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The answer to all of these is income. Maybe your magical income moment is the day you qualify for
a company pension, but the current trend says you may not want to rely
on that. Maybe your savior is Social Security. Counter to many alarmists
trying to make a point today, my personal belief is Social Security will be around for a long time, but you probably will never
get back all the money you put into the plan (especially since it will
be taxed when you get it) much less get a good return on investment.
Your 401(k), 403(b), and/or Individual Retirement
Accounts (IRA) will probably set you free some day (if
you are investing in one or more of these accounts), but more than
likely, that will depend on decades of investing, when you want to
retire, and whether or not you cash out on an upswing in the market.
Even if you do manage to get out on an upswing, have you thought about
how you’re going to turn your IRA, 401(k), or 403(b) wealth into
income? If you keep all your money in growth, you have to sell shares to
get cash for your living expenses. Once you sell your shares … you
don’t have them anymore! Obvious I know, but it still seems to allude
the masses.
You could take your money and put it in a savings
account, money market account, or certificate of deposit (CD). However,
$1 Million in a 401(k) only generates $10,000 of income per year if you
stick it in a “no-risk” savings account at 1% … of course, you can
currently get around 4% in a money market account … which gives you
about $40,000 of income per year. But what if rates go down again? Even
if they don’t, can you live on $40,000 per year today? In ten years,
that $40,000 will only be worth about $20,000 when you consider the
impacts of inflation. If that’s all the money you need to live, then
by all means, put it in super-safe investments such as savings accounts,
money markets, or CD’s. It makes no sense to take on added risk for
money you don’t need. On the other hand, if you manage to accumulate a
million dollars, I doubt you will be content living on $10,000 per year.
If you use the concepts in this book, however, you can
turn that mythical $1 million balance into over $100,000 of annual
income. Better yet, if you use the concepts in this book now,
depending on your age and how much cash you invest, you could have an
extra $100,000 income … or more … before you retire … regardless
of what’s in your 401(k), 403(b), and IRAs. Incidentally, you can also
use these techniques in your retirement
accounts. Read that last sentence again; it’s an extremely important
point!
The
Ultimate Retirement Plan
Since we’re talking about retirement, I’ll give
you my guidelines for what I consider to be the best
approach to retirement:
1. Get as many checks coming
in from as many different sources as possible.
2. Always reinvest at least
10% of your incoming checks.
3. Never spend your principal
(a.k.a., “Don’t kill the goose that lays the golden eggs.”)
I realize these three tenets are tough goals to
achieve, but this book will show you how to do it.
That’s all I’m going to say here since retirement is not really
the topic of this chapter; however, we’ll discuss it in more detail
later.
Assets
do not create a wealthy lifestyle …
Until
you convert them into income!
Getting back to the power
of income … If you have a mutual fund with $100,000 in it and it
goes up in value to $110,000, does your life change any? No. You might feel
richer, but you still have all the same bills and a fixed amount of
income to pay them. Your life doesn’t change until you take profits or
convert your wealth into income. If you have a 401(k) with $450,000 in
it, a mutual fund account worth $100,000, a house worth $350,000, a
thousand shares of a stock that has grown in value from $10 per share to
$110 per share, two cars, a boat, a cat, a dog, and three goldfish, you
would be “rich” with a million dollars worth of assets, but none of
it improves your lifestyle until you convert it to income. In fact, if
you used debt to buy the house, the boat, the cars, and the dog
(they’re expensive these days), and you have a fixed salary income,
you might feel trapped with the life strangled out of you as you watch
your paycheck disappear every month to pay the bills. Even if you get
paid bi-weekly, you don’t feel any better because you watch your
paycheck disappear twice every
month.
If you have excessive income, however, things change
dramatically. If you owned absolutely nothing but $100,000 giving you a
paycheck every month at a rate of 12% return every year regardless of
what the market does, you would have an extra $1,000 in your pocket
every month. That could change your lifestyle. Even if you didn’t take
that $1,000, but reinvested it instead, your income would grow every
month. Furthermore, as market prices dip, that $1,000 extra cash could
be used to buy more shares of the best investment opportunity at the
time. Wealth is not about assets; it’s about income!
High-Income
Investing
Let’s assume I can show you how to turn any monthly investment
amount you choose into a monthly income
of five times that amount within the next 20 years … what would that
do for you? Would you …
- Retire
early
- Take
exotic vacations
- Travel
less for work
- Sleep
better at night
- Give
more to your church or charity
- Change
your job to something more fulfilling
- Pursue
a business you’ve always wanted
The more your income grows, the more secure you will
feel; you won’t have to worry so much about keeping your job. The
ridiculous stuff you endure at work will be less stressful …
especially when you start making more at home than you do at work. You
might not care so much about that next raise or promotion, and you’ll
have better control of your future.
My personal goal started with $1,000 per month from
investments; now, my goal is to exceed my salary income, and I’m
getting closer to meeting that goal every month. If you’re investment
income is $1,000 per month this year, next year it would grow to $1,104
per month (assuming 10% Return On Investment) and over $1,645 per month
in five years. If you supercharge your returns using the techniques in
this book and get 15% average Return On Investment (ROI), your
$1,000/month income will exceed $1,160 in one year and $2,107 in five
years. And just in case you’re curious, your income would be $4,440 per
month in ten years.
Of course, this assumes you don’t add any more money
to your initial investment. If you added $100 month to the 15% ROI case,
your monthly income would grow to $1,176 in one year, $2,217 in five
years, and $4,784 in ten years. Just to put things in perspective,
$4,784/month is $57,408 per year which is higher than the average annual
income in this country, and your investment income continues to grow
every month as long as you continue to reinvest or compound at least a
portion of that income.
Now, if you have been a growth investor for the last
five to ten years, consider your performance. If you took your current
growth portfolio and invested it all today at 10% “guaranteed”
yields, would it pay you $4,784 per month … or even $2,217 per month?
To get $4,784 per month off a 10% annual yield investment, your account
would have to be worth $574,080 (or $382,720 at 15% ROI). Are your
growth investments worth that much?
Let’s look at a more realistic situation for the new
investor.
Compound
Your Income Into a Fortune;
How
to Turn $100/month Into $544/month in 20 Years
Let’s assume you start with $1,000 to invest, and
you can add $100 per month. I can show you a mutual fund you can open
with $1,000 and $100 per month that currently pays an annual yield of
12.7% plus growth potential; but let’s ignore the growth potential for
now. If you invest using my techniques and only get 12.7% annual returns
(in other words, you choose not to use any of my supercharging
techniques), your monthly income will be $25.47. That’s not too
exciting, but it is 25% of
your $100 monthly investment. Assuming you don’t ever change your
monthly contribution, in five years, your monthly income will be almost
$108. Still not exactly financial freedom, but your account is now
earning more per month than you are investing. So, let’s move ahead
further … still without increasing or decreasing your monthly
contribution … In 10 years, your monthly income will be $291; in 15
years, it will be $635; in 20 years, it will be $1,283/month; and in 30
years, it will be $4,793/month. Now, you’re getting there; that’s
over $57,000 per year.
A Simple Technique to Magnify Your Returns to 20% or More …
While Reducing Your Risk
Interested
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