Net worth certainly has value, but the amount of sustainable after tax cash flow that can be produced from net worth is the real measure of wealth. Also keep in mind that the invasion of net worth to provide an unrealistic level of cash flow is bound to end up producing no cash flow at all.
How are people to know? Check out the following analysis from InsMark’s Wealthy and Wise® System.
Male 65; Female 60
$3,000,000 in Liquid Assets Available for Retirement Cash Flow
Annual After Tax Cash Flow:
Strategy 1: $100,000
Strategy 2: $150,000
Strategy 3: $200,000
As you can see from the Strategy 3 flag pointing to zero, $200,000 in cash flow produces a long-range disaster as the liquid assets run out at ages 85/80. Strategy 2 hangs on longer, but it eventually dissipates at ages 93/88. Strategy 1 more than supports its level of cash flow and also provides for a substantial inheritance for heirs.
Wealthy and Wise also calculates that Strategy 1 can support $29,000 in additional annual cash flow with Liquid Assets never dropping below their starting point of $3,000,000. The $29,000 can be used for: 1) additional retirement cash flow; 2) gifts to heirs; 3) funding deductible gifts to charity in the amount of $42,000 (31% tax bracket assumed); or 4) a combination of all of them.
Every individual contemplating retirement (or any other scenario that requires cash flow) must be certain to determine the sustainable level that a given amount of liquid assets will provide. In addition, a valid analysis must also illustrate the conversion of some or all illiquid assets (if present) to liquid assets whenever a shortfall of cash flow occurs.
If you initially address “let’s be sure you won’t run out of cash” with each prospect or client, you will have vitally interested listeners to the rest of your presentation.
For a license to use Wealthy and Wise, go to InsMark or contact Julie Nayeri at InsMark at julien@insmark.com or 888-InsMark (467-6275). Institutional inquiries should be made to David A. Grant, Senior Vice President ? Sales at (925) 543-0513 or dag@insmark.com.
