Changes In The Financial Laws - What Do They Mean for You?

Changes in the financial laws - what do they mean for you?

It’s an unsurprising statement of fact to say that the world of personal finance revolves around laws. As a natural consequence, therefore, the passage of new laws – or significant changes to existing rules – means that the complexion of your retirement strategy and products may also be required to change. Or so you would think. Here are some real-life cases in point:

• Before the passage of the Revenue Act of 1978, 401(k)-type plans did not exist in America.
• The Tax Reform Act of 1986 made primary/secondary residence mortgage interest (within limits set out under Section 163 of the tax code) just about the only tax-deductible interest for individuals, after 1991. Before that time, even credit card interest was tax deductible. In response to this change in the law, homeowners have resorted to using cash-out refinances to convert their otherwise nondeductible consumer interest payments into deductible mortgage interest. Doesn’t that make perfect sense? And it’s legal!
• Also, since the Taxpayer Relief Act instituted Roth IRAs in 1997, investors who thought it wise to leverage the benefits from them had to make some changes.

I could go on and on, but here’s the point I am trying to make: I’m only an observer of Congress, but I’m fairly certain this trend toward new laws and changes will not be ending anytime soon. That means that as an investor, you may need to revisit your strategy/product choices and, more importantly, make some changes to ensure that you are taking full financial advantage within the scope of those new laws.

So far everything sounds pretty normal, but the reality is that only a cutting-edge financial counselor will be savvy enough to suggest you examine your plans/products and make such changes. And from what I am witnessing, the rather unfortunate truth is that some financial professionals have no more idea about what’s cutting edge than I do about performing open-heart surgery.

I’ll be the first to admit that none of the highly trained professionals here at Laser Financial Group (including myself) could ever claim to know everything – because we don’t. But what we are sure of is that we are constantly keeping up with developments in our industry. And whenever we are asked a question, we give honest and correct answers, which occasionally include the admission that we will have to do further research to find the complete answer and get back to the client a little later.

However, some in this industry will go as far as dishonesty just to save face or prevent losing a potential client. Think about this. You’ve learned something new and exciting that you believe could be a plus to your retirement strategy, and you seek verification or a second opinion from a financial professional. After all, you expect YOUR advisor to be honest, don’t you? However, this guy or gal has only the vaguest idea – or is completely unfamiliar – with your inquiry, but happens to be one of those types who wants to be perceived as a know-it-all.

What kind of response are you likely to get? I’m thinking the possibilities range anywhere from, “That’s illegal, because I’ve never heard of it,” to “Since the law surrounding this is fairly new, it’s probably a good idea to stick to the old system and wait to see how this new strategy works out.” If not literally, the answers would probably be close to this.

Don’t get me wrong. I am a huge proponent of proper due diligence, especially when it comes to retirement. But don’t we all need to be reminded that laws change and we may have to change our course accordingly, if we want the best results? This statement by Benjamin Franklin pretty much sums it up in my opinion, “When you’re finished changing, you’re finished.”

To that end I also recommend that you heed this advice by the late President Reagan: “Trust, but verify.” I would, however, add my own very important caveat that your verification source must be knowledgeable and 100 percent honest.
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To schedule your appointment with a knowledgeable and honest financial advisor who will help you sort through any changes in the law that may affect your retirement planning, please visit our Web site or call us directly at 301.949.4449.