The majority of bankers are, after all, Moguls (aka Capitalists) as well, and the optimum method for a loaner to guarantee a surplus is to lend to those likeliest to reimburse the mortgage. While, the doorway to fortune or public identity is wide unlocked only to those who are fitting certain ideals, it is a provision or rather a weak spot to the Mogul system. Sadly enough, these so called low-grade poor people, in the world of finance, universally dont meet those principles. A different breed of loaning has surfaced to battle this wicked era, celebrated as MicroCredit or MicroFinance. The issue is not the dollar sum that unavoidably makes a loan a MicroCredit; its the measures that loaners must meet.
MicroCredit has scientifically substantiated to be an influential and yet liberating strength in communities where adult females, in specific, have to wrestle against oppressive cultural and economic conditions like in the ghettos of Calcutta or the poverty-stricken hills in Mexicos sugar cane province. The custom of drawing out little trusts to singular loaners who have been customarily denied passage to any credit whatsoever, has developed into one of the most well-liked antipoverty schemes in the world.
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Using Insurance As an Investment Strategy
With the massive increases to our taxes taking place on January 3rd (barring any major changes), the notion of avoiding taxes or simply delaying payment becomes all the more attractive. Since the 1980s when deductions were largely eliminated except for mortgage interest and charitable contributions, it has become increasingly difficult to protect your hard earned money from the redistributionists who want to give it to someone else. Insurance is something you should consider.
Stock-market-investment-strategyLets start at the basics, what is insurance? Simply stated, insurance is the act of transferring risk from one part to another. So you purchase auto insurance to transfer your driving risk to a company who, because of its broad coverage can pony up the cash in the event of a collision. Or you purchase life insurance to transfer the risk of the financial loss incurred by your death to an insurance company. Its pretty simple really, but there is one key component to insurance that makes it possibly quite attractive to you as an accounting investor; the growth of your money inside an insurance contract is tax deferred!
Lets assume for a moment that youre in that hideous 39.6% federal bracket meaning that you and your spouse make more than $250,000 per year. So the next dollar earned, you keep (including State taxation) only about 55% of your earned money and that does not count the special investment taxes that have been placed on capital gains and dividends. So what do you do? Well, insurance may be an attractive idea. Lets assume you fund a variable life insurance policy and with it, rather than investing money in simply more ended mutual funds or ETFs, you put those investments under the insurance umbrella. The resulting returns are pretty staggering. Due to its tax deferred accumulation, the return inside the insurance contract can be ½ of the return outside and with no additional risk, yield the same future amount. Lets be specific, lets assume youre 35 years old, and earn just over $250,000, so you can save $1,000 per month toward your future retirement. With that money, option one is to invest it with a traditional investment product like a Mutual Fund or ETF, and option two is to purchase a variable insurance product. Here are the results, assuming they both earn 7% per year over the next 30 years, and taxes dont change, and you pay 1.5% per year in cost of the insurance product. At 65, you will have gained over $500,000 more by using the insurance vehicle to invest rather than the non-insurance way.
Now heres an interesting question that sometimes comes up, whats the difference between using Insurance and other retirement plans for your accounting plans like 401ks and IRAs? Well I would say this, there has been talk in Washington of nationalizing the 401ks and IRAs and while this may be a long shot, there has never even been a discussion of stopping the insurance products. So you make the call, is it less risky to have an insurance product tax deferred or a 401k/IRA?
One final note, all insurance companies and all insurance products are not created equal! Your invested capital is regulated but that doesnt mean the insurance company will be around to honor its commitments to you, so conducting due diligence on your part is required, and is smart. As you evaluate your entire capital structure including your house, your cash, your equity assets, your debt assets and your commodity assets, keep in mind that only you have genuine concern about your future. Your advisor and your agents care, but they have many people to care about. You and you alone bear the ultimate responsibility to know where your money is, what your money is doing, and why its placed as it is!