Monday, March 28, 2011

What Is the Most Lethal Force Against Your Retirement?

What Is the Most Lethal Force Against Your Retirement?

As a managing principal of a financial firm who constantly interacts with retirement investors from across the nation, I can confirm without a shadow of a doubt that the majority of Americans approach their personal finances with broad generalizations. You can confirm this by taking a sampling of any number of folks, asking them which investment product(s) they believe is/are best for achieving their retirement income needs. Nine out of ten – if not all of them – will give you the exact same responses. And when you ask the follow-up question regarding how they arrived at their conclusions, you’ll almost certainly hear another similar response: “Isn’t that what everybody else owns (or is doing)?”

The rather sad mistake with this troubling phenomenon is that it lumps all retirement investors together. Common sense, on the other hand, tells us that in matters such as this, no two individuals are ever the same, even identical twins.

I must say, however, that I don’t fault the average investor at all, because it’s not their fault. I squarely blame the financial press and certain so-called experts who have – either knowingly or unknowingly – created the completely bogus illusion that it is appropriate to lump all investors together as one single unit. This would be akin to a doctor assuming that every patient needs the same medicine, which you’d have to admit would be totally ridiculous, unprofessional, and quite frankly, dumb. As basic as it may sound, the fact is that something that would work beautifully for John could leave Mary’s life in ruins – and that applies to the field of personal finance, too!

What makes this generalization nonsense even worse is that the average investor usually doesn’t digest the advice thoroughly because it sounds perfectly fluent and logical – yet beneath the surface, these theories are almost always half-baked and never present the complete picture.

A recent case in point occurred when a man was willing to bet the ranch on the advice that “all annuities are taxed on their gains.” You might even agree with that statement. Here’s the problem: that statement is based on the broad generalizations you are likely to see in the financial media, read in certain financial books, hear on radio shows, or watch your favorite TV financial guru spout off. The fact is, that’s not the complete picture and hence not entirely accurate! Unbelievable, isn’t it?

“All annuities are taxed on their gains” is true only for “qualified” and “non-qualified tax-deferred” annuities. Do any of these experts know that there’s a third category of annuities known as “non-qualified, income-tax-free?” Yes, those are annuities, too! And they are completely income-tax free! My point is that generalizations always omit certain critical details that could make you or break you – or any other investor, for that matter.

On an almost daily basis, I hear and/or read supposedly powerful financial information that makes me agree, more and more, with the legendary Will Rogers’ statement: “The problem in America isn’t so much what people don’t know; the problem is what people think they know that just ain’t so.”

I often wonder how many folks out there are making critical retirement choices based on what they think they know that isn’t actually the complete picture. Wouldn’t you agree that everyone needs all the pieces of the puzzle in front of them from day one? Please, do your future financial comfort a huge favor and stop seeking generalizations. After all, you are unique, aren’t you?
Contact a strategist at Laser Financial Group for a
complimentary consultation so that you can learn about personalized financial options that are tailor-made for your situation. 301.949.4449

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