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We help our clients pursue their wealth management goals through careful advice. We offer our customized wealth management solutions to wealthy individuals and families, family offices, charitable gift programs, endowments and foundations. Call us at 972-386-6639 to schedule a personal wealth review.
July 6, 2011

Did you put off saving for Retirement?

Did you go thru an awful divorce and ½ of your 401k is with your ex?

Most people get out of college, get married, buy a home and have children. As the kids grow, they move to a bigger home. As the kids get older, there are private schools and soccer camps to pay for. And then you are 40 and you wake up and you realize you have not started saving or have not been saving enough for your retirement. Or simply, did you get laid off and you went thru your retirement plan Do you need to catch up?

A solution might be Leveraged Planning!  

Leverage planning is relatively a simple concept. Are you better off with investing a large one time deposit today or depositing small amounts over the next 20 years? In other words, are you better off with a $240,000 deposit today or $1000 a month for 20 years (or the same 240,000)? Well, if you earn 7% each year, the one time deposit will grow to around 900K. The monthly $1,000 investment will grow to around 525K. A huge difference! So the answer in this example is investing $240k. But the question is how do you get the one time $240k. Simple! Borrow it. If you borrowed the 240k at 5%, your monthly payment would be $1,000. Sounds familiar? Well yes. You have a choice. Pay $1,000 a month for 20 years and get just over $500k or borrow $240k then pay the bank $1000 a month interest. You still are paying the same amount but you have benefit of the one time LARGE deposit.

It is like buying a home. You borrow the money, pay the bank back each month and have the equity after you pay the bank back.  

By the way, some accountants deduct the interest payment so the true interest cost in this example would be in a 30% tax bracket only 3.5% or $700 per month

This is what we call leveraged planning. Banks love this idea. You invest in an account and pledge the account as collateral. If you default, then the bank will get the accounts balance. They are never at risk, they earn interest and YOU have the LARGE one time deposit. Of course there are some restrictions and you would have to qualify for the $1,000 per month. There are also restrictions on where you can invest but the accounts are tied to the stock market in a very advantageous way to protect you as well as the bank. For example, if the market value increases 10%, you get credited 10%. If the markets value drops 10%, you lose nothing. Again, the bank is never at risk. The growth is tax deferred just like your 401k. And best of all, UNLIKE your 401k, you will have access to your money tax free. This benefit will save you or add to your retirement income at least 25-40% depending upon your tax bracket.  

Can you invest more, of course! It all depends upon your cash flow and how much you can put away comfortably. Sounds interesting? Call me at 972-386-6639 and I can go over the details.  


My name is Mark S. Pincus and with over 25 years of experience in the financial services industry, I have been involved in almost every aspect in the business. From individuals saving for their children’s college to creating and structuring various complex business financing options, I have the experience to help you accomplish all of your financial goals.

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