The Donohoe bulletin

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 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: 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. 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. 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 RetirementThe 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.

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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: Myers-Briggs Type Indicator test (http://myersbriggs.org/my-mbti-personality-type/) DiSC personal assessment tool (https://www.tonyrobbins.com/disc/) Gallup's Strengths Finder (http://gallupstrenthscenter.com) Kolbe A Index (http://m.kolbe.com/aindex) 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

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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

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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:

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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

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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. Now? 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. Persue 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 The Three-Legged Stool 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

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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.

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