WHY IS BALANCE IMPORTANT FOR RETIREMENT?
We talk a lot about finding balance in life.
It’s important to focus on not just one or two, but all three dimensions of Authentic Wealth: Financial, Foundational, and Intellectual.
Within each of those dimensions, there are multiple areas you want to balance. Take the Foundational Dimension, for instance: You want to strive to strike a balance between time building your family relationships, time spent focusing on your spirituality, and time devoted to developing your talents.
When it comes to the Financial Dimension—particularly in relation to retirement—this is where it is absolutely critical to find balance. And in challenging and unprecedented times like we’re in right now, (the kind that can upset stock and real estate markets in almost an instant), it’s especially important to approach your future with balance.
BALANCING YOUR RETIREMENT BUCKETS
As I meet with audiences from around the country, one of things I teach is balance and diversity with retirement strategies. You want to diversify where you put your money to be as financially healthy as possible in retirement.
INVESTMENT BUCKET – Many people put a big chunk of their money in their Investment Bucket, which can include traditional vehicles like IRAs, 401(k)s, stocks, bonds, and mutual funds.
The downside to this bucket? Many of these accounts are vulnerable to loss due to volatility in the market–and Uncle Sam loves to take his portion. Investors are disappointed (if not devastated) during the withdrawal phase at how taxes chip away at their nest egg.
Everyone would be wiser to put no more than 30% of their money in this bucket.
REAL ESTATE BUCKET – People also use the Real Estate Bucket, which can include your personal residence(s) and investment real estate.
But I don’t think all of your retirement income should be coming from just rental income or real estate, because frankly many people get sick and tired of managing the property, taking out the trash, fixing the toilets.
Here too, aim for no more than 30% of your retirement money in this bucket.
GUARANTEED INCOME BUCKET – Now the Guaranteed Income Bucket, which can include pensions, annuities (and eventually Social Security), is unfortunately where 80% to 90% of people’s money often lies when they begin working with an IUL Specialist to find better solutions. Many times people want some guaranteed income, including Social Security or a defined benefit pension, but in truth it would be better for them if their money in this bucket were in a lifetime annuity, to avoid running out of money at age 75, 80, 90 or beyond.
TAX-FREE BUCKET – Now let’s look at the Tax-Free Bucket, which can include Roth IRAs, Roth 401(k)s, Municipal Bonds, and LASER Funds (properly structured, max-funded, tax-advantaged Universal Life Insurance policies).
Personally this bucket is where I have over 60% of my retirement income, specifically in the LASER Fund.
Here’s why: When you ultimately pass away, your money blossoms in value, and transfers to your heirs tax-free. Comparing the LASER Fund to other financial vehicles in this bucket, municipal bonds transfer tax-free, but my LASER Funds have always earned at least 2% or 3% more in interest than a municipal bond. Plus, many municipalities aren’t as safe as we think they are—we can’t be guaranteed they will manage their finances well long-term, which lends some risk to this vehicle.
The Roth is a step in the right direction, but as I explain more in-depth in another article, the LASER Fund is called the Rich Man’s Roth. It essentially has the same benefits of a Roth, plus additional benefits Roths will never have. And so my favorite vehicle is the LASER Fund.
EMPOWER YOURSELF – EXPLORE MORE
Ideally, you want to have a diversified approach to retirement, with money set aside in all four buckets. Some buckets may deserve a higher percentage of your money than others (like the Tax-Free Bucket, particularly with my favorite vehicle, the LASER Fund). The important thing is to educate yourself so you are making decisions that work for you, decisions that can help you advance toward a bright financial future, rather than a dim, imbalanced one.
If you would like a deeper dive into these principles, it’s all in my book, The LASER Fund. It’s my 11th book, and the second book I’ve co-written with my sons, Emron and Aaron. It’s actually two books in one. One side is written for the left-brain folks, with 14 chapters over about 200 pages, filled with charts and graphs.
If you’re a right brain person and you learn by stories, flip the book over to read about 100 pages comprised of 12 chapters featuring 62 actual client stories of how they used the LASER Fund for retirement, as well as for tax-free income for everything from college funding to business capital, emergency needs, estate planning, and more.
In summary, the LASER Fund is the only vehicle in the Internal Revenue Code that allows you to accumulate your money tax-free, access your money tax-free, and when you pass away it blossoms and transfers income tax-free. That’s why the subtitle on the book is: How to Diversify and Create the Foundation for a Tax-Free Retirement.
Hear Doug talk about related concepts in his YouTube insights:
Explore deeper understanding with Doug’s related blog articles:
Get a FREE copy of Doug’s book, The LASER Fund.
Disclaimer: With any mention of The LASER Fund, maximum-funded tax-advantaged insurance contracts, or related financial vehicles, let it be noted that life insurance policies are not investments and, accordingly, should not be purchased as an investment. The content contained in this post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Many traditional retirement vehicles involve risk, and the value of your investment will fluctuate over time and you may gain or lose money.