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If you have an old 401(k) laying around from a previous employer, you only have a small number of options on what you can do with it. Here are 5 options you have when dealing with an old 401(k). We help people out with Option 5.   What is Ratchet Growth? If you’ve ever used a ratchet, you’ll understand this analogy. For those of you who haven't used one, when you're using a ratchet you set it so that it only moves in one direction - forward in whichever direction you decide, never backward. Each turn of the ratchet is a step forward, securing progress with every twist. Now, picture one of your financial accounts doing the same. Just like a ratchet, the growth in your account only moves in one direction – up, never down! Here's how it works:
Don't let market volatility ratchet down your dreams. Utilize an alternative solution where your financial growth is as secure as a ratchet's grip. If you want to learn more on how you can leverage this powerful tool for your financial strategy, contact us today! You can also watch this brief video below highlighting the benefits of this strategy.  You may have heard about what happens if you double a penny every day for a month. Usually someone will give you a choice between taking a million dollars today or a penny that doubles every day for a month. A lot of people will instinctively choose the million dollars because it seems nearly impossible that doubling a penny every day for a month would be more than a million dollars, but IT IS! You would actually have $10,737,418 at the end of the month!!! With that in mind, we want to take it a step further to highlight the importance of letting that penny grow uninterrupted by comparing it to four big wealth destroyers (Fees, Volatility, Taxes, & Interrupting Compounding). This is what happens when you inject the wealth destroyers into the equation: 1. FEES: If you double your penny every day, but pay just a little 2% fee — you’ll have $5,857,093 at end of month. 2. VOLATILITY: If you double your penny every day, but have only three days of volatility (a negative 40% return on days 10, 20, and 30) — you’ll only have $289,910 at end of month. 3. TAXES: If you double your penny every day, but you pay a 25% tax on the growth of your penny — at end of month you'll have $1,918. 4. INTERRUPTING COMPOUNDING: If you double your penny every day, but on day 21 you use the cash to buy a car and reset the compounding back to a penny — you'll have just $2.56 at end of month. Between those four wealth destroyers, we are talking about a difference of MILLIONS OF DOLLARS 🤯 ($4,880,325 to $10,726,930)! So, you can see how important it is to avoid these four wealth destroyers as best as possible. Our clients can use three distinct tools to avoid or severely reduce all four of the wealth destroyers to allow their money to compound uninterrupted EVEN if they use their money! If you want to learn how to protect yourself from these threats to your money, let's setup a time to talk. Here's the math on these four wealth destroyers so you can see it with your own eyes:  A couple weeks ago a fellow financial professional was saying that one of his client’s husbands was repeatedly giving his client a really hard time about using one of our secure retirement tools to protect her money. Her husband had ONE year where he experienced higher gains than her and apparently that qualified him as a genius in the world of finance. That same day, this friend also mentioned a comment that he saw on social media where someone said their money would be better off sitting in the S&P 500 than in the tool our friend’s client was using. People say all types of things online and will often attempt to portray that they’re speaking with some sort of authority on subjects they actually know nothing about. Well, the funny thing about both his client’s husband’s repeated nagging comments and the social media comment is that we can actually run the numbers and see who is right. So we did. 😉 (See below) LET ME TELL YOU ABOUT THE TOOL IN QUESTION… As simply as we can explain it, you don’t expose yourself to ANY of the losses in the stock market. That means that if the S&P 500 has negative returns then it doesn’t affect you at all. You don’t have any gains, but you also don’t have any losses like your friends can have who are in the market. Because you can’t take any losses, you can’t also expect to take all the gains. That wouldn’t be fair. So to make it fair, your gains are capped. The tool our friend’s client is using has a cap of 10% on the S&P 500. Here’s what that means…
With his client’s 10% cap rate in mind, we ran the hypothetical 10% cap from the year 2000 all the way through 2023 and the results didn’t disappoint. *Important note: We do not know what the cap rates were for his client’s particular tool in the year 2000. We only know what they were from the time she started using it to now (which has been 10%). One other thing, the S&P 500 isn’t the only index she can follow. She can use multiple other indexes and even some without any cap on gains, BUT to keep things simple for an illustration, We ran the numbers as if she followed the S&P 500 all 24 years with the same cap rate of 10% and here are the results:  In red you can see the actual price return of the S&P 500 from 2000 to 2023. In blue you can see the actual S&P 500 returns with a 10% cap. Each year where the S&P 500 experienced a loss, the tool using the S&P 500 with a 10% cap just stayed flat (because the losses are capped at 0%). Each year where the S&P 500 experienced a gain of less than 10%, his client would’ve received that entire gain. Each year the S&P 500 experienced a gain of more than 10%, his client received a 10% gain. In both scenarios, the client started with $100,000 and at no point in the entire 24 years would his client have been better just putting her money into the S&P 500 in this hypothetical. HERE’S WHY THAT’S THE CASE… When you take losses, you have to have to make up for those losses before you can start experiencing gains and in the years 2000, 2001, and 2002 the S&P 500 experience a series of negative returns. It also had a massive negative return of nearly 40% in 2008. So from 2000 to 2013, if you had invested in the S&P 500, you would’ve spent nearly 13 years just getting back to breakeven. We don’t have to look back that far though to determine if the opponents of this tool are right. We can just look back over the past year and a half (when our friend’s client began using this tool) to determine if her money would’ve experienced better returns in the S&P 500 or in the tool she’s using had she allocated all her money in this tool to follow the S&P 500 with a 10% cap. We ran those numbers too and guess what, so far, she made the right choice in this scenario:  As you can see from the chart, we used the same hypothetical $100,000 for each option. In year one (2022), the S&P 500 dropped by 19.44%, which means had she invested her money in the S&P 500 she would’ve lost nearly $20,000 right away. With the tool she’s using, she didn’t lose a dime because she isn’t subject to market volatility. Her losses are capped.
In year two (2023), the S&P 500 gained 24.23%, which means had she invested her money in the S&P 500 she would’ve recouped her losses, but she would ONLY have a net gain of $80 over two years! With the tool she’s using, she would earn 10% (the full amount that she can earn). She didn’t have to spend 2023 making up for the prior year’s losses. She started experiencing growth right away and in this hypothetical she is up $10,000 instead of the $80 she would’ve been had she invested her money in the S&P 500. We were halfway through 2024 and still, as of July 1, 2024, she would still be ahead using the tool she’s using. In fact, she’d be roughly $6,500 ahead and she doesn’t have the stress and worry that comes along with being exposed to market volatility. If you’re interested in exploring what this tool could look like in your portfolio, let’s talk. |
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