Eight Ways to Free Up Money for Your Private Reserve Account

Private Reserve Strategy > Eight Ways to Free U Money for your Private Reserve Account


1. Restructure debt

In some situations, cleverly reducing debt will allow you to use the dollars freed up for your policy. There are a half dozen ways to do this, which can free up a significant amount of monthly cash flow to help fund a ‘Private Reserve’ that could help you achieve your goals as quickly as possible.

2. Reduce funding of your 401(k) or other retirement plans

Many people find money to finance their ‘Private Reserve’ by backing off on funding their 401(k) plan or other retirement accounts, and continuing to pay only the amount that their employer matches. This brings them the guarantees, tax advantages, and flexibility that their traditional, government-sponsored 401(k), IRA or pension plan does not. It lets them stop playing retirement-plan poker and have the peace of mind that a predictable retirement income stream brings.

3. Raid your IRA or 401(k)

You can use a federal rule, the 72(t), to pull money out of your traditional retirement plan, which could then be used to fund your ‘Private Reserve’. This enables you to avoid the usual premature distribution penalty anyone younger than 59½ would otherwise be required to pay. (Be sure to consult with a qualified advisor and tax professional before considering this option.)

4. Tap your savings

If you have been building an emergency fund in a savings or money market account, a ‘Private Reserve’ is designed to maximize the power of saving so you may want to consider opening a policy and moving some of your current savings into it. It could easily beat the interest rates of savings and money market accounts and CDs – without increasing your risk.

Moving some of your “safe” money can result in your dollars working much harder for you, without losing sleep”

5. Rethink that tax refund

Some people love getting a big tax refund check in the mail every year. But that’s your own money you’re getting back. You’re giving the government an interest-free loan, while getting a zero rate of return on your money. It’s fast and easy to adjust your withholding, immediately increasing your monthly cash flow (in some cases by hundreds of dollars a month), and you could then use those dollars to fund your ‘Private Reserve’ policy.

6. Make lifestyle changes

One option to consider that could enable you to start a plan sooner is holding onto your car a few years longer than you normally would and holding off on buying a new one. It’s also easy to cut monthly costs through simple changes like eating out less, and bundling your Internet, cable TV, and phone services.

7. Convert existing life insurance policies

Transferring cash value from existing policies may be an option. In some situations, taking a withdrawal from the old policy and using that to fund a policy that meets the requirements for ‘Private Reserve’ may be an option. (A word of caution: Giving up an old insurance policy is not always in your best interest. We can explain the pros and cons and show you the impact of doing this.)

8. Manage your home equity wisely

Many people like the feeling of security that comes with building up equity in their home, or owning it free and clear. Some people make extra mortgage payments, or refinance to a 15-year mortgage, even if it makes them feel financially pinched. But there are hidden dangers to the belief that you can’t have too much equity in your home:

  • Payments of principal you make into your home do not make money for you
  • The equity in your home is not liquid
  • The equity in your home is not guaranteed (a fact which came as a shock to many when the real estate market crashed)
  • There is no tax benefit to having equity in your home

Unfortunately, many people never discover these pitfalls until it’s too late!

You may find that you can restructure your mortgage, or stop making extra payments of principal, and free up more seed money to help fund a ‘Private Reserve’ policy, so you can move closer to a secure financial future.

That is not to suggest that you use your home equity to directly finance your lifestyle, or that you use your home as an ATM, as it’s been referred to in recent years. This will not get you the desired result.

But if you put those dollars into the kind of policy recommended for the ‘Private Reserve’ concept, you could then borrow your equity in the plan to make major purchases, paying your loans back to your plan, so you recapture the interest you now pay to outside finance companies… and so you can ensure you have a worry-free retirement.


< Back to Private Reserve Strategy