Everyday I am confronted with great clients seeking financial advice based on old rules or outdated information. The reason this is so troubling is because playing by the old rules puts all of a person’s wealth in great jeopardy. Even more disturbing is the idea that so few are willing to invest the time it takes to learn. Time, not money is really what is in short supply in Middle class America. If you don’t invest the hours that it takes to learn the right way to do things you will pay the cost on the back-end.
What I hope to do is begin a conversation with my facebook.com/managerofwealth and twitter.com/managerofwealth friends that exposes the truth of the financial world and helps put folks on the right path.
Lets start with the biggest myth of all. Retiring with a big 401K or IRA and a paid off mortgage is a good thing. A lot of money in a qualified plan puts you in a horrible tax position at a time when you need the money the most. Who knows what tax rates will be in the future, every financial expert agrees that higher income tax rates in the future are a must to repay the government’s debt and keep social security afloat. How much of your retirement income will you be paying in taxes 25%,35%,45%, your guess is as good as mine but the safest bet is to be paying 0% in income tax. That can’t be done from a qualified plan.
Next is a paid off home. This gets tricky for three reasons. First, no one wants a mortgage payment after they retire, and if planned for properly you should not have one. Second 85% of Americans net worth is equity in their homes. The money retirees need to live is trapped under their feet. Thirdly, if you get sick for a long time medicare wants you to deplete all of your assets down to $2,000.00 before they will step in to help. Your house just sits there like a big fat turkey waiting to be slaughtered at Thanksgiving. When the government comes looking for assets you don’t want to have any because if you do they will be taken. Remember the government looks back five years so don’t think you can just give your assets to someone else after trouble comes.
If you want to empower you self with knowledge then come to a Free dinner and educational workshop held at the BWI Westin on July 29, 2010 at 6:30 pm. You must register at www.wealthdinner.com . I hope to see you there. nothing will be sold so please just come to learn.