Archive for April, 2011
Good day to you. I hope you are feeling valuable and powerful after yesterday’s lesson on calculating the value of a life in financial terms. I hope you now understand that your lifetime earnings must be protected if things are going to progress for you and your family. If you didn’t read yesterday’s blog stop and do it now, before going on. What I share next is powerful but it needs to be put in context.
Yesterday’s Blog – Calculating the value of a Life in Financial terms:
Making your Money Immortal
Immortal money means taking a portion of your current income and guaranteeing a lifetime of income for you and your family. It means that if you earned $65,000.00 a year your family will have at least $65,000.00 a year for life. It means if you get hurt and can’t work your retirement account still gets funded. It means if you lose your job your savings and insurance can pay for itself. It means living real tax free wealth to your family and setting it up so they can’t squander the principal.
The Myth of Term Insurance
There is a huge myth that has been going around since the 1980s about cheap/affordable insurance and expense/unaffordable insurance. Whole companies have been built on concept that traditional insurance as most people knew it before the eighties was too expensive. Cheap policies should be purchased and then people could focus on building up wealth and ultimately be self insured. The concept was called “Buy term and invest the difference”. It was a bad concept when it was introduced and it’s an even worse concept now.
Why is “Buy term and invest the difference so bad”? Historically only 2% of term policies ever pay a death claim. Term is cheap when you are young and gets increasing more expensive by the time you really need coverage in your older years. This causes you to drop coverage and the insurance company never has to pay out a thing on 98% of all the policies out there. Stop and think about that. The Insurance Company has a 98% of never paying a dime.
The second reason “Buy Term invest the difference” doesn’t work is most American won’t be well off enough to self insure by retirement age. For a number of reasons this just isn’t happening. A person who purchased term insurance in their early adult years is too old, too sick, or too poor to afford any coverage and will one day pass away leaving little or no financial legacy because they had the wrong information in their youth.
Get More than you Pay For
Here is a thought. Let’s get what we pay for. In fact let’s get more than we paid for by investing in a vehicle that is guaranteed to pay in all possible life scenarios. It needs to pay me if I live to retirement age and need and income. It needs to pay enough to totally replace my lifetime income if I die prematurely. It needs to pay for itself if I can’t work because I’m disabled and still fund not only my life insurance but also my retirement funds. It cannot be tied to the stock market because I don’t want the policy losing money in an economic downturn and having all my cash value eaten up by insurance. Lastly, it has got to grow with me so by the time I reach retirement age I have at least 50% more insurance coverage than I originally purchased.
The answer is purchasing the right type of permanent insurance that covers you for your Whole life time. If you are like the person in the part 1 of this series and need $1,625,000 in insurance. You may purchase $625,000.00 in permanent coverage with a 1 million dollar CONVERTABLE term rider. You can now afford the best coverage on your current budget. You buy it this way for 2 reasons. First you will never need to medically qualify for coverage again so from day 1 you have the total protection you need. Second, as your income grows you can convert all at one time or in parts the million dollars in term into permanent insurance.
If you want to know the best type of permanent insurance policy to invest in call my advisor Tony Brayboy of Matrix Wealth Management http://www.matrixwealthllc.com/. Have him educated you on all your options for protecting your family.
Spending the same money for a greater result
For years planners and advisors have been saying get insurance and then save 10 – 15% of your income for retirement. This is supposed to give you a secure retirement. But the insurance keeps running out just when we need it and the retirement account keeps getting hit by downturns in the economy and taxes. You need your money to be Immortal. That means your plan has to work for you and your family no matter what happens and no matter what the economy does. You can achieve the desired result from the same money others have encouraged you to invest in buy term and invest the difference. The result will be more money, more security, less tax, and your protection and legacy wealth will be there for your family.
Mark Fuller - Manager of Wealth
Wealth Wellness Wisdom
Responsible people should do an analysis of what their life is worth in financial terms. I’m not talking about net worth which is you assets minus your debts. That is totally another discussion. For the sake of this discussion let’s calculate the value of your life the way an attorney would if you had been accidentally killed and someone was at fault.
An attorney is going to look at your age of death and how many years you could have been expected to work until retirement. You are 40 years of age and expected to work until age 65. Now multiply that number by your current salary, $65,000.00. Normally they are also going to add something in for inflation but we will leave that out for now.
Life valuation by income = (years until retirement) * (current income)
By this calculation (25yrs * $65,000.00) = $1,625,000.00 is where an attorney would start the lawsuit against the responsible party. In a court your life is worth at least$1,625,000.00 but people are walking around with little to no insurance to protect their incomes. Who is left bear the financial pain and loss of $65,000.00 a year, in addition to the emotional loss? Your spouse and your kids, that’s who!
Please don’t tell me you have insurance on your job that you don’t plan to have the rest of your life. This is big mistake. People change jobs every three years on average in the United States. Change jobs or get fired and your family’s protection goes way. You need to own your family’s protection. The older you get the harder it is to qualify and the more expensive the cost of insurance. Get a permanent plan while you are young.
Don’t tell me money is the issue because money isn’t the issue when it comes to the house you live in, the car you drive, or the school your kids go to. It isn’t an issue when it comes to the clothing you wear or the lifestyle you live. You just don’t know how little it really cost to properly protect your income for your family.
Even those with insurance walk around with too little to meet the family’s needs and the wrong type of policy. That’s tomorrow’s lesson.
For today make up your mind that you are going to find out how best to protect your income and your spouse’s income if you have one. Protecting your income for your family is smart and practical and not doing so in negligent or your part.
I’m going to refer you to the smartest guy I know in the world of finance to help you figure out how to put together an affordable plan to really cover your family. The way you know you have the right plan is that it works weather you live to 100, get disabled and can’t work, or die tomorrow, you and your family still have your income and the security it provided.
Call Tony Brayboy of Matrix Wealth Management LLC and talk to him about your family’s needs and how to replace your household income between now and retirement. Tell him I sent you and get an hour consultation free of charge (normally $250.00 an hour).
Manager of Wealth
Wealth Wellness Wisdom