Back To Your Future

As of January, 2017, less than 6 in 10 Americans have enough money saved to cover an unexpected expense of over $500![i]  And nearly 1 in 2 adults reported that they, or a family member, had faced a major expense such as this in the last 12 months.[ii]   These facts do not bode well for over 41% of working Americans.  Notice that this is working Americans!  We are not even discussing those who have already stopped working or even looking for work.  Part of this huge problem is that most Americans have been lead to believe that savings, investing and hoarding money are one and the same.  This misunderstanding is destroying the American way of life.

Many people believe and are lead to believe, that by delaying taxes and stockpiling money away so it can be invested, then deferring the tax on the growth of that investment, is the best thing since apple pie.  But few people realize that these kinds of plans can only possibly augment your savings, they can never replace them, nor were they designed to do so.

Dishearteningly enough, there is over $3 trillion hoarded up in such investments across America today, and that is one reasons why working Americans have so much trouble meeting a $500 unexpected expense in their lives.  Having access to your money is more critical to your financial well-being than deferring taxes.  Who cares if you have $100,000 or $100 million stockpiled and invested, if you can’t access that money without paying a penalty and taxes, what good is it doing you when an unexpected expense arises in your life?

Savings is defined as liquid money that is earning a rate of return which you are not penalized for when you access that money.

Any other money that you have stored away, which may or may not be earning a rate of return and which you would pay a penalty, taxes or both to access is really an investment.  Money that is tucked away that is not earning a rate of return is simply hoarded money that is losing value because of inflation the longer you hoard it.

By distinguishing what moneys, you have saved, invested and/or hoarded will put you in superior position of control over your financial security, both now and in the future.  Of course, saved money is always more essential to your financial security than either invested money or hoarded money.  In fact, “Making saving a habit—or making it automatic—is the best way to ensure your financial future.”[iii]

Using Participating Whole Life Insurance premiums as a habitual or automatic way to save money is irrefutably the most advantageous way to save money for several reasons: 1) It provides you with quick and easy access to money, 2) without penalties, 3) without taxes, 4) without additional fees, and 5) you continue to participate in the profits of the insurance company while you have access to the money from your policy which you can use for anything with no restrictions.  On top of that your premiums continue to multiply providing a tax-free death benefit once you no longer have any need of the money you have saved up in your policy.

This brings us back to your future.  How much money will you need when you can’t work like you are working today?  Do you know?  Does anybody know?  Do you know how long you will live?  And if you don’t does anybody know?  When will you no longer need money to survive?  These are questions that many have attempted to answer through various hoarding and investing strategies and assumptions,  but it is only through saving money and keeping your savings liquid and fluid enough to continue and recover the cost of acquisition in your life that you can be assured that you will never run out of money before you no long need any of it.

[i][i] CNN Money, 6 in 10 Americans Don’t Have $500 In Savings, Kathryn Vasel, 1-12-2017

[ii] Ibid

[iii] Money, Why The “Monster” 401k Is Wrecking Retirement Security, Dan Kadlec, 5-26, 2016