20s 30s 40s 50s Report

As you experience all the stages of life, so should your financial and protection coverage. Below are some perspectives to consider and discuss with your financial specialist.

20s

• Be smart about your debt

• Begin good savings habits

• Establish good credit

You’re most likely transitioning from the years of studying and college parties to starring down the barrel of your tuition debt. The last thing on your mind might be planning for your retirement.

But did you know that 1 in 4 of today’s 20 year-olds will become disabled before they retire?* How do you build your retirement while protecting your income?

Working with a financial representative that understands both retirement and protection can help you establish good habits and a foundation that will pay off when life gets even more hectic!

• Develop your financial intelligence. Your 20s can be overwhelming with establishing your financial intelligence while needing to pay off loans and credit cards. This is the time to get your act together. Figure out where your money's going, come up with a plan for spending and saving it by paying yourself first and regularly monitor your execution of that plan.

• Start an emergency fund. Begin putting aside money in a risk-free savings account that you'll be able to easily access in case something happens, such as a serious illness or job loss. Hunt suggests setting a goal of six months of living expenses.

• Open a retirement savings account. If you think you’ll just wait to start saving for retirement, look at how quickly the last 5-10 years went by then look down this chart at the 40 to see the added cost that are approaching your future. Begin paying down those credit card and school loans debt but don’t put off beginning your wealth building. Beginning to save and plan (even a small amount) gives you an advantage and that is you’re able 20’s does have some great opportunities to take advantage of compound growth.

— You can learn more about strategy in our Precision Strategy Learning Section —

30s

• Create a Budget and wealth building perspective

• Understand and establish insurance coverage

• Consider buying a house

You’ve reached your thirties and can go back to that high school class reunion showcasing all of your hard work! But there’s new change and more planning that needs to be established in your protection and wealth building.

Fully fund you’re a retirement plan. Now that your career's on course, it’s time to really begin looking at a full retirement plan. Set up automatic deposits so you don't have to think about it. Do you need to plan for your children’s college education? There are ways to pay for college and not impact your retirement income. Search out your options.

Buying a home. Since you've been saving through your 20s, you should be able to use some of that money for a solid down payment. Learning and understanding how to be efficient with your money when it comes to the rationale between a 15 year and 30 year payment is important.

Don't succumb to consumer debt. Your 30s are typically the time when you're having children and settling into a home, which can mean a lot of spending and racking up debt. Beware of lifestyle creep, and stay focused on keeping your debts down. Inflate your savings not your lifestyle.

Ask the hard questions: You have kids, a house, and responsibilities. Plan for the “what ifs” by insuring what you have. Homeowner’s insurance, health insurance*, disability insurance* and life insurance: they’re all crucial.

— You can learn more about strategy in our Precision Strategy Learning Section —

40s

• Review your portfolio

• Revisit your Savings and Wealth Building strategy

• Reinvest in yourself

This is usually when people realize that they're either doing pretty good -- or they're behind and start to get freaked out.

Make retirement savings your main goal. In this decade, even though your kids are nearing college age, you want to avoid prioritizing saving for their education over your retirement goals.  As much as you’d like your kids to have a hefty college account waiting for them on graduation day, don’t save for them at the expense of your retirement. Bottom line: You can always borrow for your child’s education, but you can’t borrow for your golden years.

You’re just entering the Sandwich Generation years, which means you’re likely juggling your kids’ needs, your parents’ needs and your needs all at the same time. Still, it’s imperative to try to pay yourself first. It’s a normal reaction to focus on the kids but this is why it’s a good thing that retirement tops this decade’s list. Just remember you’re not alone so it’s a great time to work with a financial representative that can show you options for incorporating a good balance.

Scrutinize your retirement plan every couple of years. If you have been saving and investing, this is not the time to become complacent. Step back and really look to see where your path is going. Make sure your retirement savings are living up to your expectations. You may have more expenses than ever; still, it’s important to keep in mind that every dollar you save now can potentially earn you as much as $10 in retirement income.*

— You can learn more about strategy in our Precision Strategy Learning Section —

50s

• Prepare for kids moving out

• Review insurance plans and begin thinking about long term care

• Review your portfolio

In your 50s your kids are hopefully transitioning out of the nest so you might focus on building up your emergency savings with more than six months of take-home pay. A strong goal is to build up to a year or two’s worth.

The good news is you can take advantage of catch-up contributions. Check with your financial representative for details. Keep in mind, though, that the IRS has specific catch-up limits that apply to individuals 50 and older.

Eye on the finish line of retirement! Your retirement plan should be your first priority now. Revisit your “estimated future living expenses” with your financial representative and determine what you’ll have and need when you retire.

Have you consolidated yet? If you have worked for several employers over the years and have accumulated a number of smaller plans, consider consolidating them. This will give you a clearer picture of your plan’s overall performance. It can also make managing your portfolio simpler and easier.

And always remember…

Protect your loved ones: Make sure the beneficiaries on all your accounts are up to date. If you don’t already have one, create a will. And determine if your life, disability and homeowner’s insurance provides enough coverage for your family’s needs.

— You can learn more about strategy in our Precision Strategy Learning Section —

Women Leaders

A Transcript from Women, Leaders and Finance Pod Cast

Hi and welcome to another audio blog. I’m Jennifer Kleckner from Precision Prosperity. Today we’re taking about women, leadership and their impact on finances!

Many of us already know this but Women… We’re having an impact when it comes to financial power but there’s still room to grow! Although I’ll share some encouraging statistics we have to understand that there’s a stigma in our society between money and women. For example, friend of mine had a financial advisor tell her that maybe her next step was to find a rich man. So the struggle is still out there.

But it’s shifting as many women reside over countries and governments, as well as serving as chief executives of national and international companies. And let’s not forget how many of us  are CFO’s of our households! Did you know that 38% of married women earn more than their husbands?

While it is true that we still face challenges, like equal pay, a large number of us also control a significant portion of the nation’s wealth and more women are also leaders on the job. So things are changing. But let’s get to some hard core numbers.

A report released by BMO Wealth Institute titled “Financial Concerns of Women,” it analyzed the personal and professional progress of American women over the last 50 years, and revealed that women are in control of 51% ($14 trillion) of personal wealth in the United States.

If you want to understand the speed in which women’s wealth is growing globally -  According to Money.com, In 2015 Women controlled over $39.6 trillion, or about 30% of the world’s wealth and by 2020 that number will rise, where women will control an impressive $72.1 trillion.  

As we look at careers, the Institute found that women have assumed a little more than half (52%) of management and professional positions in the United States.  

But we aren’t stopping there. An increasing number of us are becoming entrepreneurs - women now own 30% of all private businesses.

As we build and lead companies, we bring a strong difference to leadership. And by the growth of women leaders these traits are a building block to our success. So let’s see if you resonate with any of these characteristics.

Women tend to lead with….

• Kindness without weakness

• Confidence without arrogance

• Strength without harshness

• By Modeling without preaching

• Positive without being unrealistic

I’m going to close this segment with a final perspective that makes us strong and different. We’re passionate about giving back!

Even though we’re are making great strides with wealth accumulation, we don’t keep it all for ourselves. We share through mentorship, as well as a financial contributor.

• According to a 2011 study, women are either sole or equal partners when it comes to making a charitable contribution in 90% of high-net-worth households.

• Women also comprise 62% of donors who make contributions following their death.

• When the survey respondents were asked what motivates them to give, 81% said we were moved by how our gift would make a difference in someone else’s life.

As we continue the journey, we’ll continue to make a difference as passionate leaders, mentors, business owners and colleagues.

If you want to learn more, check out our Precision Strategy section. Or if you want more information or have a question, contact us! We’re happy to help!

Thank you

I owe what?

This tax season was an uncertain, and in many cases, a stressful time for people. While we all want to pay our fair share of taxes, we’re also looking for ways to make money and mitigate some of the taxes we’re confronted with having to pay.

There are products that can provide tax savings, as well as understand how things like dividends can help us from a tax perspective. In this article, we’ll look at dividends; because when people think of their investments i.e. dividends, they usually think of profits paid to shareholders, hence taxes.  

Let’s begin by taking a deeper dive into how dividends work with different products as you build a wealth strategy.

Dividends - Insurance Companies and Stock Companies

Both Insurance and Stock companies can provide dividends. But the word “dividend” causes confusion because it is most often used in connection with a public company paying a stock dividend.  

A Stock Company - if you own stock in a public company that pays dividends, you might receive a quarterly check from the company or stock dividends, which come in the form of additional shares rather than cash. Dividends represent corporate earnings and are determined by a company’s board of directors.

A stock dividend fluctuates with the ups and downs of the market. Most people re-invest their stock dividends; and if the price of the stock goes down after that reinvestment, you have essentially “lost” your dividend, or must wait for the price of the stock to go back up in order to recover your dividend. Of course, you can take dividends in cash; in which case, you wouldn’t lose it.

Stock Insurance Company – these are traded on the stock exchange (publicly traded) so like other stock-oriented companies, they try to get the most dividends in the shortest amount of time for the profitability of their shareholders, not their policy holders.

Life insurance dividends - Most people are surprised that a life insurance dividend also represent earnings. There are two types of insurance companies; publicly traded (stock, as noted above) or owned by the policy holders (mutual). A mutual life insurance company can play a role in our savings and ability to liquidate money. By law, mutual companies must share ALL profits of the company with participating policy holders. Profits over and above monies set aside for legacy benefits and operating expenses are distributed back to policy holders in the form of dividends.

When you think about life insurance do you associate it with making money? It’s a financial tool that might provide powerful savings and income.

— You can learn more about strategy in our Precision Strategy Learning Section —

Dividends as they relate to insurance

In most cases, dividends have been paid out for the past 100 years. Recent announcements show life companies declaring their biggest dividend payouts ever for 2019.

Mutual Life Insurance companies share their profits with participating policy holders, via a dividend which is declared annually, usually around the end of the calendar year. *This dividend is listed as a dollar figure and sometimes only an interest rate.

But what does this mean (or should mean) to you? Do all life policies provide a dividend or cash value? Let’s look at some common policies.

Term:

• Provides insurance for a specific period, such as 10, 15 or 20 years, and is renewable after those terms are up.

• Generally have lower premiums than permanent insurance, but increase on renewal.

• Does not accumulate cash value (no savings component).

Permanent (whole life and universal life):

Provides lifelong financial protection as long as the policy is in force.

•       The premiums for universal life typically increase upon each renewal.

•       The premiums for Whole Life remain the same for the life of the policy.

•       Includes a savings component known as cash value; the longer you pay into your policy, the more its cash value grows. You can choose to cash in or borrow against your permanent life policy and use the funds as needed.

Although both are considered permanent, only a participating whole life policy will receive a dividend.

If dividends are paid and reinvested into the policy as paid-up additions, they become part of the guaranteed cash value and part of a new, higher basis or floor that increases future gains—both guaranteed gains and dividend payouts.

Cash value can never lose value and is guaranteed to grow by at least a minimum guarantee. Therefore, reinvested dividends cannot be lost due to a market downturn. And any dividends paid and reinvested ensure that any future cash value gains and dividend payouts are actually increased, unlike a stock dividend.

Paid dividends are also owned by the policy holders who are called “contractual creditors” with a right to vote for the Board of Directors.

These insurance companies consider the benefit and the protection of the policyholders and their beneficiaries. They are far more conservative, consider safer investments, and have the luxury of planning for the long haul. While not guaranteed, these are the companies that are likely to pay a dividend every year, even in turbulent economic times.

When looking through a wealth strategy lens, we consistently recommend a mutual insurance company and a permanent policy.

Taxes - Whole Life insurance dividends and Stock

Whole Life Dividends –

Fortunately for whole life policy holders, the IRS does define dividends as a return of excess premium and therefore not taxable. However, be aware that if you take dividends in cash, you can owe taxes on dividends paid over and above the amount of premiums paid. Dividends re-invested as Paid-Up Additions are not taxed.

Stock Dividends-

Cash dividends from public companies in the stock market are taxable. For those who invest outside of tax-favored retirement accounts like IRAs, it's vital to know what taxes on dividends you'll need to pay. Dividend income is taxable, but for some, the current federal tax rates on in the U.S. are lower than you'll pay on other types of income. A tax expert should be consulted for individual situations. 

A bit more on Mutual Insurance Companies 

Now that you know you can get a dividend from a mutual insurance company through a permanent policy, how does this relate to the wealth strategy? When you structure a life insurance policy the right way you gain certainty, liquidity, and tax benefits.

These advantages are why people like Walt Disney and Senator John McCain used this strategy. 

You can receive the dividend in several ways—some of which are more tax-strategic than others. You can:

*Note: You can take “up to cost basis” tax-free, meaning you can take up to the amount you have paid into the policy tax free, then once you’ve received what you put in, you’ll have taxes to pay.

In each of the “no tax consequence” options, you can consider that money off-the-books for tax purposes.

Here’s an example: Let’s say you need to buy a car. You could take the dividend as cash, pay due taxes on it, and buy your car. . .OR you could reinvest the dividend  into your paid up addition and take a loan against that pool of money to pay yourself—voila, you’ve got your car with no need to pay taxes on the money you borrowed from your savings component. Then you’ll pay yourself back and recapture the growth.

As you consider a policy for your financial strategy, you’ll want to talk with a financial strategist that understands the differences between companies and their policies - they aren’t all the same. 

To reiterate, you should think about life insurance in connection with growing your wealth because it’s a powerful financial tool that provides savings and income.

— You can learn more about strategy in our Precision Strategy Learning Section —

Thieves of your wealth and savings

Thieves of your wealth and savings

It’s not 2008 but looking at these 2018 headlines causes anyone to pause about where to put their money.

“Why the stock market is freaking out”

“Stock market falls as investors worry about the economy”

“Welcome to the longest bull market in Wall Street history”

“U.S. Stocks log worst year since 2008”

“Wall Street Hits New 2018 Lows as Fed Decision Looms Over Markets”

“Stocks fall back into negative territory”

Because of headlines like these, one of the most common questions I’m asked is - Where should I be putting my money?

 As the saying attributed to Albert Einstein goes, “The definition of insanity is doing the same thing over and over again, expecting different results.”

Change is all around us -- and that includes our economy. People see it, feel it and hear about it. The current economy is in the midst of a huge shift; and as we’ve said in previous articles, your first step to adapting to change is gaining knowledge. It can be tempting not to pay attention to your financial health, to get overwhelmed, and/or tell yourself you’ll worry about it later. Making no decision is a decision that can have harmful financial impacts. The choice to thrive or remain status quo is an important choice in an ever-volatile economy.

Reacting independently to each financial opportunity can cause just as much distress. Many clients have a variety of financial accounts, yet they have questions about their overall financial picture.

With an estimated out of pocket medical costs rising to over $200,000 during your retirement, it’s critical that you have a sound strategy.  You need to know your financial outlook based on liquidity of your money, continued income streams and the protection of you and your money.

Understanding the destroyers of your money is an important first step. Here are three of the top wealth destroyers that can derail your investments and financial growth:

 1. Inflation

What is inflation really?

 Basically, if you’re making $100,000 today, in 20 years at 3%-4% inflation your income needs to be around to $200,000 for the same buying power. To put this in perspective, think about what a candy bar cost you as a child compared to today? Now think about it in terms of your day to day living expenses.

Why is inflation important to your retirement strategy? Many of us (or at least one partner) is projected to live in retirement longer than we worked. If your money doesn’t keep up with inflation, you can only afford less! As you save and accumulate your net wealth, it may be a large sum now, but in 20 years as things get more expensive, what type of buying power will it have? Understanding a client’s inflation numbers is one of the first things we discuss with them. .

We’ve been conditioned to believe that we need inflation to build a stable economy.  The Federal Reserve has an initiative to encourage inflation each year, claiming that in order to stimulate the economy, prices need to slowly increase.  However, the stark reality is that inflation makes everything cost more. We have to work harder to pay for the same products or services. Our banking system contributes to that increase in inflation through its loans.

 Assuming you retire at age 65, and begin to withdraw money out of your retirement funds, how will that money grow to keep up with inflation? It can’t; because inflation doesn’t stop increasing the price of things.

 How does inflation relate to the value of your investments?

Three percent is a relatively small number right? When prices go up 3 percent, it doesn’t seem like a lot, but over time it compounds and has a major effect on our financial world.

 So, the question to ask yourself is, “Are my investments guaranteed to keep up with inflation?”

Inflation is sometimes considered a ‘silent thief’. It’s something most of us don’t pay attention to, nor do we really understand its enormous impacts to our retirement money.

 Being aware of this wealth thief, learning about strategies to beat inflation and taking the right next steps will give you the upper hand in wealth building.

— You can learn more about strategy in our Precision Strategy Learning Section —

 2. Taxes

The United States “briefly” imposed income taxes during the Civil War. However, Then, in 1913, the Federal Reserve was created. Coincidentally or not, this is also when income tax and the IRS were created.

2018 brought additional tax changes.  As for many Americans, it ended up being a bit of a surprise at tax preparation time. While you expect and accept that you need to pay your portion of taxes, we consider this as another thief.

Although we rely on good accountants and tax preparers, they are generally in a responsive mode, vs. proactively looking at your financial picture from a strategic perspective. The money that you’re paying in taxes could be used in several ways that would directly benefit you.  If you don’t consider other options, you stand to lose a lot of money over time.   It can be  a massive  and unavoidable “opportunity cost” . . .

So, what can you do? First, find out if you regularly pay the government more than you need to. Find out if your tax deferral accounts are costing you more than they should. Discover what other alternative investments might help leverage your tax situation.

3. Fees

We’ve previously addressed the importance of fees in several of our articles. Fees are in everything you do financially -- at the bank, with your investments, and continuing into your retirement. As noted above, you may not realize how these seemingly small commissions and fees eat away at the money you assume is growing. These minor fees can result in major damage over time, up to two-thirds of your mutual funds’ overall expense   

 Understanding how your money is working for you should be one of your top priorities. Ultimately, to realize how to build and maximize your accumulation of money, you must understand the factors that are eating away at your savings and investments and take appropriate steps to mitigate the damage.

By “unlearning” what you previously believed, and listening to your intuition, you can now learn how banks and brokers have conditioned us to believe that when we earn money, we need to put it into the bank or the stock market for safekeeping.

Yet, if we understand how the wealthy in our country use the power of their money, we discover that they no longer need to provide those benefits to the banks and brokers. Did you know that Senator John McCain used his personal finances in his Presidential campaign?

Who is making the money? The reality is that in traditional banking, your money is taken and used to make more money for the banks; yet they charge you fees. Individuals and business owners who understand the single concept of “being your own bank” can turn this system on its head and allow you to make that money, instead of the bankers.

— You can learn more about strategy in our Precision Strategy Learning Section —

If I only made more money..

We’ve all heard it before, and many of us have probably said it at some point in our lives. But the scary reality is that a 2015 Nielsen study found 25% of American families making $150,000 or more a year live paycheck to paycheck. One in three households earning between $50,000 and $100,000 find themselves in the same predicament.

 Is saving for retirement that includes an actual strategy suffering from a lack of making money; or is it from a lack of understanding about some of the long-term impacts? In one of our other articles, we reflect on how we learn to save and invest, as well as getting a glimpse of the practices and products of wealthy individuals that are also available to us.

But what if you’re not living paycheck to paycheck? Many of our clients started off having a good income and were saving; but they had questions lurking in the back of their minds when it came to a solid strategy.

 You don’t have to be a stock broker, but you need to have some knowledge about your wealth. Why? Because your current method, way may be costing you dearly!

Let’s take a look at some immediate things we need to understand to increase our financial wealth.

“What kind of retirement plan allows millions of people to lose 30-50 percent of their life savings just as they near retirement?” This question was raised in a report on CBS’s 60 Minutes regarding 401(k)s,

Many of us remember what happened in 2008. And yet, most still put in a large amount of money into a 401(k) acct. Money is being poured into the account because there’s ‘free’ money in a company match. And honestly, it’s become a habit, so we feel comfortable doing it. It’s allowing us to be lazy with our money by automatically contributing to it, hoping it will be enough by retirement.

Let’s look at some facts about 401(k) plans: Did you know –

They were started as complements to the pension system, specifically at the executive level, and were never intended to be the main source of retirement income. We’ve now seen them as a retirement savings vehicle for about 30 years, and we also now see the struggles it creates at retirement time.

• The Government can change the rules on your account at any time; e.g. regulations could make you wait until you’re 68 or 75 before you take withdrawals without a penalty.

• Most participants vastly underestimate fees – which can eat up to half of your gains over a

30-year period…yes that’s right, HALF! With 401(k)s, there are usually more than a dozen undisclosed fees: legal fees, trustee fees, transaction fees, stewardship fees, bookkeeping fees, finder fees and more. But that’s just the beginning. The mutual funds inside 401(k)s also have fees.

• Participants believe they’ll come out ahead from a tax perspective, but are they? Deferring taxes is not the same as not paying them.

• Using your account as an emergency fund can backfire. There are typically deadlines with penalties along with other charges.

— You can learn more about strategy in our Precision Strategy Learning Section —

What you need to know about the fees –

In 2013, PBS’ Frontline had an eye-opening segment on how Americans are dealing with retirement and the cost and impact of retirement fees.  The Retirement Gamble is well worth the watch if you haven’t seen it.

https://www.pbs.org/video/frontline-retirement-gamble/

In that report money columnist, Ron Liebere reminded us how 2% from a small amount of money is not a big deal short term, but as your money grows 20, 30 even 50 years, that fee is now six figures!

Another incredible example from the Retirement Gamble segment.  The mutual funds inside 401(k)s often take a 2 percent fee off the top. If a fund earns a gross 7 percent for the year, they take 2 percent and you get 5 percent. Most people are okay with this because it seems acceptable, right? The problem here results from the compounding effect on your money. Using a compound calculator, comparing the 5% and 7% gross earnings over 50 years, you would have lost two-thirds of what you had because of that 2% fee.

As Jack Bogle, the founder of Vanguard explains it, “What happens in the fund business is the magic of compound returns is overwhelmed by the tyranny of compound costs.” Bogle puts it like this, “Do you really want to invest in a system where you put up 100 percent of the capital, you take 100 percent of the risk, and you get 30 percent of the return?”

If you’re like most investors, compound costs are not part of your everyday vocabulary. But it’s something that must be understood when it comes to money. It’s easy to keep avoiding what we don’t know. Let’s face it, if it wasn’t for our 401(k), we wouldn’t be saving anything. But even with these type of accounts, why are so many professionals questioning their retirement money?

It’s estimated that 50% of those eyeing retirement will have to live on 50% of their current income.

Chase things that may be hard

A friend who is in the financial business typically speaks about the fact that in a few years we’re going to see the ‘Hot Mess’ that is occurring in our retirement cycle. We’re at a serious point in which we need to understand what is going on with our financial wealth. Clients tend to have concerns when it comes to medical costs, alternative living expenses, and social security.

Are you building a financial puzzle, but only have a table full of pieces? The reality is that when you’re making money decisions, it’s much harder to learn and implement new ways of putting together your wealth strategy than it is to hand your money to someone else and hope it grows.

Choosing the path of least resistance probably doesn’t lead anywhere. Conversely, it takes effort to build wealth. Investors who are willing to learn and leverage that knowledge will experience more success in creating and pursuing their wealth-building goals.

— You can learn more about strategy in our Precision Strategy Learning Section —

Are your financial actions a Strategy or a Checklist?

Our financial activities are scattered because we’re trying to find the perfect solution to each financial challenge. If your financial plan looks more like a checklist, it’s possible that you’re undermining the effectiveness of your whole financial program:

Taken by themselves, many of these situation and strategies can make perfect sense. But if there’s not strategy behind these decisions, simply adding another item each time something new arises usually doesn’t work well. Stretching or dividing up money into various accounts can feel defeating and also result in an inefficient lifestyle.

Here’s why:

The best laid plans change. If you think back 5-10 years ago, was your life different? If we don’t approach having flexibility in our financial situation it can cost us dearly through surrender charges, penalty taxes and fees. Imagine if your income is suddenly interrupted, or you’re in need of a new vehicle or your child is not wanting to attend college. There are so many financial options to us that it’s easy to look at each one individually. But over time there becomes a tipping point when we start asking how and if all these things makes sense.

Are you spreading yourself too thin financially? We get overwhelmed with all these items and put at risk getting rid of something that could prove to be advantageous to our financial future. Thinking about ‘what happens if’ is an important step to consider.

What happens if…the education account isn’t enough to pay for the degree but is enough to disqualify a student from receiving financial aid?

What happens if….a job change doesn’t provide disability coverage but the person is older and unable to find reasonable coverage?

What is it costing you? There’s a surge in employees borrowing from retirement accounts such as the 401(k) plans. Retirement accounts work best when they aren’t accessed until retirement. But if the financial approach is looking at each item without a strategy, it can be costly. There are career changes, health problems, or financial emergencies that occur on a regular basis. The event doesn’t have to be a bad situation.

What happens if…the decision is to maximize a 401(k)s fund yet a person find themselves tapping the account and paying the penalties. Using a 401(k) before retirement is not only costly and can result in another debt that must be added to the monthly budget.

But what happens if… that same individual would minimize their 401(k) contributions, and instead establish an account to accumulate money that is flexible? It allows for the realities of change and limited resources, and gives you options to better respond to whatever comes up.

— You can learn more about strategy in our Precision Strategy Learning Section —

Is your money making money? Did you know that the wealthy people have multiple streams of income? There are more and more ways to bring in extra income or to build wealth that provides additional income.

What happens if…there is a plan to consciously build more than one income stream through side businesses or investment vehicles?

Are your actions adding to your checklist?

Adding to mortgage payments. A bank loves this because it provides them with more money to use while there’s a possibility that you’re losing money. Instead of opting to pay off your home loan with a 15-year mortgage or additional payments, have you (or a financial specialist) calculated if it’s in your benefit to choose a 30-year term and accumulate the difference?

Retirement account contributions above the employer match.  When maximizing the amount to a 401(k) deposit from each paycheck, this money is now being frozen until a retirement age. Learn with that saving can go elsewhere to diversify your assets as well as ensure access to your assets.

“Education expenses only” or ‘long term care’ specific accounts. Any accounts for a specific reason can put your money in a hostage situation. Be curious about learning if there are other options that provide you’re the flexibility to address these situations but don’t force certain situations to happen to have access to YOUR MONEY!

FSA accounts funded over and above basic healthcare expenses. As FSAs are “use it or lose it” accounts, over-saving simply leads to overspending at the end of the year.

Disability and long-term care. As the baby boomers are entering the retirement age, these items are making an appearance. If there are exposures to your income and a group disability plan, this should be reviewed. It also may make sense to utilize “living benefits” from a substantial permanent life insurance policy that can function as a multi-purpose flexible accumulation account, rather than risk underfunding life insurance, disability, and long-term care.

Insurance premiums. Most consumers come out ahead by reducing premiums, raising deductibles, and saving the difference. We see this in auto/home insurance quite often. But what about life insurance. The solution is to save money in accounts that can be used for unlimited purposes.

What’s the best way to save money? There are many possibilities. By leveraging cash value accounts there are benefits and flexibility to savings:

• tax-advantaged

• liquid

• easily collateralized

• safe from market fluctuations

• not controlled by employer or government rules, and

• earn reliable rates of return

By taking a step back and assessing all the types and reasons behind your financial tools can provide you flexibility with your money as well as the confidence in your strategy. Controlling how your money is being used for your wealth is a key to enjoying life now into retirement.

— You can learn more about strategy in our Precision Strategy Learning Section —

Women, leaders and finances..

Today’s article is in an audio format, so you can listen to it at your convenience.

Thank you for listening!

Wealth and money thief's

Wealth and Savings Thief

Do you wonder why people are uneasy when it comes to putting their life savings in the stock market? Just take a look at just a few of these headlines in 2018.

Why the stock market is freaking out

Stock market falls as investors worry about the economy

Welcome to the longest bull market in Wall Street history

U.S. stocks log worst year since 2008

Wall Street Hits New 2018 Lows as Fed Decision Looms Over Markets

Stocks Fall Back Into Negative Territory for 2018 as Economic Uncertainty Grips Investors

Change is around us and our economy is no different. People see it, feel it and hear about it. The economy is in the midst of a huge shift, and as we’ve said in previous articles, your first step to adapting is gathering knowledge. It’s too easy to get overwhelmed and say that you’ll worry about it later. Making no decision is a decision and can have harmful impacts if you don’t pay attention. The choice to thrive or remain status quo is an important choice in this more volatile economy.

There are people who attend our classes and say that they’ll wait and hopefully they’ll win the lottery. (a true statement) With an estimate out of pocket costs rising to over $200,000 during your retirement, you need to start taking your future seriously. You need to do the research, learn some basic information and learn how to ask questions. 

As the saying goes by Albert Einstein, “The definition of insanity is doing the same thing over and over again, but expecting different results.”

Let’s highlight three of the top wealth destroyers that can derail your investments and financial growth:

1. Inflation

What is inflation really?

In basic terms, if you’re making $100,000 today, in 20 years at 3% inflation your income needs to be around to $200,000 for the same buying power. Do you remember what a candy bar cost you as a child compared to today? 

Why is it important to your retirement money? Many of us will be retired longer than we worked. If your money doesn’t keep up with inflation you can only afford less! As you save and accumulate your net wealth, it may be a large sum now, but in 20 years as things get more expensive what type of buying power will it have? Understanding a client’s inflation numbers is one of the first things we help people understand.

The industry has conditioned us to believe that we need inflation to build a stable economy, and the Federal Reserve has an initiative to encourage inflation each year. They claim that to “stimulate” the economy we need prices to slowly increase. But the stark reality is that inflation makes everything cost more. We have to work harder to pay for the same products or services. And our banking system helps with the increase of our inflation through the loans.

So when you turn 65 and retire and you’re withdrawing money out of your block of money, how does it grow to keep up with inflation? It can’t but inflation doesn’t stop.

How does inflation relate to your investments?

3%...a pretty small number right? When prices go up 3 percent, it doesn’t seem like a lot, but over time it compounds and has a major effect on our financial world. (learn more about Compounding in our Precision Strategy learning section)

So the question to ask is, “Are my investments guaranteed to keep up with inflation?”

Inflation is sometimes considered a ‘silent thief’. It’s something most of us don’t pay attention to, and we really don’t understand the enormous impacts to our retirement money. Being aware of this wealth destroyer and learning about strategies to beat inflation will give you the upper hand in wealth building.

As you take the steps to learn more, learn more about this thief. We can help.

2. Taxes

The United States imposed income taxes briefly during the Civil War and the 1890s Did you see the word ‘briefly? In 1913, the Federal Reserve was created. Coincidentally or not, this is also when income tax and the IRS were created. In 2018 we had another tax change which if you’re like many Americans, it ended up being a surprise for many at tax time. Although many will agree that they want to pay their portion of taxes, we consider this a thief.

Although there are good accountants and tax preparers that we rely on, there are several ways in which you could be using that money for yourself. If you don’t then over time, you lose a lot of money. It’s a massive opportunity cost . . . and yes, unavoidable.

What can you do? Find out if you regularly pay the government more than you have to. Find out if your tax deferral accts are costing you more. What other alternative investments might help with a tax situation?

3. Fees

We’ve addressed the importance of fees in several of our articles. Fees are in everything you do financially, at the bank, your investments, and continue in your retirement. As we mentioned as to what you may not realize is how these seemingly small commissions and fees eat away at the money you think you are growing. Minor fees can do major damage over time. Up to two thirds of your mutual funds expense over time. Check out our other articles on fees.

The importance of understanding how your money is working for you is one of your top priorities. If you’re finally realizing that you must understand how to build and maximize your accumulation of money then you must understand the factors that are eating away at your savings and investments and take steps to limit the damage.

Again by unlearning and listening to your intuition, you may learn how banks and brokers have conditioned us to believe that when we earn money we need to put it into the bank or the stock market for safekeeping.

Yet, if we understand how the wealthy in our country use the function of their money we discover that they no longer need to provide benefit to the banks and brokers. Did you know that Senator John McCain financed his own Presidential campaign?

Who is making the money? The reality is that with typical banking, they take your money and use it to make more money for themselves and yet charge you fees. As many understand the single concept of “being your own bank” you can turn this system on its head and allow you to make that money instead of the bankers.

Interested in learning more? Contact us

It’s just what you do…right?

While Wall Street and our political environment hold the purse strings of our nation. We as the average American investor, are putting money into stocks, bonds and mutual funds because it’s just “what you do,” right?

With the decrease of pensions our society has suffered from the lack of education and the uncertainty of how to ask the right questions, there’s a staggering number of us (roughly 120 million) approaching our investment by just speculating or doing what others are doing. Yet we all have different needs and family situations.  

Today’s ‘I’m Investing’ really means ‘I’m Speculating’ or what I think others are doing

Our parents weren’t concerned with their retirement income questions because they had pensions, strong social security and savings. Our parents knew their retirement income and that’s a key element missing today. Our generation has fallen in the gap of financial knowledge and we’re passing that on to our kids. Unfortunately there may be other options, but few search them out because not enough questions are being asked with an open mind.

46% of employees spend, on average, two to three hours per week during work hours dealing with their personal finances rather than the work at hand

79% of Americans reported that personal finances keep them awake at night

According to a 2017 Gallup Report, 54 percent of American adults have money in the stock market. For Americans with annual household incomes between $75k and $99k, the number jumps to 75 percent. For those with incomes over $100k, it rises all the way to 89 percent. Many people that have more money to invest, aren’t aware of the different financial alternative available outside of the stock market.

Many of these accounts are through 401(k), IRAs and other qualified retirement plans and now becoming popular is the target-date funds. With a high percentage in these accounts the question is why? Easy access? What research are individuals doing and what questions are they asking? What alternatives might be costing someone? Is an advisor working for a particular company or for the individual?

Most of us remember what happened to our money in 2008… What else happened?

Remember 2008? Well at the end of 2007, there was a perfect storm. The Department of Labor actually changed the default option for qualified plan investments from stable value funds (a safe, steady investment that protects principle) to stock-based funds (more volatile). This is a big issue especially because this happened just before the stock market started the long slide that deleted TRILLIONS of dollars from American investors’ accounts. As stocks slid 50 percent from October 2007 to March 2009. Even the target-date fund that are popular because of their appeal to investors lost. Nearly 24%.

According to Smithsonian.com, the average American household lost one-third of its net worth during the recession.

Let’s stop right there because plenty of questions were asked by investors, like ‘how did this happen?’ ‘who’s responsible?’ ‘What should I do now?’ Yet somehow we’ve been programmed for the response, ‘stay in the market and overtime it’ll recover.’

Our financial world was unstable and yet there were payouts for executives, we had the financial crisis over the banks and company bailouts.

Where do we go from here? In order to ask different types of questions we need to start by asking when it became okay to accept such losses like we see in the market. Yet like many, investors follow the Pied Piper and stayed in the market with feelings that they had no choice. How did we change our investment behavior?

So what can we learn from this? How do we step back and unlearn what we’ve been ‘taught’. When it comes to “Max out your 401(k)” or “stay in the market, it’ll recover” what are the soft or wrong questions we’ve been asking? Do these sound familiar?

·       “How much should I have in stocks vs. bonds?”

·       “Which mutual funds had the highest returns last year?”

·       “How much risk do I need to take to earn the rate of return I need?”

·       “What target-date fund should I invest in?”

We can’t blame ourselves completely but this is where getting active with knowledge and learning can help ask the right questions.

Let’s start with shifting our thinking and consider these variations of questions -  

“Should I invest based on anticipated (or past) rates of return, or are there more important considerations?”

As you review tv commercials or marketing material for market securities, you see the fine print that warns “past results are no guarantee of future performance,” Should you continue to gloss over that statement or now, think about what that really means to you as the investor?

While rate of return is important, you never want to stand the chance of losing the money you’ve worked so hard to save. You want to ask yourself, how am I considering safety, liquidity and tax treatments? How much control over my investment money, cash flow and more. 

We understand that there are people that love to take some risk and if that’s you, that’s perfectly fine. But isn’t it a little crazy to speculate in a market that nobody can predict or control… and to pay fees and often taxes in order to do so! Check out more about the fees you’re paying in our previous article.

If we want to unlearn and ask different questions we need to think differently. Because as you shift your thinking and stop ‘following’, there’s an important and not so surprising item for you to know about individuals that have wealth and invest it…

..People who build and keep their wealth do not chase unrealistically high rates of return or take risk lightly.

Let’s begin to look at the shift of questions to consider asking.

“ How much should I have in stocks & bond’ vs. “How can I ensure my money grows regardless of market fluctuations?”

“Are there better investment choices than stocks and bonds?”

Yes there are, but you need to think about where you’ve been getting your information. If you want to know more beyond stocks and bonds you won’t find them Wall Street or a “typical” financial planner.

As we talk about the Precision Strategy section, we first need to understand the importance of your 2 phases of retirement. Maximizing your Accumulation and Understanding what happens in Distribution.

Learning about the variety of options that aren’t tied to the market or a specific company will help you assess the approach that is right for you.

At Precision Prosperity we like to take the philosophy that teaches investors to avoid the risks of investment gambling, and consider a variety of alternatives that reside outside the stock market.

“What are your fees vs. How will taxes and fees eat into my investment returns?”

Do you know how many fees are associated with your accounts? When looking into 401(k)s, there are usually more than a dozen undisclosed fees: legal fees, trustee fees, transaction fees, stewardship fees, bookkeeping fees, finder fees and more. But that’s just the beginning. The mutual funds inside 401(k)s also have fees.

Unfortunately, your advisor will likely show you charts and graphs that will show the “potential” or “average return” of an investment, but not the real returns. You’ll have to ask the tough questions or use your own calculator to get the whole truth. 

 “What mutual funds do you recommend? Vs How do I know you operate in my best interests?”

How do you know that mutual funds are the best fit for your situation? If you ask for something specific that’s what you’ll get but what are the long term impacts of that question? If your advisor is with a financial firm, chances are that there are particular investments that they focus on. What you may not know is that firms have access to the same funds. And if you’re asking about a type of mutual fund, that’s what you’ll get. Your financial strategist should have a variety of financial tools that include outside of the stock market. Your strategy should include options so you can leverage and control your money and savings.

 “Who’s in control vs. How can I maintain control of my own money?”

Because of the uncertainty of what to ask and why, the question about ‘control’ usually comes into play in the form of asking about what fund has the lowest fees. People feel that their only control is in fees. But if you’ve read our other articles you’ve learned about fees.

By understanding that once you sign the dotted line, the money managers are in control and that, even small fees add up over time as the fees which impact your opportunity costs and your compound cycle. Losing out on opportunity costs is taking the control out of your control hence your wealth.

If we look at who’s in control, the financial system enables money managers to control the money you invest. Today we see a variety of Profile Funds that companies design for a risk level or time frame. But what are you investing in?

·       What are your mutual funds invested in?

·       Where are your target-date funds allocated?

·       Few investors have any idea, and even the money managers making the decisions have no control over the market or its returns.

It’s another reason why unlearning some assumptions we have is important if we want to move into a stronger financial situation.