When giving my tax-planning, wealth-building seminars, I like to ask the audience, “Raise your hand if you know the Rule of 72 and how it works.” Typically, about one-third of the audience raises their hands.
I’ll explain this rule to be sure that we all understand it. Write the number 72 on a piece of paper. Assume you are getting a 10 percent rate of return on your investment. Divide 10 into 72 and you get 7.3, or the number of years it will take your principal sum to double at that rate. For example, $10,000 compounding for a 36-year period will double five times and eventually become $320,000.
What if that 10 percent return was subject to a 40 percent income tax at the state and federal level? Then you would only have a 6 percent return because 6 into 72 results in 12—12 years to double your money. This means that $10,000 will only double three times over a 36-year period.
When you compare $80,000 to $320,000 when tax deferred, it can make a huge difference.
Two factors that are measurably important to creating wealth are rate of return and tax deferment.
If you have money in a qualified plan such as a 401(k), profit sharing or any of the many IRAs and other qualified plans, then you are on the road to tax deferment. If you are the owner of a Roth IRA or the new Roth 401(k), then wave your tax-free flag high.
Now we come to the hard part—the rate of return. How would you like to average a 16 percent rate of return (or greater) per year? With a senior settlement (SS), you can.
An SS is simply the purchase of an existing insurance policy from a senior citizen (who is 65 years old or older) by an investor. The selling senior, who no longer wants to pay premiums, gets a much larger price for the policy than the cash surrender value from the insurance company. The investor wins by making a large profit without risk (because the senior is sure to die).
How do you become such an investor? There is a public company, trading on the NASDAQ, that makes it easy. The average rate of return on SS investments is 16.36 percent per year and has been greater than 16 percent throughout the company’s 14-year operating history.
You can become an SS investor in one of three ways: taxable, tax-deferred or tax-free. Let’s examine these possibilities:
Taxable—This category includes your own funds or funds you control (such as corporation or other business entities, family limited partnerships or any non-charitable trust).
Tax-Deferred—Almost everyone can participate via their qualified plans (IRAs—traditional or roll-over, 401(k)s, profit-sharing and other qualified plans). The trustees of pension plans or other plans that are not self-directed can join the profitable fun by investing the plan funds in SS for the benefit of all participants.
Tax-Free—A Roth IRA or Roth 401(k) can fatten your tax-free accumulations. Charitable entities—charitable remainder and lead trusts and family foundations—are a perfect fit.
Because SS plans are probably new to many of you, here’s a suggestion: Show this article to your professional advisors—CPA, lawyer, banker, financial planner and others. Discuss SS from at least two aspects concerning your investments (taxable and otherwise): 1) determine how an investment in SS compares to other possible investment choices, and 2) compare existing investments to your long-term and short-term goals.
Do you want more information about how you can earn an average 16.36 percent per year, without risk? Fax me your name, address, phone numbers for business, home, and cell, and include your estimated time to invest. Please note that the minimum investment amount is $50,000 for accredited investors.