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Missed Fortune – Predictability Is a Good Thing

Posted on | December 18, 2011

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Outliving Your Money Isn’t An Option

We’ve all seen or heard of the parlor trick where members of the audience are asked to pick a number, take it through various mathematical manipulations, then to pick a corresponding letter, animal, country and fruit.

After walking through the many steps of this exercise, roughly 80% of the audience will find themselves envisioning the same animal, country and fruit.  This exercise is not so much a mind-reading demonstration as it’s a great example of creating predictability.

Predictability is extremely important.  A good example of this would that of Dr. Edwards Deming who, in the 1970s, correctly predicted that the Japanese automakers Honda, Toyota and Nissan would one day dominate the American automobile market.

The Big Three U.S. automakers laughed at him.

They’re not laughing now.

Deming was hired as a quality management engineer for in Japan and he created the predictable quality that defines Japanese automobiles today.  Good management creates predictable results and this is true regarding how we manage our money.

When you’re getting predictable liquidity, safety and rates of return on your serious retirement cash, your financial planning success is almost certain.

On the other hand, so many Americans tend to simply follow the crowd and continue to put their retirement money into IRAs, 401(k)s or directly into the market where it’s at risk.  Their advisors have told them to “hang in there” with the promise of an average rate of return of 12%, but when taxes and inflation or market volatility strike, the returns are much more modest.

Using Doug Andrew’s Missed Fortune strategies, a person can see their serious cash safely accumulate tax-free with a predictable rate of return averaging 8%, even in the worst of economies.  These strategies have worked for the past 30 years, including the dizzying ups and downs of the Lost Decade we’ve just been through.

Since 1998, Doug’s strategies have included indexing as a means to prosper even during a down economy.

Many financial advisors simply can’t fathom why anyone would consider capping their rate of return at 14, 15 or 16% when the economy could go up 30%.  But when you consider that the past decade saw the market make two major drops of 40% that will take years to make up, the reason for indexing becomes clear.

Those who were using the indexing strategy didn’t lose a dime during those precipitous down years.  By not losing money, they didn’t have lost ground to make up and the second the market began to recover; they got to enjoy the upside potential.

Every year they made money, these investors using indexing got to lock in the gain.

Predictably.

By contrast, for those putting their money in the market in growth mutual funds, the average investor rate of return according to DALBAR was only 3.83%.

Following the Crowd Is a Losing Game

There are 3 kinds of people in the world:

  • Those who make things happen
  • Those who watch things happen
  • Those who wonder what just happened because they missed the boat

This is especially true when it comes to understanding how money works.

For many it’s so easy to follow the crowd, to save for the future in IRAs and 401(k)s, to “hang in there” waiting for a 12% return on their money.

If you averaged 12% on every $100,000 that you had back in 1990-1991, you’d have $1,100,000 today.  But people just aren’t averaging 12% returns.

Even if you had $1 million dollars in your nest egg, by the time you figure in the taxes you’ll have to pay when you start accessing it, you’ll really only have about $666,000 left to work with.  If you pull out $72,000 annually, you’re only going to net $48,000 in a 33% tax bracket.

More and more people are realizing that they’re not going to be in a lower tax bracket when they retire because they’ve done away with all of their deductions and exemptions by the time they reach retirement.  Also Congress keeps raising taxes.

Taxes keep going up.  Inflation is around the corner.

Plus market uncertainty is expected to continue.

These three factors constitute the triple whammy that will threaten most people’s retirement nest egg throughout the coming decade.

This is why it’s so critically important to have the proper strategies in place to address each of these threats.

Your money must be able to accumulate, distribute and transfer tax-free.  Your savings vehicle should be tied to those things that inflate so your money grows at a rate that’s greater than inflation.  And it should be able to participate in any market upsides without being placed at risk in the market.

Learn how to put each of these strategies to work by meeting with a Missed Fortune advisor today.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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

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