When it comes to the world of investments, there are the big two that the majority of people take part in: bank account investments and Real Estate. But, there is one thing that many of us overlook and simply because we do not have enough information on the subject – these are Retirement Plans and Life Insurance. But wait a minute, we’re not talking about your ordinary life insurance policies and retirement plans – actually they are not at all what they seem and you will see why later in the article. First, we will discuss bank account investments and real estate talking about how they work and why. Afterwards, we compare them to life insurance and retirement plan investment strategies.
When you put your money into a bank, you invest into it. The banks “promise” to take care of your money, to have it available to you whenever you need it, plus they offer a small rate of interest on your return, something like 2%, so you can make a little money just by having them hold it. But did you know that even though the banks may be backed by FDIC, in Nevada, banks are only required to pay out the maximum amount of $200,000 to each individual account holder? Also, they have a time limit of 99 years to payback these monies to the people they owe! Banks (like Nevada State Bank) go under all the time, and so this investment risk is always there whether we know it or not. Although the risk may be a small one (or not), it is important to know that there is a risk and when it comes to Real estate, the risk may be greater.
Today, Real Estate will seem like the best investment choice. When you invest in a property you can see it, you can touch it, you can renovate it, rebuild it, rent it out and have the tenants pay off the mortgage for you. Yes! And, yes, property in Las Vegas is cheap. My Las Vegas 4 bedroom house that was once $350,000 is now, as of May 14th 2012, $76,000. So, if you have the money, this is probably the perfect time to buy. However, if you are looking to buy a house in order to make a short term profit in the near future, you might be simply rolling the dice in the dark.
No one knows when the Real estate market will get back on it’s feet. Pessimists will speak of doom and gloom in the real estate arena, while the optimists point out the turn out statistics of the 2012 real estate market. But, when it all comes down to it, real estate has everything to do with the unemployment rate. No jobs = no money, and no money = no long term investments which = no one can buy a home from you even if you had one for sale. Of course, if you have the money and are willing to accept today’s Real estate worst case scenario: to sit on a home until people are able to purchase homes again – go for it – but remember, who knows how long you have to wait?
So, before doing so, why not look into other investment strategies such as Retirement planning and Life Insurance? Never thought of it? It’s because no one really knows about them. To an average Joe, a Retirement Plan doesn’t seem like a profitable investment tool and life insurance seems like anything but a profitable investment tool. But, this is seeing these investment tools using a traditional perspective – a perspective that was created for the masses.
A very successful Retirement Planner who specializes in setting up Retirement Plan and Life Insurance accounts told me that the super wealthy have been using for years a certain loophole so that they can avoid paying their extremely high tax rates. And so, with the right Retirement Planner, anyone can do the same. Retirement plan and Life Insurance policies can actually be used much like a savings account where you can withdraw your money whenever you like and benefit from its interest rate return. Bank-offered Savings accounts or Certificate of Deposit accounts usually give you 2-3% interest rate on your returns (and that’s if you’re lucky). Now, with Retirement Plans and Life Insurance, you get more than double this: about 5-7% interest rate. Best of all, these accounts are tax exempt, so you do not need to pay taxes when you withdraw from your account. Better yet, there are no withdrawal penalties.
Yes, Retirement plans and Life Insurance policies are masterfully created investment strategies, but again, like every investment… it’s a gamble. But, what’s the risk? The biggest gamble with Retirement Plans and Life Insurance is with the trustworthiness of the companies that provide these services. Can I trust that they will do what they say? Make me money and not just disappear to some tropical island with all the money? Well, my research has shown that companies that provide this service, like Bankers, MetLife and New York Life, have been around for over 100 years and so it is more than likely that they are not going to disappear anytime soon.
Now When it comes to the FDIC, some of these investment companies are not backed by FDIC. I have spoken to a company representative and he said that they don’t need the security of the FDIC. Billions of dollars flow through these companies every day and the reserves they keep are so plentiful that your $500,000 in 15 years policy is “guaranteed.” What these companies want from you is a scheduled “contribution” to them of a specified amount of money at a certain amount of time. With your consistent contribution, they can more easily move money from one “account” with low interest rates to another “account” with higher interest rates – kind of like stock trading. Personally, it was a little difficult for me to trust them at first, because I realized I am just gambling on them gambling with my money. But, when I weigh out and compare the amount I would “forfeit” to the amount I am “guaranteed” to gain, it actually doesn’t seem like a bad idea since these investors and traders who are handling my money are the best of the best.
One representative from Bankers said that with a $135/week deposit into a customized Retirement Plan account, a person will make over $1 million in 30 years. That sounds like a great long term investment, and something I’ll have on the side in the near future, if all goes well of course. And, in the end, like any gamble, if the gain out-weighs the loss, hey, that’s a bet I’m willing to make – one that I can live with, regardless of win or loss.