Stop Talking and Start Fixing – or Get Ready to Potentially Become Dead Broke

Stop Talking and Start Fixing – or Get Ready to Potentially Become Dead Broke

Since the September 2008 stock market crash and the subsequent wild rides, it has become almost unusual to run into an investor who didn’t lose significant portions of his or her portfolio. I have even met some folks who lost upwards of fifty percent! That’s half of their nest eggs.

Investors are really, really worried – and rightly so. They all express the sentiment that they NEVER again want to see their portfolios in a predicament of this magnitude. By all accounts, this is a truly horrific situation, and I have since spoken and written in support of these investors. And by all means, each of these investors has the right to express and vent his or her frustrations.

Here’s the thing, though. If all you do is talk – or vent, in this instance – without taking any concrete action to actually fix the problem, you will accomplish nothing. Frankly, this is not one of those situations where simply discussing the problem gets anyone anywhere worthwhile.

So, please, if you’re serious that you never again want to lose that much of your portfolio or feel so powerless and insecure about your retirement, you’re actually going to have to take some pragmatic action to fix the situation. Again, I perfectly understand that you may be feeling betrayed by your advisor. But once you’re done venting, go ahead and fire him or her. FIX IT!

How Do You Fix It?

Believe it or not, there are folks just like you who did not – I repeat DID NOT – lose even a penny of their portfolios’ value when the very same stock market crashed. What’s more, they are also positioned to make strong index-based gains, whenever things improve. Needless to say, they are quite pleased with their current situations. So consider educating yourself about the strategies these folks are pursuing to see if they might also be useful to you.

Life being what it is, events like these will always happen. Before they come at us, though, we must reevaluate and, if necessary, make changes about particular strategies that simply do not work. If we don’t make changes – or just talk – can we expect any different outcome or ever feel safer?

It’s time to take control of your own financial security. Stop talking and start fixing – REALLY!

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To set up your complimentary, no-obligation consultation and explore ways you can start fixing YOUR finances TODAY, call Laser Financial Group at 301.949.4449 or visit us on the Web.

The Case AGAINST “Don’t Put All Your Eggs in One Basket”

The Case AGAINST “Don’t Put All Your Eggs in One Basket”

I am sure you’d agree with me that perhaps the most widely used phrase in the field of personal finance is: Don’t put all your eggs in one basket.

But if you really think about it, does this always make sense? For instance, if your financial advisor claimed that he/she knew which portfolio would effectively accomplish your financial goals, why wouldn’t you go in for the kill? Why would any sane person want only a little bit of something that was assured to work really, really well?

Or … could it be that most traditional financial advisors know perfectly well that these so-called diversified portfolios they propose are pure gambles: both unpredictable and with the potential to actually vanish at a moment’s notice? So in reality, aren’t they just prudently covering their own butts by encouraging investors – that’s YOU – not to put all their eggs in such unpredictable baskets?

About a year ago, I had the opportunity to make a recommendation to a then-63-year-old lady who wanted to ensure that the $200,000 she intended to leave for her only son and two grandchildren reached them intact. At the time I met with her, I was unaware that she had already consulted with two other financial professionals, both of whom recommended dividing up the said amount among various bond, money market, and “conservative, diversified” mutual funds. You know, so she didn’t put all her eggs in one basket.

Here’s What I Recommended

I advised her to use the $200,000 to purchase a contract that would pay her $11,880 annually beginning immediately and lasting as long as she lives – regardless of what happens with the stock market. Then I suggested she purchase a permanent life insurance policy with a No-Lapse Guarantee, through age 110 – should she be fortunate enough to live that long – in the amount of $400,000. The guaranteed level premium for such a policy is $5,598 per year.

So here’s a simple breakdown of what’s going on: She’ll be receiving $11,880 which after an estimated 25 percent tax (or $2,970) would net $8,910. This amount will keep flowing for as long as she lives, period! And if it so happens that she dies before drawing the entire $200,000, her beneficiaries (son and grandchildren) will receive a check for the remainder. But the payments will not stop after she draws all $200,000. If you do the math, the initial $200,000 investment will be depleted in about 17 years (or around age 80), but those payments will keep coming for as long as she lives. Isn’t this just beautiful – and the very definition of peace of mind?

Then out of that net amount of $8,910, she will pay the $5,598 premiums to guarantee that her beneficiaries receive a death benefit check for $400,000. And you know what takes this over the top? Under section 101 of the Internal Revenue Code, that $400,000 check is completely income-tax free! No kidding!

You are quite the smart cookie, so you realize that the woman still has $3,312 left (the difference between the $8,910 yearly draw and the $5,598 insurance premium) to do with whatever she likes. I recommended using it to enjoy a really nice, quality vacation each year with the people who matter most to her – the very ones for whom she is protecting the $200,000.

So let’s say this lady lives for 20 more years, just to age 83. She will have received $11,880 for 20 years, which amounts to $237,600. This is a guaranteed contract, so there is no stock-market hoopla to lose any sleep over. And – in addition – her family will still receive a $400,000 income-tax free check, upon her death.

Are you getting the BEST financial advice?

I have no idea about your situation, but can you even begin to comprehend how this seemingly simple yet thoughtful and powerful strategy changed this lady’s outlook on life? Of course, she decided to dump the “don’t put all your eggs in one basket” approach to go with common-sense and precisely put everything into the one basket that is guaranteed to work.

This might really be something to laugh about. Try telling your spouse/partner that it really ISN'T a good idea to put all your eggs in one basket, and watch their reaction. Just don’t tell them that I suggested you say that.

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Contact Laser Financial Group today - or phone us at 301.949.4449 – to schedule your free consultation so that we can review your financial goals and retirement plans. Of course you're always free to follow traditional financial advice, but you might rethink that once you learn a proven, common-sense approach!

Is “Building Equity” In Your House a Good Idea?

Is “Building Equity” In Your House a Good Idea?

Just the other day, a couple came in to run their strategy for funding their kids’ college education by me to see what I thought about it. Basically, they are aggressively paying down their mortgage debt so that they can “build equity” – and when the time comes for their kids to go to college, they’ll simply “cash in” some of those “equity dollars” to pay for college expenses.

Millions of Americans are doing something similar. Others are targeting retirement, instead of college funding, whereby, upon retirement, they intend to downsize to a smaller house and, again, cash in on those “equity dollars.” You may have heard or perhaps read somewhere that this is a very prudent approach. Just last month, AARP offered this very advice to Boomers looking toward retirement. 

Here was my response to the couple, as well as to all who are following this school of thought: “Your house is NOT a piggy bank.” Folks who take this approach fail to understand two basic facts about equity.

1. Equity in a house is an illusion until it is turned into ACTUAL cash.

Is it possible that just as this couple’s kids are about to enter college, the equity in their house either significantly diminishes or completely evaporates? You bet! And you don’t have to look very far to see this illustrated, because this is precisely what happened – and is still presently affecting millions of Americans – courtesy of the recent real-estate debacle. Many people will be digging out of that one for years to come.

Many retiring homeowners were hoping to sell their houses, downsize, and then use the equity they had built to augment their retirement living. But all those years of building equity didn’t turn out as planned, did it? Always remember this fact: Equity is no different from any other investment over which you have no control – like stocks.

2. Equity in a house – contrary to what anyone thinks or believes – will ALWAYS have a ZERO percent rate of return.

Yes, I said zero. ZIPPO! You see, most people (and sadly, this includes some financial professionals) confuse changes in the value of a house with a rate of return on equity. That couldn’t be further from the truth. Just because you have a reduced mortgage or your house has been paid off does NOT make your house worth more than your neighbor’s. In other words, your mortgage balance does not determine the value of your house. Home values are determined by the market forces of demand and supply, period.

Your house is not a piggy bank!

Some clients of ours told their friends and family that they had not lost their home’s equity when values tanked recently. This did not imply that the values of their homes had not plummeted. They did, just like everyone else’s. BUT these clients’ equity wasn’t “sitting in their houses” – so they avoided the loss. It was, instead, invested in a side account that is linked to, but not directly invested in, the stock market. Doesn’t that seem more like a realistic plan for actually building something?

One more thing. Most homeowners seem to misunderstand that banks and lending institutions do not make loans solely based on the amount of equity you have in your home, but rather, on your ability to repay them. Try getting a loan when you have no source of regular income but a lot of equity, and see what happens. So think about this for a moment. If you were to suddenly experience a major financial setback, would you wish you had, say, $100,000 SAFELY tucked away in an account you could quickly access, or would you prefer to have $200,000 of “equity” trapped in your house?

As for the couple, I sent them a copy of my book on mortgages, Savvy Strategies for Turning Your Mortgage into a Goldmine, and they are scheduled to meet with me soon.  If you’re a homeowner who’s intent on managing your finances wisely, I strongly recommend that you contact us at (301) 949-4449 or www.LaserFG.com to request your copy of this book.

At the end of it all, most people I meet intend to make the most of their money and other assets, but some follow what I call “financial truisms,” instead of proven, time-tested, common-sense, factual – and above all – realistic strategies. 

401(k) Calculator Deception: Don’t Let Them Take You for an Idiot

401(k) Calculator Deception: Don’t Let Them Take You for an Idiot

Have you ever used one of those 401(k) calculators? You know the one – it lets you punch in information like your current age, your intended retirement age, your contribution amounts, and expected rate of return among others, and then once you hit the “Solve” button, it spews out a number indicating how large a nest egg you’ll have. If you have a 401(k) or other similar employer-sponsored qualified retirement plan, chances are good that you’ve probably used one of these calculators, or have seen similar estimates in a sales brochure or at a benefits seminar.

In my view, all such calculators that I have seen and examined are misleading in two major ways.

First, There Is Absolutely No Mention of Fees/Costs

You see, in those employer-sponsored plans, the fees are deducted from your returns. So say your plan costs 1.5 percent per year, and you expect to earn 7 percent. Your net return – the amount you actually end up with –ultimate income will be 5.5 percent (7 minus 1.5). Did you realize this? If not, it’s a pretty stark difference, isn’t it?

Let me illustrate with this example. To keep things simple, let’s say you invest $20,000 in a lump sum, and have not added anything to it. At a yearly interest rate of 7 percent, your account would have grown to $152,245 in 30 years. Notice, this is true ONLY if the 7 percent is the AFTER-COST return. But in reality, there’s an annual fee attached (let’s assume it’s 1.5 percent), meaning that your account will actually be growing at a rate of 5.5 percent. Are you ready for this? At the end of 30 years, the balance will be $99,679 – that’s 35 percent less! All I am saying is, let the actual numbers tell the true story.

Second, They Only Show You How Much You’ll Accumulate

But they NEVER show you how much of that “huge” amount really belongs to you – and by that, I mean the portion that you and/or your heirs actually get to spend.

To their credit though, most of the calculator programs give you a long, winding, legalistic, small-font disclaimer in gibberish, at the end of the page, like this one from the Profit Sharing/401K Council of America:

All estimates and dollar values are pre-tax. No deduction has been made for the income tax payable on these amounts when they are distributed. It is up to you and your tax advisor to calculate your income tax liability for distributions.

Don’t you find it quite odd that these bright individuals and organizations could design such complex calculators, but somehow neglect to include just one more space for you to type in your estimated tax rate so you can have an idea of how taxes will impact your “sugar-coated” gross distributions?

I wonder if it has anything to do with the fact that most investors, armed with a more complete picture of how things might turn out AFTER-TAXES, would think twice and perhaps turn to other better options? Like non-qualified alternatives that allow for income-tax free access and transfer to heirs and which also do not impose any “required minimum distribution” rules once you hit age 70½.

A Few More Questions to Ponder

Did you realize that you and/or your heirs will have to pay taxes on every dollar that comes out of your qualified employer-sponsored plan? And the tax rate will be whatever it is at the time (in the future) that those funds are withdrawn? And there is absolutely no chance whatsoever that your tax rate will be zero?

How proper, prudent, and respectful is it to you, as an investor, for companies to bury this CRITICAL piece of information in a disclaimer that you are almost sure not to read? More than a little sneaky, if you ask me.

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Call Laser Financial Group at 301.949.4449 or visit us on the Web to schedule a complimentary consultation where we can do a REAL projection of what you can expect to earn with your qualified or non-qualified retirement plan.

How to Be Skeptical – but NOT Stupid – About Your Investments

How to Be Skeptical – but NOT Stupid – About Your Investments

Over the years, as I have spoken at events and consulted with people from across the nation, it has become apparent that some of the proven, common-sense concepts and strategies we prefer and teach here at Laser Financial Group completely rattle conventional thought. How do I know this? Because we usually get looks that translate into something like, “What the heck are they talking about?!”

Consider these three concepts:

1. Instead of investing in the stock market, we recommend our that clients link their portfolios to the market. That way they are guaranteed to not lose even a cent when the market dips, but promise to make gains – up to a cap – when it advances.
2. You can grow your retirement income in an account that guarantees 8 percent per year interest, compounded annually for the next 20 years – regardless of what happens to the stock market. Meaning your income accounts’ value would double in 9 years and quadruple in 18 years – guaranteed!
3. You can use an accumulation vehicle that will allow you to access your income, completely tax-free! And the money may be accessed before age 59½ without any IRS penalties, and without any obligation to repay. You’ll not have any “required minimum distribution” rules to comply with at age 70½ and beyond. And you get to transfer the remainder to your heirs, income-tax free!

If any of these ideas are resonating with you, you may be having your own epiphany right now. But the one thing you should know is that all of our concepts and strategies are based on fact, very practical application, and above all are 100 percent legitimate – we never have and never will base our clients' plans around tax loopholes, because we believe those strategies are just plain stupid.


Should You Reject Something Simply Because It's New to You?


As one would expect, some curious, well-meaning folks try to get validation on our strategies from their financial advisors, CPAs, estate planners etc. And for some reason (which I’m still scratching my head about), a few seek validation from coworkers and friends who are not licensed financial professionals. Some of these so-called professionals become extremely defensive when questioned, and even go as far as attacking our credibility and background, while providing amazingly childish excuses. Here are some of the great ones I have heard – my comments follow, in italics:

• I am aware of what he’s talking about, but you (meaning the client) don’t need it. Really? If the client is inquiring about it, don’t they at least deserve the courtesy of an explanation so that they can make an informed decision about whether it actually may be better for them?
• But you (the client) did not tell me you needed something that does what he’s talking about. Wait a minute – who’s supposed to be the licensed financial professional guiding the discussion? A client often doesn't know what they need until the professional recommends it – this response suggests that the client should already have all the information they are seeking from the financial professional.
• He’s not as experienced as I am. I have been advising your family for years, so you must trust me! Wow – this sounds a lot like the "because we've always done it that way" answer. And since when has that been the right response to trying something new?
• What he’s saying is illegal or untrue, because I've never heard of it. Nobody, regardless of how many years in the business or how experienced they are, knows everything. To equate their lack of knowledge with the illegality or untruth of the idea being proposed – without even doing any research – should be a bright red flag. 

Should Your Financial Professional Be So Arrogant as to Think He/She Knows It All?


If there’s an option that your advisor hasn’t discussed with you but is very quick to dismiss – without any factual argument, you should be very cautious. I often come to find out that the real truth behind the unnecessary and child-like behavior illustrated in the above examples stemmed from the fact that some of these so-called professionals were completely unfamiliar with our strategies. Then there are those who work for firms that do not offer the products and/or strategies in question or are not licensed to implement a particular product.


I recommend that you seek validation and assistance from true professionals who have the decency to be honest with you by making factual, intelligent arguments, and run as far away as you can from those who simply generalize – like the ones I mentioned earlier.


And just in case you were wondering, YES! I humbly admit that I do NOT know everything, but I do know how to tell folks, “That sounds interesting. Let me look into it and get back to you on the FACTS surrounding the issue.”

If you have questions about a particular financial product or strategy  – or would simply like another opinion/evaluation of your current financial plans, please call us at 301-949-4449 or visit us on the Web to schedule your complimentary consultation.