For lifestyle security you want to rely on 5% of passive earnings from an amount set aside for long-term investment. This can include inheritance.
From this amount, you don’t want to touch principal because you can never know:
- How much catastrophic health care and/or preventative healing/assisted living/ medical care could cost you, your spouse, or loved ones relying on you over your lives.
- You don’t know how long either you or your spouse will live:
- You know people are living longer.
- Quality life expectancy may skyrocket.
- You don’t want to put either of you in destitution, especially your surviving spouse.
For Next Level Goals (“NLG”), you may also have broader goals and want to:
- Have flexibility to trade foreign currencies.
- Be able to do deals and help companies grow indefinitely, and have available capital to do this.
- Build some collections like cars, precious coins, art, antiques, properties, or similar interests into businesses.
- Contribute to charitable causes you support.
- Invest in family experiences, give your kids at least some gifts, and mentor them along the way, and pay for grandkids educations.
- Travel the globe and explore yachting or other sports.
- Enhance your children’s positions in society, as long as it is not to the detriment of your own position.
With this in mind, what do you need? This is how you map Lifestyle Security (“LS”) or Next Level Goals (“NLG”).
What is Lifestyle Security?
What do you need to live on in today’s dollars? What amount ensures comfort for you and your family?
LS is the amount of principal necessary to produce the pre-tax passive income that you need to achieve your goals, usually measured at 5%.
For example, to live on $400,000 earnings before tax or $275,000 after tax*, your lifestyle security goal is $8,000,000:
$8,000,000 x 5% = $400,000 per year
* estimated current federal + state blended married tax rate on $400,000 to live comfortably on this income.
Here is a table to help you determine what is your lifestyle security goal or NLG:
- How much “gross income” = before tax, do you need to accomplish your lifestyle goals? Choose below:
Annual Gross Net Annual Net Monthly … to Live $250,000 = $175,000 $15,000/mo. after tax* $400,000 = $275,000 $22,916/mo. after tax $500,000 = $375,000 $31,250 /mo. after tax $1,000,000 = $730,000 $60,833/mo. after tax $3,000,000 = $1,800,000 $150,000/mo. after tax $5,000,000= $2,500,000 $208,000 /mo. after tax
- What is your comfortable annual passive gross income goal?
Extra income needed to achieve lifestyle security is almost always taxed at the highest rates, because the money to save toward your goals is in addition to and TAXED ON TOP OF living income.
- If you live on $400,000, every dollar over will be taxed at about 50% in most states (about $450,000 if you are married, filing jointly).
- The Affordable Care Act adds 3.8% to most investment income.
Your Escape Velocity (EV) to achieve lifestyle security or NLG can also deceiving, filled with rosy predictions today that the future will not change in business, health, or family matters. When you look at your EV and the years involved, you are likely taking some big risks.
Below is a chart of Taxable Income and after-tax income when such income is taxed at the highest federal rates and average state tax rates.
- How much do you keep after taxes? When you address this problem alone, you are able to double your EV, accelerate your financial independence and peace of mind, and reduce your risks to leave the legacy you deserve and gave your life to build.
- As you learn in The Legacy Success Cycle, 75% of Wealth Creators like yourself are NOT Wealth Preservers. A big part of the problem is here.
Annual Gross 50% Left After Tax at the Highest Rates $250,000 = $125,000 $400,000 = $200,000/mo. after tax $500,000 = $250,000 /mo. after tax $1,000,000 = $500,000/mo. after tax $3,000,000 = $1,500,000/mo. after tax $5,000,000= $2,500,000 /mo. after tax
- What is YOUR NET of the gross extra that you earn?
How do Escape Velocity and Lifestyle Security work together?
After you’ve read the basic descriptions of EV and LS, watch this video to see how EV and LS work together with FTI’s unique processes and other strategies to help you accomplish your goals with confidence and speed. We think it's pretty cool.
Watch our video to learn more »