Asset protection is an often overlooked, yet vital part of obtaining the Optimum Financial Condition. It also has many different meanings and applications. Most of us tend to think of asset protection in the scope of what happens if there is some kind of a lawsuit levied against us. Other very important questions you should consider that are often overlooked are as follows:
How protected are my reserves from the stock market?
How protected are my income sources from taxes?
How protected are my assets from inflation or deflation?
Our responsibility is to ensure you are looking at every possible risk which could impact the value of your assets and to come up with a plan to make certain you are taking some action to lessen the risks.
Asset Protection Enemy #1:
The Stock Market
The world’s largest casino is at it again with record highs in the Dow and S&P 500 and glorious double-digit returns in most mutual fund accounts. What could possibly go wrong? PLENTY! If you have been lucky enough to recoup some of your losses in your mutual fund and stock market accounts, its high time you protect those assets from potential loss. It never ceases to amaze me why people would put a substantial amount of savings in a system where you put up ALL the capital, take ALL the risk, and have a portion of your accounts skimmed every year with absolutely no guarantees of return of your investment. That IS the Mutual Fund and Brokerage industry. How do your protect these assets? Simple. You transfer these accounts to institutions and financial products which guarantee your principal AND promise you the possibility of a guaranteed income stream. Life Insurance and annuity companies can make these promises and take the risk for you. The first annuity was created around 222-225 AD, during the Roman Empire. Do you know of any mutual funds that have been around that long?
Asset Protection Enemy #2: Taxes
It is vital that you have some idea of the tax ramifications of your income sources as you get closer to retirement. Many of you have been taught to “defer” taxes until some time down the line by putting the majority of your reserves in qualified accounts such as 401ks and IRAs. If you have been utilizing the Econologics system for any length of time, you know we have a fundamental disagreement that you will be in a lower tax bracket and therefore you should look towards “alternative” types of investment vehicles to building your wealth. These include primarily cash value life insurance, non-qualified annuities, and mutual funds that are passively managed, tax efficient, and have low trading costs.
Asset Protection Enemy #3: Inflation/Deflation
Inflation is an increase in the money supply which then creates a disparity between products available and the amount of money in circulation. This generally causes market prices to increase. Deflation is simply a decrease in the money supply which then creates a disparity between products available and the amount of money in circulation causing market prices to fall.
The way to successfully handle both inflation and deflation is to have multiple income sources which are feeding you a lot of income now and in retirement. Some ideas of sources you should consider include: investing in things which pay dividends or cash flow, having a portion of your reserves in guaranteed income sources, owning some commodities, and staying out of consumer debt.
Don’t make the mistake of thinking that asset protection is only about handling a lawsuit or only for “the wealthy.” It’s about making sure you have a solid plan to protect your assets from the real wolves so you keep what you have spent a lifetime accumulating. We can help.