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Teach Your Kids and Grandkids the Power of Compounding (The 8-4-3 Rule)

by Eric Seyboldt 

Would you like to “change your family tree”? Here’s a strategy that you can communicate to your kids and grandkids that will teach them how they can start with a little and end with a lot.

Compounding interest is recognized as a highly effective mechanism for amassing wealth. Within the arsenal of strategies to utilize this mechanism, a noteworthy strategy is the 8-4-3 Rule of Compounding. This rule demystifies the approach to securing a prosperous retirement, distilling desired returns and investment durations into simpler, actionable parts. We delve into the specifics of the 8-4-3 Rule and showcase a real-life example to illustrate its formidable capacity for accumulating a significant retirement nest egg.

Grasping the 8-4-3 Rule

Centered on the goal of obtaining an average annual investment return of 8%, spanning 40 years, with the ambition to triple the starting capital, the 8-4-3 Rule of Compounding takes advantage of compound interest's exponential growth nature. Earnings from investments are reinvested to generate additional earnings over time.

• 8% Return: Targeting an 8% annual return is deemed attainable for a mixed portfolio of stocks and bonds, optimizing the balance of risk and potential rewards. Historical performances of significant stock indices, like the S&P 500, support the feasibility of these returns over extended investment periods.

• 40 Years Duration: Leveraging a 40-year investment period maximizes the compounding effect, underscoring the importance of beginning as soon as possible.

• Tripling Investment: The objective to triple the initial capital sets a definite goal for investors, guiding them towards a tailored savings and investment approach.

Case Study: Karrie's Road to Retirement Prosperity

Let's consider Karrie, who, starting at the age of 25, decided to focus on her retirement savings. With an initial investment of $20,000 and a commitment to invest an additional $5,000 yearly, Karrie targeted an average annual return of 8%.

• Initial Investment: $20,000

• Annual Addition: $5,000

By age 65, consistent investments at an 8% annual return, together with yearly additions, cultivated Karrie's portfolio to:

• After 10 years: $78,227

• After 20 years: $247,115

• After 30 years: $566,416

• After 40 years: $1,295,701

Karrie’s adherence to the 8-4-3 Rule allowed her to amass well over $1.2 million by retirement, a figure significantly larger than her total input.

Putting the 8-4-3 Rule into Practice

For investors aiming to apply this rule effectively, they should consider:

• Starting Early: The sooner one begins investing, the greater the period for compounding.

• Regular Contributions: Persist in investing regularly, despite market fluctuations.

• Diversified Portfolio: Keep a varied investment portfolio to strike an ideal risk-return balance.

Conclusion

The 8-4-3 Rule proposes a methodical and strategic blueprint for retirement preparation. By aspiring for an 8% return over a 40-year duration with the goal of tripling the investment, individuals can fully leverage compounding interest's power. As exemplified by Karrie's success story, adhering to this rule significantly boosts one's retirement savings potential, emphasizing the necessity for disciplined investing and patience.

Reach out to us for a complimentary, 10-minute consultation call. Let's explore together how we can help you maximize your income in retirement, ensuring your golden years are as fulfilling and worry-free as you’ve always imagined. Email Eric at [email protected] or give us a call today to schedule your consultation. Let's make your retirement dreams a reality!

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Client Q & A of the Week - Is It Just Me or Are Healthcare Costs Out of Control?

Client: Mark, it seems like Healthcare costs have escalated even faster than the cost of meat or gas for our cars. How can we possibly keep up and prepare for the future costs?

Mark: Medical expenses are famously difficult to predict and typically increase as individuals age. With advancing years comes a higher likelihood of developing persistent conditions that necessitate continuous care, possibly extending into long-term facilities. Furthermore, the rate at which healthcare costs inflate often surpasses the general inflation rate, adding to the financial strain. Such expenses might take up a large chunk of someone's retirement savings, affecting other plans for their golden years.

The unpredictability of health-related costs, combined with a rise in the need for healthcare, marks this as a crucial concern for individuals approaching their retirement years.

Ideally, preparations should start well before one retires. Some tactics include:

• Opting for a Comprehensive Health Insurance Policy: Having a solid health insurance plan with broad coverage can lessen the impact of unexpected bills. It's also worth looking into additional policies like Medigap or Medicare Advantage plans for extra benefits.

• Contributing to a Health Savings Account (HSA): For those who are eligible, putting money into an HSA brings a threefold tax advantage: the money you contribute is deductible from your taxes, any earnings on the account grow without being taxed, and the funds withdrawn for qualifying healthcare expenditures aren't taxed.

• Purchasing Long-term Care Insurance: This type of insurance can help cover expenses that regular health insurance does not typically cover, such as services in assisted living facilities. At Novus Financial Group, we consider LTC insurance to be the equivalent of an “asset retention” policy.

• Setting Aside Funds for Healthcare: It's crucial to factor in medical costs into your retirement budget. Seeking advice from a financial advisor to estimate these expenses and tailor your savings strategy can provide valuable insights.

It's vital to actively manage healthcare costs to preserve financial health during retirement. By getting a handle on expected costs and examining both insurance and savings avenues, retirees can better protect their finances from substantial medical bills, leading to a more comfortable and secure retirement.

Reach out to us for a complimentary, 10-minute consultation call. Let's explore together how we can assist you in optimizing your Medicare options and healthcare strategies, ensuring your health needs are met efficiently and affordably as you age. Email Eric at [email protected] or give us a call today to schedule your consultation.

Fixed annuities can be an essential component of a well-rounded retirement strategy, offering security, predictability, and efficiency in financial planning.

Here are current fixed annuity rates and their durations from Top A-rated carriers (subject to change at any time, not FDIC insured): No changes from last week

3- year: 5.70%

5-year: 6.15%

Please feel free to email Eric at [email protected] if you’d like to ask any questions or request information on these fixed annuities or other retirement topics that are on your mind.

REAL ASSETS, Invest Like the Ultra-Wealthy 

The US Dollar Is Taking a Historic Beating! Now, How Do We Outperform The Historic Level Of Inflation?

For many Americans seeking ways to diversify and ensure the safety of their retirement funds amidst the current economic and geopolitical volatility, we offer some solutions...

From concerns over the debt limit, escalating inflation, rising interest rates, increased government expenditure, the diminishing value of the dollar, to the unpredictable nature of financial markets, we find ourselves in an unprecedented "choose your dilemma" scenario in our country's history.

A protective investment strategy that is becoming increasingly popular is converting a portion of your IRA or 401(k) into tangible assets such as physical gold or barrels of Bourbon.

The valuation of tangible assets is primarily affected by three key elements: 1) the worldwide demand for these assets, 2) the enduring interest rates of currencies, and 3) how the worth of paper money stacks up against tangible assets.

Given these considerations, Real Assets often thrive during periods when loose monetary policies trigger inflation or in times of economic recessions. Bourbon investments appear to thrive under any economic conditions. Thus, tangible assets are often considered reliable protections against severe financial crises, in addition to being a method for diversification during stable periods.

Allocating funds into the asset class known as “Real Assets” may be a strategy that you should consider.

Ask us how to Rollover a portion of Your IRA or 401k To A GOLD IRA (link below) or a BOURBON IRA (www.bourbon.fund/how-it-works/) and:

• Safeguard your assets from the collapsing dollar

• Incorporate the ‘REAL ASSET’ class into your portfolio like the ultra-wealthy

• Hedge against the current high-inflation conditions

• Protect your retirement assets against economic crises

Just get in touch. It’s easier than ever.

Feedback or Questions?

You’re invited to get in touch with us if you’d like to find out how the Novus Financial Group can help you on your journey to a happy, fulfilling life in Retirement. 

We have a lot of great information, as well as podcasts from our radio show ‘The Financial Insider’, and tools on our website - www.novusfg.com.

[email protected] www.novusfg.com [email protected]

Office: 614-943-2265

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Investment advisory services are offered by duly registered individuals on behalf of CreativeOne Wealth, LLC a Registered Investment Adviser. CreativeOne Wealth, LLC and Novus Financial Group are unaffiliated entities.

The content we provide here isn’t financial advice and cannot be taken as such. Please speak to your financial advisor before making any investment decision. Also, note that every investment comes with its risks and drawbacks. Lastly, we would like to remind you that past results cannot guarantee future returns.

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