Why take the time to explain this reality? Why is it a big deal that we are going to have another correction without a crash and then another rally in the markets? Why must we keep asking about this information over and over again? Here is the reason: it is what has killed investors and the American people time after time.
When the real crash comes, and it will be soon, NO ONE WILL BELIEVE IT! We will be told this has happened many times during the almost 10-year Bull Market and look what would have happened if you would have gotten out of the market. You would have missed all these wonderful gains.
One Year In 10 Days!
What is hard for most people to wrap their head around is in October we lost an entire year of gains in 10 days. When bubbles burst it only takes three or four months and you will have lost 40 to 50 percent. If you remember in 2000 to 2002 the S&P lost almost 50 percent. In 2007 and 2008 the S&P lost over 50 percent. In 2000 to 2002 the Nasdaq lost almost 80 percent. We forgot about the Dot Com bubble bursting because it is now almost 20 years ago. Many people lost everything.
Let’s look at this market for just a minute. The Dow Jones Industrial Average is right around 25,000. If it loses 40 percent, that would be a loss of 10,000 points which would take the Dow back to 15,000. That is around what the Dow was in 2007. Do you remember it was 14,200? That is an entire decade of returns lost in 3 to 4 months. And don’t kid yourself: no one will get out in time. They will be led to believe it is like the other corrections that occurred during the last 10 years. It is so sad Americans will lose 30 to 50 percent of their net worth again. That is why most Americans don’t have enough money to retire on. You can’t lose and get back to even and lose again and get back to even and expect to build a successful retirement future.
A Better Way
We have a better way. What if you never lost money ever again? Would that be different than your current strategy? What if you had almost complete access to this money that could never lose? Wouldn’t that put you in a position to take advantage of opportunities that are created AFTER downturns? Finally, wouldn’t the government almost always give you a heads-up when the opportunity had its best chance for success? Doesn’t the government always tell you when they are going to stimulate the economy? Does stimulus have its best impact after a major downturn in the economy? Aren’t the answers to the above questions almost always yes? Wouldn’t that dramatically increase your chances for success without having to guess what terrible things the government, Wall Street or the banks were going to do next?
Have you ever heard the phrase, you should buy term and invest the difference because cash value life insurance is a lousy investment? Don’t you hear that a lot? Don’t media financial super stars mostly espouse that belief? Isn’t that idea shared thousands and thousands of times in the media? Isn’t it unfair? Why don’t they understand how amazing cash value life insurance is?
At times I’ve felt angry, sad, depressed and yes, even doubtful about whether I was doing the right thing for my prospects and clients. Is cash value life insurance a good recommendation if it’s not a good investment? Should I really sell term insurance and invest the difference in annuities or mutual funds, stocks or bonds? Am I doing the right thing selling and recommending this “product from hell” called cash value life insurance?
Maybe I Was Wrong
All life insurance agents think about it. Do you know how I know? There were many times early in my career that I doubted selling cash value life insurance. I couldn’t understand why these media financial superstars would say what they say if it wasn’t true. Maybe I was wrong. That is what I thought for many years. Maybe I was wrong. How much cash value life insurance do you think I sold if I even had doubts about the veracity of the advice I was giving? That’s right, not much. I allowed everyone else to dictate the conversation. Let me say that again. I allowed everyone else to dictate the rules and I played by them even though the rules everyone else was playing by were incomplete. They had purposely limited the discussion about cash value life insurance to only its investment value. I lost way more times than I won. I lost because I allowed everyone else to limit the discussion about cash value life insurance to whether it was a good investment. When you limit the discussion to only whether cash value life insurance is a good investment you have lots of competition. Could stocks or bonds or real estate compete with cash value life insurance as an investment? Of course they could. Could mutual funds, coins, commodities even digital currency like bitcoin compete with cash value life insurance as an investment? Again, of course they could, easily.
Dr. John Huggard teaches that in order to determine whether variable annuities are better than mutual funds or stocks and bonds you must take into account all benefits, costs, taxes, expenses and investment results. Shouldn’t the same criteria be applied to cash value life insurance?
Whenever anybody brings up the misinformed claim that “cash value life insurance is a bad investment”, I’m very inclined to ask a bunch of questions because you cannot change anyone’s mind by telling them things. They will only change their minds when they use their own common sense to reason out why doing something different than they have been previously told might not be beneficial for their particular situation. The only way to help someone use their reasoning power is by asking questions that allow those same people to reason out a different conclusion than they previously held.
Questions Deserving An Answer
For anybody considering or investigating the strategy of cash value life insurance, they really need to answer these questions:
1. Did you know that when people say cash value is a lousy investment, that it’s actually demeaning to cash value life insurance?
2. Did you know cash value life insurance can do so many additional things with the same dollar and that if you build a sound strategy around it, you can actually control how good of an opportunity for investment gains can be created? Man is that one key.
3. Wouldn’t it be important to do the math?
4. How many times have you lost money during serious downturns?
5. Would you be further ahead now if you hadn’t ever lost any money before?
6. What if there was a way to guarantee that you would never lose any money ever again?
7. Would that be a good thing?
8. If all I do is keep you safe, will that help you achieve your financial or retirement goals? Of course it won’t.
9. So, what is the best time to invest in the markets, when they are high or low?
10. When will that “low” be exactly?
11. Isn’t that why people always mess up, because they don’t know? Nobody does for sure.
12. What if you could wait for the bad to happen without taking any losses and yet have almost complete access to that money to invest after a crash has happened?
13. Wouldn’t that be a better strategy than the one you are using now? It’s happened for over a 100 years…like this guy
14. Where is it written in finance that you have to lose 30 or 50 or even 70 percent of your money in order to make money (it’s “up” so stay in, then it’s “down” so don’t sell and “take your losses”)? Why do people do that?
15. How many more times will you let this happen to you before you say enough is enough?
16. Why should Wall Street always screw up and then be bailed out? How many times have you been bailed out by the government? None!
17. Then don’t you think you should develop a strategy that guarantees you will never lose money again? But that’s not good enough either. Because if your strategy doesn’t make you any money you will never achieve your financial or retirement goals.
18. Here’s the best part: What if every time these negative stock market events happen in the future, not only will you not be hurt by them, what if you could take advantage of them every time they happen again for the rest of your life? Wouldn’t that be the ideal strategy? If you knew that was true when would you want to get started? Before, or after the next downturn?
19. What if you could get preferential tax treatment on your gains?
20. With all the future costs that our government will be exposed to, why wouldn’t you pay your taxes now when they are historically on the low end, and transfer as much money to the future as was humanly possible so the Internal Revenue Service and the government could never get their hands on it again?
21. With all the future costs that our government will be exposed to, who do you think they’ll need to come after in order help cover those costs?
22. What kind of financial accounts are the easiest for the government to access?
23. Why would you take a small tax deduction now on a small amount of money and build it into a large amount of money that will probably be taxed at much higher rates? Does that make sense?
24. Young people are becoming more interested in a socialist economy…and more and more of them are voting (“Feel The Bern!”). Does that bode well for income tax responsibilities in the future?
25. With not one, but two tax cuts passed by our current government are these historically low tax rates? While cutting taxes the government has increased spending dramatically causing an enormous increase in the national debt.
26. Coupled with the ridiculous unfunded liabilities for state pensions, Social Security, Medicare and Medicaid, won’t the government require enormous amounts of additional revenue in the future?
27. So, I ask you again; why put money into IRA’s, 401k’s, 403b’s and 457 plans and take a small tax deduction on a small amount of money, so you can build a large amount of money as a revenue source for the Internal Revenue Service and the government when they need it most? That will be when the Baby Boomers and Generation X’ers retire.
Please don’t ever forget the death benefit. The average age of widowhood in the United States is 57. 80 percent of men die married and 80 percent of women die single. The death benefit is still vitally important, especially if a family or a business is in debt or has a tax liability. Life insurance does not have to go to probate if a beneficiary is named. Life insurance is incontestable and private. Life insurance proceeds can actually be controlled from the grave. Life insurance has creditor and predator protection and finally life insurance can be turned from an asset into an income. It has Medicaid versatility. If a married couple has a spouse who develops Alzheimer’s there is a possibility of preserving the asset from being “spent down” by turning it into an income.
Most of the jobs that are in our country no longer support middle class life
(USA Today article). People making $50,000 per year are becoming poorer and poorer. That means there will be less and less taxpayers to support more and more people. Isn’t that a conversation for everyone with money? We have destroyed the middle class of this country. They were an important part of the financial health of our country. Now, I jokingly declare the new middle class in America has assets of $500,000 to $30 million. We will take their money next. It is not fear-mongering. IT IS MATH. We need money to run our country. We must get it from somewhere.
Again, do you want the Internal Revenue Service and the government to control how much they take or do you want to put that control in your hands? There really is only a small window of time before these planning techniques will be curtailed or even eliminated. Shouldn’t you act now while you still can?
The top 3 percent of the taxpayers paid over 51 percent of the taxes in 2016. The top 50 percent paid 97 percent of all the income taxes in our country. The bottom 50 percent paid 3 percent of the income taxes in our country. The new tax law will make that even worse. Less and less people will pay more and more of the taxes. Shouldn’t I help those people leverage what they have worked so hard for? Shouldn’t I show them how to use pennies to buy dollars? Shouldn’t I show them how to make one dollar do the work of many dollars? Shouldn’t I help them reduce or eliminate the income tax liability on a larger portion of their assets? These discussions need to be had soon because as the government determines it needs more revenue won’t the door close on many of the great benefits insurance offers?
For new people, could the tax-free benefits of life insurance and Roth 401Ks and Roth IRAs be eliminated? Could tax deferral be eliminated and have gains in annuities and life insurance taxed on an accrual basis the same way a CD or a savings account is taxed? Isn’t it true then, that the only people allowed to retain benefits like that will be the people who already own products that can deliver tax free and tax deferred access?
Shouldn’t I at least ask everyone if they want to retain these options? Please read these articles linked below. You will begin to understand that the math does not match the rhetoric of either party. We are becoming a nation of few “haves” and mostly “have nots.” Does that sound healthy to you? Hopefully you can see why I work hard to give people the opportunity to be financially healthy no matter what happens and why my clients put as much money as they can into their insurance policies.
The Authentic Agent