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Financial Flexibility: Saving Too Much in All the Wrong Places?

Posted on June 12, 2013 by KimButlerkp

“More than 25% of Americans are dipping into 401(k) retirement accounts to pay for bills.”
~The Los Angeles Times, March 7, 2013

saving-too-muchMore people are raiding their 401(k)s than ever before, but not for retirement. According to CNBC’s report of a HelloWallet study, one in four Americans are borrowing from retirement accounts to pay bills, such as their mortgage, college tuition, even credit card payments.

More than $70 billion is being withdrawn annually from retirement accounts. And the troubling trend seems to be on the upswing.

Citing a report from Wells Fargo, Bloomberg News noted in April of 2013, “The number of people taking loans from their 401(k) retirement accounts increased 28% in the fourth quarter from a year earlier as older workers tapped their savings.” According to the report, people in their 50s were the most likely to borrow against their retirement savings.

While noted as an alarming problem by financial experts, the rampant borrowing from retirement accounts is actually a symptom of two larger problems. The first is plain enough: American’s haven’t saved enough.

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Posted in 401K's & IRA's, ECONOMIC TRENDS, PROSPERITY ECONOMICS, SAVING MONEY | Tagged , , | Leave a comment

Singles and Money: Flying Solo Financially

Posted on June 5, 2013 by KimButlerkp

“In 1950, only 22 percent of American adults were single. Today, more than 50 percent of American adults are single, and 31 million—roughly one out of every seven adults—live alone.”
-book description for Eric Klinenberg’s Going Solo

Foot-Prints-379122.jpgHas Single Become the New Married?

The U.S. is becoming a nation of single people. Whether unmarried, divorced, or widowed, more Americans are living alone, and functioning as individual financial units; they are households of one.

It’s a demographic trend that’s been consistently building for the past 50 years, but still mostly under the radar of most Americans. The reasons are many:

  • Fewer people are getting married.
  • People are getting married at a later age than 50, 30, even 20 years ago.
  • As the divorce rate has climbed, fewer people are staying married.
  • The average age of widowhood is just 57, yet 57-year old women lives an average of 26 more years.

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Posted in ECONOMIC TRENDS, FINANCE TIPS, ORGANIZING YOUR FINANCES, PERSONAL FINANCES, RETIREMENT PLANNING, SAVING MONEY | Tagged , , , , | Leave a comment

Reverse Mortgage Risks and Rewards: Should You Bank on Your Home?

Posted on May 29, 2013 by KimButlerkp

“Home Equity Conversion Mortgages (HECM), or reverse mortgages, which are designed, administered and insured by the Federal Housing Administration (FHA), are one of the best engineered financial tools of our generation.”
-Jack Guttentag, Wharton Professor and nationally syndicated mortgage columnist

Reverse Mortgage Risks and Rewards: Should You Bank on Your Home?What is a reverse mortgage? In a nutshell, it is a mortgage where, instead of making payments, home equity is converted into payments TO the homeowner. Payments can occur in lump sums, monthly payments, lines of credit, or a combination of the above.

Reverse Mortgages, also known as HECM’s or Home Equity Conversion Mortgages, have been the topic of much controversy and bad press, in spite of the many they have helped. Unfortunately, as with sub-prime loans, there have been overzealous loan officers willing to push loans that weren’t always fully understood.

Are reverse mortgages risky? Not in the ways you might have been led to believe. In this post, we aim to set the record straight about the myths and realities of HECM’s, and direct you to further resources where you can find reliable information.
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Posted in ECONOMIC TRENDS, FAMILY and FINANCES, MORTGAGES, REAL ESTATE | Tagged , , , , , , | Leave a comment

Too Old for Life Insurance? The Surprising Truth about Seniors and Life Insurance

Posted on May 22, 2013 by KimButlerkp

 “Old age isn’t so bad when you consider the alternative.”
- Maurice Chevalier

senior-saving-for-heirs.jpg

Recently, a Partners4Prosperity reader asked,

“How well do ‘income for life’ type programs work for people within 5 years of retirement? Are these programs more for younger people who have time to let them grow?”

(Note: “income for life” is the term coined by The Palm Beach Letter folks for utilizing cash value life insurance as a strategic tool. Similar strategies may be better known as “infinite banking,” “privatized banking,” “family banks” or “circle of wealth” strategies.)

This is a question we hear often, generally from people over 65, but we also get it from people in their 40′s and 50′s. They hear about the benefits of whole life insurance – the compounding of their cash value, the safety, the liquidity and flexibility, the cash value component as well as the death benefit, but they wonder, “Is it too late for me?”

In this post, we’ll offer some guidelines for determining “How old is too old?” And perhaps more importantly, we’ll suggest a couple strategies that readers can implement to “stretch their assets” in their later years, even post-retirement.

Many investors assume that there may be no time to build up cash value, that life insurance makes no strategic sense if there is little time for compounding, or that life insurance is not even offered to people over 60 or 65. Oftentimes, they are pleased when they find out the facts! However, there are also times when it’s not possible or advisable for seniors to purchase life insurance.

To answer the question more fully, Tom Dyson from the Palm Beach Letter’s Wealth Builder’s Club interviewed Kim D. H. Butler about this very question. This post includes a summary of some of the points discussed. You can also listen to the interview or read the transcript.
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Posted in INSURANCE ADVICE, INSURANCE AS AN ASSET, LIFE SETTLEMENTS, PERSONAL FINANCES, WHOLE LIFE INSURANCE, WILLS and ESTATE PLANNING | Tagged , , , , | 3 Comments

The Collapse of the US Economy in 2013? (Or, seeking an investment strategy for the end of the world)

Posted on May 15, 2013 by KimButlerkp

“If things go wrong, don’t go with them.”
~Roger Babson

Recession And Recovery Keys Show Upturn Or Downturn

Should we prepare for an economic collapse or toast the recovery? While the stock market hits record highs and the jobs report is the best in years, observers are split as to whether this is a sign of a recovery or simply the calm before the next storm.

Major media outlets are decidedly optimistic, with a “consensus of economists” predicting an acceleration of the economy, according to a USA Today Economic Forecast. Meanwhile, internet bloggers and fringe analysts (who are sometimes correct) continue to lament that the financial sky is, indeed, falling.

Among the pessimists is Gerard Celente, founder of The Trends Research Institute. Back in 2011, Celente warned, “The whole system is going down. Pull your money out your Fidelity account, your Scwhab accout, and your ETFs.” Celente’s recommendation? Buy gold!

More than a little ironically, shortly after that prognostication, Celente himself lost more than six figures in an attempt to invest in gold futures. The money was taken from his account with Lind-Waldock, a commodities futures brokerage that was owned by MF Global, who filed for bankruptcy on October 31, 2011. (Famous for his financial predictions, Celente didn’t see that one coming.)

However, in March of 2012, the rating agencies downgraded the United States’ credit rating for the first time, raising questions as to whether the US would follow in the footsteps of Iceland and Greece.  And according to the FDIC’s list of bank collapses, bank failures escalated from a mere 24 in the seven years from 2000 through 2006, to over 480 bank collapses between the start of 2007 and May of 2013. (Not to downplay the seriousness of that alarming statistic, the rate of failures has slowed considerably since 2009-2010.)
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Posted in ECONOMIC TRENDS, INVESTING ADVICE, PERSONAL FINANCES, WEALTH-BUILDING | Tagged , , , , , | Leave a comment

Find Yourself, Find Prosperity

Posted on May 8, 2013 by KimButlerkp

“This above all; to thine own self be true.”
-William Shakespeare

follow your instincts“If you do what you love, as the saying goes, will the money follow? One thing is for sure – if you don’t do something you love, you will not be happy, and trading money for happiness is not a very good deal! Here at Partners for Prosperity, Inc. we believe that prosperity isn’t just about money. Prosperity includes health, happiness, love, and meaning.

Wealth is usually related to one’s career or business through the income produced, but if you feel trapped working an uninspiring job “just for the money,” that’s not prosperity, no matter how much you’re making. Prosperity is living a life that is fulfilling to you, that utilizes your unique gifts, talents, passions and preferences.  It is only in living that fulfilling life do we find our “right livelihood”.

Fortunately, you don’t have to choose between money and fulfillment. It’s not an either/or proposition. People that do what they love (and what they’re good at) actually tend to be more financially successful.

As Schlesinger, Kiefer and Brown, authors of Just Start say,

“Based on the research we did for our book, we’re convinced that when you’re heading into the unknown, desire is all-important. You simply want to be doing something that you love, or something that is logically going to lead to something you love, in order to do your best work. That desire will make you more creative and more resourceful, and will help you get further faster.

“And, it will help you persist. When you’re trying something that’s never been attempted before — beginning an unusual project at work, or trying to get a new business off the ground — you’re going to face a lot of obstacles. You don’t want to be giving up the first time you encounter one.”

Hay House author Laura Leigh Clark describes 8 “Money Genius Profiles” in her book, Wired for Wealth, and notes that earning is more effortless when they are operating in their natural strengths. Assessments such as the Kolbe Index have long been used to help people increase their career success. Continue reading →

Posted in ENTREPRENEURSHIP, PROSPERITY MINDSET, WHOLE LIFE INSURANCE | Tagged , | Leave a comment

Borrowing Against Life Insurance: The Pros and Cons

Posted on May 1, 2013 by KimButlerkp

“A bank is a place that will lend you money if you can prove that you don’t need it.” 
Bob Hope

Credit Loan Mortgage Signpost Showing Borrowing Finance And DebtTwo weeks ago we asked the question, “Should you borrow against your life insurance policy?” Today, we continue the topic by looking at the advantages and disadvantages of borrowing against a life insurance policy.

 

 

The Advantages of Borrowing Against Life Insurance

  1. It’s simple and relatively quick. There’s no need to fill out an application, qualify for the loan, or brace yourself for high fees and taxes (in most situations, see below exceptions.) You’ll have your loan in 5-10 business days for most companies, and occasionally they have faster options.
  1. It’s flexible. You can borrow about 95% of the cash value amount of your whole life policy from most mutual insurance companies. And when you borrow against your insurance policy, you can design your own repayment schedule, modify it as needed, or even continue down the path of life without repaying it if your circumstances require. In contrast, most types of non-insurance loans have strict repayment schedules that may or may not work well for you.
  1. It’s cheaper than you think. Life insurance policy loans are running in the 4 – 8% range right now. But that does not equate to a bank loan for the same amount. This is because you’re borrowing against an account that likely has an internal rate of return of 4-5%, depending on your age. And since you are borrowing against your cash value, not borrowing the cash value itself, your cash value continues to grow and earn dividends, which offsets the interest on the policy loan.
  1. It’s (probably) not a taxable event. Although there are exceptions, typically the IRS will never know that you borrowed the money. Like taking a second mortgage or line of credit against a rental property, a policy loan is not considered “income” in most situations.

What happens to the interest that you pay?

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Posted in INSURANCE ADVICE, INSURANCE AS AN ASSET, PERSONAL FINANCES, WHOLE LIFE INSURANCE | Tagged , , , , | Leave a comment