by Jon Hanna, Panama Offshore Legal Services

Protect your Retirement Assets in Panama

They say humans are distinctly different from other species by their ability to think and plan ahead, yet the majority of us seem to imitate our animal cousins when it comes to planning our retirements.  We choose to depend on our broke governments to provide for our later years through our Social Security Ponzi schemes, or through our upside down retirement pension funds, our mutual funds that overcharge us on management fees yet rarely reach their benchmarks, and our managed stock portfolios that our broker uses to churn and burn for his commissions each month while we lose money.

But for those of us who think ahead, and think “outside of the box”, retirement planning can be guaranteed by using simple mathematics and some common sense.  The earlier you realize this simple formula, the more leverage you will have in the form of compound returns over time.

Let´s take a simple example.  You and your employer pay a combined 15% of your pre-tax income to Social Security.  Let´s assume you averaged only $30,000 annual income over your 49 year working life, at $4500 per year, that’s approximately $220,500 you paid to Social Security (yet the Government calls it your “entitlement”). At age 65, Social Security would pay you a whopping $986 per month (just under $12K per year).

Now, if you took that $4,500 per year and parked it in a CD earning you just 5% compounded interest over 49 years you would have saved $892,919.98. If you buried those savings in your back yard, and withdrew only 3% ($26,787.60) per year, it would last 30 years (until you’re 95 if you retire at age 65) and that’s with no interest earned on your savings! It appears Uncle Sam´s Social Security is a terrible investment.

Now check this out, if you parked your $4500 per month in a retirement CD with a Panamanian credit union, with a fixed 9% annual compounded interest you’d have saved over $3 million in 49 years. Invest those $3 million in a 5 year Panamanian credit union CD at 8% and you are earning a over $20,000 per month (over $250K per year).

At this point, you are asking yourself, “What? A Panamanian Credit Union?” The answer is YES, Panamanian Credit Unions are solid financial institutions, who can pay you higher interest on your deposits in US Dollars, and have been doing this successfully for over 70 years and counting.  Panama Credit Unions are truly one of the best kept secrets out there, and no one knows about them because they don´t advertise, and they have historically limited their members to Panamanian citizens and employees of certain government ministries.

Through a special introduction by a Panamanian law firm, foreigners (non-Panamanians) can now open accounts and invest in savings accounts at 4% annual interest, CD´s at up to 8% annual interest, and retirement CD´s at up to 9% compounded interest.

The credit union we are referring to is one of the top 10 of the 150 Credit Unions in Panama, backed by over 15,000 members who are employees of the largest government ministry in the country, with a track record of over 43 years.  The credit union only invests the deposits into consumer loans to their members.  They do not invest the funds in stocks, bonds, real estate, or any other assets.  All liquid funds the credit union has are parked in the Banco Nacional de Panama, which is Panama’s government bank.

This particular credit union is very stable financially and can pay higher than the norm rates of return on a sustainable basis because:

1.  Unlike banks, credit unions are non-profit organizations, so they have tax free status, and all the tax savings are passed back to the members / depositors in the form of higher interest rates.

2.  Unlike banks, credit unions do not have shareholders that demand high dividend payouts, rather their members / depositors receive the profits (dividends) of the credit union in the form of higher interest rates.

3.  Credit unions provide value to their members by providing; (a) the best interest rates for deposits, and (b) quick and easy credit to their members.  Essentially, a credit union member just has to make a phone call to the credit union and request a consumer loan, and the check will be ready for them within a few hours.  The majority of the loans are for small amounts, between $1000 to $3000 per loan, up to a maximum of $30,000 (for purchasing a car, for example).  The credit union charges 1.2% interest per month on these loans (14.4% per year). The monthly loan payments are direct debited from the member employees’ government salary, and an insurance policy guarantees the loan in the event of death or job loss, hence they have a very low default rate on their loan portfolios.

4.  Unlike banks, credit unions do not offer all the extra services such as debit cards, online banking, etc that are generally not profitable services for the bank.  Credit unions only offer savings accounts, CD’s (time deposits) and loans to their members.  They do not make commercial loans or any loans outside the scope of their primary lending business.

5.  Unlike banks, credit unions are not affected by international interest rate fluctuations.  Credit union rates never change, they are always fixed.  They can do this because they have a fixed rate for all their loans of 1.2% per month (14.4% per year), similar to credit card lending rates in the US.

Guarantee your retirement today through fixed interest time deposits through a solid Panama Credit Union.

Editor’s Note: For updated information on this and related topics, see our new website at PremierOffshore.com.