DeGroff Exam 3 (Wealth Accumulation Only)

Wealth Accumulation Lectures

Wealth

The aggregate of the resources available to you.

To increase wealth.

Purpose of Wealth Accumulation?

• Increase Money

• Increase Capacity for Money

Two Ways to Increase Wealth?

Retirement

___ a time when people must rely upon their financial resources for creating an ongoing income.

Withdrawal Rate

___ rate at which assets are withdrawn from an investment portfolio.

High

• higher income, higher risk of not lasting

Low

• lower income, likely money lasts

High vs. Low Withdrawal Rates?

The 4% Rule.

A person can withdraw 4% of initial investment portfolio balance and take inflationary raises and reasonably expect the portfolio to last for retirement.

the initial portfolio balance

The 4% Withdrawal Rate is based upon . .

• Inflationary Raises Added Each Year

• 50/50 Stock Bond

• Excludes Management Fees

• Portfolio to Last 30-50 Years

4% Rule Assumptions?

• Increased Taxes

• Increased Retirement Expenses

• Bear Markets

• Legacy Objectives

Situational Factors that Affect Withdrawals?

• Roth IRA

• Roth 401(k)

• WLI

Avoid Taxes Through Tax-Free Income Sources Such As:

• Income Needs are Larger in Early Retirement Years

• If Tax Rates Increase

Prioritize Tax-Free Income When:

• Income Needs are Lower in Later Retirement Years

• Periods of Low Tax Rates

Prioritize Taxable Income When:

• Assets that are growing when the market is declining

• Assets that are income producing

Avoid Bear Markets with:

• WLI

• Savings Account

Assets that are growing when the market is declining?

• Bonds

• Dividend Paying Stocks

• Rental Properties

Assets that are income producing?

• Occur once every 9 years

• Last for 3 years

Bear Market Facts:

WLI

Complete Legacy Objectives Through?

• Death Benefit Passes Tax Free to Beneficiaries

• Short Amount of Time (couple weeks)

• More Costly to Purchase When Older

Whole Life Insurance Realities:

Cash Flow

Increased Stability Through Increasing NCC

Risk Management

Increased Stability Through Protecting Against Statistically Probable Events

Wealth Accumulation

Increased Stability Through Accumulating Wealth

• Short Term Stability​

  • ~5 years​

• Mid Term Stability​

  • Next 20+ years.​

• Long Term Stability​

  • ~Retirement+​

Time Periods for Short, Mid, and Long Term Stability?

• Buying a house​

• Increasing Cash Flow Fund to 6 months.​

• Marriage, etc.​

• Reduction of Non-leveraging debt.​

Common Short Term Goals?

• Larger purchases​

• Financial Opportunities

Common Mid Term Goals?

• Viable Retirement lifestyle​

Common Long Term Goals?

Equity

___ is your [ownership] claim on an asset

liquidity

Equity can be borrowed against to create ____?

• Increase returns​

• Minimize volatility​

Two main objectives of invesment portfolios?

volatility

Increase investment returns through confidence in ____, not by avoiding ___.

Growth

___ is first, a question of what you have, and second, aquestion of how you use what you have.

capacity

• If you are limited in what you have, your ____ for wealth is diminished. ​

• Short Term Stability​

  • Savings Account​

• Mid Term Stability​

  • Whole Life Insurance​

  • Non-Qualified Investment Account​

• Long Term Stability​

  • Retirement Accounts​

Natural Returns for Short, Mid, Long Term?

Structural Returns

____ returns that happen from what you can do withyour structure (allocation).​

• Short Term​

  • House​

  • Insurance​

  • Investment Returns​

• Mid Term​

  • Market Swings​

  • Financing your own acquisitions​

• Long Term​

  • Taxation​

  • Cash Flow​

Structural Returns for Short, Mid, Long Term?

Short Term, Mid Term, Long Term

Which provides the highest Natural Returns (lowest to highest):​

Long Term, Mid Term, Short Term

Which provides the highest Structural Returns (lowest to highest):​

Short Term

Which increases your Stability the most?​

Savings, NQA+WLI,Retirement Accounts in that order.​

Increase your stability through prioritizing:

long term stability

A focus on increasing your short term stability increases your:

short term stability

Mid-term stability is the result of:

mid term stability

Stability in retirement is the result of: