and had the moving van ready to go when I received a voicemail out of the blue from a local real estate investment company. They wanted to know more about the cash flow banking concept I taught at Paradigm Life and were interested in doing business.

Around the same time, I was invited to a real estate investor conference called Summit at Sea with The Real Estate Guys, a radio show and podcast group out of San Jose, California. Over the course of a week-long cruise, I provided education to their audience about financial principles that would increase cash flow for real estate investors.

I didn’t anticipate the degree of response from their audience. The market correction and corresponding foreclosures of 2008 and 2009 presented a tremendous opportunity for real estate investors to buy investment properties at a fraction of their market value, and whole life insurance offered a very beneficial way to to take advantage of these new opportunities.

The Role of Whole Life Insurance in Real Estate

Whole life insurance plays multiple roles in your real estate investment strategy, depending on the situation.

  • First, it is a place to save money and increase your liquidity. It’s where you keep your reserves and it’s a great place to house cash flow.
  • Second, with real estate investment, if your investments go sideways, whole life insurance keeps your money protected because it usually isn’t subject to creditors.
  • Third, policy loans can be used to fix an investment property, create a downpayment, or act as your hard money lender. It can also replace lost rent and function as a volatility buffer.
  • Finally, it acts as the best asset to pass on in an estate and give liquidity to your heirs for properties that you own.

Whole life insurance allows you to take advantage of investment opportunities when they arise because the cash value of your insurance policy is extremely liquid. I prefer the following strategies for acquiring property using your Wealth Maximization Account™:

  • 1. The down payment of 20-25% is made by borrowing from your insurance company against your Wealth Maximization Account via a policy loan. The cash flow from your property then goes to pay down your policy loan.
  • 2. If you have enough cash value in your Wealth Maximization Account, you can buy the property with cash within a few days. An immediate cash offer is usually more attractive to sellers because they want to close and get their money as soon as possible, whereas a bank mortgage can take up to 60 days or longer. Once you purchase the property, you can then apply for a traditional mortgage at the 75-80% level.

Related: How a 15-Year Mortgage Could Bankrupt You

Is Real Estate a Good Investment?

Over the years, of the thousands of investments I have analyzed, the ones I have seen perform the best and most consistently are real estate related. In terms of increasing passive cash flow and hedging inflation, I believe nothing else outperforms real estate, provided you get into it the right way. Use a high degree of discernment to understand numbers; know what you’re buying and become good at bookkeeping.

If you don’t educate yourself enough to know what you’re investing in, you have to trust someone else to make your investment decisions for you, and that increases risk. Investments that you control, especially as markets oscillate, decrease your exposure to market volatility.

“The individual investor should act consistently as an investor and not as a speculator.”

—Ben Graham

Consult the Hierarchy of Wealth before making any investment decisions. Make sure you have a solid Tier 1, consisting of your whole life insurance policy or 6-24 months of living expenses, before moving on to Tier 2 investments like real estate.

I have a personal set of criteria I adhere to when looking for deals in residential real estate. I learned it from a good friend and client of mine, Jason Hartman, one of the most informed people in the real estate world.

Criteria for a Successful Real Estate Investment

  • Rent to value ratio of 1 percent ($100,000 home = $1,000 gross monthly rent)
  • Mortgage the house at 75-80% of its value
  • Home fits the median home price for the area
  • At least three bedrooms and two bathrooms
  • Have a property manager
  • House has been recently updated

Related: Return on Investment vs. Return on Wealth

A Word on Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts exist in a number of sectors, including medical space, assisted living, hotels, apartments, vacation rentals, commercial space, etc. They function similarly to mutual funds in that they diversify your investment among a number of properties and have relatively low barriers to entry. You can begin investing in some REITs, like the crowd-funded Fundrise, for as little as $500. If you don’t have much in the way of liquidity or capital on hand, these kinds of investments may be a good option.

As with any investment, you have to educate yourself and know what you’re investing in. When considering the Hierarchy of Wealth, these types of investments are Tier 3. By law, REITs are required to pay out 90% of their profits in the form of dividends to shareholders, but this doesn’t mean they’re without risk. Outside of dividends, REITs can be highly illiquid and management fees cut into your overall yield. However, they may offer tax benefits, and depending on whether you opt for a publicly traded or privately held REIT, you have the option of being an ultra-passive or ultra-active investor.

How Is the Coronavirus Affecting Real Estate?

I recently hosted a webinar for clients where I answered financial questions and concerns amid the economic shutdown brought on by COVID-19. I was surprised at how many of the questions weren’t necessarily about financial insecurity; there were many questions from clients wanting to know how to take advantage of upcoming investment opportunities.

My advice is to look at the economy in seasons. Right now we’re in winter. It’s time to prepare to plant. Pay attention to the GDP. Watch housing prices over the next six months. Look at whether or not people are able to pay rent. The unemployment rate and health of the economy are big factors when it comes to real estate investing. I recommend increasing your liquidity so you’re ready when real estate opportunities arise.

In addition to advice from Jason Hartman and The Real Estate Guys, my friend and mentor Ken McElroy is an expert at real estate strategy. As you probably know from reading other issues of The Donohoe Bulletin or listening to The Perpetual Wealth Strategy and Wealth Standard podcasts, I’m a huge advocate of networking and learning from the experts, and I recommend you do the same. Check out this recent edition of the Wealth Standard podcast to hear my conversation with Ken about the current state of the real estate market amid COVID-19.


There will always be opportunity in real estate investment, even if things change due to the workforce. Educate yourself on the various types of real estate you’re interested in and ensure you examine these three criteria before investing:

  • 1. Determine the degree of involvement you want.
  • 2. Assess your cash flows and determine rent-to-value ratios.
  • 3. Know how to break down profits and expenses to determine the true return.

If you don’t mind carrying debt—some people do; it’s a psychological hang up for them and something to seriously consider before buying real estate—a real estate investment can be one of the best ways to generate passive income and increase cash flow. It is a tried and true way to build wealth, and utilizing whole life insurance to aid in your investment helps ensure it will be a success, regardless of what happens in the market.


Issue 5: Uncommon Investments: Think like LeBron James

Three years ago my wife Synthia did something I would have never anticipated.

In 2017, she officially became a sports fan-specifically of the Utah Jazz. Since that season, Synthia has missed only a handful of home games. The experience has officially become our weekly date night during basketball season. Most games, she cheers and coaches from the stands. However, when the Houston Rockets come into town, she takes it to another level. Without getting into the details, James Harden and Russel Westbrook usually get a mouthful of colorful language from Synthia Donohoe.

A few months ago, I could see her "dark side" emerging when the Jazz were playing the LA Lakers. Then my wife and I noticed something happening on the court that gave us a different perspective.

When a shot, dunk, or steal was made, LeBron James jumped off the bench in celebration. But when a shot was missed, he did the exact same thing, encouraging the attempt. The way he engaged with refs, media, and the Jazz staff and players was noticeably respectful. Towards the end of the fourth quarter, even though the game was in full swing, he had half of the arena's attention when he motioned for kids to come courtside. He signed pairs of shoes and other Lakers' gear for them.

LeBron James is a great basketball player and has taken that greatness to the business world. He is mentored by admirable people: Warren Buffett and Bill Gates, to name a few. As you might guess, it's not to get the stock tip of the week.

It's to gain their greatness, seeing the world the way they do.

Warren Buffett told LeBron to avoid get-rich-quick deals and to invest in what he knows, to leverage his unique strengths and attributes into the business world. This simple insight isn't relevant to just LeBron or other celebrities; it applies to everyone.

Traits to leverage for successful investment:

  • Core competencies
  • Talents
  • Strengths
  • Professional training
  • Experience
  • Credentials
  • Relationships
  • Business contacts
  • Business opportunities
  • Your reputation

Here is one of many examples of how Lebron leveraged his strengths and attributes:

Back in 2008, LeBron and Beats Electronics cofounder Jimmy Iovine met with their financial adviser to discuss a documentary (yes, they had the same financial guy). During that time, Jimmy was working on developing Beats headphones with Dr. Dre. LeBron was a big fan of Dr. Dre and had been listening to his music for the better part of his life. After their meeting, Jimmy sent LeBron a prototype of the new headphones. LeBron requested more pairs for his whole basketball team, and a brand was born.

What followed was a partnership between three music and sports icons, an eventual buyout by Apple, and a reported $30 million in equity for LeBron.

Talk about capitalizing on your relationships, business contacts, and reputation!

What's Your Investment Personality?

Successful investing isn't delegating your financial future to someone else. It is your responsibility. It comes from knowing yourself, knowing what kind of investor you are, gaining sufficient knowledge of the underlying investment, and most importantly, knowing how to use leverage.

Delegation is taking something you're responsible for and giving it to someone else. You delegate on the basis of hope that it will actually get done and get done right.

Leverage is working with another individual to produce the intended result.

Personality assessments are a great way to discover your investment personality. They can provide insight into how you get results, what your strengths are, and the way you work best with others, among other things.

I recommend using at least two of these highly regarded assessments:

If you're a visionary and quick to make decisions, consider investments that require rapid decision making upfront but might be harder to liquidate, so you


What To Do When Universal Life Fails

Thinking outside the box can check all the right boxes

How Permanent Life Insurance Strengthens Your Business

How Permanent Life Insurance Strengthens Your Business

Being a business owner can be one of the most stressful occupations out there - every financial decision begins and ends with you. How do you succesfully keep your business thriving? Read how permanent life insurance can provide cash flow to help your business grow.


The Wealth Maximization Account

Want to learn the safest place you should put your money? Sign up for our free eCourse to learn more about The Wealth Maximization Account.

Powerful Cash Management Strategies

Powerful Cash Management Strategies

Real Estate has attracted investors for hundreds of years because of its ample wealth-building benefits, but it's not failproof. Many individuals find themselves at a financail loss with property investment while they try to build wealth. Why? Read how Permanent Life Insurance provides an excellent investment system.

Optimizing Retirement Income

Optimizing Retirement Income

Dr. Wade Pfau discusses the significant risk associated with using the market as your single source of retirement income. Learn simple techniques for maximizing your retirement income in this popular ebook.

How to turn the holidays into your best investment of the year!

How to turn the holidays into your best investment of the year!

Most people do not look at the holidays as an investment. However, the holidays are one of the best times to make many investments that will give you positive yield forever.

Infinite Wealth: A Different Kind Of Retirement Planning

Infinite Wealth: A Different Kind Of Retirement Planning

When helping baby boomers prepare for retirement, we at Paradigm Life, have realized that many of those clients come to us with the same three major fears. Read how a properly structured whole life policy can help alleviate retirement fears.

Boost Your Real Estate Gains by Being Your Bank

Boost Your Real Estate Gains by Being Your Bank

Learn how to combine the wealth building powers of Real Estate and the Private Loan of the Perpetual Wealth Strategy to increase your returns and reduce your risk.


An Asset that Protects and Builds Family Wealth

Discover a powerful financial management tool for you and your family in your normal day-to-day life, as well as big events like purchasing a home or starting a business.


Tax Advantages of the Wealth Maximization Account

When compared to alternatives, the Wealth Maximization Account - a dividend-paying whole life policy designed for maximum cash value - can have some of the most lucrative short- and long-term tax benefits available.


Should Your Family Use The Family Banking Concept?

Join Ryan Lee as he discusses a strategy that has completely changed the future of his family.


Issue 6: How the Wealth Maximization Account Complements Your IRA

The subject for March is tax strategy. Specifically, one of the most common ways Americans save money for retirement and get a tax deduction—the IRA. My hope is that you walk away from this month's reading with a renewed vision of your future and new ideas of how to get there faster.

To know for yourself whether a financial product is the right fit, you must know more than one perspective. What was your opinion of whole life insurance before meeting with a Wealth Strategist and learning the benefits of a Wealth Maximization Account? There is a lot of misinformation out there about wealth strategy. The IRA is commonly lauded as the must-have retirement account. It is rarely (if ever) analyzed as being a financial tool that may NOT represent the best interest of those who use it.

"Success is achieved by people who deeply understand reality and know how to use it to get what they want. The converse is also true: idealists who are not well-grounded in reality create problems, not progress." - Ray Dalio

Define Your Results & Purpose

Recently I was part of an investment summit in Pasadena, California. The summit was small and revolved around a group of about fifty investors who were pitched by a handful of start-up companies.

At the end, we were broken into groups of eight and had 15 minutes to create a three-minute business pitch that would be made in front of the group. My group was assigned a technology that would notify parents if a child left a pre-set perimeter while in a public place.

We began, chaotically. The group instantly broke into three separate conversations about how the technology would work.

"Should the device be GPS, Bluetooth, or Beacon technology?"
"Should it be wearable or disguised?

"Guys!" I reluctantly interrupted.

"These are amazing ideas, and if we had more time, I am sure we could figure out how to create the entire business plan. The only thing we need to do is create the three-minute pitch, not the entire business."

We got focused. We started by defining the problem in simple terms and tied the horrifying feeling of losing a child to the opening lines. We pitched and got an ovation.

It seems that most of us rush to how before ever properly defining the results and their purpose.

My challenge to you is to get crystal clear on the financial results you are REALLY after. When you meet with your Wealth Strategist for your annual review (or more often, if needed), your job is to come prepared with an outline of the results you want and their purpose. Your Wealth Strategist can use this information to help you determine your how.

The Biggest Bull Market in Recorded History

The Great Recession is now over a decade in our rearview mirror. Many people have seen their IRAs rebound and grow sufficiently with recent stock market gains, improving the level of confidence in being able to retire one day.

The downside of an IRA is that it exposes you to unpredictable taxation, less financial certainty due to market fluctuation, and the possibility of your legacy going to Uncle Sam.

An IRA is structured to offer you tax advantages upfront with your contribution, and tax you at a rate the government determines in the future when you take distributions. If you're looking for more certainty and better financial strategy, the only way is to prepare now for future tax hikes.

Prepare for Tax Rates to Go Up: National Debt & Your IRA

*numbers shown are in millions of dollars
Source: Investopedia

The IRA originated in the mid-70s and began to be utilized by the average American in the early 80s—peak earning years for Baby Boomers. In 1981, the National Debt was $90 billion dollars. Today, the National Debt is over $23 trillion dollars. How is the debt going to be paid back?

There are three ways the U.S can pay down the National Debt:

  1. Cut spending
    In order to have a major impact on the National Debt, spending would have to be cut so drastically that it would slow economic growth.

  2. Drive economic growth
    To drive economic growth, you have to create more jobs. According to The Balance, most jobs per dollar come from increased spending on infrastructure and education. Currently, the majority of government spending goes to our military.

  3. Raise taxes
    Presidents are generally opposed to raising taxes. It can cost them elections. Some argue that cutting taxes, rather than raising them, drives economic growth, but the last time tax cuts had a significant economic effect on debt was during the Reagan administration, when the highest tax rate was 70%. (Today the highest individual tax rate is 37%.)

The United States's National Debt has increased by $1 trillion per year since 2007. (Donald Trump's 2021 fiscal year budget projects the National Debt will increase $4.8 trillion.1) We are currently in diametrically different times and being keenly strategic is the only way to navigate what is to come.

United States's Government Debt: % of GDP

While most countries with a debt-to-GDP ratio of over 77% would be in economic crisis, our country's debt-to-GDP ratio at the end of 2019 was 108%2 (compared to 2.4% in 1981). A portion of this debt belongs to Social Security and Medicare.

1 "What's in President Trump's Fiscal 2021 Budget?"" The New York Times. The New York Times, February 10, 2020. https://www.nytimes.com/2020/02/10/business/economy/trump-budget-explained-facts.html.

2 "United States Government Debt: % of GDP" CEIC Data, January 30, 2020. https://www.ceicdata.com/en/indicator/united-states/governmentd-debt-of-nominal-gdp

Your Social Security Income & Medicare in Retirement

The promised benefits of Social Security and Medicare have a future cost of $128 trillion. But the government doesn't have the money to pay.

Since Social Security's institution, the government has been borrowing from it to fund increased spending. You pay taxes to Social Security and Medicare to ensure you have income and health care in retirement, but the government is spending your retirement money with no payback plan in sight. In fact, it's financially impossible for the government to pay this debt.

Funding future Social Security and Medicare costs will be challenging given the handful of options at the lawmakers disposal—cutting other spending, driving economic growth, raising taxes, or financing it (going deeper into debt)—the odds do not look to be in your favor of retiring with a lower tax rate than you currently have.

Future legislation is guaranteed to impact tax rates, for better or worse, exposing your IRA to a huge amount of risk. Remember, IRAs are created and governed by the IRS tax code. Opting to fund other assets that offer more favorable tax advantages, like your Wealth Maximization Account, is one way to mitigate this risk.

IRA vs. Whole Life Insurance

Funds in an IRA aren't leveraged or protected to the same level of funds in your Wealth Maximization Account. Basically, the more money you have in an IRA, the more taxes you pay in the future. The more money you have in your Wealth Maximization Account, the fewer taxes you pay.

As far as taxation on your policy goes, every dollar in cash value is treated as first-in, first-out. This means you can withdraw every dollar you've contributed (also known as your basis) tax-free. Once you've hit your basis, every withdrawal will be treated as an ordinary income withdrawal, which you'll be taxed on. But one of the greatest tax benefits of your whole life policy is that you can use that money—beyond your basis—in the form of a policy loan, and policy loans aren't taxed.

Every dollar you save in a Wealth Maximization Account can be used as future tax-free income for you to spend or future tax-free legacy for your beneficiaries.

When you withdraw from your IRA now instead of later and put those funds in whole life insurance products, you can achieve better long-term planning, protection from future tax hikes, and more certainty in retirement.

In addition to tax security, whole life from a mutual insurance company isn't exposed to the volatility of the stock market, so you don't have to worry about the amount of your retirement income plummeting like it did in 2008. The value of your Wealth Maximization Account is guaranteed not to go down.

How the SECURE Act Affects Your IRA

When the government approved the SECURE Act in December 2019, it changed the way your beneficiaries use you the money you leave behind after death, known as the stretch IRA.

Non-spouses inheriting the funds in your IRA can't take distributions in perpetuity. They must empty the IRA account in 10 years. This means they have to take distributions in spite of market downturns, rather than only taking distributions when the market is high and offering favorable returns. Effectively, it lowers the amount of your legacy.

In addition to affecting the amount of your legacy, the elimination of the stretch IRA forces beneficiaries to pay whatever tax rate(s) apply during the 10 years of distributions. This can add higher costs for your beneficiaries while raising an estimated $15.7 billion in tax revenue for the government.

With whole life insurance, your beneficiaries receive tax-free income unaffected by the stock market or the IRS. They can choose how and when to use the money you leave as a legacy.

Qualified plans, like the IRA, are cash cows for the government. Your Wealth Maximization Account is a cash cow for you and your family.

How to Protect Your Retirement Income

Your Wealth Maximization Account is the safety bucket of all your assets. It offers two key ways to optimize your IRA. First, is the covered asset. Second, the volatility buffer.

The Covered Asset

Because you have a permanent death benefit which will play the role of your legacy asset, you can take larger withdrawal rates on your assets or get the highest withdrawal rate with the least amount of risk using a straight life annuity, which guarantees an income for life regardless of when you pass on. This strategy also reduces your reliance on the market.

The Volatility Buffer

With whole life insurance, you can make withdrawals from your IRA when the market is up, and rely on funds in your Wealth Maximization Account when the market is down, giving time for your mutual fund investments to rebound. This strategy is known as the volatility buffer.

When to Fund Whole Life Insurance Instead of Your IRA

A Wealth Maximization Account and an IRA are not mutually exclusive. There can be a place for both in your retirement portfolio.

The question is: Are you putting too much money in your IRA and exposing yourself to unnecessary risk? To find out, meet with your Wealth Strategist. They have financial tools to calculate your ideal strategy, and your strategy may shift as you experience changes in income or set new financial goals.

If you're over 59 ½: If you're approaching retirement, whatever that looks like for you, it's imperative to have a strategic game plan in regards to your future income. You might want to consider putting more of your money in life insurance products and less in your IRA to guarantee the least amount of risk and tax. The Social Security and Medicare benefits you plan to take will have a major impact on how you want to distribute your wealth.

Schedule a free appointment with a Wealth Strategist to calculate the best way to manage these moving pieces.

If you're under 59 ½: Regardless of when you withdraw money from your IRA, you have to pay taxes. But if you're withdrawing funds before age 59 ½, you'll also get hit with a 10% penalty on the amount you withdraw.

Fortunately, if you're using funds in your IRA for whole life insurance products, you can utilize section 72(t) of the tax code to avoid this penalty, provided you make five equal distributions to a Wealth Maximization Account. This can be a complicated process. It's crucial to meet with your Wealth Strategist before embarking on this path, to ensure you aren't penalized.

Strategy for Your Annual Review

When determining how large of a whole life policy you need, Paradigm Life recommends a 1:1 ratio. The amount of your assets should equal the amount of your death benefit. If you have a Wealth Maximization Account with a smaller death benefit than 1:1, you may want to consider using IRA funds to increase your death benefit.

If you have a substantial amount of money in tax-deferred vehicles like an IRA, now is a great time to evaluate your finances. An incumbent president historically won't make changes to the tax code in an election year, which gives you the rest of 2020 to create a game plan for how to best fund your IRA and whole life insurance policies to better protect and grow your wealth and improve your position for next tax season.

Don't skip your annual review with your Wealth Strategist. It's more important this year than it has been since our last election year, in 2016. Opening additional whole life policies, funding premiums, or increasing your legacy are just a few of the ways extra money in your IRA could be better protected.


Webinar: What Would Your Financial Future Look Like By Using The Perpetual Wealth Strategy

Join Wealth Strategist, Nate Butler and discover how to BECOME YOUR OWN BANKER using this powerful strategy.


Issue 2: What Life Insurance Brings to a Financial Portfolio

During a client meeting a few months ago, I asked the savvy investor I was meeting with about what initially brought him to Paradigm Life.

The Perpetual Wealth Strategy for Business

The Perpetual Wealth Strategy for Business

Did you know 401(k)s were never intended for retirement? Find out a better solution for your bussiness that will help you finance your expenses and retain good employees.


Typical Lending vs. Whole Life Policy Lending

Quick access to liquid capital is invaluable. Rather than locking away and restricting access to your savings, or requiring borrowing approval from an outside institution, The Perpetual Wealth StrategyTM allows you to access your money when and as you wish through the whole life policy loan. While it may not always be your best funding option for future purchases, investments, and needs, here are a few ways the whole life policy loan stands apart from typical lending options.

Planning for a Successful Retirement

Planning for a Successful Retirement

A successful retirement can happen sooner than you think - it takes knowing the right details about your plan. Too often, people focus on money accumulation to get into retirement, but forget how far their money will go after they've reached retirement.


Preparing for Your Complete Retirement Journey

Retirement should not cause worry, the golden years are meant to be enjoyed. Listen to President and CEO of Paradigm Life, Patrick Donohoe, discuss how Whole Life Insurance, when properly used and structured, can facilitate an abundant retirement.


Year 1 Best Practices for The Perpetual Wealth Strategy

Your first year of adopting The Perpetual Wealth Strategy is an exciting one. You’re on a new financial path, have established a sound pool of resources, and will likely find that many new opportunities present themselves as a result. As you explore investments, family planning, or additional ways in which to use your policy, there are a few To Dos you won’t want to skip. Print this checklist and keep it handy throughout year one to ensure you’re getting the most from your strategy and your Wealth Strategist.

In Search of the Best Way: eBook

In Search of the Best Way: eBook

From his regional law firm to Paradigm Life wealth specialist, Will Street has professional insights that can help you with your financial future. Through this comprehensive eBook you will learn how using whole life insurance and the perpetual wealth strategy can make you wealthier and happier.


Overcoming Emotional Investing

“Let's not invest in things that we don't understand.”


Saving and Spending Smarter with the "AND Asset"

There are two common spending profiles most people fit into. The first is The Saver - the person who saves money for purchases in a bank account, then withdraws that money once it's reached its target amount. The second is The Debtor - the person who uses a credit card or line of credit to pay for purchases, then repays that balance over time, trying to get back to even. One major problem they share is failing to capitalize on compound interest. Here's how The Perpetual Wealth Strategist - the person leveraging their whole life policy as an "AND Asset" - acts on financial needs and opportunities without eliminating their ability to grow their wealth.


Protecting Assets in the Family Business

How to preserve a multi-million dollar enterprise with keyman insurance


Protect Yourself from Market Volatility

Relying solely on the Stock Market during your retirement may leave you penniless. Patrick Donohoe explains how you can protect yourself and create a “buffer” against market volatility. These strategies can not only protect the money you have saved, but allow you to continue to grow your savings during retirement.


Issue 1: The Life Insurance Loan

After more than 10 years advising clients on the Perpetual Wealth Strategy, there’s one thing we continue to hear more than anything else:

Banking on Long Term Success

Banking on Long Term Success

Banks and corporations have several different streams of cash flow that help to protect their money, and keep their business thriving. Have you ever wondered what you can do to mimic their powerful wealth strategies?


Issue 4: How to Embrace a Mindset of Financial Freedom

I read an article recently that shocked me. It talked about how medical and technological advances should be increasing the average lifespan of people, yet American life expectancy is actually going down. The causes? Drug abuse, suicide, and an unhealthy lifestyle. Data shows people are unhappy and soothing it with quick fixes that don't provide lasting joy.

The mindset many of us currently adhere to leaves us unfulfilled during our working years as well as in retirement. We're stuck because we put limits on our lives based on money and allow it to be the driving factor for our decisions, as well as the excuse for our unhappiness.

We've been conditioned to believe our lives should be a linear equation of A+B=C. Here's an example:

  • A. We earn a degree and land a good job with benefits.
  • B. We put 10% of our money away for retirement.
  • C. We retire at 65 funded by savings and social security.

If this linear equation was the key to financial freedom, all retirees would be exuding joy, and financial worry would be a long-forgotten emotion. Unfortunately, life is not linear, and according to a recent USA Today article, the anxiety level of retirees is greater than it was when they were working.

The Solution: Mindset

In Carol Dweck's best-selling book Mindset: The New Psychology of Success, she outlines two mindsets to navigate life: a fixed mindset and a growth mindset.

A fixed mindset prevents happiness.

A fixed mindset has a lot of rules that must be followed in order for happiness to be experienced. A job title, a bank account balance, the right friends, the right spouse, the right body, the right looks, and so forth. A fixed mindset is always looking for what's wrong or what's missing, focused on reaching the mirage of financial security.

A fixed mindset puts limits on what you can achieve, how happy you can be, and how much your life is worth. It's why many of the richest and most successful people struggle with depression, substance abuse, and suicide. They subscribe to a mindset that leaves them feeling unhappy in spite of all they've accumulated.

Are you stuck in 1929?

Prior to 1929, America was the epitome of a growth mindset. The Industrial Revolution was a time of possibility, innovation, and living the American Dream. The Great Depression ushered in an era of deep-seated fear, of which the impact can still be felt today. People weren't just afraid they wouldn't be able to feed their children or keep a roof over their heads, they were afraid they wouldn't survive. A chasm formed between wanting as much certainty as possible and enjoying the real meaning of life.

One of the primary originators of the idea of retirement was The Great Depression. That is when the US Social Security program was conceived. Those who made it through The Great Depression emerged with a money mindset that prioritized financial security over financial freedom, with the ultimate goal of not having to work past a certain age. The "indulgent" experiences of vacations and meaningful family time were deferred until a later date in the future; a sacrifice for the carrot of retirement.

Embracing a Growth Mindset

Most Americans live better than kings did 100 years ago. Healthcare, communication, transportation, nourishment, access to limitless information, and the vast forms of entertainment couldn't be fathomed by our great grandparents. 2020 is a miracle compared to how the world operated just a few decades ago, and our opportunities for experiences reach nearly as far as our imaginations.

When you value your life by experiences instead of money, you'll find you're worth quite a lot more than you thought. This is a growth mindset. However, a growth mindset does not happen overnight. It requires an ongoing purging of conventional wisdom.

Financial freedom isn't possible without a growth mindset. If you prioritize work and money, you won't walk away from your retirement party with the ability to enjoy vacations and family time-because you won't know how. You've never allowed fulfillment to be defined by anything other than money, and there will likely never be enough.

Keeping Up with The Joneses


Completing and Evolving Your Financial Strategy

Just like a soundly structured portfolio, a complete financial strategy contains many diverse pieces that work together (and in consideration of each other) to help you achieve your financial goals over time. As such, it’s essential that every component of your strategy be looked at through both an independent lens, as well as that of the bigger picture. Whether you work with just one financial professional or have a deep team with various specialties, the considerations below should be continually discussed and planned for together with transparency and clear communication as you continue employing the Perpetual Wealth Strategy™.

Using a Perpetual Wealth Strategy as Permanent Growth Path For Your Business

Using a Perpetual Wealth Strategy as Permanent Growth Path For Your Business

Gain the liquidity, flexibility and security to finance your business expenses without a bank.


Hierarchy of Wealth

Just like Maslow's Hierarchy of Needs, there is a natural progression for meeting your financial needs: fulfill the most essential first before pursuing any other financial goal

How To Maximize Your Wealth Using a Wealth Strategy

How To Maximize Your Wealth Using a Wealth Strategy

In this informational eBook you will find resources on how you can become more passionate about what you do, and create a strategy that works for you that will increase your yearly.


The Power of Mutual Insurance Companies

Banks and corporations hold billions of dollars in cash value life insurance. The providers of these policies, mutual insurance companies, have been some of the most proven and reliable companies in existence. From their foundational structure to their fiduciary responsibility and historical performance, mutual insurance companies can be one of the safest places to store your assets. Here are just a few of the ways their structure sets them apart from banks and other financial institutions.


Determining the Capital Value of Whole Life Insurance

Putting monetary value on a human life can feel heartless. Yet, insurance companies every day. Placing value on their client's lives to ensure that the clients beneficiaries feel (at least financially) as if the loved one had not passed. When it comes to Whole Life Insurance, mutual insurance companies take a completley different angle.

The Whole Truth About Whole Life

The Whole Truth About Whole Life

Learn why the critics such as Dave Ramsey and Suze Orman are right about Whole Life but also learn a few of the reasons why they misinformed.


Using an Annuity to Navigate Retirement

It’s never too late to achieve your financial goals


Issue 9: How to Network Successfully (And Actually Enjoy It)

I used to consider myself an introvert.


Growing up, I was quiet, shy, had only a few good friends, and even fewer strong relationships. People are surprised to learn that about me given my business and entrepreneurial pursuits, which have allowed me to meet thousands of people around the country and the world. I get to host two podcasts, which requires a lot of talking to others. I wrote an Amazon best-selling book and am in the process of writing another. Best of all, I get to lead an incredible team here at Paradigm. My life today doesn’t exactly paint the picture of a guy who used to be socially awkward.

So what changed?

I learned about the true value of relationships and how to gain them through meaningful networking. It changed my life and I know it can transform yours.

In my experience, it is not the principle of networking that stymies effort; it is the misguided approach that fails to produce the intended results. I believe successful networking will transform your relationships, your business, your finances, and your overall quality of life. During these challenging times is the greatest opportunity ever to network and help a lot of people.

Why Do Most People Despise Networking?

When you think about networking, do butterflies appear when visualizing an ”elevator speech”, superficially nodding your head in conversation at a dinner party, or obsessing over having the perfect business card? I don’t blame you.

There are two primary reasons the approach to networking goes awry.

We’re Not Taught the Nature of Good Networking

During my junior year of college, I had an awakening of sorts. I was enrolled in one of the more challenging economics classes—econometrics. The curriculum was focused on economic modeling and the relationships between different economic phenomena. The math went right over my head and I was lost in a sea of regression models and polynomial functions.

Like many of you, I had a formal education. I was taught and conditioned that results in school were derived from individual effort and that working with others was cheating. We’re expected to not just learn the wide spectrum subjects, but to excel at each of them. We’re not taught much about the power of teamwork, relationships, and networking.

If you think about it, the notion that merit comes from individual effort alone goes against the progression of civilization. Most major achievements are the result of individuals serving in specific roles within a group that possesses an aligned purpose and objective.

The principle that efficiency of a system is improved by the division of labor dates back to the times of Plato. From that point in time to our present day, theorists continue to push the limits of efficiency. Today, society and the quality of life as we know it are impossible without the contributions of others. I could not write to you without the use of my computer, made possible by individuals who possess skills and knowledge I can’t begin to contemplate. The delivery to you would not be possible at such scale without my team here at Paradigm, the internet, email, and a website—other complex systems that are well outside of my wherewithal.

Still, society has conditioned the belief that individual effort is the ideal and group effort is cheating. If you replace that limiting belief with an empowering one that identifies the unique talent, skill, and experience of the individual effort operating within the framework of a team or group with a unified objective, you get one of the most profound forces in business and one of the catalysts to wealth.

I aced that econometrics class because I sought out other students who had a better understanding of the complex mathematical functions than I did. I sat by them in class, helped to organize a study group, brought pizza, and asked good questions. It was there where I was able to connect the dots among different people’s strengths, non-strengths, learning styles, and their enjoyment of achieving as a group, not on individual merit alone.

Over the course I’ve time, I’ve discovered there’s only a tiny slice of the whole pie where I excel. There are other slices where I can get by, and the rest of the pie I’m better off letting those with expertise handle. It’s the same principle taught in an idea I discuss in Heads I Win, Tails You Lose, the Human Capital Statement. To be truly successful, you need to know your Human Life Value assets and focus on strengthening them. You also need to be ok with identifying what you’re not good at, and recognizing that others do possess those assets.

Awareness of your strengths and non-strengths allows you to focus, be more productive, and make a bigger impact.

Networking Seems to Go Against Human Nature

As human beings, we’re wired for self-preservation and naturally inclined to look out for our own self interests first. If your motive for networking is “What can I get,” it will undoubtedly feel scammy. If you ask a different question, “What can I give,” a new world opens up to you.

I define networking as the activity of seeking out relationships and opportunities where I can add value.

Back in 2008-2009, I thought my business wasn’t going to make it. It was a very humbling time. At my lowest point, when I had all but given up on myself, I changed my focus. I decided to seek out ways to help others, regardless of there being an exchange. After all, what did I have to lose?

I was hosting a lot of webinars at the time and teaching anything I felt was relevant. I came in contact with a dentist in Phoenix who was days from filing for bankruptcy because he was in default on his primary residence mortgage that amounted to double what his house was worth at the time. The situation didn’t sound right. He was current on his other obligations, including those of his dental practice and even had some cash assets that would be taken in bankruptcy. I decided to research the recourse laws for the state he resided in, which defined what actions creditors could take in the event of default. Sure enough, his state had a non-recourse law, which meant that if he defaulted completely on his mortgage, the bank could not go after his other assets for the deficiency (the difference between what is owed and what the property was sold at auction for). He didn’t file bankruptcy, which would have been worse than the being foreclosed on.

This is one of many experiences where even though I sought out ways to help, regardless of any benefit to me, the individual ended up doing business with me a year later. During this same period of time, I connected with a group of real estate investors and we formed a partnership by adding the use of whole life insurance as part of a holistic wealth strategy. Over the course of almost a year, I worked with over 100 investors. This is when the Wealth Maximization Account™ was born.

It also led to the best networking experience I’ve ever had, the Investor Summit at Sea. The Summit at Sea is an annual cruise hosted by The Real Estate Guys. I was invited to attend and speak about the benefit of using a Wealth Maximization Account to acquire real estate investments. It was the first cruise I’d ever been on. I still have my presentation recorded (it was horrible, by the way) but my intention in going was simply to teach. I didn’t expect much out of it, I was there just for a once-in-a-lifetime opportunity. I wanted to discover what people needed and learn how to help. I ended up forming lifelong relationships.

Searching for What Other People Want

It may sound altruistic, but my years of professional experience have proven to me that serving others really is the best way to get results. I also learned that building relationships is a skill I excel at. Me, a former introvert, pursuing expertise in relationships! Who would have thought?

My first lesson in professional relationships occurred during an internship I did with the Hartford Public School System in Connecticut. It was a temp position that I hoped would lead to a full-time job of executive secretary for the bilingual department. The department went through multiple interns over the course of a few months before I arrived because the head of the department was perceived as difficult to work with. While I was there I realized this woman was just misunderstood and wanted to feel valued.

You absolutely cannot assume that you know what other people need.

In any relationship the cardinal sin is thinking the other party wants what you want. That isn’t always the case. One of the worst networking experiences I’ve ever had was at a dental conference some years back. I didn’t know what challenges they faced, but I incorrectly assumed I did. I presented over the course of two days and got nothing in return. In retrospect, I didn’t even try to understand their wants and needs. I went into the conference with too narrow of a focus and my own singular perspective.

The Law of Reciprocity

The key to networking successfully is laying the groundwork for an exchange to happen. If it’s a one-sided exchange, whomever you’re trying to network with will likely think they’re getting a bad deal. I think of all the requests I get to “connect” on LinkedIn. Only one in about 50 actually has something of value to offer. The rest just seem to want something from me.

A while back, I was chatting with my friend and mentor Tom Wheelwright at an event. We were both speakers slated to present that day, and I told him I felt like I had butterflies in my stomach before going on stage. He said it was because I was focused on myself, not focused on the audience. I wasn’t thinking about what the audience wanted and needed. Internally, I wasn’t trying to create value for them; I was worried about how I would be received and how my presentation would benefit me.

In order for the law of reciprocity to work, the focus can’t start on you.

I guarantee you will help someone at some point who isn’t able to reciprocate at the time, but they’ll feel like they need to reciprocate, especially in business. It’s like when someone gives you a gift at Christmas and you haven’t bought anything for them. You feel like you have to get them something. Trust that people will reciprocate at some point.

I like to think of the 3-to-1 rule: Provide three times as much value as you take and you’ll become a networking guru. That said, there has to eventually be an exchange. Otherwise you’re just getting walked on. Both parties need to grow and benefit.

In my experience, networking functions best in the short term. Playing the long game is exhausting and can cause you to cast doubt on your own value if your efforts aren’t being reciprocated. The fact is, plenty of people won’t value you. Like the dental conference I spoke at, it can be a hard lesson to realize maybe you didn’t provide the value you think you did.

If you don’t already know how to be valuable, you have to go out and learn how to be valuable. Find opportunities. Seek out 10 people and offer your services to them for free. Ask for feedback and look for areas you can improve. When it comes to my book reviews and business endorsements, if I just went to random people and asked them to create value for me by leaving a testimonial or writing a review when I haven’t created value for them, that’s scammy. But if I’ve already given them something of worth, it’s time to call in the due.

Consider networking relationships like a bank account. You have to make deposits so you can withdraw funds when you need them. Don’t go into the negative. Build your resume and expertise to reflect the value of people you would like to network with. Without it, no one is going to bet on you.

Who You Know Matters

Anything that is meaningful to me is based on a relationship. I believe things have no value without people, and people aren’t meant to be by themselves. Meaningful relationships should exist in business in order for business to be successful. In fact, relationships in business are the fast-track to success. There is very little on earth that hasn’t already been achieved by someone else. Identify people who have achieved what you want and surround yourself with them.

In 1916, Henry Ford sued the Chicago Tribune for libel. Over the 14-week trial, Ford spent days on the witness stand answering questions to prove his intelligence. At one point, Ford became frustrated and stated:

“If I should really want to answer the foolish question you have just asked, or any of the other questions you have been asking me, let me remind you that I have a row of electric push-buttons on my desk, and by pushing the right button, I can summon to my aid men who can answer any question I desire. Now, will you kindly tell me, why I should clutter up my mind with general knowledge when I have men around me who can supply any knowledge I require?”

In past issues of The Donohoe Bulletin, I’ve written at length about personality tests like Myers-Briggs and the DiSC assessment. As important as it is to know yourself, it’s equally important to understand other personality types. What are their weaknesses and strengths? How do they process information, make decisions, and celebrate wins? How can your personality compliment theirs to make a more complete pie? Humanity thrives because we all bring something different to the table.

"You are the average of the five people you surround yourself with.” —Jim Rohn

There are so many different ways to view the world. The more you’re curious about understanding the people you know, the better you’ll be at networking. Who you know matters. Getting to know who you know on a deeper level matters even more.

Networking in Times of Social Distancing

With business conferences, conventions, and other common types of networking events on hold due to social distancing, how do you become better at networking right now? Anyone who knows me well knows I’m a huge hockey fan. Sometimes when I need a motivator to remind me of the benefits of working with a team, I go back and watch the movie Miracle about the 1980 United States’ Olympic hockey team and how their combined efforts won them the gold medal. It’s available on Netflix and Amazon Prime if you’re looking for something to watch tonight.

I’m also trying to teach my kids, now that they’re home schooled for the time being, about the importance of working in a group. One of the best conversations I’ve ever had about shaping the way kids value their individual talents and what they can offer a to collective whole came from an episode of The Wealth Standard Podcast with Peter Gray, a research psychologist at Boston College. I strongly encourage you to listen to the episode here.

For a good read about how influential your environment is, check out Family Fortunes: How to Build Family Wealth and Hold on to It for 100 Years by Bill Bonner. I also recommend the books Reinvent Yourself and Choose Yourself by James Altucher. He’ll be a guest on The Wealth Standard Podcast later this month, so keep an eye out for that as well.

Finally, peruse social media and look for opportunities. What problems are people posting about that you can help fix? What challenges are people facing? See if you can formulate a solution without expecting anything in return. Now is a great time to grow your network.

Like anything in life, things you despise often stem from a flawed perspective. Use this summer as an opportunity to change your definition of networking to the activity of seeking out relationships and opportunities where I can add value.

Go add value, and then expand your expertise so you can add even more. Focus on building relationships, find out what is challenging people and help. No one knows exactly what you know, and you have the toolkit to help others in a unique way that no one else can. Put it to good use.

Real Estate Investing Using The Perpetual Wealth Strategy

Real Estate Investing Using The Perpetual Wealth Strategy

This article will teach you about a financial system that has been followed by some of the most successful investors, individuals, and institutions in history. You will learn why it is so successful and the steps to take to implement it. Regardless of your current financial situation, you can implement this system on a small, medium, and large scale with success.


401(k) or Whole Life Insurance

How to save for retirement without sacrificing cash flow

Access Your Savings Tax Free with a Private Retirement Plan

Access Your Savings Tax Free with a Private Retirement Plan

401(k) Savings Plans have not helped the last ten years earn the title “Decade of Nothing” for no reason. Learn how the retirement plan really stands up.


Issue 7: 2020 Is the Year You Rethink Retirement

It’s been a shocking few weeks since my last Donohoe Bulletin. I hope you and your loved ones are safe, healthy, and in good spirits.

My greatest desire for this month’s edition is to inspire and motivate you to thrive during what will likely be one of the greatest challenges of our generation. I want you to have a glimpse at what could equally be the greatest opportunity for you, your family, and your career/business.

What Will Be the Legacy of 2020?

It seems like yesterday that we greeted 2020 with an attitude of euphoria. We had all-time highs in the stock market, 401(k) balances, and home prices. The unemployment rate was low and credit was flowing freely—with record low interest rates to boot. Although there were signs of vulnerability, they paled in comparison to the positives.


We are at a standstill. The world, in a matter of days, has become awfully quiet. Humbled is an understatement to describe what I am experiencing and seeing all around me. Schools are closed and kids are at home, not even able to physically interact with their friends. Stores, restaurants, offices, and roads are empty, every professional sport—even the Olympics—all on hold. Unemployment will soon reach historic highs, and there doesn’t seem to be an end in sight.

Who could have ever anticipated something like this?

The team at Paradigm Life was fortunate to get ahead of the curve, and we were able to move our entire company virtual in only a few short days. We have hardly skipped a beat. Here is a picture of the team doing one of our daily Alley Rallys on Zoom.

I am so grateful for such an amazing team, for stepping up, rallying together, and doing everything possible to minimize any disruption to the business and service to you. Now that we are settled, we are asking ourselves a much different question. Perhaps, the same question you are asking.

What do we do now?

Taking Back Control

A few weeks ago, I shared the following passage from the book Man’s Search For Meaning by Viktor Frankyl with my team:

“The last of the human freedoms: to choose one's attitude in any given set of circumstances, to choose one's own way. And there were always choices to make. Every day, every hour, offered the opportunity to make a decision, a decision which determined whether you would or would not submit to those powers which threatened to rob you of your very self, your inner freedom; which determined whether or not you become the plaything to circumstance, renouncing freedom and dignity.”

There is so much of life which is outside of our control. The one thing that circumstance can’t take is our ability to control our attitude, mindset, and paradigm.

We can act, or let ourselves be acted upon.

Austrian economist Joseph Schumpeter is known for originating the term creative destruction—when longly held ways of doing things are destroyed but are necessary for the birth of even better and more innovative solutions.

We as a global society are experiencing history in the making and in the months and years to come. These very moments will be seen as necessary steps that give way to the extraordinary innovation to come.

The question I have been asking my team, the podcast audience, and now you is: Will you stand by and be a spectator? Or embrace these times and use them as fuel to live an even more fulfilling life?

The list of what will change is potentially endless but undoubtedly includes: the way our children are educated, how we work, how we travel, the role of government, healthcare, manufacturing, money, and today’s topic—retirement.

It’s Time to Rethink Retirement

In my book Heads I Win Tails You Lose: A Financial Strategy To Reignite The American Dream, I articulate why retirement is a flawed idea and empirically demonstrate that the average individual would have to save 50% of their income to adequately retire. Current market conditions reinforce just how vulnerable retirement accounts are, which are primarily made up of passive investments.

Rethinking retirement may not be easy because the rest of the country is hooked on the same broken system. But when is going against tradition ever easy? In fact, “traditional” retirement isn’t even an old idea. It was created in the last 50 years as a tool for companies, letting them off the hook for pension payments. It was an employer benefit, not an employee benefit. Ted Benna, the creator of the 401(k) has since said he created a monster because Wall Street used it as a vehicle to exploit the individual worker. It was never meant to be used as it is now, relied upon by employees to fund a mythical retirement.

Here is the good news: I am convinced that ‘being retired’ isn’t what people want anyway.

I’ve found most people seek something better. And what they’re seeking can be easier to achieve than mainstream retirement. It doesn’t mean retirement is impossible; it means you have to rethink what retirement means to you and reshape your strategy.

Let me give you an example.

The Life of Bryan

Bryan sought out Paradigm Life in his early 50s to set up a Wealth Maximization Account™ as part of his estate plan. The policy loan feature of his account was particularly useful and gave him the financial freedom to start investing in real estate.

Up to this point, Bryan’s financial plan was fairly typical of most Paradigm Life clients: Set up a Wealth Maximization account to grow wealth tax-free and use policy loans to invest and make large purchases.

As life went on, Bryan’s financial situation and goals changed. I can guarantee yours will too.

As he grew closer to retiring, growing wealth took a back seat to securing future passive income. Bryan felt he wanted to do more to ensure his savings and investments would last him for life. Even though he had a solid financial strategy, he wondered, “Is it enough?”

A major factor in this concern stemmed from his 401(k), which he was still contributing to because he received a generous employer match. In spite of the match, his funds were still recovering from the Great Recession. His main worry was that another market correction, like the one we’re experiencing now, would wipe these funds out.

Hating the thought of having to work a job with no exit strategy in sight, he decided it was time to revisit his Wealth Maximization Account and set new goals. Namely, how to position his assets for the greatest amount of cash flow and the least amount of risk.

First, we looked at his 401(k). In Bryan’s mind, his employer match was like a 100% return on his investment. Diving deeper, the benefit of the match was actually much less than he supposed. At the time, the match was $9,000 per year, but it was only available if Bryan also contributed $9,000. His 401(k) balance was $1.2 million, which meant his employer match was only adding 0.75% annually.

Next, we analyzed the future portfolio income of his retirement account using the Monte Carlo simulation.

The Monte Carlo Simulation

The Monte Carlo simulation comes from the gambling and casino world. Basically, it determines the odds of something happening. When it comes to retirement accounts, it takes into consideration different portfolio scenarios, like various investments in gold, stocks, bonds, and commodities. It factors in the percentage of annual withdrawal you take over a number of years and the probability of that distribution rate lasting throughout your lifetime.

When I taught Bryan this, we were assuming that over the coming years his 401(k) balance would grow to $1.5 million. At that amount, the yearly distribution recommendation given by typical financial planners would be $45,000 to $60,000. For Bryan, that wasn’t even close to what he was expecting. Even with his real estate cash flow and Social Security, the number still left him short.

Fortunately, Bryan had sufficient whole life insurance for a strategy we call the Covered Asset, which could boost his income by 100% with a lifetime guarantee. Instead of the projected income from the Monte Carlo simulation ($45,000-$60,000) he could have a guaranteed income of $90,000 to $109,000 for the rest of his life.

I also calculated the best ages to file for Social Security for Bryan and his wife, looking at the provisional income tax thresholds that would trigger income tax on up to 85% of their benefits, as well as Medicare surcharges. (Yes, your Wealth Strategist can do these calculations for you too!)

As I spoke with Bryan, we both came to the realization that he didn’t really want to retire. He wanted to rethink retirement.

Pursue FInancial Independence

Over the course of Viktor Frankyl’s imprisonment, he developed what came to be known as Logotherapy. Logotherapy is a psychotherapeutic approach to what causes stress and anxiety. It is the drive we all have to discover our meaning in the world. In other words, how we are valuable and important as it relates to others.

When we work and are paid, unconsciously we know we are valuable because someone is willing to pay us for our time, energy, and knowledge. We find meaning in our work. According to a study done by Gettysburg College, the average worker will spend 90,000 hours working over their career, which means we spend a lot of time being validated for who we are and the value we bring to the world. If people stop working and the meaning they’re used to experiencing is gone, the end result is not pretty. They are not happy, no matter how many rounds of golf or games of bridge they play.

A few years ago, the American Association of Psychology connected the dots in an article titled “More Than Job Satisfaction.” It emphasizes that when you spend a lifetime accumulating knowledge and experience, you begin to associate it with who you are. It validates your worth and brings you pride. It proves you’re valuable. To simply stop sharing that with the world at age 65 leaves most retirees feeling unfulfilled, unsatisfied, and depressed.

Talking with clients and friends over the years, I’ve learned the main reason people want to retire isn’t because they don’t want to work. It’s because they aren’t growing, don’t care for the leadership they’re currently under, they work in an office with poor culture, or they don’t feel they’re appreciated and rewarded to the level they deserve.

I am convinced that the end result people are really after when they talk about retirement is financial independence.

We stand by our charge of pursuing financial independence now, not retirement at 65.

So how do you achieve financial independence now? First, stop thinking about retirement and start thinking about the contribution you make to society that rewards you the most.

How to Start a Career Rebirth

With a secure financial future in place, Bryan began looking for opportunities to use his knowledge. He started by making a list of attributes his dream career would have. Things like working remotely, creating his own schedule, having time to travel, and the flexibility to only work 20 hours a week. He also created a list of his skills, experience, and overall business sense, including his vast professional network of executives, business owners, and influencers. The end result: Bryan could have a career rebirth as a consultant and freelancer.

There is no better time in history to reinvent how you make money. In our current climate, with so many businesses forced to work remotely, this will be a norm for employment going forward. You can do the work that is most fulfilling, from wherever you are located, and on a schedule you choose.

You may not be qualified yet, in experience or technical ability. However, if your aim is to achieve this work criteria as the end result, and you could get there in half the time, wouldn’t you be ready to rethink retirement and make a plan of action?

The Three-Legged Stool

I see financial independence as a three-legged stool. Remove any one of the three, and the stool won’t have enough support to stand. The three legs are as follows:

  • 1. Purpose-Driven, Fulfilling Work

    I cannot emphasize enough how important it is to know your skill set, personality type, and have a solid picture of what you want your future to look like. Without this, none of the other legs matter. You have to know what you want.

    Discover a fulfilling career that aligns with your talents and abilities that you love. Structure your career so that it provides the ability to schedule your life and time in a way that you feel alive and like you can work on your own terms. This may take awhile as you gain experience and discover what you really want to do, but with modern tools and technology, working 20 hours or less a week and working remotely from any place in the world, are very real possibilities.

    Regardless of your age, start looking now for ways to make this dream a reality. Build your resume for the purpose of working remotely, network, and start now so you can scope the appropriate time to make your transition.

  • 2. The Right Financial Tools

    Your wealth strategy needs tools that have both long-term and short-term benefits and fit your unique requirements. There can be benefits in 401(k) for retirement purposes, including tax deferral, asset protection, company match, and forced savings, but since your outcome is NOT retirement, the majority of these types of plans are usually not suitable.

    The Wealth Maximization Account is the ideal foundation because it offers many of the same long-term features but it has additional short-term benefits such as liquidity without penalty. This new source of capital for financing needs not only helps you avoid high-interest debt, but offers you a funding source for training and professional development. Additionally, it gives you a degree of certainty that is unprecedented and allows you to capitalize on opportunities during downturns in the economy such as the one we are currently experiencing.

  • 3. Cash Flow Investments

    A vital step toward financial independence is learning how to make good investments, specifically ones that give you monthly cash flow. We utilize The Hierarchy of Wealth as a check and balance to help you determine the degree of risk an investment has. I believe that financial independence is possible using the most safe tiers—Tier 1 and Tier 2. It is an iron-clad financial foundation that can accelerate your timeline to achieve your goal of independence.

Tools and Tips for Reinventing Your Career

If you are considering holding on to your traditional job, but you want to start making the shift towards working remotely, I recommend searching for remote work on Indeed, or look on job and project platforms like Upwork, Twago, GoLance, and Jobspresso. If you enjoy working with startups, AngelList is a good reference.

I can’t stress enough the inspiration and guidance I’ve found in great books. My recommended reading list for budding entrepreneurs, freelancers, and consultants is as follows:

In this book, Seth outlines the importance of bringing your personality and your passion to your work. By taking pride in your work and truly loving what you do, the work is no longer about collecting a paycheck. The work becomes about bringing value.

This book aims to inspire you in your pursuit of creating the life you want and gives ten major tips for starting anew, whether you decide to embark on a non-profit venture, entrepreneurship, freelancing/contracting, or simply making the switch to working remotely.

For Better, or For Work is geared towards couples in business and examines the impact of remote work life on family life.

Simon Sinek gives some powerful insights to help people find more inspiration in their work, how to become creative about problem solving, and how to inspire others.

This book is geared toward women who are considering working remotely, but the message applies to anyone. It offers perspective on how women can take the time they need to practice self-care and do the things they love.

What If I Am Older Than 55 or Already Retired?

A common misunderstanding is that, like a 401(k), a Wealth Maximization Account must be started early. The truth is I speak with many clients 55 and older. It’s never too late to start shaping your future. Most older clients have assets in place and good savings. They’re not starting at zero, they have established finances. It’s simply a matter of repositioning and using some of those assets to build a foundation with whole life insurance.


If you want the same results as everyone else, keep carrying on down the same retirement path you’ve been following. But if you want a BETTER version of retirement that leaves you fulfilled and financially independent, speak with your Wealth Strategist and create a personal solution that fits your unique goals. It’s time to rethink the way you look at your future and it’s my passion to help you get there.

Is Your Retirement Plan Hanging Out To Dry?

Is Your Retirement Plan Hanging Out To Dry?

Our country is faced with some pretty stark realities when it comes to retirment savings plans. 401(k)s, IRAs, and even 403bs are connected to the fluctuating stock market. Find out how to avoid connecting the success of your future to the market.

Infinite Banking at a Glance

Infinite Banking at a Glance

Learn the basics of the Infinite Banking Concept that was created 40 years ago by a man named R Nelson Nash. The concept was revolutionary then as it is today.


Climbing to Financial Freedom

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Growing Multi-Generational Wealth Through the Perpetual Wealth Strategy

There are two major destroyers of wealth: 1. unnecessary tax burdens, and 2. future generations without the adequate financial IQ to continue growing family wealth. The Perpetual Wealth Strategy is designed to help you avoid both in your financial plan. By implementing family finance practices now that incorporate tax considerations and involve your children in financial planning and decisions, you have the ability to establish a lasting legacy that includes multi-generational wealth for your family.

Austrian Economics: For a Failing Economy

Austrian Economics: For a Failing Economy

“Central banking is like a thief in the night, silently robbing us of money and control as we quietly sleep.”


The New Real Estate Rules: What changing markets mean for property and investors

Join Paradigm Life CEO Patrick Donohoe and co-host of The Real Estate Guys™ Radio Show Russel Gray for an exclusive webinar everyone who owns real estate must watch.

Discover The #1 Cash Flow Resource: Permanent Life Insurance

Discover The #1 Cash Flow Resource: Permanent Life Insurance

For nearly 79 years this asset was used by the majority of Americans to store their wealth. It was a replaced with financial products like the 401k and IRA. However, the replacement never did what it was intended to do. Today, you can still store your wealth here, and more and more people are learning and benefiting from it like they did in the past.


Webinar: Whole Life Insurance - A Private, Protected Asset Class

The insurance industry has aided individuals in building wealth with more consistent success than Wall Street. Did you know these assets come with a level of privacy too?

Free Chapter of Heads I Win, Tails You Lose

Free Chapter of Heads I Win, Tails You Lose

It's no secret that Americans are losing the game of money. In Heads I Win, Tails You Lose, Patrick Donohoe teaches you how to win. Discover the time-tested and proven wealth-building strategies that lending institutions, government, and fee-based advisors don't want you to know about - the ones that put the power of financial freedom back in your hands.

This free chapter will get you started hearing about the journey Patrick has taken to start Paradigm Life and help people learn the investment strategies they need to be successful and build wealth outside of Wall Street. Begin learning how to take back control and achieve true financial freedom through proven financial strategies that will help you grow your wealth like never before.


Optimizing Equities and Allocating Assets

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Agriculture At Work With A Permanent Life Insurance Strategy

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Your New Money Mindset

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Issue 10: How to Use the Volatility Buffer to Achieve Financial Independence

One of the most valuable business lessons I have learned is uniting a team around a clear and concise mission, vision, and purpose.

Our company 'why' is to help you, our client, live a more meaningful life.

Specifically, the mission of Paradigm Life is to come alongside clients to implement a personalized wealth strategy that empowers them to live a fulfilling life now, and ensure a future of their dreams.

Our first goal when working with you is to gain clarity around your purpose and why you are saving, investing, and pursuing better ways to manage wealth.

It is with rare exception that clients aren't after the same end result—a more meaningful life. Money and wealth are simply tools to get there. Tools that give you more time doing what you love with the people you love. Tools that remove uncertainty. Tools and strategies that afford you opportunities to give to those less fortunate, and so on. Money and wealth are the means, not the end. Without that clarity, our job is difficult.

There is, however, a differentiating factor: Every client comes to us with a unique financial situation and definition of what financial independence and a meaningful life is to them.

Financial Independence & Your "Why"

It is the mission of Paradigm Life to identify what you, the client, really want and create a personalized wealth strategy to help you get there.

The first step is to identify the financial phase of life you are in. The GROWTH phase of life is where the focus is on building wealth. During the growth phase is when you identify what it will take to achieve financial independence. When that is identified and achieved, the INCOME phase begins. The focus here is generating the highest and most tax efficient income from your accumulated assets. LEGACY is the last phase, which represents leaving assets behind smoothly and efficiently with all relevant parties kept in the loop.

A good wealth strategy is designed to achieve an outcome with the highest degree of certainty possible. When I analyze a person's finances I want to know the answers to the following questions:

  • Where do these assets fall within the Hierarchy of Wealth™, which measures the control and risk of the underlying asset.
  • Is there sufficient ongoing savings?
  • Do you have a thoughtful spending plan?
  • Which assets are the most consistent?
  • Which assets are best for income?
  • Which assets are the most tax efficient?
  • Are some assets better to pass through to an estate than others?
  • How will income from this asset be taxed in the future?
  • What is plan B during inevitable market volatility?
  • How is this asset impacted by inflation?

I then take a three-step approach:

  1. The Present - The here and now.
    • What is the biggest obstacle preventing progress from where you are to where you want to be?
      • To verify 'biggest' I look for worry, fear, uncertainty, and frustration—the emotions you attach to the underlying obstacle.
  2. The Horizon - 5-20 years into the future.
    • What are the most important parts of your life? What are your values?
      • The answers are a sign to what gives you the most meaning and what you are working toward doing more of and spending money on when you are financially independent.
  3. The Legacy - The final stage of life.
    • What is your life about and what stamp do you want to leave on the world?
      • Decisions made today are the causes of future results. The goal is to align your decisions with your optimal values-based, long-term results.

Financial Independence: A Case Study

I want to illustrate what I have just shared through a recent experience with a client I've had the privilege of working with for the last 10 years. I'm going to show you what financial independence and a meaningful life is to this particular family and how a wealth strategy can be created to achieve that. My real goal is for you to better identify what financial independence and a meaningful life is for you and how your wealth strategy is leading you to that end.

This example is peculiar, almost a dichotomy, because the wealth they have accumulated would support their lifestyle four times over. I am sharing to demonstrate how important it is to have a well thought-out end result and a strategy as early as possible.

This particular family is financially wealthy, and most people would consider them affluent if they looked at their financial statement. However, on the surface, they live a simple life, similar to someone who spends every paycheck and has zero assets.

The First Appointment

I was introduced to this family in 2010. At the time, they owned and operated a successful business and were in the process of selling it. The business was 20 years old, had loyal customers, was highly profitable, had zero debt and a lot of assets. The business was clearly marketable, and any qualified buyer could easily have obtained financing and bought it outright—even in that hard economic time. However, the family wanted to sell the business on a structured note, where the buyers would pay for the business over 10 years. Later on, I discovered that one of the primary motivators for this unconventional way to sell was to maintain a paycheck for another 10 years.

The family assets at the time were moderately diversified. They had a lot of cash, a few annuities, retirement accounts, gold, silver, a rental property, and land. Over the years, we set up multiple insurance policies, annuities, and recommended strategic partners who specialized in single family rentals and real estate syndications.

The Follow Up

When we met up recently, their finances were in great shape, but their initial GROWTH strategy wasn't. We hadn't shifted gears to the next phase of life, INCOME. The family was paying their bills with random investment returns and cash. Their anxiety levels were high, almost red-lining. Although the shift in strategy from GROWTH to INCOME was my priority, LEGACY would also be part of the conversation, how they would pass on surplus assets that were not going to be used for income.

The meeting took place during the COVID-19 economic shutdown through a video conference. Although they had amassed several millions of dollars in assets, there still remained an underlying sentiment of uncertainty. The cause was due to both the market volatility at the time and the lack of an INCOME strategy.

The family balance sheet consisted of no debt and almost a dozen different asset classes: equities, bonds, real estate, mutual funds, annuities, precious metals, commodities, land, and business interests. Each asset had not only a different risk profile but a different way in which it was taxed. On top of all of that was the question of how and when to file for Social Security.

Here is a snapshot of their financial statement so you can get an idea:

Over the course of our discussions, it was clear to me that the family's definition of financial independence and a meaningful life was simple, even though their finances were complicated.

The Present

This family wanted a monthly paycheck they could count on for the rest of their life. A paycheck that sufficiently maintained a lifestyle they loved, the one that provided what they considered a meaningful life. It was as if they were paralyzed from making any other decisions until that certainty was achieved.

The income amount they wanted was $95,000 per year. I alluded to a reasonable income in the $300,000 range, conservatively. Surprisingly, there was resistance. Their house was paid off and so were their cars. Their travel plans would not change much or their other living expenses. They didn't know what they would spend the money on.

The strategy I settled on was what we call the covered asset. It is when you optimize the relationship between a straight life annuity and a permanent life insurance policy. A straight life annuity is when you give a sum of money to the insurance company and they guarantee a monthly paycheck for life. The catch is, to get the highest payout from the insurance company, you agree that the paycheck goes away when the annuitant dies. That is why we 'cover' the asset with life insurance because if the annuitant dies early in the annuity, the life insurance will pay out.

The family already had two deferred annuities that had been growing for the last 10 years. We now have income for life at $33,972/year. Additionally, we converted cash assets that were earmarked for hard money lending, but given the economy and the inherent risks in real estate, we agreed to allocate that money to a more certain asset, a SPIA (Single Premium Immediate Annuity). The annual income from that immediate annuity is $34,125.

After taxes and lifestyle expenses, there is still a surplus of $6,532 per year.

The permanent life insurance that the family has in place is $1,699,780. The required coverage to 'cover' the asset is $525,000.

Here it is broken down:

Their balance sheet now looks like this:

The death benefit of the permanent life insurance is now delegated as the LEGACY benefit and regardless of when death occurs, will be paid out to the estate.

The Horizon

Now that a strategy exists to eliminate the short-term friction, a monthly paycheck to cover living expenses, the next objective is to align actions and decisions with the family's respective values, what they care most about in life. These values have an order of importance. Usually, values are family, business, profession, or hobbies.

I spent 10 years getting to know this family and I knew their values well. First, they cared about their church, specifically donations and time to volunteer. The lifestyle expenses of $95,000/year afford them the time to serve in their church service.

Their next value was family, their kids and grandkids who all lived out of state. They travel several times a year to visit their kids and grandkids and also wanted to start covering an annual vacation. This would be another $40,000 per year in expenses. The income that would allow them to provide this annual family retreat would come from their real estate cash flow.

To ensure that this amount of money was consistently available, we incorporated the Volatility Buffer. The Volatility Buffer is a strategy we use to optimize those assets that can lose value or not produce income in any given year. The strategy is to take income from an uncorrelated asset that is liquid and can't go down in value the year AFTER the primary income asset that does happen to lose value. This strategy gives that primary income asset time to rebound and recover. Because much of their wealth was in assets that could lose value, maintaining 5-8 years in this uncorrelated asset was a conservative approach.

The Wealth Maximization Account™ (high cash value permanent life insurance) is the ideal vehicle to serve as the Volatility Buffer. The policies on the family have $535,000 of total cash value which is sufficient to cover a withdrawal of $40,000 for over 8 years.

Here is how the income breaks down:

Although establishing an income strategy was the priority, analyzing LEGACY was still important to consider as part of the overall strategy. While the life insurance policies serve both a role in the covered asset and volatility buffer strategy, there is a surplus of cash flow sufficient to cover required premiums. The cash value will continue to build and so will the death benefit, providing for even more options in the future.

Future conversations about LEGACY will include preparations for assisted living and long term care, more in depth legacy planning for the kids and grandkids, as well as how to transfer assets efficiently.

How a Volatility Buffer and Covered Asset Strategy Differ From the Conventional Approach

I did another Donohoe Bulletin on typical retirement planning which you can access here.

Typical retirement planning in the growth stage of life advocates growing wealth in a balanced portfolio inside a tax deferred account. The transition to retirement is recommended at an older age, usually 65-70 years old. In retirement, income comes from withdrawing a percentage of the portfolio every year based on a Monte Carlo simulation. A Monte Carlo simulation determines the probability of a positive portfolio at the end of a given time frame. The example below illustrates this concept, ranging from a 3% withdrawal rate up to an 8% withdrawal rate, showing the likelihood of having enough money to retire.

Monte Carlo protects the investor from 'sequence of returns risk' which occurs during times of market volatility. For example, if your portfolio balance was $100,000 at the beginning of the year and the market declined by 30% and you took a 10% withdrawal for income, your ending balance would be $60,000. Even if the market rebounded that next year by 30% to get back to what they consider break even, your balance would only be $78,000.

That example is why Monte Carlo simulations are performed and where the 4% rule came from. The 4% being a safe withdrawal rate that would weather 'sequence of return risk.' However, the 4% was developed based on markets and interest rates during the 90s when assets weren't as correlated and safer assets had higher yields. The 4% rule is no longer reliable due to different market conditions.

Control: A Key Variable of Financial Success

Typical retirement planning does not give the investor control over their wealth and financial future.

Having more control over your wealth/wealth strategy gives you more freedom and more certainty in the future.
Control is a function of education and experience and enables the individual to obtain a positive outcome.Today, many claim that technology, algorithmic trading, and a more scientific approach completely mitigate risk factors. To me, that is a dangerous perspective to have, as human behavior is not linear and calculated. Human beings are always growing and innovating, yet are still prone to irrationally reacting to the unknown and uncertain. No matter how clever we become or think we know what the future looks like, there are always variables that disrupt.

During times like these you have to make your own informed decisions and question conventional assumptions. The quality of your decisions is in direct proportion to your education, experience, and corresponding control and influence. That is freedom.

Managing Risk

Another way to approach successful wealth strategy is by drawing out the worst case scenario from the beginning.This exercise stimulates the best questions and assesses risk at the core. Most people are afraid to dig into the worst case scenario because no one likes to experience fear, even though it might just be conjecture. It allows you more freedom because you can use your intelligence to mitigate any inherent risks now, not in the moment when risk manifests itself. You can formulate options, plan B, plan C, maybe even a plan D. Options equal freedom.

Navigating the Path From Where You Are to Where You Want to Be

"Life is a dance between what you want the most and fear the most." —Tony Robbins

Clients do not come to us with a clean-slate financial life nor do they move forward by implementing everything we recommend. They have pre-existing assets, assumptions, challenges, and mindsets. That is why we start with some common ground, where you want to be.

First: Define where you want to be and what financial independence means to you.

Independence isn't necessarily a function of money, it's more of a mindset. Someone can have millions of dollars in savings accounts but feel trapped. Someone with a nominal residual income that pays for their lifestyle expenses and only works because they want to has infinitely more financial independence. You can read more on how to have a mindset of financial freedom here.

Financial independence goes beyond your financial statement. So, what does your ideal life look like? How would you characterize what financial independence is to you?

For a more practical approach, I like to use the 3-legged stool analogy to illustrate the three common elements I've observed that bring about financial independence.

The 3-Legged Stool

    Leg 1: Do meaningful work within an integrated lifestyle where you can live a life you love, and do work that you love and that makes a difference.

    Leg 2: Focus on assets that you can control that give you a residual income—income that you don't have to do much for. The caveat is first obtaining financial education to increase control and reduce risk.

    Leg 3: Establish a secure foundation which consists of adequate reserves and liquidity in a Wealth Maximization Account™, a spending plan (budget), proper insurance protection and asset protection.

Second: Determine the biggest obstacle in your way.

The biggest impediment to living with more independence is fear. You have to tackle it head on. Thinking through the worst case scenario and, in a sense, living it out is a way to better understand your fear. Once you've done that, you can ask better questions and take preventative measures to either mitigate it from ever happening or knowing what to do when it does.

Third: Continually assess your financial statement, the role of your assets, and distance to achieving financial independence.

Most of our clients come to us heavily invested in the stock market. Typical financial planning is based around the idea of handing your wealth to someone else to take care of, and it's something that isn't always carefully thought through. Additionally, the narrative of 'investing for the long-term' implies that it's ok when the market or your portfolio drops. Other than diversifying across asset classes and committing for the long haul, typical financial planning offers very little, if any, certainty or control, let alone a path to financial independence.

Determine your "why" and your expenses in retirement. Both the volatility buffer and the covered asset strategy typically offer higher income with less risk and better return rates (not to mention more tax advantages) than a qualified retirement plan.

You're not alone on this journey and we are here to help.

Don't hesitate to reach out to your Wealth Strategist.


Live Presentation: The "AND Asset"

Experience our President and CEO Patrick Donohoe presenting on The Real Estate Guys Summit at Sean in 2014.


Webinar: Discover the Secrets to Becoming Financially Stable in the 21st Century

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