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Missed Fortune – What We Can Learn From Natural and Financial Disasters

Posted on | March 20, 2011

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Learning From Past Disasters

Modern life requires learning from disasters including physical disasters like the quake and tsunami in Japan that killed thousands and resulted in hundreds of billions of dollars in damage.

We also face financial disasters like in 2008 when most Americans lost 30-40% in the value of their IRAs and 401(k)s in a single year.  During the “lost decade” most people are barely coming back to break even from what they had 10 years ago.

During the 2005 quake and tsunami in Thailand people should have seen the signs when the animals were all fleeing for high ground. We’re supposed to be the higher intelligence.

What can we learn from disasters?

The answer is not fleeing away from all risk, like in the earthquake or the 2008 financial quake.  You need to be able to reposition yourself to the high ground financially rather than following the herd.

They Come In Threes

The three biggest dangers that most Americans face financially:

  1. Taxes. Taxes are going up.
  2. Inflation. It’s coming. We’re on the brink of seeing the cost of living go up significantly.
  3. Market Uncertainty & Volatility. If you continue to follow the herd in IRAs & 401 (k)s , you’re going to lose it.

The three greatest opportunities that Americans may not recognize:

  1. We have a 2 year window to reposition money trapped in IRA’s & 401(k)’s. Consider a strategic rollout to get that money out while tax rates are lower and the account values are lower, and reposition that money into something that will be tax-free from this day forward.
  2. Link the returns you safely earn to things that inflate if we experience inflation. This way inflation is helping you and not hindering you.
  3. Reposition your serious cash for your future for retirement or your kids’ education you can participate in any upside potential when the economy goes up without any risk. This also protects you when the economy goes down so you don’t lose your principal.
  4. You protect the money you earn this year and you keep it safe . Every year you make money that becomes principal that’s not subject to risk or loss if there’s a downturn.

This is the time for action.

The three strategies to protect yourself when the markets go down:

  1. Always maintain ownership and control over your future so you have liquidity. So you can get your money out without penalties.
  2. Safety of principal. You need to have a strategy so if the stock market or the economy goes down, you don’t lose money.
  3. Earn a rate of return that is tax free and keeps ahead of inflation.

Reposition yourself and your money and learn how to act and not just react to those things we have no control over.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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