Most financial institutions teach the rule of 100. We subscribe to the idea that economists say you may live a long time… therefore plan as such using the KP121 Rule.

The KP121 Rule™ focuses on the Accumulation, Distribution, & Legacy Phases using the KP Financial Model™ to verify the APPROPRIATE BLEND with instruments of actuarial science & investments over your financial journey.

To understand the appropriate blend of actuarial science and investments, we must explore the age-appropriate, asset appropriate, income appropriate timeline to manage the balance of risk/reward.

kpandco kp121 chart

0-21 Education Phase

  • This is where solid money relations are taught preparing individuals for the Initial Accumulation Phase (IAP)
  • As you age the burden of protection and the need to save for the pre-accumulator shifts from the caregiver UNLESS special needs exist
  • Very little to no focus is necessary for protecting personal assets at this phase
  • Very little to no focus is necessary to protect income in this phase
  • Until assets accumulate beyond the max acceptable loss of the provider, there will be little need or want to provide protection over the pre accumulators life
  • Maximize tax-free, tax-preferred vehicles & instruments

21-35 Initial Accumulation Phase

  • Protection 
    • This phase is designed around protecting future income producing potential
    • The likelihood of a young person in the IAP phase is much more likely than premature death
      • This creates the need to protect income earning ability greater than in the later accumulation years
    • In this phase, individuals build family and create more of the need to protect the ones they love
  • Savings
    • The principle of paying yourself first 
    • Goal of saving 15% of gross earnings
    • Tax-free, tax-preferred, tax-deferred in this order IF you believe taxes will be higher in the future
    • Diversification of savings should consist of 70-80% at risk, and 20-30% in safe money assets (24 months of cash flow)
  • Growth
    • This is the ownership component
    • Real estate, first-time homebuyer, understanding the use of proper leverage at 75-100%
    • Build wealth with credit & leverage potential 
    • Expansion of liquidity, use, and control of assets
    • A strategic balance of risk/reward
    • Works with an investment advisor to develop an investment policy

36-72 Pre Distribution Phase

  • Protection
    • 36 → 55 Protect Income
    • 56 → Life Expectancy Protect Assets from long term care events
    • Protect Assets from liability 
    • Protect assets and income from disability, medical, long-term care & risk of longevity
    • Protect Assets, Income & Life 
      • The eroding factors of wealth examples
        • Premature death
        • Planned obsolescence
        • Increased Income Tax
        • Inflation
        • Long-term Care events
        • Technological change
  • Savings 
    • Build on to 24-month cash reserve (the 3-5 day money access)
    • Continues to save 15+% of income (any excess of the standard of living money)
    • Goal to reach 100% tax-free distribution phase
    • Maximize the efficient match from the employer or your business 
    • Avoids consumer debt
    • Utilizes efficient arbitrage
    • Begin to review the use of leverage for cash flow aka. Rev. mtg, SPIA’s, etc…
  • Growth 
    • 3% – 4%  minimum shift to non-correlated assets
    • Real Estate Ownership grows
    • Continue development of investment policy with investment advisors
    • Maximize liquidity, use, and control of all assets (ie. cash value) (tax-preferred growth instruments)
    • Shifting to more tax-preferred & tax-deferred volatility controlled instruments

72-121 The Legacy Phase

  • Protection
    • The goal of a 1-1 ration between protection of assets & value of assets
    • To protect income & assets 
      • Volatility control instruments
      • Pensions
      • Social Security, SPIA’s, Fixed Indexed Annuities, and Deferred Annuities
      • Have adequate life insurance to cover long-term care events and replace assets needed for those expenses
  • Savings
    •  Starts exercising minimum to maximum distributions from qualified retirement instruments
    • Seeks to stabilize or grow cash equivalents to beyond 24 months
    • Seeks to maximize the use of distributions in every tax-free asset available
    • Distributes necessary standard of living cashflow
  • Growth
    • Align assets for maximum enjoyment of wealth w/o risk of running short
    • Maximize volatility control
    • Minimize the risk of loss
    • Utilize real estate strategies for max L.U.C
    • Develop investment policy w/IA for max distributions for maximum enjoyment

KP121 Rule™ focuses on the Accumulation, Distribution, & Legacy Phases using the KP Financial Model™ to verify the APPROPRIATE BLEND with instruments of actuarial science & investments over your financial journey.