Losses are Optional

Losses are Optional

December 13, 2020
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Safety Is Key to a Prudent Retirement Vehicle

Mark Cuban almost lost his fortune in the stock market.

And it would have been bad…

If you are a retiring corporate executive, this could apply to you, too.

Let me explain the situation.

In 1999, Mark’s company Broadcast.com was purchased by Yahoo for $5.7 Billion. They paid him in stock, which made him wealthy. On paper...

But there was a problem on the horizon...the markets were about to take a serious turn.

He planned for it… and he didn’t pay one dollar out of pocket for this protection.

(SMART)

Mark had restricted Yahoo stock, which traded at $237 per share, and he decided to protect it from losses.

Good call…because by late 2002, if he had not been protected his wealth, his shares would have been worth $13...anyone want a 95% loss?

Instead of being a billionaire investor on Shark Tank and a household name, most would have never heard of Mark Cuban if he didn't have the foresight to protect himself and his family. 

There are many similarities in markets back then to what we see today.

 What I have found is that many executives fail because they underestimate the risks as they approach retirement.  Don’t let that be you.

Listen, 10 years ago, you had the precious commodity of time. The crash of 2008 was bad, but you had the luxury of another 10 years to course-correct, wait, and grow.

But things are different now. You don’t have the luxury of time.

Had these people utilized indexing, they likely wouldn’t have lost a dime due to the plummeting stock market values.

So that was then, but what about now? The next 10 years are likely going to see chaotic ups and downs, as well.  Don’t be a victim of volatility; use volatility to your advantage.

Indexing can give you the ability to protect your principal against loss and grow your nest egg competitively.

INDEXING = PROTECTION

Essentially, indexing insulates you from market bubbles.  It gives your money a safe harbor where stormy seas of volatility can’t sink your retirement ship. With indexing:

  1. Your money is linked to the market so that when the stock market performs well, you participate in the market gains.  At the same time, if the market loses, your money is protected with a guaranteed floor.
  2. Your cash value will receive an indexing credit, based on the market/index that you select.  When that market grows during a segment, which is commonly 12 months, your cash value will be credited with interest.
  3. If the market you are tied to experiences large losses, like many did in 2003 and 2008, your cash value won’t decrease due to market performance.  The downside risk is eliminated because of a guaranteed floor.  Because your money is not in the market, but linked to the market, and because of the guaranteed floor, it is safe and secure.
  4. Any gains from a previous period are locked in and protected against loss, even if the index you are tied to loses in future segments.  Each and every year this resets, so gains are added to the principal and never lost due to market performance.

TWO OPTIONS FOR INDEXING

  1. Private Reserve Account, or Life Insurance Retirement Plan:  If you are looking to minimize taxes and grow your money in a tax-advantaged environment that also can have tax-free at-retirement benefits, this is the vehicle to choose. When structured correctly and funded optimally, these policies can be very inexpensive, compared to other types of insurance and retirement methods.
  2. Fixed Indexed Annuity: If you would rather use indexing with a product that can guarantee payments so that you never run out of money.  A quality annuity will replace the bond portion of a portfolio with more performance and less risk.  (While we refuse to sell 99% of all annuities in the marketplace, a select few have passed our level of scrutiny).

Contact us to learn more

Click here for a short video on the most modern indexing strategies.