The Three Scariest Words Affecting Your Retirement...

by Pamela Yellen Bank on Yourself.com There are three words that could have the biggest impact on whether you enjoy a comfortable retirement... or you have to struggle and  forego life's luxuries – and even life's necessities. But almost no one is talking about these three words.  And there's a good chance you've never even heard of them. These three words could have more impact on your retirement lifestyle t han living longer than you expected... or than being forced to retire sooner than you planned (which happens to nearly 50% of Americans,  according to the Employee Benefit Research Institute). The three words may sound a little technical, but I'm going to  make them brain-dead simple to understand. The three words are: sequence of returns.  Specifically, the "unfavorable" kind. It's a fancy way of saying that retirees who have  a big portion of their assets in equities and  mutual funds face the very real risk  that the market will fall as they are  withdrawing money from their accounts. Many people plan to use the widely recommended "4% rule,"  which advises retirees to take out no more than 4% of the  value of their retirement accounts (adjusted for inflation) each year.  Studies show that rate of withdrawal has a good chance of making  your money last as long as you do.  (It should be noted that more recent studies show  that a 3% annual withdrawal is the maximum needed  to make your money last.) That means that if you have $100,000 in your retirement accounts,  you can safely pull out $4,000 a year using the 4% rule.  If you have $500,000, you can withdraw $20,000 a year,  and if you have $1 million in your account,  you can take out $40,000 a year. If you haven't thought much about what kind of lifestyle withdrawing  4% a year from your accounts would give you, I'm guessing you might  be feeling a little queasy right about now. Oh! And don't forget to take whatever you'll have to pay  in taxes that you deferred in your 401(k)  or IRA off the top of that number!) It's easy to see that if we experience another market crash of  50% or more – as has happened twicesince 2000 –  as you're nearing or already in retirement,  it could have a devastating impact on how much  you can withdraw each year. If your million-dollar 401(k) suddenly becomes a 201(k) worth  $500,000, withdrawing 4% will provide you only $20,000 a year,  instead of the $40,000 you had planned on. But here's where it gets really sticky... timing is everything... When you run the calculations, you discover that the impact of a market decline in the first few years of retirement is even worse  than in later years. It turns out that when you begin to take withdrawals, market volatility has a far greater impact than rate of return. An unfavorable sequence of returns may make you have  to cut back significantly on your retirement lifestyle, or force you to work longer than you had planned. The BIG problem, of course, is that there is no way  to accurately predict when the next market crash  will happen, or where the markets will be  when you are ready to retire. We may be at the beginning of the next major crash...  or several years away from it. Nobody knows for sure. One way to protect yourself from this very real threat to your  retirement lifestyle is to diversify your assets. What if a portion of your savings were in an asset that is  guaranteed to grow by a larger dollar amount every year?  That would be a favorable sequence of returns that translates  into financial peace of mind for life.

Such an asset exists, and it's called Bank On Yourself.   It's never had a losing year in more than 160 years! It also lets you fire your banker and become your own  financing source for your cars, vacations, a college education,  business expenses and more. And the best part is that it's easy to find out UP-FRONT  what your bottom-line guaranteed numbers and results  could be if you added Bank on Yourself to your financial plan. To find out how a custom-tailored plan could help you reach  your financial goals and dreams   without taking any unnecessary risks.  – just request your free Analysis right here.

Are you financially illiterate? Pamela Yellen discusses the truth about money that no one is teaching...

      Pamela Yellen: Creator "Bank on Yourself"

by Teresa Kuhn, JD, RFC, CSA

Authorized Bank On Yourself Advisor(TM)

Living Wealthy Financial Group

For a long time now, I have been encouraging my clients, friends, and family to take charge of their own financial destinies by becoming more educated about how money really works.

It's always shocking to me when I read the latest studies demonstrating just how few Americans grasp basic financial concepts.  Even well-educated Americans who consider themselves to be savvy in the area of personal finance often fail when given simple money tests.

Pamela Yellen recently joined the Living Wealthy Podcast to discuss her short, simple, but ultimately revealing new money quiz and the alternative to Wall Street offered by the Bank On Yourself system.

Check out the interview here:

http://www.blogtalkradio.com/livingwealthyradio/2015/08/14/financial-illiteracy-do-you-know-the-truth-about-money-with-pamela-yellen

Also, be sure to take the Financial IQ Quiz yourself.

http://www.bankonyourself.com/financial-literacy-month-quiz.html

PS: We'd love to know what YOU scored.  Call our office M-F 8AM-4PM Central time and tell us your score.  We'll send you a free packet of information full of great money advice.  

(800) 382-0830

One Way To Guard Against Identity Theft

by Teresa Kuhn

Living Wealthy Financial

Each year, over 15 million United States residents have their identities stolen.  

The resulting financial losses have been estimated at nearly $50 billion annually.

According to the US Department of Justice  approximately 7% of all

American adults have experienced identity theft with the average loss per incidence at $3,500.00.

As the technical expertise and savvy of would-be identity thieves increases, so does their ability to extract information from government and corporate databases, even those with high-level security.  

Breaches of these databases occur much more frequently than you might expect, making your risk of identity theft even greater than before.

For several years now, I have recommended that my clients take advantage of the legal access and identity theft protection offered by LegalShield.(R) 

LegalShield Platinum Council member Larry Smith says that as the danger of identity theft has grown, LegalShield's product has become stronger and more effective, offering features that other identity products can't match at a price nearly anyone can afford. 

 In June of 2015, security powerhouse Kroll International partnered with LegalShield to launch "IDShield," an innovative solution to guard against identity fraud. 

"Everyone needs this, says Smith, "and the monthly cost is such that anyone can afford it.  Your financial information is vulnerable and you need to protect it as best you can."

Learn more about the legal and identity services offered by LegalShield by going here:

IProtectPeople.info 

Funding Your Family Vacation (..without using credit cards..)

by Teresa Kuhn, JD, RFC, CSA

President, Living Wealthy Financial

One of the keys to achieving a sound financial future is to learn the the art of living well while avoiding the kind of debt that will destroy your retirement plans.

It's understandable that parents want to give their children experiences they will remember and treasure the rest of their lives.  That's why places such as Disneyland 

Park in California and Walt Disney World Resort in Florida are continuing to draw record crowds despite an iffy economy.

Unfortunately, the costs of these adventures have increased dramatically.  For example, a typical 7 day Disney resort package for a family of four runs right around $4,000, not including transportation and the obligatory souvenirs and snacks once inside the park.  You could easily drop over $8,000 on that one trip.

That's why the temptation to use plastic to finance vacations is so seductive.  After all, it's hard to save that much money and the kids are growing up fast, so....

I encourage my clients to think twice about putting any big ticket items on a credit card, even vacations.

Instead,I tell those who are managing their cash flow using the power of Bank On Yourself to consider financing their vacations themselves, provided they have enough money saved in their policies, of course.

What's at stake is big in terms of both unnecessary interest and lost opportunity costs.  Many credit card companies charge 18% or more in interest.   Look at the chart below and see how much a "budget"  $4,000 vacation really costs when you put it on credit and pay it off in 3 years.  As you can see, you've wound up paying over $1,200 in interest alone!

Imagine, then, loaning yourself the money from your specially-designed whole life policy, setting your own interest and repayment terms, and paying yourself the interest instead of the credit card company.

Wouldn't you enjoy your vacation more if it didn't include the stress of having a large debt hanging over your head?

Plus, by paying yourself back with interest, you are helping your BOY policy grow... and that's always a good thing for you and your entire family.

If you want to learn 

To learn more about becoming your own source of financing, call our office M-F at 

(800) 382-0830

Bank on Yourself for Fabulous Vacations

                         photo courtesy of Tammy de Leeuw

by Teresa Kuhn

www.livingwealthyfinancial.com

As someone who values experiences over “stuff,” I can certainly appreciate it when my clients want to use their Bank on Yourself policies to create unforgettable memories for their families and friends.

Whether it’s a Caribbean cruise or a trip to Disney World, once in a lifetime vacations can be less expensive and stressful when you plan ahead, research your destination,  then add the power and flexibility of your Bank on Yourself plan to the mix.

When you use BOY to finance your vacation instead of credit cards, you accomplish some very important things:

• You avoid paying tons of extra fees and interest charges by not relying on plastic.
• You arrange repayment on your own terms.  
• If you have to miss a payment due to unforeseen circumstances, your credit report won’t get dinged.
•  Using BOY makes you more aware of your spending so you don’t caught up in mindless transactions that sap your cash.
• Using BOY means you won’t have to tap into your emergency fund, college fund, or retirement savings to finance your dream vacation.

5.       Financing your dream vacation with a Bank On Yourself policy helps you accumulate more cash in your account…faster.

Bank On Yourself is hands-down the most creative way I know to finance memorable family adventures without adding more debt (and more stress) to your life.

If you’d like to find out more about how you can use the Bank on Yourself system to finance vacations, cars, houses, and other major purchases, visit our website at www.livingwealthyfinancial.com.

Or call toll free: (800) 382-0830

FILE UNDER #savingfordisneyland, #bankonyourself, bank on yourself policies, financing your own vacations, banking on yourself, #livingwealthyfinancial, best-financial-advisors-austin

Saving vs. Investing: It's important to understand the difference...

by Teresa Kuhn, JD, RFC, CSA

President, Living Wealthy Financial

Most of us understand the idea that saving and investing are two completely different, yet complementary, mechanisms for achieving a solid financial future. However, given the enormous amount of painfully misleading information doled out by financial entertainer-types and journalists; advice that does not take into account the distinct functions that both investing and saving serve, it might be a good idea to review a few of the main differences between these two concepts.

Investing differs from saving in four essential ways that you can remember with the acronym RAIN.

R= Return. While the potential return on investments can be high, so is the risk. Most savings vehicles offer less return on investment in exchange for not having to risk your principal.

A=Access (or Availability)  Investments are generally not liquid.  This means that getting your money out in the event of an emergency can involve loss of gains in the form of penalties.  Viable savings vehicles, on the other hand, provide liquidity, use, and control of your money.

I =Inflation.  Good investments offer some hope of overcoming the deleterious effects of inflation on your wealth. Depending on the savings method chosen, many savings plans offer some protection against inflation, though that is not their primary function. 

N=Negligible risk.  Great savings plans mitigate or eliminate risk and provide peace of mind, which is something the majority of investment opportunities cannot promise.  

Certainly this is a somewhat condensed discussion of these two ideas. My point is that you need BOTH in your overall strategy and you need to know the different approaches to take at various times in your financial life. 

The ability to draw a clear distinction between saving and investing will assist you in critically evaluating the arguments against specially designed whole life insurance.   Much of what has written against the concepts presented by Bank on Yourself centers around the criticism of BOY as an "investment strategy," rather than as a tool for cash management.

Most of you who know me realize that I have NOTHING against legitimate investing.  In fact, I do it myself and encourage my clients to do the same.  The key phrase here is "legitimate."  You see, Wall Street has conjured and concocted a lot of suspect, even downright risky schemes for taking your money.  They slap some pretty ribbon on a load of toxic products, call them investments, and use marketing dollars to make them seem legitimate or even sexy.

Having a Bank on Yourself plan firmly in place as your "cash hub," allows you to safely build and manage your money so you can take advantage of true investment opportunities when you come across them.  

If you don't have a plan in place yet, or you have questions you need to answer, please call our office today at 1-800-382-0830.

Why having a whole life policy for college planning is a great idea…even if you already have a 529 Plan.

By Teresa Kuhn, JD, RFC, CSA

Authorized Bank On Yourself ® Advisor

President, Living Wealthy Financial

Earlier this year, the Obama administration proposed that 529 plans be taxed at ordinary income rates on both the initial asset value and all future returns on the asset. Since an asset’s value is in its’ future returns, this proposal amounted to double taxation.

While the plan was squelched due to public backlash, I have no doubt that more attempts to tap into 529’s will be made in the future.  After all, a pile of money saved by responsible citizens is just too much for politicians to resist.

The government’s recent attempt to skim 529 plans highlights what is perhaps my biggest reservation about using them (or any government-controlled plan) to save for college.

It’s the fact that whoever builds the plan gets to call the shots. 

Take Individual Retirement Accounts (IRA’s) for example.  Since their introduction in 1974 as part of the Employee Retirement Income Security Act (ERISA), the rules have been tweaked and massaged multiple times and the idea of taxing those accounts is always hovering over Capitol Hill.

My point is this: most peoples’ financial strategies, whether saving for retirement, a new home, or college, are formulated with current rules and regulations in mind.  These types of plans are marketed with the implicit idea that one is “secure” and “locked in” and it’s implied that the government will never change the rules.  We’ve seen time and again that this is simply not true.

Every plan, whether government-backed, privately-managed or even plans funded by the type of specially-modified whole life that I advocate, has its’ own inherent weaknesses.

There is nothing that is 100% bullet proof.  However, when you relinquish the amount of control that you must in order to participate in a government-backed plan, you incur an especially large degree of vulnerability.

Aside from vulnerability to the whims and hidden agendas of politicians, 529 plans have some other weaknesses of which you need to be aware.   These weaknesses are some of the reasons why I recommend my clients fund a significant portion of college using specially designed whole life policies.  Such policies have distinct advantages over 529 plans and can be used in conjunction with 529’s to create a more secure, more powerful strategy.

Many people who market 529’s claim their superiority over other options is due to the potential for growth.  However, in nearly every state, 529’s possess a lack of investment options.  This limits your ability to seek out your own preferred funds and you are limited to trusting that the folks in charge of your plan have made the wisest decisions.

In addition, even in states where there are some limited choices, you can only exercise your option to change once per year.  You have zero margins for error.

Because of this, many of my clients have opted for the peace of mind, safety, and guarantees of whole life over the volatility associated with the stock market.

Another problem with 529’s is that their rigid rules allow the funds accumulated to be used only for “qualified” educational expenses.     Certain things your child will need as he or she enters college might not be considered qualified expenses and will have to be paid out of pocket. These needs might well engender debt that the student might have a difficult time paying back.

Situations such as these are when having a properly managed modified whole life policy can come in handy.  Not only can you take money out 100% tax free via loans and withdrawals from the policy, you can do so at ANY time for ANY reason. Imagine how useful this would be for students who have needs outside the definitions of a 529 plan. 

Unlike government-sponsored plans, in which the regulations are highly restrictive, the flexibility of whole life allows for some very creative possibilities for college and retirement planning.

One of my clients came up with what I think is a brilliant strategy.  She wants to fund a whole life policy for her child that would allow her to buy an apartment or condo in which the child can live during college, rather than a dorm room.   

Imagine if, instead of paying tens of thousands of dollars to house her child in a dorm room, this parent could provide better housing for her student and acquire an income-producing property in the process.  The property could become part of the parents’ retirement blueprint or they could gift it to their child upon graduation; allowing him or her to enter the world with a ready-made source of income.  That would be an awesome head start for anyone, but especially for kids living in a world where a college degree no longer guarantees a job.

Another problem with 529’s is that contributions are limited.  At the time of this writing, parents can contribute up to $14,000 (or $28,000 for married couples) each year without incurring gift taxes.    By accelerating five years of investments, you can also, via a special election, contribute $70,000 at one time. ($140,000 for couples).

You might be saying at this point, “So what?  Modified whole life plans also have contribution limits.”  This is true, especially during the first few years of a policy.  However, unlike 529 plans, the vast majority of whole life plans can be structured by a knowledgeable financial professional in such a way that contributions can easily exceed 529 contribution limits.   Icing on the cake is the fact that whole life plans are not capped at the $350,000 lifetime limit of a 529 plan.  With a whole life plan, you can have as much as you want in the plan and get the money out whenever you want.

Another significant difference between whole life and 529 plans that has the potential to blindside parents concerns beneficiaries.   In a 529 plan you can change the beneficiary without penalty for any reason anytime you want.  If Johnny Jr. insists he doesn’t want to go to college, you could switch the beneficiary to another relative.  As long as that relative uses the money for qualified educational expenses, there are no penalties.

Whole life policies also allow you to change beneficiaries when you want, but with some big differences.  In a whole life plan, you can designate anyone (not just a family member) as beneficiary, choose multiple beneficiaries, or designate a charity, church, or other institution as the beneficiary. 

For some parents of college-bound students, the money they’ve saved in their 529 plan, even if they’ve managed to max it out, won’t be enough to pay for 4 years of college.  This is especially true if their students have chosen certain careers, such as medicine, law, dentistry, or veterinary medicine or they choose to attend a more expensive private university.

For example, according to US News and World Report, the average cost of medical school tuition for the 2014-2015 year was over $50,000.  That’s just tuition.  Add in the costs of housing, food, supplies, and fees and a 4 year medical degree could cost most than $350,000.

The American Medical Students Association (AMSA) estimates that ever-increasing costs have driven students to seek financial aid and private loans.   In 2015, over 86% of all medical students graduate will graduate with significant debt, some of which they must begin paying back within a few months of graduation.

A whole life policy could solve this in several ways.  For one thing, as I mentioned before, there is no cap on how much you can have in your policy over a lifetime. 

Another big advantage is that, while a robust 529 plan can impact your child’s financial aid score, money in a whole life policy does not factor into financial aid calculations. This could have a huge impact on the amount of aid for which your child qualifies.

The problem inherent in all planning is that you can’t see into the future.  Your goofy little boy, the one who scribbles on your walls and breaks your furniture, could wind up with the talent to become a heart surgeon.  Or he might want to start his own business right out of college, or teach school in Africa.   You can’t possibly know what the future holds.

That’s why I recommend, even if you want to keep your college savings in a 529 plan, that you investigate the potential for regaining the use, control and liquidity of your money by starting a modified whole life policy. 

That way, no matter what your child chooses to do in life, you can ensure that he or she has the very best start possible, without compromising your own financial future, and without having to leap through hoops to get access to your funds.