Financial Pitfalls-2

The 4% Rule

If you have a 401k or IRA, you’ve already lost the game of money and you don’t even know it yet! Your advisor doesn’t even know it yet. There is 1 enormous flaw to your 401k and its called the 4% Rule…The dirty secret that your 401k was not designed to produce good income, like mathematically impossible. The 4% Rule works like this… However much money you have saved up when you arrive to retirement, you should only reasonably withdraw 4% of it annually to avoid the risk of running out of money too soon. What does that look like for you? $100k saves- $4000 of annual income $500,000- $20,000 The elusive $1,000,000 portfolio all these “gurus” talk about- $40,000 of taxable income. You are a millionaire living barely above poverty levels… It really doesn’t matter how good your 401k is… with the 4% Rule… it will always produce low retirement income… Do you know how much income MPI can produce? Up to 15%! Im Curtis Ray Always Be Compounding!

Deferred Taxes

There is an on-going debate that asks, which is better for your retirement planning? Deferring your income taxes or paying taxes now, called post-tax contribution. In a deferred system, you will not pay taxes now on the income invested – so none of that income is included in current income taxes. This is called “qualified money” and is part of the traditional 401(k) and IRA. By deferring your taxes, when you go to withdraw money in retirement, you will then be taxed at full income rates at whatever the rates are on that day. In a post-tax system, like a Roth IRA or Cash value life insurance plan, you pay tax now on the income and then when you access it for retirement, it can be 100% income tax-free. Most financial advisors promote the deferred system because you get an immediate win on your taxes. You get an upfront tax break! They also suggest that you get to invest a larger amount of money which will then compound faster, making you more money… So which is actually better for you? Let’s break it down… The first myth I want to debunk is the idea that “more” money compounds faster. When looking apples to apples including the taxes, this is not true in a traditional system. Even though everyone says it is… Its Simple math! For example, if you invested $10,000 a year deferring your taxes at an 8% growth and let it compound for 30 years, you would have around $1.1mm in your account… If you then were to get taxed 20% on the total account, you would have $880,000 after taxes. So what happens if you do the same scenario but use a post-tax system? Taking the same $10,000 a year but taxing the income now at 20%, or investing only $8000 a year. At the same 8% growth for the same 30 years, guess what the NET result is? You guessed it! $880,000- exactly the same. At same tax rates, same compounding rate, deferred or post are the exact same result. However, the financial world will tell you to defer your tax because you “should” be in a lower tax bracket when you get older… Think about how funny that is… They are already predicting you will be poor in retirement. That’s the unfortunate assumption of current financial planning! The 401(k) and IRA are so bad at producing retirement income, by deferring your taxes now, and because your income will be so low in retirement due the accepted “the 4% Rule”, you will barely pay tax then… I guess it kind of makes sense because they already accept their system won’t produce good income! It was never designed to. Additionally, what risk does deferring your taxes bring to you? What is the tax rate going to be in 10, 20, or 30 years from today? Do you think it will be more or less than it is now? We don’t know, no one knows but with all the government liabilities and debts, my guess is it is going UP!… See, a good financial plan has the obligation to eliminate as many unknowns and risks from your future self… Deferring your taxes does not make you more money and even worse, puts you at risk of higher tax brackets in the future… It mathematically just makes no sense to defer taxes when post systems are available.

Compounding Fees

Yesterday I was talking to a financial advisor from Merrill Lynch and he made the comment that MPI was an expensive insurance product. This is a common saying in the financial advising community with no math to support it… Scare tactics to manipulate… so lets look at the estimated fees you will pay inside of MPI account vs the advisor who “only” charges a 1% management fee… Lets say at 35 years old you begin to invest $500/mo into a managed IRA or an MPI account By 65 years old, in MPI you would pay around $9000 in fees The 1% IRA… Around $55,000 Continue these fees for 25 more years of retirement, MPI… around $12,000 TOTAL for 55 years Your low cost financial advisor, even cutting the fee to ½” in retirement years- up to $200,000 of your hard earned money! One of the many reasons MPI produces up to 4x more retirement income over an “actually expensive” managed IRA. Math never lies! I’m Curtis Ray Always Be Compounding

15 Year Mortgages

Compound Interest is the 8th Wonder of the World… He who understands it, Earns it… Unfortunately, very few financial influencers understand it… and why few people earn it! One very common financial philosophy promoted to the world is to get a 15 year mortgage rather than 30 year. This concept is opposite of Compound Interest. For example, a $300,000 15 year mortgage would cost around $2150 a month. House paid off after 15 years. If you then begin compounding the $2150 from years 16-30, you’d have around $900,000 in your account and a paid off house… A 30 year mortgage would cost around $1400 a month. If you compounded the $750 difference, but immediately, in an MPI Compound account, for the same 30 years, you’d have around $1,700,000. Both scenarios your house is paid off, same money out of pocket, and up to $800,000 of increased wealth in your pocket. Don’t chase pennies and ignore the dollars right in front of you. I’m Curtis Ray. Always Be Compounding

Risk

It will always rebound! A common saying in the financial advising community to justify their bad investments! Just how bad in this mindset… It will cost you millions of dollars in your lifetime. Compound Interest is the most powerful force in the Universe but can only be achieved if you don’t lose. Why? Because when you lose money, you lose time. When you lose time, you lost the most important asset you can never get back! The Power of Time inside of Compounding!!! So how well has the stock market compounded over the last 90 years… Inflation adjusted, real value of your money, Around 65 years have been losing or rebounding from the bas investments and only around 25 years have been real growth. Think about that… You were sold the stock market would produce you wealth but instead, it was all just a Counterfeit… MPI never loses in down markets, and why it out Compounds all other financial plans. Im Curtis Ray, Always Be Compounding. Cash Emergency Fund- DROP DOWN + VID A common suggestion by the financial world is to have an emergency fund up to 6 months of your salary saved up in cash or a liquid savings account. Is it a good idea to have emergency fund? Of course. In a savings account? There is a much better way! Its called a Compound Account with Liquidity. As an example, your hard-earned money in a savings account loses around 3% value each year due to Inflation! So if you had $15,000 in your emergency savings account, the buying power of your money would drop to $14,550 after 1 year and after 20 years, as low as $8,000. Inflation would erode almost half of your money’s value sitting in a savings account. However, having your $15,000 in an MPI Compound Account, that has liquidity similar to a savings account to act as your Emergency Fund, and continue to Compound simultaneously, after the same 20 years of inflation, would still have real value of up to $70,000. Know the Rules of Compounding!

Debt Payoff

Whole Life

Infinite Banking Concept, Bank On Yourself… its a really cool name. These life insurance policies have so many cool features. Life Insurance, Tax free retirement income, no accessibility penalties, guaranteed security, dividends, and various other advantages, but there is one advantage it doesn’t have… It doesn’t make much money… Only Around 5% per year. Do you know how bad that really is? Means it will double your investment roughly every 14 years. A good Compound Account does it every 7 years… So what does that mean in real life: Lets say you invest $500/mo into a Infinite Banking compounding every 14 years. After 30 years you would have around $409,000 producing a retirement income of around $20,000. Same $500/mo into a good insurance plan such as an MPI Account compounding every 7 years on average, after 30 years, around $1,000,000 and a retirement income of $120,000 annually. When looking into insurance based retirement plans, not all are created equal! Im Curtis Ray Always Be Compounding

All In Business

Statistics tell us that up to 70% of small business fail in the first 10 years. Business is not easy. I know, I have 4 of them but there is a little secret I want to tell you that will make your probability of success much higher! DO NOT, let me repeat, DO NOT re-invest all your profits back into your business, or flipping more houses, or opening a 2 nd location sooner. There is a reason up to 70% fail and it is a thing called liquidity. Some money saved for a rainy day… The biggest decision you can make to give your business the best chance of success is to invest 50% of your net profit back into expanding your business and then 50% to a Secure Compound Account! What does a secure compound account do for your business? First, Reserves for a rainy day because of things like Corona and second, Secure Compounding of your profits. In around 10 years using this 50% Method, your Secure Compound Account, such as MPI, can be making more profit per year than your whole business makes! I’m Curtis Ray, Always Be Compounding

529

The Children’s 529 College Savings Plan… The Absolutely WORST Compound account ever designed. Compound Interest is money making money for you, forever, as long as some of the money remains in the compound account. So why is a 529 so TERRIBLE? You build it for up to 18 years and then the financial advising world tells you to kill it! Makes ZERO sense at all! Let’s say you invested $250/mo for a newborn in a 529 Plan. By their 18 th birthday, there should be around $100,000 in this account to go to college. Your child spends it all and gets out of college debt free. Good idea, right? Not so fast! By saving the same $250/mo for the same 18 year, not a penny more, but into an MPI Children’s Compound Account, and continuing to compound rather than killing it, and using the growth to pay for college, there could be up to $1mm in this account by their 40th birthday. Not a penny out of your child’s pocket, college educated, and debt-free. Learn the Rules of Compounding! I’m Curtis Ray Always Be Compounding

Velocity

Permanent vs Term

There are various types of life insurance. So you can build your best future, I want to explain the 2 main options. Term and Permanent Insurance. Term is the more common type. It is a contract you make with an insurance company that if you pass away in a specific “term” of time, typically between 10-30 years, the insurance company will pay your beneficiary a specified amount of money. Because historically term insurance only pays out around 2% of the time, this type of insurance is much cheaper. 98% of the time, you threw away your money. Permanent insurance, on the other hand, is a life-long agreement. It also has a specific amount of coverage, and will pay out guaranteed to your beneficiary at any age you die. This type of insurance is more expensive and typically has a Compound Account attached to it where you can save for retirement. If you can afford it, permanent tends to be the better option because it provides guaranteed generational wealth transfer and retirement benefits. Im Curtis Ray, Always Be Compounding.

Emotional or Mathematical

I get hundreds of messages a day from people I’ve never met asking me what they should do with their money? I always say the same thing… Do you want the emotional answer or the mathematical answer? One makes you feel good and one is actually right. Financial advisors across the country build their business on very emotional topics with very little mathematical validation. Some of the advice that is not in your best interest: Pay Off Your Debt Before Investing… You Lose the most valuable thing in Compounding- Your TIME. Get a 15 year Mortgage- Opposite of Compound Interest. Save Money in a bank account- Losing 3% Value per year Due to Inflation. Invest in a 401k/ IRA- 4% Rule leaves you poor. 529 Children’s Plan- Worst Concept Ever designed. Defer your taxes- So Uncle Sam Can tax the crap out of you later… I can go on forever… If its mainstream financial advice… most likely it is an emotional answer with little to no mathematical foundation. Trust the Math, it never lies. Im Curtis Ray Always be Compounding…

Real Estate

I had 5 rentals in 2014… It was the lion’s share of my retirement plan for my future. Seemed like a really good idea at the time with so many people pushing it. Holding Real Estate long-term has 3 main advantages: Appreciation, Cash Flow, and Leverage. There is just 1 problem. This method is very difficult to achieve wealth and carries a lot of risk. Yes, some people can, in the right market, manually build a great empire inside of Real Estate. But for everyone else, a lot of bark and very little bite. Let me explain: Appreciation of Real Estate: With a national long-term average of 4.2%, that’s barely above inflation. Most your growth is maintaining, not increasing your wealth. Cash Flow: Literally opposite of Compound Interest. Spend you earnings, that’s a near guaranteed way to never achieve the financial freedom you desire. Leverage: Now this is really cool but inside of Real Estate, lies a lot of risk. Market plummets, evictions, baseboards, carpet, just the crap of being a landlord. Tune in for part 2 where I break down the #’s compared to a Good Compound Account! Part 2- In 2014 I had 5 rentals. Let’s break the math down if it is a good long-term retirement plan. The average rental purchase price was $200,000. I put 20% down, totaling $200,000 out of pocket. Appreciation Value: Started at $200,000, at 4.2% Average Appreciation, in 30 years, each House would be worth around $650,000. Equity unfortunately means nothing unless you sell and most of that growth would be inflation only. Cash Flow- In these houses I was making, after expense around $200/mo, increasing 3% per year, also just inflation. No real wealth building. In 30 years, all 5 houses would have been paid off, giving me retirement income of roughly $7,500 a month in today’s buying power. Decades of work and risk, a retirement around of only $90,000 annually. Pretty Good! However, If you would of put the $200,000 down payment into a good Compound Account such as MPI, and did nothing but wait and Compound, your retirement income could be around $180,000 of real buying power! Double the Income, Little effort on your part… Im Curtis Ray, Always Be Compounding. (mortgage, taxes, insurance and maintenance)