Create a safety net --a protective overlay on your savings. In this episode, I'm going to
address the question "How to protect 401(k)s from stock market crashes?" Get ready. You're going
to learn some things that most Americans and most financial advisors don't even understand.
So, my name's Doug Andrew and I've helped people prepare for a comfortable retirement now for
a more than 4 and a half decades. And frankly, I've never owned a 401(k) and I never will.
And especially if I ever did, it would not be invested in the market. Yet, most Americans
have their money in tax-deferred IRAs and 401(k)s invested in the market.
And that's the last thing that you should be doing at retirement, is having your hard-earned
money (savings) exposed to market volatility. So, you want to make sure that the pitfalls
of money invested in the market historically has caused people to put off retirement sometimes 7
years waiting for the market to come back or they've had to tighten their belt or they've been
afraid, "Golly, I may outlive my money." It causes all kinds of havoc and it's not predictable. So,
you want to get your money out of the market. You can still participate in the market when it does
well but not lose when it goes down. How do you do that? I'm going to show you 2 ways in this episode
how you can protect yourself so that you do not lose when the market goes down. A safety net,
a protective overlay on your money even if it's in the market. But I would recommend you get most of
it out before retiring. So, clear back in 1980 when one of my favorite vehicles first came out
and was introduced by EF Hutton, they were not an insurance company. They were a brokerage firm.
My clients were never happier than when I got them out of the market. So, let me share with
you before I teach how indexing works which is one of my favorite strategies. And most people,
most financial advisors do not understand that. Let me share with you how you need to participate
when the economy when the stock market is doing well but not have your money directly at risk
in the market. In other words, what you want to do is be able to participate when the market is doing
well --when the stock market goes up. But not lose when the stock market crashes or goes down. Now,
most advisors do not understand what I'm about to teach you. They go, "Oh, come on. You know,
just hang in there. Grow up. The market eventually always bounces back." And yeah, true. But there's
a lot of retirees that in the year 2000 going clear until 2010, that decade, they saw their
retirement nest egg drop 40% in value twice during that decade. They felt like they had lost their
future. So, what you want to do at retirement is not have your money subject to that market
volatility or the crashes. What you want to do is maybe not make very much when the market goes
down. As Will Rogers once said, when things get tough, people get more concerned about the return
of their money than the return on their money. So, the concept here that I'm going to teach is how to
participate on the upside when the market goes up and not lose when the market goes down.
You ready? So, before I show you indexing, I want to make sure you can get a sneak preview of a free
gift I'm going to offer the end of this episode. This 300-page best-selling book the Laser Fund
will explain a lot about what I'm talking about. But watch. This is indexing and many financial
advisors do not understand this. I often compare the stock market like a person with a yo-yo. Now,
hopefully, walking up some stairs. But there are periods of time where it's like a market EKG where
the market goes up and down up and down. And like from 2000 to 2010 and '12, the s&p, the Dow Jones,
the Russell 2000 were basically in 2012 back to where they were 12 years earlier. And so, the
person with that yo-yo was walking across the flat surface because it wasn't really gaining anything
in the long run because of the severe losses from 2001 to 2003 and 2008. I didn't lose money
during those periods of time. In that 12-year period, I tripled my money tax-free. A million,
triple to 3 million. Most Americans barely got back the million. Why? How? Well, Warren Buffett
has 2 rules of investing. Rule number 1, don't lose money. What's rule number 2? Don't forget
rule number 1. Well, sometimes that's easier said than done but let me show you how to do
this. Chrismont, they did research and they said that in the S&P 500, if you looked over a 50-year
period and this time period was 1962 to the year 2010, so ending after that worst decade since the
great depression. They said if you eliminate 100 of the losses during those periods, usually in
a 10-year period, you'll have 7 gain years to 3 loss years. 2000 to 2010 there were 5 lost years.
And yet during that 10-year period, I still more than doubled my money. How? Well, if you eliminate
the loss years, you would only need 25 percent of the up years to outperform or beat the market.
Did you hear that? Well, I did far better than that. So, how does this work? A 25% loss
has to be followed by a 33% gain to get back your money. Get back to break even. If 100 thousand
goes down to 75 thousand, 75,000 has to increase by a third (25,000) to get back to break even. A
33% loss has to be followed by a 50 gain. A 50% loss has to be followed by 100% gain. If 100,000
goes down to 50 grand, 50 grand has to double. Has to have 100% increase to make up for a 50% loss.
So, let's not lose in the first place. How do you do this? The myth is... In Wall Street is
the market's up 50 down, 50 up, 50 down, 50. And they say, "Well, it's flat. It's zero."
No. It isn't. See, if the market goes let's say up 50% and you have $100,000 (and this is the S&P
500), 100,000 goes up to 150,000. Now, the market loses 50%. You lose 50 percent of 150,
okay? 75,000. You're down to 75,000. Now, the market rebounds 50%, you're up to 125.
It loses 50% of that, you're down to $56,000. You have lost nearly 44% of your original principal.
So, up 50, down 50, up 50, down 50 isn't a net of zero No. It's a horrible loss. So, let me simplify
it let's say the market went up 10, down 10, up 10%, down 10 for 10 years. Most people say, "Oh,
it's flat." No, it isn't. If you went up 10, down 10, up 10, down 10; you will not have your 100,000
at the end of 10 years. You'll only have 95,000. But what if the market went up 10 and then down 10
but you did not lose the 10 you made this year. In other words, you had 110 but you just kept it.
You didn't make anything the next year but you didn't lose. That means in 10 years, you had 5
years. You made 10 but the other years you didn't make 10 but you didn't lose.
What's the difference? You'd have 161,000 up here instead of 95,000. it's 69% more money
by having it this way. And so, folks, this is indexing simplified. How does this work? Well,
this is example of an actual statement of one of my son's clients. And at the end of the year, he
was able to diversify and one-fifth of his money in a max-funded insurance contract using indexing,
he locked in gains of 13.65 on 20% of his money. And he had, I think about a half a
million in here. 11% on this one. 9.5% on this one. 15% on this one and this one, I just left
in the company's general account portfolio at 4.4%. The average of all of those was over 10%
tax-free by using indexing. If the next year the market crashed and dropped 40%, he would not have
lost any of the gains he made that year because of a feature called lock-in and reset. Now, one of
the beauties of indexing is every year, you get to lock in any gains that you made the previous year
and reset. What does that mean? It's sort of like a ratchet wrench. You know, when you use a ratchet
wrench and you tighten a nut or a bolt, you're tightening and then you reset, but you don't
retrogress. You don't loosen the bolt because it's resetting. So, with lock-in and reset, there are
years that the market goes up and you make money. But so many people with their money at risk in the
market, they may lose what they made the previous year or 2 or 3 in1 single year. Like 2008, people
lost 40%. That means they lost all the money they made from 2004 to 2007. They lost in one
single year and it took four more years to make it back again. Folks, you don't need to do that.
Indexing allows you to be able to link to an index anytime you want. And any gains you make, you lock
them in and you reset. So, for example, in 2008, many clients who followed my instruction here,
they may not have made much of anything in 2008 but many of them were almost like cheering. Go,
go. Because it's going to reset down here. And see it's a lot easier to start making money again from
a lower starting point than up here where it left off. Most Americans they lose lose lose and they
have to wait till it gets back up to here to make back what they lost and start making money again.
No. You don't lose with indexing but you reset. So, many of our clients locked in games of 16%
the first 90 days of 2009 after not losing a dime in 2008. That means if 2010, the market crashed,
they still keep the 16% they made in 2009. Let me use another example. In 2017, many people using
indexing locked in gains of 16%. Some 25%. Now, actually 2018 was sort of a ho-hum year. But let's
say 2018, there was a huge crash. That means on a million-dollar nest egg, in 2017, they either made
160,000 so they had 1,160,000 at the end of 2017. Or if they made 25%, that would be a million 250
000. Let's say 2018 and the market crashed 40%, instead of losing 40%, they didn't lose a dime.
They still had their 1,250,000 and they locked in that gain and reset. So now, if 2019 turns
around again, instead of having to wait a year or 2 to make up for what maybe you lost in 2018,
people using indexing, they locked in the gains, they reset. And then they start making money again
as soon as the market starts going up again. But they don't lose. That's called lock-in
and reset. It knocks the socks off of having your money in the market and waiting around for 1,
2, 3, 4 years for you to make up for the loss you incurred maybe in one single year. Don't do that.
So, I've mentioned a safety net or a protective overlay. So, if you have money that is still in
the market and maybe it's earmarked to eventually go into a max-funded indexed universal life
insurance contract. But you can't put that money in all at once in order to grandfather yourself
to have tax-free income the rest of your life. It takes 5 years to satisfy what is called the
technical and miscellaneous revenue act of 1988. So, many times, people need a safe repository
to have their money be protected even if it's in the market while they're waiting to get it
repositioned into a Laser Fund wherever you are at. Or sometimes, I tell people, "You know,
you need to stay diversified. I would recommend that no more than 30% of your retirement resources
come from money in the market. You ought to be transferring and getting money over the
tax-free bucket. But maybe only 40, 50, or 60 percent of your retirement resources should be
in the tax-free bucket." So, if you have money still exposed in the market but you've learned
some things here, "Golly. I would love to not lose when the market goes down",
I have associates affiliates who educate people on very unique proprietary strategies. They are
called protective overlays so that if you have money in the market and the market crashes, you do
not lose. Or if the market crashes 40%, the most you might suffer is maybe a 6% loss but not a 40%.
It's called a protective overlay, a safety net. But sometimes when the market dives,
you actually come out ahead. This is very typical like indexed universal life where zero is your
hero. Some years, you may not make anything but you don't lose. And so a 0% rate of return
may be your hero because everybody else is losing 30 or 40 percent. So, the message is when
you reposition money into a max-funded indexed universal life, you don't lose when the market
goes down. You make money when the market goes up. But if you have money that is yet to be deposited
in there or you have other money that you do not want to allocate towards a Laser Fund, explore
a safety net, a protective overlay. Now, we teach educational webinars all of the time and I point
my students and to some of these instructors these strategists that help you understand this. The
best way to learn about our webinars is to claim your free copy of our most recent best-selling
book The Laser Fund. And when you do that, you can opt in to be notified whenever we teach these
educational webinars. So, here's how to do that. You can claim your free copy by going to Laser
Fund. It's here on the bottom of the screen. Contribute a nominal amount towards the shipping
and handling. I'll cover the rest of that cost and then I will pay for the book. aAd this will
begin to empower you. And you can also be notified about our other educational events. And there's
additional resources to listen and learn and watch and learn. But here's to your brighter future.