MAXIMIZING AND PRESERVING CAPITAL GROWTH
Maximizing rate of return is essential for building long-term wealth and financial independence, with most strategies best suited to longer time frames for weathering market ups and downs.
Balancing risk vs. reward – between pursuing opportunity and protecting against potential loss, can be a constant tension, where failure to account for risk can result in major setbacks.
Conservative investment portfolios that prioritize safety over growth, typically yield annual returns between 2% and 5%, while balanced portfolios, normally the highest risk threshold to maintain safety, yield 5% to 6% with moderate levels of risk.
What if there were an asset class with a 12% yearly historial growth rate and almost zero risk? See the effect higher return rates can have with compounding over a period of years.
The compounding rule of 72 calculates the number of years for a balance to double by dividing the rate into 72. A 3% return doubles the balance in 24 years, 6% in 12 years, and 12% in 6 years. Notice the impact of rate differences over time. If you were able to generate 12% returns with close to zero risk rather than 3% or 6%, how could that impact your lifestyle?
Flexmethod is a long-term, capital growth strategy – a permanent life insurance policy with added growth components. In addition to a death benefit it features living benefits, tax-free accumulation/access to funds, and virtually no savings limits or penalties. Permanent life insurance is considered by banks to be a Tier-1 Asset, as secure as cash. Flexmethod policies offer fixed and indexed returns, which participate in market gains, but not market declines. Outcomes are not guaranteed as the future cannot be predicted, though the results seen in the (indexed) examples below are based on historical market data and credit/interest rates over the last 100 years, including recessions, depressions, wars, pandemics, and market/housing declines, with tax-advantaged returns on indexed policies averaging 11% – 16% over the long term.
Retirement planning is typically made up of two stages:
The Accumulation or growth stage of retirement planning, where you’re actively saving and investing, aims to build wealth over time. The focus is on higher returns, often with more risk tolerance since there’s time to recover from market fluctuations.
The Capital Preservation Phase, or the protection stage, usually closer to or during retirement, shifts from growth to safeguarding the wealth you’ve built. Investments emphasize stability, lower risk, and reliable income streams to ensure funds last throughout retirement.
Once the protection stage is reached, see the effect below that conservative returns (5%) can have on retirement income.
*For Illustrative Purposes Only*
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Notice the difference below between IRA/401(k) plan on the left, earning 8% up to retirement and 5% after, and the Flexmethod plan on the right, earning 11% – 16% before and during retirement. What impact would $187K/yr vs $35K/yr have on your lifestyle?
The corporate Flexmethod can help employers face 3 key challenges: the cost of employee benefits, hiring and keeping key employees, and the burden of taxes, all by redirecting money sitting in a checking (low-yield account – i.e. emergencies/long-term projects, etc.) into a safe, liquid asset with much higher growth rates and added tax advantages. Additional earnings and tax savings can generate significant profits, be used for cash-flow management and/or can be used to offset the cost of employee benefits (healthcare costs, permanent life insurance, pensions). Flexmethod business applications have yielded long-term tax-advantaged growth rates averaging between 14 – 21%, allowing significant income streams in relatively short periods of time.
A Sample of a CorpFlex Plan for an Employee Benefit
*For Illustrative Purposes Only*
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Sample Application: $100K policy yields $2.7M of income over 35 years: Above see an example of a $100K Flexmethod employee policy. 6 years into the policy, the initial cost of $100K can be returned to the company and the remaining cash value ($48K) given to the employee, turning into an employee pension of $72K/yr by year 16 and increasing over time. This benefit could be used as an incentive to gain/retain valued employees. While the initial policy transfer to the employee is taxable, all subsequent policy disbursements to the employee can be taken tax-free. If the employee leaves before year 6, he/she retains the lifetime death benefit and the business can keep the cash value and resulting growth from the policy. Using Flexmethod, the net cost of this benefit is $0.
A Sample of a CorpFlex Plan for an Employer Benefit
*For Illustrative Purposes Only*
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In the example above the employer takes out a $100K CorpFlex policy and in year 6 is able to add $26,000 of yearly income from the policy, which increases over time along with the cash value. The results above are all from a $100K initial investment, and are scalable to larger amounts.
Using Flexmethod To Pay $300K Mortgage & Create Retirement Income
*For Illustrative Purposes Only*
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46-year-old buyer purchases $300K Flexmethod policy with 1.9M death benefit
Policy generates income stream of $23,245/yr to pay $300K, 30-year mortgage @ 6.5% (years 1-15)
Year 16: income from policy jumps to $73K/yr, netting $49K+ over mortgage payment
Yearly income stream jumps to $103K by year 25 and to $157K by year 30 with $2.6M death benefit
By age 76 the policy holder has received an additional $1,127,729 in income while paying off the mortgage
25-Year-Old Uses Flexmethod To Accelerate Mortgage Payoff & Create Retirement Income
*For Illustrative Purposes Only*
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25-year-old takes $308K 30 year mortgage @ 6.5%
Purchases a $10,000 Flexmethod policy, using funds normally held in a bank for an emergency
For 13 years, an additional $5,000/year is added to regular mortgage payments
By year 14, at age 38, policy income stream makes remaining mortgage payments for balance of 30 years
Income stream once the mortgage is paid off (beginning in year 31/age 56) increases yearly
Yearly disbursements @: Age 56 = $35K Age 66 = $77K Age 76 = $204K
What if it were possible to hold onto the gains while significantly reducing the risk of a loss?
Flexmethod can be used in conjunction with an Integrated Options Portfolio to enable 100% of market gains without exposing capital to market losses. Instead of buying stock shares for the higher-risk portions of the portfolio (yellow, green, purple), options on the shares are purchased, which provide the right without the obligation, to purchase stock at the option price within a given time period. Options can be purchased expecting a rise or fall in share prices, with earnings from the Reserve portion offsetting option costs. Should share prices increase or decrease within the period, stock can be purchased at the option price and sold at the current price. When expectations of a rise or fall of share prices are not met, the options may be left to expire.
With a Reserve portion returning 11% – 16% rather than the typical 5% average, more flexibility is afforded when choosing option contracts. Healthy returns from the Reserve portion can also add significant growth to a portfolio over time, both in reducing or covering costs during option losses, or by adding revenue to option gains.
*For Illustrative Purposes Only*
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The Flexmethod Giving Machine can add considerable value to charitable donations. In this example, the amount received by the charity and the tax benefit are both increased by 49% over direct donation amounts. With a death benefit adding another 86%, the total impact leaves 184% more revenue, or almost 3X the amount of direct giving.
*For Illustrative Purposes Only*
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Two top-tier football universities are attempting to recruit a 5-Star athlete during his senior year in high school. School A offers a $1.5M signing bonus. School B uses the same $1.5M for a $500K upfront payment, and a $1M Flexmethod policy resulting in the deferred income streams shown below. If, after weighing all other factors, it comes down to compensation, what effect do you think the Flexmethod income streams beginning at age 23 will have on the decision?
SCHOOL A – $1,500,000
One Time Payment
SCHOOL B – $500,000 Down Payment
$1,000,000 FLEXMETHOD POLICY
See results below
Long-term wealth creation can reflect a wide range of financial priorities, a few of what you see above. There’s no one-size-fits-all approach – each plan has its own objectives. We believe the Flexmethod strategy offers a combination of aggressive growth and capital preservation that cannot be matched, no matter what the financial goal. If you feel comfortable sharing with us what matters most to you financially, we’ll use our experience and unique resources to help you design a plan that will meet and most often surpass your objectives. Whether it be saving for the future, tax mitigation, legacy planning, managing business capital, investing, charitable giving, whatever your particular needs may be, we would welcome the opportunity to serve you. You begin with a brief introductory phone call, after which you decide if you’d like to see some examples of how we could help to meet your objectives. We welcome any input or participation from your financial & tax advisors. Just fill in the form below to get started.
Explore freely, decide confidently, no sales pressure ever.
Mark Twain
*Disclosure
- By reviewing this design, you acknowledge and agree to the following:
1.Conceptual Numbers – All values used in this design are conceptual and are not guaranteed by any party, including your agent, wealth consultant, any life insurance carrier, or US Life. These values are for illustrative purposes only.
2.Non-Carrier Illustrated Figures – The figures presented in this design are not carrier-illustrated numbers. The Flexmethod is not an insurance product itself; rather, it incorporates insurance products into your overall financial strategy.
3. Refer to Carrier Illustration – Before moving forward, you will be provided with a copy of the official policy illustration from the carrier. The carrier’s illustration will contain the detailed terms and conditions of your policy and should be referred to for accurate information regarding your policy.4.Indexed Universal Life Policy (IUL) Performance – If you are using an Indexed Universal Life (IUL) policy, its performance will be based on the returns from external indexes. This design simulates potential index performance but does not represent actual future returns. Actual returns may be more or less favorable than the assumptions used in this design.
5.Borrowing Risks – Borrowing from an insurance policy introduces additional risks, including the possibility of the policy lapsing if the amount borrowed exceeds the surrender value. Borrowing may also affect or eliminate any guarantees provided by the insurance carrier. If your policy lapses, you will lose the death benefit and may incur tax liabilities on the borrowed amounts.
6. Interest Rate Assumptions – The borrowing rates used in this illustration are assumed for simulation purposes and may differ from actual future rates. These rates are not guaranteed and will fluctuate over time. The actual borrowing rates could be more or less favorable than those shown in this design.
7. Core Assumption – The Flexmethod strategy is based on the assumption that, on average, the cost of borrowing from the insurance policy will be lower than the average returns earned by the policy. While we believe our assumptions are conservative, there is a possibility that actual outcomes may differ, and this assumption may not hold true.8.Not Tax Advice – Any references to taxes in this design should not be interpreted as tax advice. US Life and its wealth consultants are not licensed tax advisors. You should consult your own tax professional regarding the potential tax implications of the Flexmethod strategy as it relates to your specific situation.
Robert Dombrosky US Life (317) 975-1615 learn-more@savings4life.com