According to Don Blanton (insurance industry spokesman and software creator who developed The Private Reserve Strategy™), there are three ways to make major, capital purchases like automobiles:
1) Going in debt. You may not have a choice. Millions of Americans don’t, and that is what keeps the wheels of the banking industry turning. Debtors aren’t earning any interest, so they are forced to pay interest.
2) Save up for it. Saving up for something in order to pay cash for it is an admirable discipline. Savers earn interest on their savings dollars and then pay for the purchase outright. Paying cash is better than borrowing money, but you still have to pay yourself back in some way or another. Then there’s the third way:
3) Collateralize. This method is used by individuals who could pay cash for the purchase, but they understand that second principle of compound interest: it works best if left alone to grow. These are the ones who earn compound interest on their savings and they collateralize their major purchases. This is the method most conducive to creating wealth. Collateralization simply means to pledge a portion of one’s money as security for an amortizing loan against one’s cash purchases. That way, your money is still earning interest while you are paying interest.
I’m not just saying that because I live in Florida and it happens to be one of my favorite states. Florida really can be one of the best states to own an annuity! It is one of the few states where annuities can help provide protection from lawsuits and creditors. Florida has certain laws that help protect your annuities and life insurance assets. Because of this, many people in Florida place their assets inside of annuities and/or life insurance, because of the asset protection they can provide.
To take asset protection in Florida even a step further, not only is there no state income tax, but also if you pay your house off in full it is better protected under Florida law. Once your house is paid off, you can choose to put your non-qualified assets into annuities and/or life insurance, thus making it so that everything is better protected!
You see, Florida provides much more than just sunshine and waves!
Franklin Templeton Investments conducted a new 2015 survey called the “Retirement Income Strategies and Expectations (RISE) Survey,” and I recently read an interesting article on Yahoofinance.com that discusses the survey’s findings.¹
This survey included 2,002 Americans, and Franklin Templeton Investments says their “annual survey reveals significant insights about the views, expectations and income strategies people have regarding retirement.”² The company also said this survey has taught them “more about individual behaviors and the impact working with an advisor has on helping people prepare for what’s next.”²
I found this survey very interesting, so I wanted to share my opinion on some of its findings.
One of the few remaining legal and legitimate tax shelters left is Cash Value Life Insurance. There is a minimum one can pay for a given amount of insurance coverage for a specific age. Who determines that? The insurance company, naturally.
They will tell you how much you must pay for indemnity on which they bear risk. Insurance companies and their actuaries calculate the least amount of premium they can charge and still make a profit.
But is there a maximum you can put into a cash value life insurance policy?
Yes. The government will tell you the maximum you can put into it. Why? Because of the tax advantages life insurance provides. Essentially, the government has decided the upper limit of tax-advantaged growth they will allow you to have.
That tells me that it must be a good thing, if the government regulates it. If you buy more life insurance than the limit set by the government, it becomes what is called a Modified Endowment Contract (MEC) and is no longer tax advantaged.
Albert Einstein was right to call compound interest the eighth wonder of the world. Like the atom, it can accomplish powerful things. Two things are true about compound interest: It works best:
- Over time, and
- If you leave it alone.
The concept of the interest earning interest on interest earning interest is the simple reason why the rich get richer. It’s an immutable law of finance.
If you stop and think about it, whether we know it or not, we finance everything we buy. “But wait a minute,” you say, “I pay cash for everything I own.” Really? The cash you pay could be earning interest if you had kept it, couldn’t it?
So, by forfeiting that potential interest, you essentially financed it, right? If you paid cash, you have to make payments to yourself to get back to where you were before you made the purchase.
Acting as Your own Bank
The Infinite Banking Concept ® is a concept that is rapidly growing in popularity among those whose goal is to create wealth for themselves, rather than create more wealth for the lending institutions. The concept was developed by Nelson Nash, who is also the author of Becoming Your Own Banker.
In 1935, when President Franklin D. Roosevelt signed the Social Security Act into law, it is claimed that he vowed never to tax Social Security Benefits. FDR kept his promise, too, because as long as he was alive, there was no tax imposed on Social Security benefits. But during Ronald Reagan’s presidency, the Social Security Amendments of 1983 changed all of that. Beginning in 1984, if your base income as a single taxpayer was $25,000, or, if you earned more than $32,000 per year as a married couple filing jointly, then up to 50% of your Social Security could be taxed by the Internal Revenue System.
The next tax increase would come with the 1993 budget deal under President Bill Clinton, which raised taxation to up to 85% of benefits for single filers with incomes of more than $34,000, and for couples with annual incomes of $44,000 or more.
When I was in junior high school, I decided I would learn to play chess. It was sort of a fad sweeping the eighth grade. I thought the best way to learn the game was to play with another classmate who already knew the game. I figured chess couldn’t be much more complicated than checkers. After all, they were played on the same board. I knew the basic pieces and how they moved. It looked like fun. The other kid slaughtered me. It was checkmate in fewer than 10 moves every time we played – that is, until I bought a little 50-cent book entitled Chess for Beginners at the local news stand and learned that there was something called “strategy” that was involved in this game. Once I understood the rules and strategy, I rocked! Well, that may be overstating it a bit. At least I didn’t get killed so much.
You’ve been paying tax into the Social Security system for many years now. Every time you receive your paycheck, you look at the stub and your eyes scan to the place where the deductions are spelled out. You grimace. It pains you to think of all of the money you have earned that never reached your bank account or your pockets.
Rest assured you are not alone. American workers across the country go through the same emotions every payday.
On January 1, 2013, a lame duck Congress at the last minute voted to approve legislation that would avoid what the media dubbed the “fiscal cliff,” a catchy term for the conundrum that the U.S. government would face at the end of 2012, when the terms of the Budget Control Act of 2011 were scheduled to go into effect.
To copy a page from the inimitable Jeff Foxworthy, who made his mark on American audiences with “You may be a redneck if…” jokes, you may be a baby boomer if:
- You know what a “sock hop” is.
- You ever listened to “The Lone Ranger” on the radio.
- You know who Howdy Doody was.
- You ever used Brylcreem.
- You can complete this song lyric: “I wonder, wonder, wonder, wonder who…”
- The first photos of you are in black and white.
- You ever used a metal ice tray with a lever.
- Your family had one automobile and it had fins.
- You know what a pet rock is.
- Sean Connery will always be James Bond to you.
- Your first allowance was payable to you in change.
Officially, baby boomers are those who were born between the years 1946 and 1964 when the birth rate in America rose dramatically following World War II. Those post-war babies have shaped the country and the world socially, philosophically and economically, and they are still doing it. The earliest of the boom generation are turning 65 at a rate of 10,000 per day. Words they applied to “old people” in the heyday of their own youth, such as “retirement” and “Social Security,” are now being used in connection with them.
Albert Einstein was right to call compound interest the eighth wonder of the world. Like the atom, it can accomplish powerful things. Two things are true about compound interest: It works best (a) over time, and (b) if you leave it alone. The concept of the interest earning interest on interest earning interest is the simple reason why the rich get richer. It’s an immutable law of finance.
If you stop and think about it, whether we know it or not, we finance everything we buy. “But wait a minute,” you say. “I pay cash for everything I own.” Really? The cash you pay could be earning interest if you had kept it, couldn’t it? So by forfeiting that potential interest, you essentially financed it, right? If you paid cash, you have to make payments to yourself to get back to where you were before you made the purchase.