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Imagine with me for a second here and please be opened minded while reading and not think that every word you are reading you disagree with. what if i could offer you a box, yes that is right a box and inside of this box you stuff money into it until it is full. after it is full the money grows as well as the box, they both continue to grow until you decide yourself when to take the money out.
Let’s say for example at age 50 your good friend calls you and tells you that he recently spoke with an investor that gave him some good advice. the advice was to purchase a piece of property. the investor tells him that this piece of property should double within 5 years and it would be a great investment. however your friend cannot afford it nor get the loan for the full amount of $500,000. so he tells you about this and he feels the only way this will work is that you split this piece of property with him, $250,000 each. (for all of you reading this so far, stay with me)
think about this with me. where are you going to get your $250,000 from to purchase half of this piece of property? If i had to guess you probably don’t have it sitting in your checking account. You can’t get it from your IRA, Roth, 401(k), or any other type of retirement plan. Ah, remember that box you had that you stuffed money inside for period of time, you can get it from there, not to mention no taxes or penalties. You can take it out( while still continuing to grow) oh, and after your money doubles from the property you can put it back in.
this box allows you lots of flexibility, choices, and options in a lifetime. Here me on this, there is only 3 things that could every happen to you in a lifetime. 1) you live a long healthy life 2) you pass away to soon 3) you become sick or have an accident and can no longer work. Remember the box that’s working for us? 1)If you live a long healthy life you’re saving money ( and getting a compounding 7.5% ROR each year-after taxes) 2) if you pass away too soon this box makes sure you’re family is financially prepared to live without you, not emotionally but financially. 3) if you become sick or have an accident when everything else stops for you, i.e…you can no longer fund your 401 (k), ira, roth, or whichever other plan you have because you are not working and i hope you own disability insurance but that would not be to provide for a retirement plan, that would be to keep you and your family above water, so when all of your finances come to a halt after a disability, remember that box? It self completes and the box funds itself after a disability and continues to put the same amount of $ into it that you were. wow! that’s a product that will take care of anything i will ever need financially. live, die, become disabled.
the story is permanent life insurance, it’s a phenomenal tool if you understand how it works, here me again, if you understand how it works. This is not short term dollars that is what mutual funds are for, this is for long range dollars.
Last thing, for all of you “buy term and invest the difference” people: The experts will tell you if you take 2 married couples today under the age of 60 that do not smoke or use tobacco, the average age of the second person to die is 92, people are living longer today than 20 years ago. most of the time it is the female that lives longer. “buy term and invest the difference” only works if you know for sure you are going to pass away early. Because if the guy makes it to 70+ yrs. his term has probably run out. here is the key: he cannot spend all of his retirement money from 401k, ira, or whichever because he has to leave his wife money to live off of for many years after he is gone because he no longer has life insurance, his term expired and is in no shape to buy more term because his health is obviously not what it was when he purchased his 30 level term at age 40. If he could purchase it the cost would be entirely too excessive.
While Buy Term invest the difference is great, but it has several flaws. What happens if you outlive the term? What is the cost of insurance after the term period? Can the advisor put in writing the future gains of a mutual fund? If an Advisor says he can GUARANTEE future returns on a mutual fund, then run away! What happens if I want to add MORE money to my IRA on an annual basis? How much do I need to have at retirement? When will I run out of retirement money? Will my 401k/IRA contributions be enough to get me to the goal? How about my estate tax, how much will go to the IRS? Cash value insurance can answer these questions with Authority in spades. Buy Term Invest the difference crusaders can’t answer these questions with any authority because they only look at on small aspect of the huge financial planning picture: the cost of insurance. They miss the lost opportunity cost of Triple compounding, Tax-Free Income, Estate Taxes, Increased Premium rates AFTER the Term period on Term Insurance, and the instability and inherent risk of Investing in Mutual Funds. They get you focused on the Insurance Agent’s “GREED” instead of focusing on the greed of the IRS, Brokerage Houses, and the people who promote these simpleton concepts. Buy Term invest the difference crusade was excellent in the 70s, but it is over. There are TOO many excellent products and concepts to locked into just this ONE financial plan. Buy Term invest the difference is a EXCELLENT starting point, but I would not want to finish there.