Archive for August, 2011

The Unholy Alliance “Your Money and the Stock Market”,you can do Much better!

It’s the day after another market collapse and a lot of people are feeling pretty sore because they have just been beaten up.  Why is this type of abuse acceptable for average Americans and is it all just part of the way saving and investing works?  The short answer is NO, this is not how it works. Today I’m going to share a brief history lesson that will tell you exactly how we as American workers got to the point where we watch our life savings go up and down everyday in the market and how we can get out of this trap.

The IRA, 401K, 403B, and Thrift savings plans did not always exist. If you were a worker in America before 1980 you didn’t have one of these plans. These plans were created by The Revenue Act of 1978 and it forever changed the average person’s relationship to the financial markets. Before this date American workers had “defined benefit plans” meaning when you retired from a company they would pay you a certain percentage of your former salary and benefits. Most American referred to them as Pension Plans. Firefighters, police officers, military, some government employees still have these plans. When the Revenue Act of 1978 was created it signaled the end of the defined benefit plan and started the era of the “Defined contribution Plan.” A defined contribution plan meant that an employee was allowed to put up to a certain amount of money into an investment account,with no financial advising, tax deferred and a company could also match all , a portion, or none of those funds. As America moved through the 80s companies large and small began moving out of pension plans and into qualified plans. This is what created the disaster you see today.

What’s so bad about investing in the market?

First of all workers are not really investors they are savers. The purpose is to save your money so that you can replace your income when you retire. Investing is risk. Sometimes you win and sometimes you lose. America’s life savings was not meant to be in the casino every single day. When you start work at a company they give you a form that says retirement plan options. You check low, medium or high risk and now 6 percent of your money is going into a fund you know nothing about. When the market is good and your money grows, like in the greatest bull market in history 1982-1999, you feel like a genius. When it crashed like in 1999, 2008, and yesterday you feel like a fool. Neither is true. The truth is you and most of the American work force should not have their retirement money in the stock market. Who advised you on that retirement portfolio. Who keeps telling you to hang in for the long-term even as large institutional companies fail.  Who is telling you all of these things, chances are you are and the media that sells advertising to the financial service companies.

What can I do instead of stock market investing? Pension plans are not an option, are they?

What you can do is get your life savings out of the market!  You can’t afford to lose everything. You couldn’t afford to lose half of everything in 2008 and chances are you have gone over a decade without making a dime if you subtract your contributions from your returns. Stop the madness now! And yes, there are was to set up your own private pension plans that are not exposed to the market and will secure your retirement without the up and down of the market. The companies that provide these plans have been producing uninterrupted returns for over a century. Paying dividends, not losing your hard-earned money. These companies are where the wealthy and educated store the vast majority of their fortunes. I hope you know that less than 20% of the wealthiest people’s money is in the stock market. The wealthy don’t take those risk. Think about it. The short answer is dividend paying insurance companies can set up a private pension plan for you that will work and pay you the income you are saving for. Not every company is the same and there are more companies to stay away from than to save with. Shoot me a message and I will be glad to point you in the direction of someone who can help you understand all there is to know about safe options.

Maybe you need the cold hard facts on the history of the 401k from the government itself. Here is the history and you will see that until 1980 American workers did not suffer loses like yesterday. When the great depression hit, workers did not have money in the stock market. It was a depression because companies closed and there was no work. Satchel Paige once said, “It’s not what you don’t know that will  hurt you, it’s what you think you know that ain’t so.”

Read the history for yourself:

You may also find this video enlightening.  60 minutes did an excellent job on the 401k. Share this with your friends because it doesn’t need to be this way

Wishing you Wealth Wellness and Wisdom

Mark Fuller – Manager of Wealth


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Leaving a financial legacy , Seniors can do much more with retirement income than pay off homes!

Imagine working your whole life and paying every on time or early. You have done all the right things, raised your children, and worked for 40 years on a good job. Now you are retired and drawing a fixed income of $3500.00 per month from your pension and social security. You are also like many American seniors who are still paying a mortgage. You live in a $250,000.00 house but you have paid down your mortgage so you only have $100,000.00 left to pay before you house is paid off. Now when you got this mortgage you were ten years from retiring and earning $70,000.00 per year on a full-time job. The mortgage payment of $1700.00 per month represented less than 30% of your income but now in retirement the mortgage payment is now 50% of your monthly income. Taxes, insurance, utilities and medical expenses  have almost all disposable income going to bills. With 20 years left to pay on this mortgage and a life expectancy of 85 you might be paying for this property for the rest of your life.

But there is a great option that creates additional income and provides an opportunity to leave a much greater financial legacy than bill paying ever will. Instead of mortgage payments for the next 20 years you could create a great financial nest egg with the same money. Most never consider this option because they want to pay off the house and leave it to their kids(who already have homes of their own, and will sell your house as soon as they are able)

Lets assume $1500.00 a month was going to principal and interest and $200.00 was going to taxes and insurance. If you stopped paying a mortgage and started sending $1500.00 a month to a saving account paying 5% over the same 20 year period of time you would amass $620,619.46. So the same dollars that only pay off a house could have built up a huge financial legacy for your heirs. In addition, it could have acted as a safety net in case you fall on financial hard times.

For many seniors once they retire their retirement income is so low they can’t qualify for a home loan because their debt to income level in too high.   Most live on a lower fixed income than they had while they were working. With 85% of American’s net worth is in real estate equity and 65 %to 70% of the wealth belongs to seniors. This reality creates a huge problem or a huge opportunity. Being equity rich and cash poor is a disaster waiting to happen.

The reverse mortgage is one of the few government programs that actually performs as promised, if you use it properly. Advice form a great mortgage adviser and a great investment advisor can be invaluable. I hear more mythology about these products which is far from the truth and has seniors scared to death.

This is a mortgage that accrues interest instead of one that you pay monthly.  It is not you signing over you home to the bank. I have heard people say these mortgages are for poor people who can’t pay their mortgages . Everyday I see wealthy people use these mortgages to capture the equity in their properties and move the money to savings accounts where they can keep the growth.

Don’t let misinformation steal your opportunity. Get educated. Why would a person take half their income for 20 years to pay off a house when they could amass over $600,000.00?  Only because they don’t know any better. If people knew better they would do better.

For more information please contact my mortgage planner Omar Smith 443-271-5952 and get all the facts.

Wishing you Wealth Wellness and Wisdom

Manager of Wealth

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