Apr 10
13
Are The Writings on the Wall Leading to a Global Financial Meltdown?
Almost every day I read news articles online from different sources reporting bits of evidence leading to the conclusion that the worst is not over. The tell tale signs predicted in the book “Aftershock Protect Yourself and Profit in the Next Global Financial Meltdown”? The signs are abundant, signs like failed treasury auctions a couple weeks ago, Moody’s warning to down grade US Treasury bonds, close to I trillion in corporate junk bonds due in 2012, hyper-inflation eminent for the future, Americas dependence on foreign debt and the list goes on and on. Today I read an article on line by Jim Angle for Fox News (article). The article dealt with the fact that the money borrowed by the federal government will produce a national debt of $20 trillion before 2020. The article goes on to state that this will cost American taxpayers $1 trillion per year in interest payments only, (based on current bond rates). The Congressional Budget Office is projecting that the U.S. interest payments on our debt will increase 400% over the next 10 years, and will be the largest single item in the budget. Bob Greenstein of the Center on Budget and Policy Priorities is stating, “If you wait ‘till the crisis hits, then your options may be more constrained and you may have to take action that’s more draconian and hits the average American in painful ways.”
The article also pointed out that even though we are a much stronger economy than Greece, we are headed in the same direction, and even if we experience a little of what Greece is going through now it will be very painful for the American people. Now with Moody’s warning to downgrade our treasury bonds combining the financial problems, since the lower the bond rating =the higher the interest = higher interest payments and everything now begins to snowball. All this can really make you wonder is it the end of the world, as we know it? I do not think so, at least not yet. However, it does give us ample reason to prepare for the possibility of the perfect financial storm.
So how do we protect our hard-earned retirement savings from the possibility of a global financial meltdown and still be able to take advantage of any increases that may be available in the market? If we put all our money into cash accounts, we risk losing purchasing power by not keeping up with today’s inflation rates not to mention the possibility of double-digit inflation that may be ahead. In addition, if there are still good growth years ahead before the bear market really steps in, we could lose some strong earning potential by acting too soon. However, if we delay and cannot move our money fast enough during a devastating market drop we risk losing all the gains or more that we have recently made up.
One thing I have learned in life and thru an in-depth study of financial cycles and market crashes, there is always profit to be made in any financial down cycle or market crash. Most people do not experience the positive results simply because they do not want to look at the truth and prepare for the changes. Change is scary, but if you do not embrace it, you will be left out in the storm. In the book “Aftershock Protect Yourself and Profit in the Next Global Financial Meltdown”, the authors give some very practical advice on protecting your retirement savings as well as how to prosper in a global meltdown. Much of their advice could bring increases to your investment portfolio even if there is not a total global financial meltdown.
One thing most financial analyst agree upon is that we are heading for higher taxes and higher inflation, so let’s talk about a strategy to produce tax-free income during retirement, provide a strong hedge against inflation and guarantee your principle against market loss. You might be asking yourself what could do all that. The answer is simple and it involves what national tax advisor Ed Slott says is the number one tool in the tax code for producing tax-free income, Life Insurance! That is right life insurance for producing tax-free income is absolutely the most powerful tool available today for producing tax-free income. However, the type of life insurance that was sold in the past was whole life insurance or standard universal life insurance, which produced low returns, and variable universal life insurance, which included market risk and higher fees than many mutual funds.
Today however many life insurance companies are offering a product so dynamic that at first glance it almost sounds too good to be true, but it is true. It is called equity indexed universal life insurance also available are equity indexed annuities. Here is how it works all the money is guaranteed, just like a fixed account so you cannot lose money, however the growth in the account is tied to an index like the S&P 500 up to a cap. So you take advantage of market growth but you do not participate in any market downs in fact some companies even offer minimum floor rates during market downs. Therefore, while mutual funds, 401k employer sponsored retirement savings accounts, stocks and bonds ECT are losing 20% to 40% or more, your equity indexed universal life insurance policy or equity indexed annuity is protected from all lose and may even be growing due to a small floor guarantee provided from the life insurance company. Then when the market moves up your account value moves up with it.
When you combine this awesome savings strategy with what Ed Slott says is the number method for tax-free income “life insurance” you really have a win, win scenario. So regardless of how the financial future goes this strategy should be looked into as viable means of producing financial growth, protecting your hard earned retirement savings assets and providing for tax-free income during retirement. This strategy like any investment or savings program requires additional information to determine if it is suitable for you, we recommend contacting a licensed financial professional (registered investment advisor representative, registered investment company representative, life advisor or life insurance sales person) in your area
We provide service in Southern California, in and around Orange County California, please feel free to Contact Us with any comments or further information on this or any other topic on this site.
Your Life Advisors
Dean Barwick / Manager (714) 380-4586