CHANGE YOUR LIFE

• Don’t worry so much about when you “buy” stocks or mutual funds, just never sell low!
• It’s not what you earn it’s what you keep.
• You can eliminate credit card debt
• You might want to think about being in debt for hundreds of thousands of dollars
• There is good debt
• You can be happy when the stock market goes down
• You may be in the lowest tax bracket you will ever be in
• Money market accounts are not investments
• There are three places you can put your money that offer tax free withdrawal

CASE STUDIES

CASE STUDY 1
Joe and Jane Comfortable

Overview
• Approx. $4,000,000 in assets
• Own their own home with no mortgage
• Minimal IRA funds
• All money invested in stocks, bonds, and mutual funds
• Both semi-retired but have some part time income
• $100,000 of life insurance death benefit for their two children

Goals: Reduce taxes, guarantee comfortable retirement income, lower risk of portfolio, provide for one of the grown children.

John and Jane should be commended. They have accumulated a nice asset base and now want to review and plan for this next step in their lives. Retirement! They are both healthy and at age 60 both could easily be enjoying retirement for the next 30 years. The last thing they want is to outlive their income. They have long term care, the medicare supplement plan that is right for them, now they are ready to take the next step.

After evaluating their portfolio I pointed out three glaring problems. The first was that their portfolio had no guarantees. All their investments were 100% at risk and they could not afford for the stock market to take a big hit, like on 9/11. They don’t have the time for their portfolio to recover. Also, all of their invested assets except for the small IRA’s were creating taxable income through dividends and capital gains, even though they were reinvesting these earnings and not using the earnings for income. The third area we discussed was life insurance. They didn’t have enough to do what they wanted for their heirs and protect their assets from estate taxes.

We set up a plan to take a small tax hit when they sold some of their mutual funds and then reinvest the proceeds in an annuity that offered a 5% bonus when it is opened, tax sheltered growth, tax favored withdrawals, no fee to open and no annual fees and 10% per year could be withdrawn penalty free for living expenses or whatever their little hearts desired. We now had $500,000 sheltered and not throwing off any taxable income.

Next we started taking IRA distributions while they were still in a low tax bracket and used those proceeds to purchase a 7 pay life insurance plan. Using after tax dollars we leveraged the annual premium to create estate tax dollars and leave tax free money to their children. After 7 years no additional life insurance premiums were due, the contract was paid up and the money in the contract in the cash account continued to grow tax free and could also be accessed for their needs on a tax favored basis.

Using the average return of the stock market to estimate the growth of the cash account we see that their total contribution over the 7 years was approx. $133,000 and the estimated cash value in 20 years is over $500,000 and the death benefit will be tax free to the heirs.

END RESULT
• Taxable income reduce by approximately $35,000 a year
• IRA slowly being liquated to all taxes will be paid and no mandatory distribution will be required at age 70 ½
• Life insurance offering tax free benefits to their children as a death benefit and offering tax free accumulation as a living benefit

NOW JOE AND JANE ARE EVEN MORE COMFORTABLE!

CASE STUDY 2
Gilda Glorious

Gilda, age 28, mother of 2 year old Emily, a single mom trying to make ends meet.

Current Position: Beginning to earn enough to live on without going into debt, no savings, some credit card debt
Has a job as a dental assistant with benefits and gets an annual review at work

Objectives: Provide for her daughter Emily, eliminate credit card debt, be in control of her money
Initial recommendations:

First we sit down together and figure out how much money Gilda needs to live on. This list will include all fixed expenses like utilities, rent, car payment and flexible costs like food and fun. We look for any and all ways to save a few dollars. Some of these ways were to eat at home more and avoid MacDonald’s and most fast foods, raise her deductible on her car insurance and since her employer doesn’t match the 401k that her company offers, stop that $50 per month contribution. We were able to free up $100 per month, this includes paying an additional $20 on her credit card debt, applying for a life insurance plan that has a cash accumulation feature and opening a ROTH IRA.

Now her credit card debt is steadily going down and her assets are starting to grow. Gilda gets statements showing cash accumulation in her life insurance plan and her ROTH. We have given Gilda USE & CONTROL of her money. Any cash in her life insurance she can access in an emergency and her ROTH IRA is available because contributions to a ROTH can be withdrawn at anytime without penalty.

As her situation changes will we continue growing her plan and her confidence. Whenever Gilda gets money she wasn’t expecting, like a raise or a tax return refund, we have a plan in place. Gilda gets to keep HALF the money. That is her “raise” or fun money to spend however she would like. The additional half gets invested and her nest egg will grow and grow.

SPECIFICS OF PLAN
• Eliminate credit card debt using E Idea plan
• Apply for a life ($ 30 per month)insurance plan that will not only protect Emily but provide a long term cash accumulation – set up on an automatic bank draft so Gilda never has to write a check
• Open a ROTH IRA for $50 per month

GILDA IS NOW EVEN MORE GLORIOUS!