The sale or transition of a business is a messy, complex, and time consuming process. If you want to make sure it’s a success and doesn’t tear your family apart, you have to make sure it’s done right. Randy Long reveals the biggest misconceptions around selling a business and how to make sure your children still want to eat Thanksgiving dinner together afterward. Randy is a lawyer by trade with a background in finance, having practiced for the past 25 years. Around half way into his career in law, Randy started working with the father of exit planning, John Brown. Around 9 years ago, Randy and his daughter started a separate consulting firm focused on helping multi-family, multi-owner businesses get prepared to sell. Many business owners have no idea what it takes to prepare a business to be sold. Working in the business and getting the day-to-day tasks done can make it hard to step out of that role and plan for the future. That’s typically where Randy comes in. Transition periods can be quite long, with most businesses working with Randy for more than a year. Some families contract with him for multiple years when the situation involves transitioning between generations. One of the biggest misconceptions is business owners don't understand that buyers are going to look at their business differently than they do. They don't look at it with the same set of eyes. The business owner has to be able to put on the glasses of a buyer to look fresh at their company, which can be a major challenge. Many business owners struggle with transitioning their business to their kids without causing a lot of conflict and strife among the other family members. Randy uses the Thanksgiving Test to judge the success of a business transition to the next generation. The first year after the parents are gone, will the kids still have Thanksgiving dinner together and be happy to be there? Not communicating with the family can be devastating after a parent’s death. Another major misconception is the belief that a person’s business will sell for a hypothetical average multiple, but the truth is each business is unique and sold on their pros and cons. Many business owners also find themselves in trouble after selling their business where they no longer have the income, benefits, and insurance they used to be able to deduct. There are a lot of variables when it comes to selling a business and no two sales are going to be quite the same. The business and merger and acquisition cycles also have an impact on the sale of a business. Ideally, business owners time the sale to maximize the value. Don’t wait until you absolutely want to get out of your business, plan around the business cycles instead. Service-based businesses can be sold too, they just need to be structured in a way that the business owner isn’t physically necessary to get the work done. Those types of business owners need to shift their thinking from the down to earth job of getting things done to higher level strategies like joint ventures. Randy usually starts working with those business owners by eliminating their tasks and slowly delegating them out to employees, which frees up the owner to do what they are good at: finding new business and inspiring employees. You’ve got to get away from the day-to-day grind to give yourself time to think and get your head around the future. Business owners often desire control, which can prevent them from scaling past a certain point. The most successful multiply themselves and expect progress instead of perfection. The first step is finding the work the business owner hates doing. Once those tasks are identified, they become the job description of the next employee. Randy prefers to keep his consulting business small and work with around 15 clients at any given time. Most financial advisors are W2 employees, not business owners. Those employees can be integral to a business and are often targeted during a transition to encourage them to stay on. One of the keys to the sale is identifying key employees. Randy tries to put a package together for them to stay during the transition that’s beneficial to them and to the future owner. Buyers are always looking to eliminate risk, and locking in key employees is one of the most important ways to mitigate risks of the purchase. Randy usually takes businesses through a sale over 6 to 12 months and works with companies earning anywhere from $2 million to $100 million annually. You have to reinvent the company as you move forward. You’re not going to run the company that your father ran because the world has changed. Just like how there is more to retirement than a 401k, there is more than just the dollars and cents in the sale of a business. The secrecy of money is an obstacle that many families face when trying to leave a legacy. Open lines of communication are crucial to the success of a generational business transition. One of the big benefits of working with Randy is his company brings a lot of things to light that might have previously been completely unknown. Randy works with business owners to figure out all aspects of their financial life prior to the sale of the business, and that can include closing the gap on what the business needs to sell for in order to fulfill the client’s needs. There are ways to limit tax exposure, especially capital gains taxes, but it requires extensive planning and time prior to the sale. The problem is business owners typically aren’t qualified to decide what they really need in this arena, but some professionals take the easy way and just do whatever the owner wants. This can lead to silo-style planning that causes more problems than it resolves.     Mentioned in this episode: questionsforbrian.com brianskrobonja.com

There is a key mindset shift that many people fail to make when they retire and it can cost them thousands of dollars from their investment portfolio. Hear about Hypothetical Helen and how her plan to pay off her mortgage with money from her 401k once she retires actually puts her further away from her goals, and what the most optimal solution for cash flow in retirement is.   Retirement in its purest form is simply the creation of passive income sources used to support your cash flow requirements. Everything revolves around your cash flow in retirement, yet many people lose sight of this fact and overcomplicate their investment strategy. Take the example of Helen. Helen was to have $40,000 per year to supplement her Social Security income. She has a million dollars in a 401k and has a mortgage of $200,000 with a payment of $14,400 annually, and her home is valued at $500,000. Her plan is to eliminate her mortgage with funds from her 401k as well as make some renovation while living off a 4% draw each year from the remainder. The 4% Rule is not necessarily the best strategy for income in retirement. The assets to income stacking method often yields better results, and can often create an additional $20,000 a year in cash flow from the same $1 million investment. Using the 401k triggers a tax liability on the full $200,000. Using an estimated 25% tax rate, Helen would end up with a distribution of $262,500, leaving just $737,500 to draw from at 4%. Factoring in the home renovations, Helen would be paying around $75,000 in taxes and reducing her annualized income by $5,100. Every one of those decisions moves her further and further away from her goal. Every decision you make flows downstream to your cash flow, which is why everything should be about maximizing that amount. Giving up control over your money is usually a bad idea. Whether that’s a bank or the government. Many people get hung up on paying a mortgage, but in Helen’s situation maintaining the mortgage would be the best solution to getting the most income from her assets. To satisfy Helen’s $40,000 retirement income goal, she could designate about $667,000 at 6%. The remaining $333,000 could be invested long term to help offset inflation or other cash needs along the way. She could also refinance her mortgage and pay roughly the same each month, but also get access to $50,000 tax-free with which to make those renovations. Instead of using her 401k which will cost her $75,000 in taxes to obtain, while also lowering her income by over $5,000 for the rest of her life, she can just use her home equity to give her the cash she needs while maximizing her income potential. A few key takeaways: tax-free money is better than taxable money. Home equity and life insurance values are tax-free sources of money. A home will appreciate whether or not it has a mortgage and has inflation as its tailwind. Once money is spent, it's gone forever and is no longer able to create income, and there's opportunity cost for every dollar spent. The mindset shift from accumulation over to utilization is where most people struggle in retirement.     Mentioned in this episode: CSF episode - The First Domino questionsforbrian.com

Regret and retirement don’t have to go together, but for many people they often do. Learn about the top five regrets people have in retirement and how you can set yourself up so instead of feeling like you should have done more, you can retire with confidence. When it comes to retirement, there are almost always things that you’re going to regret. Investments you missed the boat on or investments that went sour. Unfortunately, there is no crystal ball to make retirement planning easy. There are five common regrets that most retirees have and the first is not starting soon enough. The sooner you begin to save the longer your wealth has to compound over time. In addition to saving sooner, retirees often wish they had begun planning for the transition to retirement sooner as well. There is more to planning your retirement than just having a large investment account and picking the start date. Many retirees, mere weeks before retiring, find out there's much more to it and wish they had started years earlier. The next big regret is not asking for help sooner. Making assumptions is a slippery slope, and there is so much to consider. It can be challenging even for a seasoned advisor to navigate all the tax implications and available products. Not changing strategies is another major regret of many retirees. There are certain phases of growing assets that require a different approach and knowing when you are entering into another phase is critical for capitalizing on opportunities. Many would-be retirees start off investing in mutual funds but end up blowing right past the time they should be adjusting their investment strategy. You shouldn’t be investing the same way in retirement as you did in your 20’s. Not saving enough is one of the most common regrets of people retiring today. The idea that saving 10% will allow you to achieve your goals is inaccurate. We’re seeing the most effective plans are coming from people saving in the 20%-30% range and with the end goal in mind. Many people put their head in the sand when it comes to making important decisions about their retirement because it brings to mind their own mortality, but it’s important to think ahead. The ideal time to figure out long-term care is not when you’re forced to. Many of these regrets may seem like common sense, but the vast majority of people aren’t following through with them, common sense or not.     Mentioned in this episode: brianskrobonja.com/retirement-checklist questionsforbrian.com

Most people think about what investments they should be making or what stocks they should have in their portfolio when they approach retirement age, but they are going about it backwards. Brian Skrobonja breaks down the calculations you need to make in order to understand how ready you are for retirement and what your retirement plan needs to factor in to be truly financially free. How do you know when it's safe to retire? The answer depends on your plan and understanding the most important numbers in retirement. Success is the result of following a plan to fruition. The more specific the plan is, the higher the probability of reaching the goal. If you’re on the cusp of retirement, you may have a number of new questions and concerns starting to enter your mind. Are you invested in the right assets for retirement? How much should you be withdrawing from your accounts? Do you have enough saved up to last your whole retirement? If you search the internet, you’ll end up finding a lot of often contradictory advice. If you want to get a good sense of direction, take our complimentary Retirement Readiness Quiz. The quiz will ask you a series of questions to help you gauge how ready you are for retirement and give you an idea for what you still need to work on. One of the most important numbers you can know when it comes to retirement is your income needs. When you understand what level of income you need to afford everything in retirement, it’s much easier to work backwards from there to figure out what you need to create that flow of income. Total up all your bank payments, insurance, tax, and monthly living expenses. Include your regular expenses throughout the year as well because the total you’re looking for is how much money you will spend over a year. Keep in mind that your income needs in retirement will not be the same as they are when you’re working. Be sure to think about how you'll be spending your time in retirement because you will have a lot of time to fill. Once you have your income needs for the year calculated, subtract your Social Security and/or pension benefits, and any other fixed income. What’s left over is your income gap. With the income gap number you can calculate how much of your invested retirement money is required for retirement income. This will also tell you the yield you need to achieve to fund your lifestyle from the assets you have. This figure shouldn’t be more than 4% or 5%. Any higher and you considerably increase the risk of running out of money before you run out of life. You also have to factor in inflation on top of market volatility and healthcare expenses. If you stretch your resources too far right off the bat, you are setting yourself up to run out of money much sooner than you would otherwise. When making these calculations it’s best to err on the side of caution. Inflation will continue to be a major factor going forward. Using a historical figure of 3.5% inflation each year, we can estimate that over the course of 15 years, your income will depreciate by 68%. This is why you need two pools of income for retirement, one for income now and another for income later. The key is in finding income-producing assets, particularly ones that are pegged or indexed for inflation. This can be done either actively (getting a part time job, buying a business, owning a rental property) or more passively (annuities and other similar investments). Formulate a plan that articulates where you are, where you're going and what needs to be done to start receiving the income you need.     Mentioned in this Episode: Retirement Readiness Scorecard - brianskrobonja.com/retirementreadinessscorecard/ 6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement - kiplinger.com/retirement/retirement-planning/603596/6-things-you-can-do-right-now-to-ensure-your-money-will-last

How do you pick between a lump sum payment from your pension and an annuity? A lot of that decision depends, but if you want to have control over your financial assets, a lump sum is often the better option. Find out when you should take a lump sum option instead of an annuity, why insurance is one of the most important pieces of the puzzle, and how to ensure your family doesn’t lose out either way.  The choice between a pension annuity and a lump sum often comes down to which provides the greatest income, but that’s not the only factor you need to consider. We're seeing fewer and fewer pensions than we did 20 years ago because of the systemic issues with defined benefit programs. They are often replaced with defined contribution programs like 401(k)s. People used to retire at the age of 65 and could expect to live another 10 to 15 years on average. Today, people are retiring sooner and living longer than ever, and that is making the traditional approach to retirement unsustainable. Historically, pensions aimed for between 4.5% and 7.5% to calculate their projection of benefits. With interest rates being below that range for decades and with life expectancy being lower in the past, the math worked out, but that’s no longer the case. According to an article in the Daily News, nearly 1 million working and retired Americans are currently covered by pension plans that are in imminent danger of insolvency. Pensions are insured similarly to bank accounts by the Pension Benefit Guaranty Corporation (PBGC), but according to Heritage.org, they found that for promised benefits of $24,000 a year, they're insured up to $12,870. The PBGC has the same problem as the FDIC. The FDIC has billions and reserves, but has exposure to trillions of dollars in bank accounts. The promise of insurance for both pensions and bank accounts is not mathematically supported. If the PBGC becomes insolvent, the promise goes from $12,870 down to about $1,500. If you are relying on an annuity payment from a pension, you're placing a lot of trust in the pension calculations. And if the calculations are off, there's not enough insurance to cover the loss. The alternative to the pension annuity, the lump sum payment, gives you much more control over the future of your finances. Not all pensions are destined to go broke, but the risk should be taken into consideration when constructing the income streams that will support you for the rest of your life. A lump sum payment gives you control over your financial assets. Your income needs can fluctuate in retirement and the control of the assets backing your income gives you flexibility to meet your income needs. In the event that you predecease your spouse, they gain control of the asset. Your heirs can also inherit the asset, which is not the case with a pension annuity. Not all pensions offer a lump sum offer. In that case, the goal is to move as much of it into your control as possible. A single life annuity option is often your highest monthly benefit and is the quickest way to get the most from the pension in the shortest period of time. The downside to electing this option is that it can leave your spouse with an income shortage, which is why your spouse will have to sign off on it. In that case, you should buy insurance either within the pension or outside of it. With insurance outside the pension, you would accept the single life benefit taking the highest annuity payment then pay a premium to an insurance contract to pay a lump sum to the surviving spouse or the children if you die. Inside the pension, you take the lower annuity amount to ensure your spouse continues to receive the benefit after your death. Buying insurance within a pension that has a cost of living adjustment also comes with additional costs which compound over time. For most people, this means you’re paying an ever increasing monthly premium for a decreasing benefit. It's critical that the type of policy you purchase and the amount of the insurance obtained are in alignment with what you need to protect your family. One misstep in this process can leave your policy at risk of lapsing or expiring, leaving your spouse vulnerable to a significant income gap.     Mentioned in this episode: pensionelectionguide.com questionsforbrian.com

When it comes to investing for retirement, following the status quo investment advice is one of the worst things you can do. Most people are deferring taxes in their 401k, storing money in a bank, and working to pay off their mortgage, all without realizing that doing those things won’t move them closer to what they really want in retirement. Find out how to ditch the status quo and build an investment portfolio that allows you to retire without having to worry about income, taxes, or what’s happening in the stock market. There are no perfect investments that are right for everyone. Financial unicorns don’t exist, but it is possible to create a portfolio of investments that accomplish everything you would want from that one investment. In order to find what you’re looking for in an investment, you have to know what you’re looking for. You need to know what your goals are and what investment features you need to accomplish those goals. People often default to doing things that don't always align with what they're looking to achieve. Example: A 45-year-old business owner storing cash in a bank account earning nothing while borrowing money from a bank and paying interest to finance equipment purchases. We usually see people settling for the status quo out of a desire to do something, but it's most often not what they're looking for. They are usually following some generic advice they heard about investing that doesn’t really apply to them or their life situation. Most savers are looking for financial security. They know they need to do something to achieve that, but don’t know exactly what actions they should be taking so they default to what everyone else is doing. Deferring taxes in a 401k. Storing money in the bank, and paying off a mortgage are the three most common financial aspirations, however, these three concepts for handling money have caused more problems and difficulty for people than anything else other than debt issues. They are simple, which makes them easy to understand and appealing for most people, but the results are often underwhelming and frustrating. If you're storing money at the bank, the bank is making money on your money while paying you next to nothing in return. If you're borrowing money from the bank, you're giving up control of a portion of your cash flow to repay the loan while paying the bank interest. When you fund a tax-deferred account, you're essentially allowing the government to dictate when you can access your money, and have no real idea what tax rates will be in the future, gambling with your money in the process. There are four broad categories to consider when pairing products together, you have long-term growth, consistent income, access to cash, and tax mitigation. Aside from entrepreneurship and real estate, public markets have the highest growth potential over the long term specifically centered around capital appreciation. But there are two other aspects of growth that most people overlook, growth through income and uninterrupted growth. Growth of income is centered around an asset that creates income to reinvest and is best achieved through private markets. Uninterrupted growth is where your money continues to accumulate and earn interest in a vehicle like a specially structured whole life insurance policy while allowing you to borrow against it essentially for free. See our past episode on Infinite Banking to learn more. Stacking these growth strategies together expands your diversification. It reduces risk and volatility and can increase your wealth more effectively, giving you more control over time. Having consistent income ranks highest on the list of things needed to have financial security. Without consistent income flowing into your checking account, you cannot effectively manage your cash flow. If the source of the income is at risk, you add another layer threatening the longevity of your income. The public stock market is the status quo default of retirement plans and is the least manageable of all the areas being discussed, yet most people only think of the stock market when they think about investing. You cannot control the markets and therefore cannot predict the income account value or its longevity. Annuities and private market investments are best suited for income and should be the primary source for fulfilling the goal of having consistent income in retirement, you just need to know what you’re looking for. Having access to cash is also high on the list of priorities. Traditional stock market investments fail this requirement with age restrictions, market volatility, and tax liabilities all being major negative aspects. Public markets are best suited for long-term growth and banks are best suited for moving money around to pay your bills and conduct business. Tax mitigation is desired by everyone but seldom seen in real life because tax mitigation strategies fall outside the status quo. Tax deferral does not equal tax mitigation. Deferring taxes may actually be causing you more headaches in the future as we can’t be sure what tax rates will be during your retirement with many experts predicting them to be considerably higher. Tax mitigation is a complicated process and has a lot of factors. It’s best to consult a professional about your exact situation to come up with a plan for mitigating taxes and minimizing taxes along the way.     Mentioned in this episode:  Past Infinite Banking episode - podcasts.apple.com/us/podcast/an-alternative-banking-option-encore/id1226624694?i=1000554171157 takebriansquiz.com questionsforbrian.com

Gold has been a source of wealth for thousands of years and a safe haven in uncertain times, but with cryptocurrencies like Bitcoin coming onto the scene, is that about to change? Before we can answer that question, we need to understand the history of the US dollar and how gold has fared over the past 100 years to get an idea what the future may hold. Find out what makes Bitcoin so special and why it may be the gold of the 21st century. A growing number of people believe Bitcoin and other cryptocurrencies could soon replace gold as a safe haven against a depreciating dollar. Compared to the other cryptocurrencies, one of the unique features that sets Bitcoin apart is the fact that the total supply is structurally restricted to 21 million coins. This is a hard cap on the total amount of Bitcoins that will ever be in existence and is one of the reasons why so many investors are bullish on the future value of Bitcoin. Bitcoin has been often compared to gold. Gold has been used to store value during uncertain times for thousands of years. With mining on the decline and demand going up, it’s safe to assume that prices will rise in the future. Whether you lean toward digital currencies or prefer gold, at the core of the debate is a universal distrust of government. In recent years, governments around the world have spent and printed fiat currency at an unprecedented level, the results of which remain to be seen. With gold, history has proven its viability, but historical events have impacted its price. After the Federal Reserve Act was implemented in 1913, the government wanted to increase the money supply and declared that the spot price of gold would increase by 69%. In ancient Rome, Caesar diluted and trimmed the gold coins used as currency in order to increase the overall supply of coins. In 1971, the government was facing another money supply shortage. With the US dollar still on the gold standard, their printing capabilities were restricted. Their answer was to leave the gold standard and convert to a fiat currency. Fiat currency is a currency that’s not backed or pegged to any real world asset, and instead is backed by the printing country's credit worthiness. Gold has been on a rocky incline since. Gold seems to be inversely correlated to world events. When things are uncertain, gold rises as people look for a safe haven for their wealth, and in good times the price declines as people are more willing to put their money elsewhere. After 2001, the US experienced a series of drastic changes. 9/11, the tech bubble, and the 2008 financial crash all happened within an eight-year span and since then, the government has been printing money in an unprecedented fashion. In recent years, and as a result of tax cuts and deregulation, the markets rose by 56%. There have been many comparisons between the United States and the Roman Empire. The US is currently going down the same economic road Rome did before the collapse of the empire. There are rising tensions between the US and Russia, as well as China, that are creating conditions eerily similar to the Cold War. It’s impossible to know for sure if Bitcoin will replace gold as the new safe haven for wealth. For diversified investors, the best answer may be to own both. Bitcoin and the blockchain technology have some advantages compared to gold, but it also comes with disadvantages. Bitcoin may be revolutionary in the near future, but it still relies on systems like electricity and the internet to function, whereas gold doesn’t have those drawbacks. At this point, Bitcoin is too volatile to truly replace gold as a storage of wealth. One of the most important things to consider before buying gold, Bitcoin, or any other investments is really understanding and knowing your risk tolerance. Discover your exact risk tolerance score at skrobonjafinancialgroup.com/risk-tolerance.     Mentioned in this episode:  skrobonjafinancialgroup.com/risk-tolerance questionsforbrian.com

There is no silver bullet investment that’s right for everyone, so beware of financial professionals recommending a particular investment or product without first understanding where you are in your life and what your money goals are first. That’s essentially like prescribing a treatment before your doctor diagnoses your problem! Find out what questions you should be asking yourself and your financial advisor to figure out what you’re trying to achieve and the best strategy for you to get it done.  Discussing investment options with an advisor without first having a strategic plan in place is like asking for a prescription without a diagnosis. The majority of people are confused about how to approach their financial situation, but the people that need to hear this message the most are the most likely ones who think that this message is for someone else. It's important to know why you're building the wealth and not just learning about what investments to add to your portfolio. Asking about a specific type of investment is the wrong question to ask. You should think about your investments in the context of what you’re trying to achieve and what stage of life you’re in. Recommending an investment would be like recommending a drug for a random ailment. A doctor can’t prescribe a treatment without first diagnosing the issue. In the same way a financial advisor can’t say a particular investment is right for someone without first going through what they need and where they are trying to go, but that is surprisingly common in the way people approach investing. Solving a problem like retirement income planning requires specific solutions. Management styles, approaches to diversification, benchmarks, performance, and other metrics are important to consider, but they come after figuring out the overall financial plan and goals. People who have accumulated wealth understand how to grow money. But when it comes time to begin using the money or protecting it, it can lead to confusion and uneasiness. Every investor wants to grow their money, but that isn’t enough information to be able to plan around and make recommendations on what should be in their portfolio. What’s the number one priority in your life right now? Is it to build income streams for when you retire? To make sure your wife is taken care of when you die? Answering that question will go a long way to pointing you in the right direction. Financial advisors are often so focused on gathering assets to manage that they often miss the forest to the trees. They assume people want their assets to grow and focus solely on that goal. Financial Planning is not about investments. It's about mapping out how to use your money now and in the future. Investments are tools used to accomplish that goal. Not everyone is an expert at investing and there is often a disconnect between their needs and investments. Remember, there are specific things you need the money to do for you in retirement, and you should focus on that. What do you need the money for? If your current advisor is entirely focused on the products they are offering and not your financial goals in the long-term, maybe it’s time to look for another advisor.     Mentioned in this episode:  brianskrobonja.com/resources questionsforbrian.com

Brian Skrobonja breaks down the myths and the mechanics of Infinite Banking and how this strategy allows you to take control of your cash flow and finance larger purchases while still allowing your money to earn dividends and interest. Learn how Infinite Banking works, why you need to forget what you think you know about whole life insurance, and whether this strategy is right for you.  In order to understand the concept of Infinite Banking, you have to set aside the common understanding of how life insurance works. You also have to realize that there are pros and cons with every financial strategy and there isn’t any silver bullet that everyone should adopt. Infinite Banking, also known as Privatized Banking, Cash Flow Banking, or Bank On Yourself, utilizes a specially designed whole life insurance contract. If you search for those terms you’re likely to find a huge number of articles on how the process works (or doesn’t work) because the strategy has been around for years. When you look at the course of someone’s life, you might be surprised at how much money is actually earned and spent. Capturing and maintaining control of this money as it comes in and goes out is the core of this strategy. Many of us use banks on a day-to-day basis. Aside from the recurring expenses that we all need to spend money on, there are also semi-frequent large transactions that you may want to save for. Big ticket items may require borrowing money from a bank, but no matter how you go about funding those purchases, the end result is a zero-sum game which requires a continuous need to earn money. In the example of purchasing a $30,000 automobile every five years, you save money each month and then write a check at the five-year mark, bringing your account to zero with the whole process starting off again. Using a specially designed life insurance contract can create long-term wealth from money that you would have otherwise spent. It requires using the life insurance contract that is very different from the traditional approach. Make sure you are working with a financial advisor that understands the concept. Many people dismiss whole life insurance as too expensive with rates of return that are too low, and in some ways that’s true. Term life is usually a better option for life insurance, but we are not talking about simply buying life insurance. The idea is using a whole life insurance contract as a cash alternative, not an investment alternative or life insurance solution. A specially designed whole life insurance contract has a specific feature to allow the policy owner access to money through non-recognition loans from the insurance company. This allows for your entire cash value to stay within the policy earning interest and dividends, and allows for uninterrupted growth. Compared to a savings account where you are withdrawing money and the interest earning balance declines each time, borrowing money against your policy allows that money to continue to earn interest and grow. There are ways to structure the contract that can also offset the cost of the loan. This kind of strategy is the best for business owners and habitual savers who don’t require every dollar they make. The loan on the contract comes with flexibility because it doesn’t come with the usual repayment schedule. From the insurance company’s perspective, the loan is covered by the collateral in the policy. You’re likely to want to repay the loan so that you have access to the money later. This strategy is all about cash flow and how the design creates a conduit to creating more money than simply paying cash or financing purchases through a bank. There are also tax considerations for life insurance. The earnings within a policy are tax-free, same with the money growing within the policy, the death benefit, and the loans. If you are a good saver, this strategy could work for you. Infinite Banking will lock up your money for up to five to seven years. The lack of liquidity covers the cost of the life insurance and to disregard that could be careless. Don’t beat yourself up about financial decisions you’ve made in the past. There is a lot of misinformation about financial topics out there.

How much does an average rate of return matter? Or does it even matter at all? And what about your 401k? Is the way you’re approaching it the right one? Listen to this episode to hear a few common myths being busted – and get all the positives that will come your way as a result. The other day, Brian came across a quote that read,‘If things you thought were true were actually false, when would you want to know?’ As someone who is continuously seeking information to either support his way of thinking or to provide more insight into what he’s thinking, he tends to be pretty grounded, thanks to that process. One of the biggest half truths out there has to do with an investment’s average rate of return. Brian often hears mutual fund companies, investment advisers, and colleagues of his discuss investment averages and he uses this information to make decisions about which investment to choose. If you look at the math, you’ll notice that an investment’s average rate of return doesn’t mean much. Let’s say you hear that an investment made a 25% average rate of return, then you would think that if you invested $100 over four years, you would have $244. Perhaps you would, but there are also cases where, with a 25% average, you would end up breaking even and end up with $100. Investments don’t typically have the same positive returns year after year – they can fluctuate up and down, and that’s what creates an average over time. If you made a 100% rate of return, one year, your $100 would become $200. If the following year you would lose 50% you would go back to the original $100. Think of it for a moment: if you took a 100% gain, 50% loss, 100% gain, 50% loss fluctuation, your average rate of return would be 25%. The next myth has to do with your mortgage. Quite often, Brian hears conversations related to the fact that, according to popular belief, doing a 15-year mortgage over a 30-year mortgage is the way to go. This typically stems from the idea that if you pay on a loan for 15 years compared to 30 years, then you’re going to pay less interest. That is indeed true, but there’s more to the equation than simply looking at the interest paid. Too many people get hung up on just interest rates and very micro topics. However, whenever you look at a financial topic, it’s important to look at it in a macro view, and make sure that you consider all the variables that come into it. Then, there’s something many people contribute to without actually understanding how it really works: their 401k. Why contribute to someone you don’t know much about? Many people do so simply because contributing to a 401k is convenient and offers a tax deduction. And there’s even a myth within the myth: the misconception that the same tax code exists for people working as they do for people retired. This is actually incorrect – while it’s true that some of the income one receives in return is taxed differently, the tax bracket used is actually the same. The IRS doesn’t offer a tax bracket just for retirees. As you’re thinking about your finances and your retirement, there’s a trap some fall into, and that is not understanding that some tax deductions may be available now but they won’t be in the future. Brian has three examples of tax deductions you may be getting now but might not be getting later. The first one is your 401k: as you get ready to retire, you probably won’t be contributing to it anymore. Then, there are your children. When they don’t live with you anymore, you won’t be entitled to receive any child tax credits. And, lastly, your home mortgage interest – if you have your home paid off before you retire, your interest deduction will be decreasing. And in case you’re thinking about accessing your 401k money, you’d better think again. In fact, there’s a 10% penalty fee in place for those who decide to touch that money before they are 59 and a half. That money can only be accessed without penalties when you reach that age or when you terminate the employment the 401k fund is tied to. On the flip side, when you are 70 and a half, they force you to take the 401k money out whether you need it or not… Here are a couple of questions worth reflecting on: ‘Does it make sense to risk deferring taxes and retirement just to get the tax deduction?’ and ‘Does it make sense to pay taxes now when we know what the tax codes are?’