As people lose their jobs, transition to new careers, retire or keep their money in a bank savings/CDs etc., they are often left with 401K plans, 403Bs and other investment accounts that are unable to earn a significant interest rate. This money is considered “dead”. There is no way of reviving it unless it is rolled over or invested in a vehicle that is going to offer a high rate of return. The problem is, the banks aren’t offering rates that are worth considering. So what is the average middle income family to do?
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One of my clients worked for a well established family owned franchise. After her 12 year career ended, she had accumulated approximately $36,000 in a 401K. She thought that was pretty decent considering the fact that she was only contributing $100 per month to the account. When I met with her, I educated her on “The Rule of 72”, a banking rule that gives you the approximate amount of years it will take your money to double, based on the interest rate given. With the interest rate of 2.3% being offered her (which could be considered a high yield interest rate), it would take 31 years for her $36,000 to become $72,000. She would have been 77 years old with only $72,000 to live on. There is no way that she would have been able to survive in her retirement years. I created a solution to invest her $36,000 in mutual funds. This afforded her the opportunity to become “Primary Investor” of her money (cutting out the middle-man…banks, credit unions, etc). With this opportunity, she will now earn what the banks have been earning. (We’ll talk more about this later). Her 401K has been resuscitated.
There are trillions of dollars in “dead money” floating around. People are looking for answers to help revive their investments so that their families don’t end up eating beans and rice for the rest of their lives. It is such a blessing to be in a position with the necessary licenses to offer the education needed in order to help people in our communities have a successful financial future. Most people I meet don’t have hundreds and thousands of dollars to invest. They may ONLY have $25.00. I’m just glad that I get to show them how that $25.00 can be just as powerful as those with hundreds and thousands. It’s all about the power of compound interest.
Listen, most people don’t plan to fail, they simply fail to plan. Either way, in your planning or failure, you lose. Let’s start putting some plans in place my friends. Financial independence won’t just drop out of the sky. You have to prepare for it.
Until next time,
Regional Vice President