How to Purchase More Money for Your Retirement

Pension plans have for the most part disappeared unless you work for the government.  And defined contribution plans (401ks) have and continue to fail in bridging the income gap which independent retirement accounts (IRAs) and social security were supposed to fill.  That being said, those aware of smart money management principles often encourage their clients to self-fund their own retirement with non-qualified retirement plans.

Please, don’t be misled to believe that social security will go bankrupt and stop paying retirees in the future.  Politicians won’t allow that to happen.  They want votes and nobody votes for somebody who takes away their social security check.  But you must come to expect that the age of your retirement will continue to increase as it has in the past.  And this is the reality that makes it less and less judicious for you to depend on your future social security check, at least on the date you are planning to retire.

A similar lesson can be gleaned concerning your defined contribution plan (AKA your 401k).

• Your 401k was designed to compound (grow) the most during the last 10-years of a 40-year contribution period. Any compounding before then simply doesn’t do much for you even if you can earn the average market return of 10%.[i] 

Essentially, the major driver behind the looming retirement crisis is the slow compounding growth of your 401k.[ii]  Less than 1 out of 10 Americans have enough money tucked away in their 401k to survive on $33,000 a year for 30-years.  And of those who earn less than $150,000 a year, only a meager 0.000003 have enough money in their 401k to survive that same 30-years on $33,000.[iii]

The take-home message is this:  If you are concerned you might not have enough money saved up for your retirement, you should be.  The average American spends $40,000 a year in retirement according to the Bureau of Labor Statistics.[iv] Yet, according to Fidelity that same average American has only $106,000 in their IRA and $104,300 in their 401k[v] for a combined $210,300.  Even at a 10% earnings rate and absolutely NO market corrections, this meager amount of money won’t allow you to live very long without running out long before you die.  At that time, you will then be stuck living on less than $17,000 a year which is what the average annual income Americans receive from social security.  That is of course, unless you have a non-qualified retirement plan in place and are prepared to make your golden years more pleasant and enjoyable.

Non-qualified retirement plans are best funded by purchasing permanent life insurance, especially participating whole life insurance.

• • The purchase of life insurance is really the purchase of money.

For pennies on the dollar you can purchase the money you will need in the future to live on when your 401k, IRA and social security fail to meet your living needs. And fail they will because, 401(k)s, IRAs and social security don’t have any mortality equity.  Mortality equity continues to grow regardless of how long you live.  Better stated, participating whole life becomes more and more valuable to you the longer you live while your 401k, IRA and social security check are limited to an average rate of return or an act of Congress.  Simply put, neither one of those can keep up with the actuarial mortality equity that builds in a participating whole life insurance policy.

Most people think of life insurance as the purchase of money for the next person.  But participating whole life insurance delivers equity.  And as with any equity that you own, it can be monetized by leveraging it and obtaining the cash value.  The nice thing about the cash value of life insurance is that it isn’t taxable when you leverage it AND your equity continues to grow even while you are actively leveraging it to use it elsewhere.

Of course, smart money managers have been advocating these types of plans for retirement for well over 100 years.  It has been reported that 7 out of 10 major corporations[vi] use this kind of plan to bolster their executives’ retirement, as do banks and politicians. Sadly, most Americans don’t know anything about these guaranteed non-qualified plans and so continue to believe that pensions, 401(k)s, and IRAs are the only way to save for retirement.

Here are some secrets that you’d like to know.

These plans:

1. Don’t pay taxes as they grow
2. Don’t require a plan manager
3. Don’t depend on the solvency of your pension plan
4. Don’t become taxable income when they are accessed
5. Don’t become subject to required minimum distributions at age 70 ½, like your 401K
6. Don’t charge you a penalty for accessing your cash value, like your 401k or IRA
7. Can be used before you retire for anything you need or like

In reality, using your cash values to finance other assets is a major way to increase the amount of money you can save for your retirement.  As mentioned earlier, corporations, banks, and politicians have been using these plans for over 100 years to build the wealth that they know they will need and it makes perfect sense that you should be using a plan like this yourself.

• A recent research study showed that using a plan like this provides 50% more capital for you to use in retirement compared to a 401k or IRA.[viii]

That is because the growth of these plans continues even as you access, through leverage, the equity that they have accumulated.

For more information, and to see if you qualify for such a plan, visit McFieInsurance.com and request the free book entitled Prescription for Wealth.

[i] http://time.com/money/3247321/retirement-401k-no-more-10-returns/
[ii] https://hbr.org/2018/03/americans-havent-saved-enough-for-retirement-what-are-we-going-to-do-about-it
[iii] http://fortune.com/2015/03/25/fidelity-401k-millionaire/
[iv] https://money.cnn.com/2018/03/16/retirement/average-retirement-savings/index.html
[v] ibid
[vi] https://www.insuranceblogbychris.com/using-life-insurance-to-fund-retirement-executive-bonus-plans/
[vii] As long as you don’t take out more than what you’ve paid in or always take policy loans and not distributions
[viii] Forbesbooks, SMART Retirement; Matt Zagula, page 86