Leveraged Planning for Retirement Income

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Leveraged Planning for Retirement Income

Do Not Run Out of Money Before You Run Out of Time: Every individual contemplating retirement (or any other scenario that requires cash flow) must be certain to determine the sustainable level of cash flow that a given level of liquid assets will provide.

The order in which liquid assets are accessed for cash flow should be prioritized to produce the highest possible long-range net worth. This is generally the most overlooked aspect of Retirement and Wealth Planning. Most advisors do not offer this type of analysis, but every single-issue financial strategy you consider must be looked at in this manner because you do not want to run out of money before you run out of time.

Wealth Creation

Real wealth involves sustainable cash flow, and most people are more concerned with running out of money than any other financial issue. An effective wealth planning program must have the capacity to:

Calculate the most efficient distribution from liquid assets to produce the required cash flow needed.
Illustrate revisions to the asset mix to improve cash flow to maximize net worth.
Maximize wealth to heirs in coordination with the most efficient pre-death net worth
Include special gifting strategies for clients wanting to support charitable institutions.
Maximize Net Worth and Wealth to Heirs

different income-producing assets produce cash flow in various forms and yield a methodology is needed to determine the most efficient use of various assets to produce the required after-tax cash flow while simultaneously maximizing net worth. For example, concern often exists about the quality of the tax-deferred funds contained in 401(k), 403(b), and IRAs. Tax deferral is great, but the death tax can be staggering since it can combine income and estate tax.

The top 3 factors behind how Indexed Universal Life Crediting Works:

First: Indexed Universal Life has a Guaranteed -0-% Floor

The 0% floor is important during bad marketing years. What this means is that with Indexed Universal Life (IUL) you can participate in up to double-digit returns in good market years yet give back no ground to market losses during bad years. This means that you are able to always stay exposed to market volatility without the fear of losing any of your accounts to stock market losses.

Second: IUL’s Powerful Annual Reset Feature

Every investor would be happy if after a bad year their investment losses could be wiped out by hitting a reset button, and starting over at the lower market position. This is exactly what happens with an IUL policy. Stock prices fell roughly 50% from October 7 to March 2009. The S&P is a broader market, reflecting the prices of the largest 500 firms on the U.S. stock exchanges. This index fell 56.8 percent from its peak on October 9, 2007, to its low point on March 9, 2009, here’s where the annual reset feature really matters. Once the losing year passes,

March 9, 2009, an IUL policy starts tracking its growth from that new lower (March 9, 2009) level despite the fact that your policy cash value incurred no market losses on its way down from October 9, 2007 – March 9, 2009. In other words, when the S&P 500 starts to increase from its lowest point your IUL policy cash value will grow as the market begin to rise. In contrast, your stocks, mutual funds, 401(k), and other equity accounts must make up the 56.5% loss before your account begin to earn a positive return. In order to make up a 50% loss, your investment accounts must have a 100% gain before you begin making money again on your investments. If the S&P 500 crash and then continue bouncing up and down in an indefinite range your IUL cash value can earn crediting every year when the index ends up higher than where it was 12 months prior. While at the same time your other investments may never recover from their losses during your lifetime.

Third: Marketing Fluctuations and IUL

Market fluctuations can have a significantly negative effect on your investment portfolio. However, since IUL is suited to capture the upside growth while eliminating any downside losses (0% floor) volatility can become your friend. Here is How! Here are (5) supporting facts about the S&P 500 index sequence of returns over 81 years.

S&P 500 Index Fact #1:

The market has experienced annual gains more than three times as often as it sustained annual losses. The S&P 500 Index has gone up annually 76% of the time in the last 81 years. During the study period from 1937-2017 where the S&P 500 Index experienced 62 positive years and only 19 negative years.

S&P 500 Index Fact #2:

Of those positive years in the S&P 500 Index, it was 3 times as likely to have given you double-digit crediting than single-digit crediting. During those 62 positive years referenced earlier, the market gained more than 10% in 48 of those years and less than 9% (but greater than 0%) in the other 14 years.

S&P 500 Index Facts #3-5:

Fact #3: There were only two instances where the market had three consecutive negative years during that entire 81-year time period. The S&P 500 Index had three losing years in a row from 1939-1941 and not again until 2000-2002.

Fact #4: There was only one other instance where the S&P 500 Index had two consecutive negative years from 1973-1974.

Fact #5: Immediately following those negative periods the S&P 500 Index rebounded the next year by at least a double-digit advance from the new lower starting value.

With these facts in mind, here are some questions you should ask yourself:

What better way is there to protect my account value, lock in the lion’s share of my past gains, while still staying confidently invested without worrying about when the next crash will happen?
How can I take advantage of the great buying opportunities that market crashes can provide without exposing my investments to major market losses?
What percentage of my assets would be willing to cap my annual growth in the 8%- 12% range so that I can completely erase the possibility of downside market risk. IUL policies provide a unique combination of benefits that you cannot get in term insurance or any other investment product for that matter. These benefits include:

Tax-deferred growth
A unique way to capture growth from stock volatility without stock market risk
Tax-exempt access to both your principal and growth even before age 59 1/2.
A tax-free death benefit that does not automatically expire after 20 years (term insurance).
Potential lifetime access to the death benefit in cases of chronic illness, critical illness, critical injury, terminal illness, or other situations requiring long-term care
Protection from lawsuits and creditors in certain States.

Leveraged Planning Strategies

Leveraged Planning for Wealth Creation & Legacy for Heirs

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