2015 BUYER CONSIDERATIONS
The Fast Track to Financial Security
In 1995, when interest rates were at 8.5%, if you had been told that you could borrow as much money as you wanted at 4% interest, you would have said, “Where do I sign?” You probably would have taken the money, reinvested it, and made a nice return. We’ve become so used to years of depressed interest rates, that we’ve become oblivious to one of the greatest investment opportunities of our lifetime.
Consider a typical example. Let’s say you’re not planning on retiring for 20 years, and every year you can set aside $10,000 to place in a 401K.
Example A – The Traditional Conservative Approach
| YEAR | ANNUAL AMOUNT INVESTED | ANNUAL INTEREST ACCRUED AT 5% | TOTAL ASSETS | YEAR | TOTAL AMOUNT INVESTED | ANNUAL INTEREST ACCRUED AT 5% | TOTAL ASSETS |
| 2015 | $10,000.00 | $500.00 | $10,500 | 2022 | $142,067.87 | $7,103.39 | $149,171.26 |
| 2016 | $20,500.00 | $1,025.00 | $21,525 | 2023 | $159,171.26 | $7,958.56 | $167,129.82 |
| 2017 | $31,525.00 | $1,576.25 | $33,101.25 | 2024 | $177,129.82 | $8,856.49 | $185,986.31 |
| 2018 | $43,101.25 | $2,155.06 | $45,256.31 | 2025 | $195,986.31 | $9,799.32 | $205,785.63 |
| 2019 | $55,256.31 | $2,762.82 | $58,019.13 | 2026 | $215,785.63 | $10,789.28 | $226,574.91 |
| 2020 | $68,019.13 | $3,400.96 | $71,420.09 | 2027 | $236,574.91 | $11,828.75 | $248,403.66 |
| 2021 | $81,420.09 | $4,071.00 | $85,491.09 | 2028 | $258,403.66 | $12,920.18 | $271,323.84 |
| 2022 | $95,491.09 | $4,774.55 | $100,265.64 | 2029 | $281,323.84 | $14,066.19 | $295,390.03 |
| 2023 | $110,265.64 | $5,513.28 | $115,778.92 | 2030 | $305,390.03 | $15,269.50 | $320,659.53 |
| 2024 | $125,778.92 | $6,288.95 | $132,067.87 | 2031 | $330,659.53 | $16,532.98 | $347,192.51 |
TOTAL GROSS AMOUNT INVESTED WITHOUT INTEREST: $200,000.00
TOTAL INTEREST ACCRUED AT 5% COMPOUNDED ANNUALLY: $147,192.51
TOTAL ASSETS AT THE END OF 20 YEAR PERIOD: $347,192.51
At 5% interest per year, you would have saved $347,192.51. That would give you only $17,359.63 a year to live on for the rest of your life (not counting social security or pension income). That’s less than $1,500 a month to live on for the rest of your life. After inflation, how will you pay for your healthcare, food bills, utilities and transportation costs? And, that’s assuming you stay perfectly healthy, your car or air conditioner doesn’t need any repairs, and you spend nothing on entertainment, which is highly unlikely. This example also assumes that you can actually save $10,000 every year to put towards retirement. Imagine how meager your existence is likely to be.
There is however, an alternative to this traditional approach. We have the solution which will be offered in tomorrow’s Cup o’ Joe. If you retire in 20 years at 65, and live to be 90, it may just save you 25 years of financial frustration during your retirement!