Who Says There Are No Guarantees in Retirement These Days?

Who Says There Are No Guarantees in Retirement These Days?

Did you know that you can add a separate income option to your IRA, 403(b), 401(k) or even nonqualified funds that will guarantee an 8 percent annual compound interest, regardless of what the stock market does?



Let’s set the record straight – this isn’t wishful thinking! This has been happening and still happens for retirement investors today. My regular readers already know that I allow no room for any “smoke blowing” on this blog. I present only practical, factual strategies that serious retirement investors can implement today.

For Real? Yes, Really!

It is understandable that with the recent mess in the stock market, as well as investment scams galore, it may be very difficult for you to consider something like this as a viable possibility. There are even scores of so-called financial advisors who do not have the slightest clue about what I am discussing here; that may be surprising, but it’s understandable, too – because of the thousands of investment options/companies out there, only about 40 of them (as in four-zero) offer these options in any form.

And given that the majority of financial professionals are not independent, in the sense that they work for a specific provider and therefore cannot offer options outside of their company’s portfolio, what are the chances that investors who work with them will be exposed to these options?

Anyway, without making things complex, here’s how this specific solution works. You may attach an optional feature to your retirement account that basically states that for the sole purpose of determining your lifetime income, your funds will grow at a guaranteed 8 percent annual compound interest for the next ten or twenty years, or until you start taking income – whichever comes first.

For one thing, I think this is beautiful because right from day one, you are able to know your exact lifetime income in the worst-case scenario. I must remind you, though, that this is an optional feature, so you don’t have to use it – it is totally up to you. Sort of like having a backup file for your computer, it’ll become handy when you actually experience a crash. Other than that, you’ll not need it – or would you? If the stock market performs amazingly well over the next 20 years and you end up with much more money under your base contract, you won’t have to use this feature.

But for those who believe that maybe – just maybe – their portfolios will not consistently earn 8 percent every single year for the next 20 years, this feature is pretty amazing.

I do not and cannot predict the exact future performance of the stock market – I’m thinking I wouldn’t be working if I could. But having spent several years helping a number of retirement investors, here’s what I can tell you: potential is not a retirement strategy. Potential return is never the same as actual return. You could potentially make a gazillion bucks overnight, but you could also end up with much, much less than a guaranteed 8 percent, annually compounded. You could also potentially end up with absolutely nothing.

In that instance, this optional feature would come in very handy, wouldn’t you agree? Several of our clients have secured their retirement incomes this way. But before they did, we provided an analysis of their year-by-year income account growth, and their correspondent guaranteed lifetime incomes.

JAY says “This is Unfreakin’ Believable!”

Jay is a DC-area attorney looking to retire in 10 years (at age 66), who was referred to our firm by one of our existing clients. Jay’s main concern was that – based on what he’s seen in recent years – he wasn’t so sure how much and for how long his nest egg could afford him when it really comes down to the wire.

Boy, did I have a rather simple, straightforward proposal for Jay. Why doesn’t he set aside the portion of his nest egg that he could not afford to gamble with any longer and attach this optional feature to it? He thought it was a great idea, so he decided to protect $425,000.

So Jay’s $425,000 at the guaranteed 8 percent would result in his income account having a balance of $1,009,297.44 in just 10 years when he plans to retire (at age 66) – and yes, this is all guaranteed! He’ll therefore receive $50,464.87 of guaranteed annual income – PLEASE READ THE NEXT WORDS SLOWLY – for as long as he lives. Just to be clear, this $50,464.87 is the exact amount he’ll receive, regardless of any stock market crashes.

Again, you must remember that this is not a probability or a dream. It is what will definitely happen for Jay, come what may. Of course, in the event that the market does better over the next 10 years and that pot gets bigger, he is able to draw his income from the bigger pot – and who wouldn’t?

So now can you understand why the esteemed attorney thought out loud, “This is unfreakin’ believable!”?

I do not know how you and/or your financial advisor perceive retirement but, do you really believe that your portfolio can do better than a guaranteed 8 percent interest annually, compounded over say the next 5, 10, 15, or even 20 years, in this new economy?
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For your complimentary consultation to examine whether this option may be right for you, please call Laser Financial Group at 301.949.4449 or visit us on the Web.

Common-Sense Holiday Shopping Tips

Common-Sense Holiday Shopping Tips

Wow! Where did the time go? I remember January 1, 2010, like it was yesterday, yet it is Thanksgiving already? Anyway, as we take some time to reflect and give thanks, on behalf of all the guys and gals here at Laser Financial Group, I’d like to say a huge “thank you!” to all of you for being a part of our family. And especially for your readership, feedback, and referrals. We really do appreciate the trust you have in us and want to assure you that we’ll never disappoint you – NEVER!

Thanksgiving also means that the busiest shopping season of the year is upon us once again. Here are two simple, but incredibly effective, tips to remember as you embark on your shopping expeditions.

1. Put dollar amounts instead of items next to each name on your shopping list.

This is the easiest and most effective way to stay within your budget – if you’ve made a budget. Even if you don’t have a budget, it would be wise to have an idea about what you expect your total outlay to be, before you head out. A lot of people focus on the itemized list, and wind up spending whatever is necessary to acquire those gifts, not that there is anything wrong with that if that’s your intention. But as we all know, most people end up exceeding their budgets and creating all sorts of financial worries later, when this whole process is supposed to be fun. By writing down dollar amounts instead, you’ll be sure to avoid most of the usual “had-I-only-known’s.”

Make it a point to remember that virtually nothing you buy is really worth more than the thought behind any particular gift. So please be sure not to fall for Madison Avenue’s attempts to lure you into buying so that you’ll be trendy, accepted, still-married, or better-liked. I’m guessing you know these are all bogus ideas simply intended to get you to spend more – and they don’t even come close to the mere thought of presenting someone with a gift.

2. Double-check your shopping receipts.

This is pretty basic, but please be sure that you are paying for exactly what you purchased. There have been several recent instances where shoppers have noticed double charges (items being inadvertently scanned twice), and even some including “cash-backs” the shoppers did not request – or receive – on their final bills. As you’d expect, such items are extremely difficult – if not impossible – to prove, once you exit the store. That is why it is critical for you to take just a minute or two to review your receipts. Just be sure to step aside – since there are likely to be others in line behind you. I don’t have to tell you what is likely to happen if you do not step aside, do I?

Happy Thanksgiving, and wishing safe travels to those who will be hitting the roads or the skies this holiday week.
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For other smart tips and bits of financial wisdom that will help you make the most of your money, visit our website, or call us for a complimentary consultation at 301-949-4449.

A Completely Different Perspective on Reverse Mortgages

A Completely Different Perspective on Reverse Mortgages

My discussion today is not about the ins and outs of a reverse mortgage, but rather a review of the rationale behind them. The federal government defines a reverse mortgage as “a product that allows you to convert part of the equity in your home into cash without having to sell your home…” Just about every time I watch TV, I see advertisements that pitch them as “the smartest thing you could do if you’re 62 or older.” But I see things differently: I completely disagree from a realistic, common-sense, and above all financial standpoint.

We have (so-called) experts encouraging Americans to make the largest down payments possible when they purchase their houses – so they can have smaller mortgages. Then, they are encouraged to do everything possible to pay off and eliminate those “interest-sucking” mortgages as quickly as possible!

And then, at age 62 or older, when these very same homeowners are financially broke (but living in homes they’ve paid off), they’re told the smartest thing they can do is to get a reverse mortgage, which literally means re-mortgaging those very same houses they worked so aggressively to pay off? If you think about it for just a moment, you’ll see that it’s rather backwards, and not at all smart. Really, how many financially wealthy individuals do you know who have reverse mortgages? The answer is NONE! And I’ll explain why in just a moment.

But before that, as I always echo, we need to avoid making financial decisions based on our emotions – yet again and again, it seems that the majority of folks allow themselves to be controlled by what I term extreme emotional nonsense.

It sounds pretty good – trendy, even – to hurry up, pay down your mortgage, and avoid those “money-sucking” interest payments. But in the end, will a reverse mortgage be interest-free? Of course, not! Those lenders have one goal: to make money. And guess how they make it – through the interest that is factored into each transaction.

So instead of making mortgage decisions based simply on the emotions surrounding costs, it behooves investors (and advisors, alike) to consider PROFIT. You see, in the world of savvy financial planning, there is one universal law, just like the law of gravity – because it works 100 percent of the time, whether you believe it or not, like it or not, or even know about it or not. And that law simply states that there is always an opportunity cost (otherwise known as the alternative forgone) for every dollar spent.

So instead of aggressively paying down/off your house, could you put those dollars somewhere else, where they could earn over and above the net cost of your mortgage? If the answer to that question is yes – and in most cases I have analyzed, that happens to be the case – you’d be making an unwise financial move if you used those valuable dollars otherwise. The interesting thing, though, is that if you really think about it, that’s why reverse mortgages are so popular these days – because some seniors have cash flow issues.

In the Baltimore-Washington DC corridor where I live (and I love it here), seniors lose their homes every year, in spite of the fact that they owe no mortgages. They learn the hard way that things like property taxes, which you owe for the life of your house, trump every mortgage loan. The thing is, what really matters at the end of the day for any homeowner (whether they agree about this fact or not) is a constant available stream of cash flow. So racing to eliminate your mortgage at the expense of a consistent cash flow becomes, quite frankly, pretty stupid – financially speaking.

For instance, given today’s mortgage rates of about 4.5 percent (and assuming that interest payments are tax deductible, given what we’ve been hearing on the news lately), we’re looking at a net cost of 3.4 percent (given a 25 percent marginal tax bracket). I know of several safe, secure, tax-advantaged savings programs that are paying 5 to 5.5 percent fixed interest. If you do the math, there’s a clear arbitrage PROFIT of about 2.1 percent – that would not be sacrificed by eliminating the mortgage payments.

You must also keep in mind that equity in a house is very volatile and risky because no one can control its movements, regardless of whether they might think or wish they can. So to bet your retirement on plans to get a reverse mortgage later might just reveal a nasty surprise – remember less equity in your home will mean little to no money flowing.

Please do not infer that I am opposed to reverse mortgages across the board, because I would recommend a reverse mortgage for someone who has been the victim of bad financial advice and is already left with no option but to REVERSE the very mortgage they just paid off. If you’re not there yet, however, you may want to think twice.
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For a complimentary consultation to discuss YOUR best options, please phone Laser Financial Group at 301.949.4449 or visit us on the Web.

Too Good to Be True ... or Too Bad to Be False?

Too Good to Be True ... or Too Bad to Be False?

I recently met with a gentleman who’s been a client of ours for quite a long time and, in his own words, “has been happily retired for the past four years, thanks to your guidance” (meaning yours truly). He was telling me how amazed he was about the fact that pretty much everything we’ve ever told him in reference to his investment portfolio turned out to be right on point, to the most minute detail. He’d seen how the huge stock market downturn had negatively affected some of his friends, to the extent that they had to cut back and make huge sacrifices at a time when they could least afford to do so. Yet his portfolio, under our direction, kept growing, and his retirement income didn’t experience any dips – just as we advised that it would.

As you might expect, up until this point I was having a ball, because nothing makes me happier than hearing our clients say they understand that they don’t have to suffer when the stock market tanks or tax rates rise, if they follow the strategies we carefully craft for them.

This all ended when he looked me straight in the eye and said, “Sam, you know I have to confess that had I not actually owned these strategies/products for a while now and witnessed firsthand that they truly work, I’d honestly think, ‘It sounds too good to be true.’”

My response was, “Wow, that’s a very interesting thought.” Because that’s exactly what he was looking for when we met several years ago. You see, this retiree (and virtually all investors I’ve ever met) wasn’t looking to implement any strategies or put his hard-earned nest egg into anything he did not believe to be equally “too good” and “true.”

Are there folks who actually validate retirement strategies they are considering based on that saying/principle? That would be unbelievably naïve, don’t you think? That is to say, a proposal has to sound less true to be worthy of consideration? Of course, no one should jump on board some crazy, illegitimate, or lousy proposal. But legitimate strategies that will truly help investors solve their retirement dilemmas MUST be very good and, in fact, true as well.

This phrase, “too good to be true,” originated all the way back in 1580, but it is not a credible test when it comes to dealing with serious financial planning. I’d run as far as I could from anyone who judges a proposal to be bad solely because they are unfamiliar with it or it sounds too good. For instance, this client in question would have completely missed out on his peace of mind during these trying times if he had followed the “too good to be true” principle back then, wouldn’t he?

You may recall, not long ago a young lady claimed she was attacked by a woman who threw acid on her face. Everyone seemed to believe her instantly, to the extent that her story was picked up on every website, TV, and radio program, and she was even scheduled to appear on Oprah. Soon after the dust settled, however, it was discovered that she’d staged the whole fiasco just to get attention – and boy did she get some attention! People were eager to believe something that sounded too awful to be false, which makes me wonder what would have happened if she had staged a plan that sounded too good?

If “too good to be true” makes something invalid, then by implication does “too bad to be false” make it valid? Here at Laser Financial, everything we ever recommend to our clients has to be good and true – there’s just no question about that.
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Call us at 301.949.4449 or visit us on the Web to schedule your complimentary strategy session today!

Do You Know if YOUR Favorite Financial Guru Is Offering Accurate Advice?

Do You Know if YOUR Favorite Financial Guru Is Offering Accurate Advice?

Just about anyone who knows me by any measure would wholeheartedly agree that I am a huge proponent of educating oneself, especially when it comes to planning your retirement income. In fact, that is my passion! But there’s a caveat: I am extremely cautious – and you should be, too – about determining the FACTUAL basis of the information you act upon.


Realize I did not say the source of the information, but rather the factual basis, because there is a huge difference. In the world of personal financial planning, unfortunately and sadly, most of what you read and/or listen to may indeed be nonfactual. Wait a minute! Am I saying that financial advisors, personal finance books, websites, TV programs, and radio gurus do not provide factual information? Yes, that’s exactly what I am saying – although, of course, it’s not all of them. What makes it even worse is that some of those sources aren’t even aware that they are making bogus claims – now that’s scary! I know this because, day in and day out, I disprove these bogus claims to clients and prospective clients. That’s actually what motivated my book, 5 Mistakes Your Financial Advisor Is Making. How often have you heard stories about credible sources disseminating totally bogus and inaccurate information? You may have experienced many instances of this in your own life.

Last Tuesday, October 26th, Kathy Kristof wrote a column on the CBS MoneyWatch website titled “5 Tax Moves You Must Make Now,” in which she wrote in support of smart investors saving more in their 401(k) plans now:

"...That’s partly thanks to a tax break that allows contributions to come out of pay before income taxes are computed, so each $100 in savings only costs you about $75, after you take into account the $25 in federal income tax savings. (This assumes a 25% federal bracket, which applies to singles with up to about $83,000 in taxable income and married couples with up to $138,000 in income. Higher income filers get a bigger break."

Granted, this is a hugely credible website – I mean we’re talking CBS Money Watch here – and Kathy is esteemed in many respects. Her published bio reads, “Kathy Kristof is a syndicated personal finance columnist, speaker and author of three books, including the recently updated Investing 101 (Bloomberg, 2008).” She sure sounds like someone who knows what she’s talking about, right? BUT – and this is a huge BUT – the writer’s above statement about 401K contributions is NOT so factual. It may sound eloquent, but it is NOT factual.

Dear reader, let me make this crystal clear. What I just said is NOT my opinion on that statement. The big kahuna/syndicated columnist/speaker/author has made a nonfactual statement. Scary isn’t it? We all have the right to free speech, but wouldn’t you agree that when someone is in a position of offering – or purports to offer – advice for others to act on (and we’re talking serious retirement advice), they have a duty to be 100 percent factual?

It’s no secret that the overwhelming majority of Americans enter retirement financially perplexed, after years of hard work. Why should that come as a surprise? Because if you follow nonfactual information, no matter how good the intention of the information provider, you can expect only one result: CONFUSION. I could write at great length on this topic because, as I indicated earlier, this issue gets me very fired up. But here are the bare FACTS on the author’s above statement:

1. According to the law that regulates ALL 401(k)s in this nation (and the very one the column is referencing), you get to make pretax contributions and defer (in other words, postpone) taxes on the growth, insofar as you abide by certain rules.
2. Once you draw out those funds, you must pay all the taxes you have been postponing (the ones still unpaid) – please read the FACT that follows slowly – at the tax rates in effect whenever you make those withdrawals.
3. So on that $100 savings Kathy refers to, you are effectively choosing not to pay the $25 tax today because you are betting that when you withdraw this money later, the tax rates – over which you have absolutely no control – will be lower, and you’ll therefore end up paying less than $25.

So let’s make this plain and simple. Deferring the $25 tax IS NOT a savings – it’s merely a postponement. If you have to pay it later, you would not consider that a savings, would you? Yet you can see how, as an investor, you might be inclined to believe the accuracy of that statement and therefore act on it – but, in fact, the complete opposite is true.

One final thought. Now that you know the FACT around this specific issue, do you think postponing paying your taxes at this point in America’s fiscal history, when tax rates have nowhere to go but up, is really a smart move? Then again, if you look closely, the column’s title simply says “Tax Moves,” so maybe it’s not necessarily intended to discuss “smart moves.” Armed with factual knowledge, it sure seems that way.
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Contact Laser Financial Group today to schedule your complimentary session to get the FACTS around planning your retirement income. Call us at 301.949.4449 or visit us on the web.