The Qualified Plan Myth

Table of Contents

I spent five years of my life working at one of the largest mutual fund brokerage firms in the nation. That was before I was introduced to the “Infinite Banking Concept.”  It was a good time, it really was.  I met great people and it really was a good company to work for.

The challenge that I had there was this:  MARKET FLUCTUATION!!!  You see, I was there in 2008.  I vividly remember being in the beak room with the TV on in the background.  Bear Stearns was sold to JP Morgan Chase for $10 per share, Lehman Brothers filed for bankruptcy and AIG was bailed out.  The Real Estate Bubble had burst and the stock market had collapsed!  I remember thinking, “there has to be a better way” as I went back to my desk to take calls from panicked investors.

So, needless to say, it was a real eye-opener for me.  What follows is a list of five things I learned about traditional financial planning during that time:

1.  Myth:  Your employer is giving you “free money” when they pay you a match.
Reality:  The employer match may not be all it’s cracked up to be.

An employer match is only “free money” as long as it stays in your account.  When was the last time you took a good hard look at how much money you’ll lose in time due to market volatility, management fees and taxes?  If your employer match won’t be in your account in the long run, then it’s really more of an enticement.

2.  Myth:  With dollar-cost-averaging you put the same amount of money into the market in all market conditions.  Your money will buy more shares when the market is down and less shares when the market is up, meaning that the cost of your shares averages out over time.
Reality:  Dollar-cost-averaging is really kind of a hook, line and sinker.

Isn’t there a conflict of interest here?  Who really benefits from a constant flow of money into a mutual fund?  After all, what if you decide to sell when the market is down?  You are taking possession of your shares in a down economy, “realizing” your loss and violating the sacred rule of investing: buy low; sell high.

3.  Myth:  Even though the market will fluctuate in the short term, with a buy-and-hold strategy, statistically, the market will go up in the long run.
Reality:  A buy-and-hold strategy doesn’t account for one of the biggest financial risks of all:  Inflation

First, subtract your/your employer’s contributions from your account balance and find out just how well your account has done over time.  Second, isn’t this kind of like throwing your money into the future?  What is the purchasing power of your money when you actually access it to use it?  In terms of its value in the economy, your money will never be worth more to you than it’s worth right now.

4.  Myth:  You don’t want to take money out of your qualified plan because you don’t want to incur the 10% penalty.
Reality:  What is the true cost of NOT taking your money out of the stock market?

The concept of “Opportunity Cost” says that whenever you spend money, it is necessary to consider what else you could have done with that same money.  Obviously, this topic is too large for the scope of this blog.  The agents at Paradigm Life would be happy to look at those numbers with you.

5.  Myth:  Higher risks mean higher gains.
Reality:  The individuals that invest in the market are subject to ALL the risk, while those that have NO risk, profit regardless of what the market does.

In the case of the company that I worked for, it was a privately-held company.  This means that A LOT of money was being made by one specific family. As a whole, fund managers are financially compensated based on total assets under management.  This means that regardless of whether the stock market goes up, down or sideways, managers are collecting fees.  Meanwhile, the individual investor is left holding the bag.

As my story goes, I left that company and a few days later was introduced to the “Infinite Banking Concept” over casual conversation in my new office.  My first thought was, “This is it!”  I had found what I so badly wanted to give my clients – a very unique solution to the challenges that are inherent with traditional financial planning.

I invite you to call Paradigm Life Today to further discuss these myths of qualified plans.  Your agent will show you the math supporting how you can benefit now by choosing to make a different set of financial choices.

Michael Bonny

Table of Contents

Related Articles

A Wealth Maximization Account is the backbone of The Perpetual Wealth Strategy™