Banking on Your Retirement Nest Egg could avoid a Severe Recession

The Wealth Management Industry is banking on your Nest Egg, but you are not. They get to pay themselves from your nest egg but you cannot touch your own money.

You need to be able to access your nest egg throughout your life. Let me explain. This is just an idea. It’s a variation on the Infinite Banking Concept.

You are encourage or forced by government Becoming Your Own Banker decree to save a percentage of your salary or wages each month in a tax beneficial saving plan for your retirement. This starts the minute you join the work force and stops when you retire.

So it may be 40 years or more before you actually get to use your own savings for your own benefit.

You are told that Governments and Wealth Managers have  joined forces to protect your saving for your own good. For their “help and kindness” they get paid a small percentage of your money every day, week, month and year during and after you retire.

Everyone gets paid regularly but you;

  • Your financial planner is paid each month from your nest egg.
  • Your Fund Manager is paid each month from your nest egg.
  • Your broker is paid each month from your nest egg.
  • Other fees and charges are taken out each month for advertising, administration and other services from your nest egg.
  • The tax man gets to tax your nest egg every year based on the paper profits reports by your nest egg wealth managers.

All you get a report showing your paper profit every few months, if you are lucky, based on the fact that stock markets and property markets always go up. We all now know in the short term they don’t.

This is just plain wrong. It is your money and you should be able to use it when you want to.

However because it is your retirement money it needs to be treated in a different way from ordinary savings.

I wrote a post called, “Baby Boomers – Become Your Own Bank” recently. It spoke about the ideas of R.Nelson Nash and how he devised a method of using life insurance to become your own banker.

Simply put you can borrow money from your “whole of life” insurance policy to finance consumer items such as cars and other high cost products. The rule is though that you must pay yourself back with interest. In other words money is not free.

If you purchase a new car you have two ways to pay for it. You pay it using cash and so forgo interest you would get on that cash if it were invested. Or you take out a loan with a bank or other entity and pay them interest on the loan.

What Mr Nash did was show people how to borrow money from their insurance to buy goods and pay the money back with interest.

What I’m saying is why can’t that be done with retirement nest eggs? It is your money that is in your nest egg. You should be able to access that money at any time to purchase a car, a fridge, a big screen TV.

You should have a repayment plan which pays back the principle with market rate interest over a load period.

The benefit are:

  • You get to use your retirement funds to buy things through your working life and in retirement. (You don’t just pay governments and wealth managers)
  • You pay yourself the interest rather than pay a bank or a finance company.
  • The interest paid into your retirement fund will help grow it faster as long as the principle is paid back too.
  • You stay connected with your retirement nest egg from your first loan. Too many people forget all about that money as they know they cannot touch it for 40 years.
  • Wealth Managers will have to be much more responsive and transparent to their clients as they take out loans from their retirement plans.
  • You actually save more because you are paying interest into your retirement account on your loans taken from your retirement funds.
  • Paying yourself interest will give the wealth managers more funds to use to invest in other assets.
  • It may get people to save more of their money to use in this way.
  • Loaning money to yourself will actually help your retirement nest egg grow over time and help overcome the possible low returns expected from equities and property on the future.

There are trillions of dollars accumulating in retirement plans around the world that are invested for your own good in equities and property and that you are not allowed to touch without severe penalties. Why cannot some of this money be used by you to purchase goods and services in the REAL economy, as long as you pay the money back with interest?

Using your own retirement money in this way might actually help soften the coming recession as consumer demand for products and services could increase.

Why should you pay the government and the wealth managers for 40 years throughout your life without being able to use that money for your own benefit too ? Is it fair that just as you are about to retire and use your own money, the stock market drops and you lose 40% of your nest egg, and you have never had any benefit of it during the 40 years you have saved for your nest egg?

Just as you need it you are told you cannot take a pension until you replenish your nest egg. Don’t forget though, the same people are still getting their cut in fees, charges and taxes as you keep working to get money to replenish it.

I will explore this idea more. If anyone can develop the idea further or see any flaws in the concept then please comment. I think we should all write to our government representatives and lobby them to take a serious look at this idea.

3 Responses to “Banking on Your Retirement Nest Egg could avoid a Severe Recession”

  1. Jake says:

    You’re right, if we could just borrow out of our retirement accounts, wherever they be, we could guarantee ourselves that growth. I believe one of the main reasons whole life insurance is used is because they have guarantees that your policy will grow, and never lose, plus major tax advantages.

    Jake
    http://www.becomingyourownbank.com

  2. admin says:

    Jake,

    Thanks for your comment.

    I agree life insurance has some advantages. But Whole of Life is not available anymore in Australia.

    It might just need someone with more knowledge than I have to come up with a scheme that would work.

    I used it to purchase a car several years back. I paid for the car out of my Super and paid the money back over two years with interest at market rates of around 7% I think it was.

    The interest contributed to my superannuation instead of going into a finance company’s pocket.

    The tax man stopped it soon after that.

    David Bates

  3. […] Banking on Your Retirement Nest Egg could avoid a Severe Recession […]

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