Though it has some great information and mindset advice, holy crap it's so damn verbose - 688 pages! - which keeps me from recommending it. But it might be worth skimming to find specific things you're looking for. I had never heard of annuities or private placement life insurance. (That said, I don't want them.) What a weird mix of for-dummies and super-sophisticated advice.
Ray Dalio says to cover:
1. higher than expected inflation (rising prices)
2. lower than expected inflation (or deflation)
3. higher than expected economic growth
4. lower than expected economic growth.
30% in stocks
15% in intermediate term [7-10 year Treasuries]
40% in long-term bonds [20-25 year Treasuries]
7.5% in gold
7.5% in commodities
The portfolio must be rebalanced. Meaning, when one segment does well, you must sell a portion and reallocate back to the original allocation. This should be done at least annually.
Wharton professor Dr. David Babbel says annuities are one of the most important investment vehicles we have.
Annuities, which basically allow you to go to an insurance company and say, ‘You know what? I am going to take my money and put it with you, you’re going to manage it, grow it, and you’re going to pay me back income every month for as long as I live.’
Five types of annuities that could change your life.
There are really only two general categories of annuities: immediate annuities and deferred annuities.
Immediate annuities are best used for those at retirement age or beyond.
An immediate annuity is really a form of income insurance.
“Yes, but if you die early, they keep your money!” You are dead, who cares?!
Deferred annuity. This simply means you give the insurance company money either in one lump sum or over a period of years, and instead of receiving an immediate income, your returns are reinvested in a tax-deferred environment so that when you’re ready you can, at will, turn on the income stream you want for the rest of your life.
There are roughly only three primary types of deferred annuities. They are:
1. Fixed annuity:
This is where you get a fixed, guaranteed rate of return every year (independent of any stock market ups or downs), very much like you would receive with a CD or bond, but the rates are different.
2. Indexed annuity:
This is where your rate of return is tied to how the stock market does, but you get a percentage of the upside of the market (not all) with no downside and no possibility of loss.
3. Hybrid “indexed” annuity:
This is where you get the benefits of an indexed annuity with the addition of a “lifetime income” rider. This lifetime income feature gives you the ability to turn on a paycheck for life!
A guarantee is only as good as the insurance company that issues it, so highly rated insurance companies are key.
There are insurance guaranty associations run by the state insurance departments that will guarantee up to a certain amount/deposit of the product you buy.
Essentially every insurance company that operates in that state is basically agreeing to insure all the other ones.
Variable annuities should be avoided.
Guaranteed rate of return (for instance, 3% or 4%) for a specific period of time (like 5-10 years). The money grows tax deferred, and at the end of the term, you have a few options. You can walk away with your money, you can “roll your money” into a new annuity and keep the tax protection, or you can convert your account balance into a guaranteed lifetime income. There are no annual fees in a fixed deferred annuity.
A fixed deferred annuity offers a specific longevity insurance
Guaranteed rates of income from, for example, age 80 or 85 until your passing.
Since I am only 54, my payments at age 85 would be $83,000 per year for the same onetime $100,000 deposit today!
The day I make the deposit, I’m given a schedule of what the annual income payments will be at any age I want to begin taking income.
Deferred fixed-income annuity.
Income insurance payments
Advanced-life deferred annuity, which is essentially longevity insurance.
A fixed indexed annuity (FIA).
A powerful financial product, a hybrid annuity, that gives us great upside potential during its growth phase but also provides a guaranteed lifetime income down the road,
Two relatively new types of deferred annuities that have surged in popularity since they were introduced in the early 1990s:
1. the indexed annuity, where the rate of your return is tied to a stock index, and . . .
2. the even more popular hybrid version, where you get both a fixed rate of return and the option of a return tied to the growth of the stock market index as well as a guaranteed lifetime income feature. These hybrid annuities are more commonly known as fixed indexed annuities, with a lifetime income rider or a guaranteed minimum withdrawal benefit.
• In a fixed indexed annuity, your deposits remain entirely in your control. You are not giving up access to your cash.
• It offers the potential for significantly higher annual returns than other safe-money solutions such as CDs or bonds.
• It provides a 100% guarantee of your principal - you can’t lose money.
• The growth is tax-deferred, providing maximum compounded growth for the expansion of your Freedom Fund.
• It provides income insurance, or a guaranteed income for life, when you select an optional income rider.
A fixed indexed annuity is fixed, which means your account is guaranteed never to go down. No matter what happens, you will not lose your original deposit.
If the market index drops, even if it’s one of those nasty 20%, 30%, or 50% drawdown years, you don’t lose a dime.
Advisors Excel is now the largest annuity wholesaler in the country.
The minimum age for most fixed indexed annuities was 50 or 55.
Selecting the right annuity products for your specific situation: www.lifetimeincome.com.
Private placement life insurance (PPLI),
Here are the astounding benefits available to all:
• unlimited deposit amounts (with no income limitations)
• no tax on the growth of your investments
• no tax when accessed (if structured correctly)
• any money left over for your heirs cannot be taxed.
Think of it as an ‘insurance wrapper’ you are buying to place around your investments.
Your deposits will be legally sheltered from tax in this insurance wrapper. They can be invested in a variety of different funds, and you will not pay tax on the growth or when you access your cash if we do it right.”
There are very strict rules around the investment management, which must be done by a third-party investment professional, not the policy owner.
You will have to pay tax if you take a withdrawal. But - and it’s a huge but - you also have the ability to “borrow” from your policy. In other words, you can call the insurance company and access your cash value, but it’s legally deemed and actually is a loan - and loans are not taxable. You can repay the loans at a future date of your choosing or allow the life insurance proceeds to pay off the loans when you pass away. It’s a legitimate loan, and it does get paid off. One more huge benefit to stack on? Life insurance death benefit proceeds are income tax free when your kids receive the benefit.
In order to access PPLI, you must be what’s called an accredited investor and the typical minimum annual deposits are $250,000 for a minimum of four years.
There is a “version” of PPLI that is now available to nonaccredited investors: www.tiaa-cref.org/public
Don’t wait to set up a living trust. Everyone needs one.
Even though each of these financial legends has a distinct approach, I found that they share common obsessions:
1. Don’t Lose. All of these masters, while driven to deliver extraordinary returns, are even more obsessed with making sure they don’t lose money. Defense is ten times more important than offense. You have to be very focused on the downside at all times.
2. Risk a Little to Make a Lot. He doesn’t make an investment until he can potentially get a return of at least $5 for every $1 he risks.
3. Anticipate and Diversify.
When you have a good position in something, you don’t need to look at it; it will take care of itself. Where you need to be focused is where you’re losing money.
Risk control is the number one single most important focus that I have, every day.
You always want to be with whatever the predominant trend is. You don’t ever want to be a contrarian investor.
My metric for everything I look at is the 200-day moving average of closing prices. “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out. Get out of anything that falls below the 200-day moving average.
You sell an asset only when you think you have found a different asset that’s a 50% better bargain.
Money is a good servant but a bad master. - Sir Francis Bacon
The secret to wealth is simple: Find a way to do more for others than anyone else does. Become more valuable. Do more. Give more. Be more. Serve more.
We all need to feel important, special, unique, or needed. So how do some of us get significance? You can get significance by having more or bigger problems than anybody. Spending a lot of money can make you feel significant, and so can spending very little. Sam Walton drove around Bentonville, Arkansas, in his old pickup, demonstrating he didn’t need a Bentley - but, of course, he did have his own private fleet of jets standing by.
The secret to living is giving.