Last week's DOW plunge: A Lesson in Common Sense

Last week's DOW plunge: A lesson in common sense
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NOTE: Today, I’m taking a little detour from the Financial Fiction Series to discuss the current happenings in the stock market. I hope to continue with the series next week.
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This past week has been a nightmare for some (not all) retirement investors. Sadly, though, that number of investors in distress happens to be in the overwhelming majority. Personally, as someone who has been helping scores of hardworking Americans plan successfully for their golden years, my feelings are mixed about this ordeal – sad on the one hand, yet believing this should be an “Aha!” moment for the majority of retirement investors.

My Sympathetic Side

I’m saddened and feel the pain, so to speak, for those who are enduring this ordeal. They woke up Monday, September 19, with the Dow Jones Industrial Average (DOW) at 11,401. Then they went about their usual weekly routines, and by the end of the work week on Friday, September 23, the very same DOW had plummeted to 10,771.48. That’s a 5.5 percent decrease, decline, and loss of their hard-earned nest eggs – in just a week! That translates into a $100,000 nest egg on Monday having decreased to $94,478.38 by Friday, just like that.
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I know there are some who brush this off as trivial because, as they always say, “Of course you’ll make it all back in a matter of time.” Really?
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That’s complete baloney, because none of those investors who lost money this past week will ever make that money back! Such a thing has never happened since the beginning of time and will never happen, because that’s just not how investing in the stock market works. These investors may make NEW gains to reach the same totals they had before the plunge, but the money they lost is GONE, never to be recovered.

The other very important thing investors must understand and not take lightly is that whenever they lose money this way – in the stock market – they have lost that percentage of their entire life’s savings (all their principal, plus all the gains they have made up until that point in time). You might want to let that last point sink in for a moment.

This must be an “AHA!” moment

We financial professionals are highly skilled and educated ( or at least we’re supposed to be), but this statement by the late Robert Green Ingersoll also is true:

It is a thousand times better to have common sense without education than to have education without common sense.

Common sense tells us that there are only two possible directions for the stock market: up, when you can make an unlimited amount of money, OR down, in which case you can lose everything – including your seed money. Is there any other direction I’m missing here? Of course not!

So, if you want the certainty of enjoying your retirement one day (or right now), you probably don’t belong IN the stock market game. My clients – and I mean all of them – decided not to play in the market. Instead, their nest eggs are growing every single year, including those years that the market plummets, and they certainly enjoy night after night of tranquil sleep, regardless of which direction the DOW and the S&P 500 go. That means that they will not have to delay their retirements, or if they are already retired, endure any decreases in their investment incomes.


Media reports and our everyday encounters lead us to believe – wrongly – that we are all in the same boat when it comes to investing our nest eggs: that we all lose money together and make money together. That couldn’t be further from reality – just talk to any Laser Financial Group client. 

It’s YOUR retirement and YOUR common sense, so use it!
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Contact a financial professional at Laser Financial Group TODAY for a confidential, complimentary assessment of your nest-egg so that you can determine whether getting out of the direct line of the market's volatility may be right for you. 877.656.9111 or LaserFG.com. 

Financial FICTION #9: When you "break even" or receive a refund check from the IRS, you did not pay any income tax that year

Financial FICTION #9: When you file your taxes and break even or receive a refund check from the IRS, it means you did not pay any income tax that year. Alternatively, owing $500 means you paid just $500 in income tax that year.

This particular fiction is so prevalent that in all my years of consulting with people of all sorts, I don’t remember a situation where they didn’t give me a look of “you must be kidding” when I disagreed with their interpretation of how much they’d paid in taxes for a given year. As I have said all along, especially during this Financial Fiction series, when it comes to personal finance, most of what people have come to believe (and built their retirement livelihoods around) sadly enough amounts to little more than myth.

You see, just because you did not write a check to the IRS when you filed your tax return – or you received a refund – does not necessarily mean that you did not pay any income tax. Besides, in 99.99 percent of all cases, the amount you owed at the time of filing is not what you actually paid.

To explain this, I’m going to compress a typical tax return to just four lines you’ll find on every tax form (irrespective of which form you use to file):

• Taxable Income
• Tax
• Refund
• Amount Owed

Usually a portion of the paychecks (or if you’re already retired, your investment/pension income) that you receive throughout the year is withheld in anticipation of taxes due at the end of the year. Notice that these amounts are referred to as “withholdings” or “advanced payments.”

Come tax time, when you (or your tax preparer) fill out your tax return, this is what basically happens: Your “tax” for the year is calculated, based on your “taxable income.” Then, the amount of the “tax” you need to pay is compared against your withholdings (or advance payments). If your withholdings were more than your “tax,” you’ll receive the excess money back (a refund). On the other hand, if the opposite were true, you’d need to send a check for the difference – and you’d better sign and mail that check quickly.

Therefore, if you filed your taxes and broke even, in the sense that you didn’t have to pay anything extra, nor receive any refund, that only means that your “tax” amount for the year is equal to the amount you withheld in advance – it does not imply that you paid no tax that year. On the other hand, if you ended up having to send the IRS a check at tax time, that would mean that you were paying that amount in addition to what had already been withheld.

Just the other day, I met with a client who insisted that according to her CPA, she paid only about $800 in income tax as a result of the tax planning strategies/skills of the esteemed accountant. The problem, though, was that she’d paid a little over $7,600 in taxes last year. Of course, she at first thought I was probably not as competent as she would have preferred – because she insisted that she personally signed that $800 check and requested that I reexamine her tax returns, again! The difference? The client (and, interestingly enough, her CPA) were looking at line 76 of the Form 1040 which is the “Amount You Owe” line, instead of Line 44, the “tax” line.

Now, here’s a quick question for you: Would you rather know the total amount of tax you paid or just the difference you need to pay to top off what has already been withheld? The answer is a no-brainer, right? So the next time you examine your tax situation, please pay close attention and focus on the right line/box – remembering that there is a HUGE difference between “tax,” “refund,” and “amount owed.”

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Contact a financial professional at Laser Financial Group to schedule your complimentary, no-obligation consultation to review your last income tax filing and learn how to maximize your retirement income. LaserFG.com or 877.656.9111.

Financial FICTION #8: Term insurance is less expensive than permanent insurance for the same person

Financial FICTION #8: Term insurance is less expensive than permanent insurance for the same person

You may have heard again and again that term insurance is less expensive, compared to a permanent version of life insurance, but I’m here to tell that information is inaccurate. Please bear with me as I walk you through the intricacies of this issue.

The cost of life insurance – and by this, we mean pretty much all life insurance – is based on a mortality table that factors in several items, including an applicant’s age and health. Insurance companies, having been around for a while, seem to have noticed that, generally speaking and all things being equal, the probability of someone dying (and therefore requiring a benefit payout) increases with time and age. As a result, in reality, the cost of life insurance increases (yes, goes up) for EVERYONE in America each year as they age.

Please do not doubt that last statement because the premium payments you make to your life insurance company remain level every year. That’s a method the insurance companies have devised to keep things simple for policy owners. Notice also that your life insurance premium is not the same as your cost of insurance. What actually happens is that when you contact an insurance company to purchase, say, a 10-year- term-life policy, their computers add up the (increasing) cost for each of those 10 years. The total amount is then converted into equal monthly, quarterly, or annual payments based on your preference.

Now think about this: if you want a policy for 20 years (as opposed to 10 years), would or should the cost be the same? To answer this question, I just requested a quote from a life insurance company on a fictitious 35-year old female with a death benefit amount of $200,000.

• The monthly premium will be $16.72 for a 10-year-term.
• But if this very same female wants to keep that policy for a 20-year-term, instead, her monthly payments will increase from today (Day 1) to $24.64.
• She cannot pay the 10-year rate of $16.72 for 20 years. Pretty interesting, isn’t it?

Here’s the thing, this payment difference could be attributed to only one factor: the cost of insurance increases every year. That’s just an indisputable fact!

Let me ask you a very important question. If the premium payment for a 20-year policy is higher than that of a 10-year policy for the very SAME individual, what would be your guess/expectation about the premium on a policy that would provide permanent coverage for you for the rest of your life, until the day of your certain death? Higher, of course. Our 35-year old female would have to pay $53.08 a month for such a permanent policy. Given the facts as we know them, would you consider this to be expensive?

To restate: All insurance has the same cost for the same individual. The reason premiums differ is the length of time an individual needs that protection. Expensive is a very loose term that gets tossed around a lot, but in this instance, it’s just wrong.

You may be wondering, if that’s the case, then how come almost every financial advisor, media, and finance personality preaches otherwise? I’ve been wondering exactly the same thing. But then, on the other hand, it may very well explain why the overwhelming majority of Americans, at the end of their working lives, wind up in an inadvertent cycle of poverty. If you plan your finances around myths, what can you expect as a result?

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Contact Laser Financial Group TODAY to schedule your complimentary, no-strings-attached session with a financial professional who can help you determine which type of insurance policy makes the most sense for you and your family. 301.949.4449 or LaserFG.com.

Financial FICTION #7: Ignore the day-to-day gyrations associated with variable investments – you’ll end up well in the long run

Financial FICTION #7: Once you ignore the day-to-day gyrations associated with variable investments, you’ll end up well in the long run, when it matters most.


Any time the stock market plunges, you are sure to hear one explanation from conventional advisors: “Don’t panic. Focus on the long term.” That is to say that there’s supposedly a time called “the long term” which you will one day reach, and when you get there, your investments will do great and escape the day-to-day gyrations associated with variable investing.

I don’t need to tell you that’s not reality, do I? The reality that any honest, realistic financial professional knows and cannot deny is that the risks associated with investing directly in the stock market – whether via individual stocks or stock mutual funds – can NEVER be diminished and/or eliminated by anything, including the length of time you’ve been investing. To imply otherwise is completely bogus.

Let’s say the stock market plummets, and mutual fund A’s value drops by 10 percent. Jim’s investments in fund A would experience a 10 percent decrease, just as Tara’s would, regardless of the fact that Jim has owned his fund for more than 40 years and Tara has had hers for just one month. The age of the accounts is completely irrelevant. If anything, I’d argue that the long-timer Jim would have a tougher time sleeping at night because (all things being equal) he’d be likely to lose a lot more in absolute dollar terms than Tara.

Have you noticed that, for the most part, those who use this “wait for the long term” approach, which in my opinion is only good for calming investors’ frayed nerves, never specifically define exactly what they mean by the long term? Wouldn’t you like to know when you’ve hit “the long term,” so that you can rest assured you’ll never have to worry about losing any money in the stock market again? Well, I’m sorry, but there’s no such time – EVER!

Here’s my piece of advice to retirement investors: From my point of view, the long term is nothing more than an aggregate of short-term periods. So, if your nest egg keeps taking dips here and there during the “short-term,” guess what may well end up happening when your long term finally rolls around?
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Contact Laser Financial Group today to set up your no-cost, no-obligation consultation. We'll examine your overall retirement and investment strategies – right now, for the short term, and as they will affect your heirs in the future. LaserFG.com or 301.949.4449.