California May Be A Good Example of What’s Coming Down the Pipe

California May Be A Good Example of What’s Coming Down the Pipe

The State of California is facing a $26 billion budget deficit. Basically what that means is that they have $26 billion less tax revenue than they require to handle their expenses. To close that gap, the State has two options: either cut expenses or raise more tax revenues – or, perhaps a third option, which would be a combination of the other two. “Wait a minute,” you may be thinking, “do you mean raise taxes on the people?” If you figured that out, you’re impressively smart and obviously qualify to be a big kahuna budget expert.

Before we continue, let me tell you something that happened the other day. A friend of mine who works for the State of Maryland told me that they are not going to receive their scheduled raises this year because the state is running a budget deficit. She wanted me to explain how the State’s budget issues are related to her raise. She became an expert in that area within about 45 seconds.

So let’s get back to California, now. Here are a few of the deficit-busting strategies California has implemented so far:

• Beginning July 1, State personal income tax rates – GUESS WHAT? – were increased across the board by 0.25 of a percentage point. If the old rate was, say, 5 percent, now it’s 5.25 percent, and so on.
• Effective November 1, California Law AB17 instituted a 10 percent increase in payroll withholding. While technically not a tax increase, you can call it a forced loan to the State, because the state is basically borrowing 10 percent of the people’s take-home pay until they file their taxes and will pay them no interest.

Are you beginning to understand that ANY government quickly resorts to raising taxes to fill its budget shortfalls? I have been saying this for some time now, but the bigger issue doesn’t seem to have hit home yet. Sooner or later, it has to. California’s problem is $26 billion big.

One of My Mom’s Favorite Sayings

 How about the U.S. federal government’s national debt of – GET THIS – $12 trillion, and counting? In fiscal year 2009 alone, the budget deficit was more than a trillion bucks. So my question, simply, is: What do you think will happen to YOUR income taxes? My mom would often say that if you don’t know what a dead person looks like, simply observe someone who is asleep. All of a sudden, I seem to be remembering all these sayings, even though my mom never thought I was listening back then.

Regardless of where you live in the United States, any income tax increases affect you ONLY if you have “taxable” income. Certain folks in California remain unaffected by the increases in the tax rates not because they are broke and have no income, but because their income – regardless of how much it is – is not considered “taxable.” Our clients are more and more grateful by the day as they watch events around them unfold. Plain and simple, if you don’t want to worry about income taxes, don’t put your retirement savings into taxable 401Ks and IRAs. Period!

This is true today, it was true yesterday, and it will be true tomorrow. And yet I continue to witness far too many folks allowing themselves to be fooled by so-called financial advisors who are clueless when it comes to this issue of keeping retirement money tax-free.

Even 4-Legged Creatures Are Feeling the Deep California Cuts

Another tactic California has employed is reducing the number of days animal shelters are required to hold stray animals from 6 days to 3 days. That’s right. Unless they are claimed by their owners or adopted, the state will not prevent these animals from being euthanized after just 3 days.

To be fair, Governor Schwarzenegger’s office says that the state’s animal shelters “may keep the pets as long as they wish.” Isn’t that good news? Why cut the mandatory holding period in half, then? What does cutting the funds for caring for these pets from 6 days to 3 days really mean? We’re cutting your funds and you don’t legally have to keep these pets alive for 6 days anymore, but you’re welcome to do so, if you wish. It’s not really my place to comment because I’m not in charge of how they do things in California, but it seems to me that the explanation being offered about this animal shelter situation is absurd and just goes to show how far governments, both state and federal, will go when pushed to raise revenue.

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For more information about how to keep your retirement income safely tax-free, please visit our website or call us at 301-949-4449.

Would You Rather Be Trendy and Broke, or Atypical ... and Set for Life?

Would You Rather Be Trendy and Broke, or Atypical ... and Set for Life?

If you read this blog or follow any of my media columns on a regular basis, you already know that I strongly believe that only a few are on a truly solid track when it comes to planning for their retirements. Consider this data from July 2008, Social Security Administration’s Publication No. 13-11871: On average, for every 100 Americans reaching ages 65 to 69…

• 27 have died.
• 19 have incomes of less than $7,000 per year.
• 50 have incomes between $7,000 and $45,000.
• 4 have incomes of more than $45,000.

Most of the people I have shared this data with are quite surprised, because it’s difficult to wrap your head around how someone could live on such a low income, especially in those age groups. But my follow-up question is: Why do you think only 4 have incomes of more than $45,000 per year? Of course, numerous reasons may explain this rather troubling statistic.

In my opinion, though, the most interesting issue here is that most people actually do save for retirement.

Hmmm, so most Americans are saving, but only a tiny percentage are retiring with decent incomes. The reason? They simply follow the crowd and conventional assumptions, which for the most part are completely wrong. You see, it’s not possible to follow anything short of factual, realistic principles and end up in a good spot. And as it pertains to retirement savings, it appears that only about 4 percent of the American population – clearly not the majority – is doing OK.

Here’s the Typical Advice Many Follow

“Just sign up for your employer’s 401(k) or 403(b) program. Make sure you have a well-diversified portfolio. Maintain a “long-term” focus, and you won’t have to worry about the short-term brouhahas. In the long term, you’ll be just fine.” Sound familiar to you?

Although the majority may believe this advice (after all, how could so many financial experts, pundits, and my brother-in-law, Joe, be wrong?), could it be that this advice is precisely what people should NOT be doing? If this were truly sound advice, how come only the few who appear NOT to be following it seem to be making financial headway? You may have heard this before, but it’s definitely worth repeating: Beware of one-size-fits-all financial advice.

For instance, when the stock market crashed in September of last year, the MAJORITY of Americans took a beating with their retirement funds. Although some advisors and the media would like you to believe this is “normal” and happened to everyone, that’s just not the case. A minority of investors did not lose a dime.

NO ONE should arrive at their retirement dead broke, but the time to ensure that does not happen to you is TODAY! Call today or visit us on the Web to schedule your free consultation to find out how you can get on the road to a secure retirement. You can follow the trendy crowd and wind up broke, or you can follow proven techniques that really work. The choice is yours.

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One last thing. This is the week we honor our veterans. Everyone here at Laser Financial Group sends out a big, heartfelt “THANK YOU!!” to all our retired and active-duty servicemen and women. America would not be the America we know and cherish so much today without your continued and committed service.

Lower Income DOESN’T Mean You’ll Pay Less Taxes

Lower Income DOESN’T Mean You’ll Pay Less Taxes

Even if your CPA, financial advisor, some author or TV “expert” says otherwise, he or she is not just wrong – they are TERRIBLY WRONG! My fifth-grade daughter would probably put it this way: “That’s like soooo totally wrong!”

Many Americans are following this misguided belief, tending to defer their taxes until retirement when they expect to have lower incomes – as opposed to what they’re earning today – with the thought that they will, therefore, pay lower taxes after retirement. Alas, this occurs only in fantasy land.

Income vs. Taxable Income

I personally know two individuals who I’ll call Mindy and Terry. In 2008, Mindy’s income was about $46,000 and her income tax was approximately $2,400. Terry’s income was $108,000 and her income tax was ZERO. YES, Terry earned more than twice as much as Mindy, and YES, her income tax was N-O-T-H-I-N-G! And both of them filed their taxes legally and correctly – no gimmicks.

SUPRISED? You shouldn’t be. Because under current IRS rules, we are all required to pay taxes on our “taxable” incomes. Which therefore suggests that not all income is taxable! Mindy’s and Terry’s taxable incomes were approximately $20,000 and $0, respectively. Start asking your friends and you’ll be pleasantly or unpleasantly shocked to discover a similar trend – depending, of course, on your friends’ willingness to disclose their financial information to you.

On an almost daily basis, I meet with retirees who are trying to understand why they seem to have a tax problem when they were advised otherwise – that they would pay less taxes after retirement, since their incomes were indeed now lower.

It is possible – and happens quite often – to have a lower income, yet have the same or even a higher taxable income. It all depends on how many allowable deductions and/or exemptions you have, as well as how much of your income is taxable.

The fact is, no financial advisor, CPA, or expert – including myself – has any control whatsoever over marginal tax rates – that is the prerogative of the United States Congress.

Talking tax rates, where do you think they likely are headed, given our nation’s current fiscal climate? Up, of course! Do you therefore see how preposterous this whole idea of tax deferral could be, and why smart retirees are turning to Laser Financial Group for enlightened planning? To put it bluntly, it’s simply ridiculous for you to delay paying taxes until a time you strongly believe tax rates will be higher. Period!

You Can Take Charge

We are all allowed to structure our finances so that we make a little, a lot, or NONE of our incomes taxable. If you have not already received your copy of my book, 5 Mistakes Your Financial Advisor Is Making, I strongly encourage you to please do so now! It’s FREE!

This Saturday, November 7, I will be delivering a workshop to discuss – in detail – how you can have more control over your dollars now, and especially at the time of your retirement. Regardless of where you are in your planning process – or even if you are already retired – you will likely glean some useful, practical, simple strategies that will greatly enhance your financial lifestyle.

Reserve your FREE seats, as space is extremely limited. Those out of state could still benefit from one of our webinar sessions by simply submitting a request.

No Social Security Raise For 2010, at Least for Now

No Social Security Raise For 2010, at Least for Now

On August 31, I posted a blog about the then speculation that there would be no increase in Social Security benefit checks –affectionately known as COLA (Cost of Living Adjustment) – in 2010. If you did not read it, please do or simply refresh your memory.

Well, it’s now officially a fact and reality. But, that’s not really the point of my discussion today, because I’m pretty sure you’ve already heard this announcement. I’m no political blogger, but I have noticed an incredible –and I do mean AMAZING – situation where both Democrats and Republicans agree on something, but still manage to spin it to their perceived advantage.

A Democrat friend of mine sent me an email stating that seniors depend on these checks, so the good Democratic party is asking Congress to approve a $250 check for each Social Security recipient to make up for the COLA shortfall. The message here: The Democrats care and are looking out for seniors!

Then I received a Republican friend’s email: Don’t vote for the Democrats in 2010 because they are refusing our senior’s COLA while they approved raises for themselves (referring to Democrats in Congress).

Don’t you find it amazing that each agrees that the elimination of COLA is bad, yet they still find a way to say they are better than the other?

Beyond the Politics, There’s REALITY

I appreciate our seniors a lot, and want them to live happy, comfortable lives, especially after having toiled and helping make this nation the best and most powerful on the planet. But there’s more to consider:

Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire. Saving and investing wisely are important not only for you and your family, but for the entire country.

Okay now, would you believe me if I told you the paragraph above was taken directly from the Social Security Administration? Well it was! I know you trust me, but just for the record, let me give you the official form number: Form SSA-7005-SM-SI. This is the green and white statement you receive each year – around your birthday – from the Social Security Administration. Their EXACT wording, right from the front page.

Three Quick Things

First, please do not count on the government for your retirement. Use it as the supplement/bonus that it’s supposed to be. You might be devastated if the forecasts of the Social Security trustees turn out to be true, even partially. Actually, those are not even my words; they are the government’s.

Secondly and technically, COLA data provided by the same institution that has been tracking it since it was instituted in 1975 show that it was negative, prices actually fell. I know it sounds ridiculous, but in this case, a deal is a deal. Right?

Thirdly, there are some who argue that the government cannot freeze the increase in the checks because many seniors lost significant portions of their retirement funds due to the stock market crash. It seems to me the blame should be shared between the “so-called financial advisors” and seniors who bought into the completely bizarre idea that it’s OK to gamble their hard-earned nest eggs IN the stock market, especially at this point in their lives.

FACT Flash

The stock market can delay or completely ruin your retirement, yet there are those who did not lose a penny of their investments’ value over this whole stock market’s tsunami. And they are on track to make competitive gains this year. I know because they are our clients!

Having said that, I would like the record to show that I am in favor of Uncle Sam doing whatever possible to help distressed seniors. Growing up, my mom used to say, “When your child takes a leak on your feet, you don’t – literally – chop them off. Instead, you clean them.” But notice, that does not – or at least is not supposed to happen – forever, right? In case you were wondering I was a good kid … sometimes.

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To take charge of YOUR retirement, regardless of your age, please schedule your no-obligation consultation today! You may also call us (301) 949-4449

News About the Stock Market 10,000+ Rally: Reality, or Just a Whole Lot of Hype?

News About the Stock Market 10,000+ Rally: Reality, or Just a Whole Lot of Hype?

Unless you were in a coma or on a desert island last Wednesday, October 14, 2009, you know that the Dow Jones Industrial Average closed at above 10,000 points – 10,015.86, to be exact. All you had to do was jump on any Internet news site, and you’d see flashing banners all over the screen. Every news outlet had this news as their top feature.

The main point about all the hoopla – from what I gathered – was that you were losing big if you were not in the market. “We TOLD you the stock market was THE place to invest, and see, it’s back baby! You’d better get off the sidelines and get back in the game!” I wonder how many people received phone calls from their stock brokers urging them to do just that. If I had to guess, it would be millions.

Emotions Up, Intelligence Down!

Not so fast!

Look before you leap!

Don’t jump off that bridge just because all the other kids are doing it!

All this stock market hoopla is simply an emotional selling point that amounts to nothing but absolute nonsense! Of course, I will explain why like I always do, letting you draw your own conclusions for yourself and your family.

But first, let’s be clear: I would LOVE for the Dow to soar. If I had my way, it would only keep going up forever! And the US dollar would get much stronger. And those countless Americans who are without jobs because of the stock market’s woes would be reemployed. And those facing foreclosures would regain control of their situations. And the tens of millions who’ve lost significant portions of the nest eggs they worked so hard to build – especially those who have already retired or are close to it – would regain everything.

But we live in the real world. Some of this will come to pass, but not all of it – and certainly not all at once, and not simply because of a few good weeks for the stock market. I do not like fuzzy presentations, filled with half-baked information designed to manipulate people’s psyches into doing things they would not do if they had all the information.

USA Today ran an article by Sara Lepro on their website that put it this way: “Cheering erupted from traders on the floor of the New York Stock Exchange as stocks briefly moved above the psychological barrier.”

The same article quoted one Carl Beck, a partner at Harris Financial Group, as saying “People feel more comfortable and feel like there’s less risk in the market when you get above a psychological point like 10,000.”

Jack Healy’s piece in The New York Times quoted a chief technical analyst at Citigroup Capital Markets, Tom Fitzpatrick, as saying, “It’s psychological.” I hope you’re getting the drift here.

This is what’s going through most brokers’ minds right about now: “Boy, oh boy, if we can just grab hold of investors’ emotions, we can toy with them and basically get them to do anything, even when it does not make sense. Basically, we do the thinking for them.”

I have nothing against any of these individuals personally, but their perceptions of investors are very flawed.

To think that you need to get unsuspecting, hard-working Americans – or any investor, for that matter – to the point where they invest based on feelings (i.e., irrational decision-making) because they believe there’s less risk in the market, when you know that you are not presenting the full picture, is doggone insulting and disrespectful!

Always Examine YOUR Situation More Closely

It’s perfectly true that the Dow closed at 10,015.86 on October 14, 2009. But it’s also true that the same Dow was at 10,323.16 on October 13, 1999. Given a more complete picture now, do you still think you should be so damned excited that the money you invested 10 years ago is 2 percent LESS today?

The Dow is up 53 percent since March 9, 2009. But it’s also true that on March 9, 2009, it declined to its lowest level in 12 years! So do you really think you should be ecstatic about that 53 percent gain, knowing that all the gains you made over the previous 12 years were wiped out?

What I find even more interesting – and troubling – is that back in March, when investors were freaking out, the very same experts and advisors were telling investors they should be focusing on the “long-term.” More or less, they were saying that what happens day-to-day is kind’a not really all that important. Well, we just found out that “long-term” is about seven months, because now they say it’s time to dive in, based on what happened on October 14. Pretty amazing, isn’t it?

As a matter of fact, this very same Dow plummeted 33.8 percent in 2008, which is the worst drop since 1931 – that’s 77 years!

Let me explain it this way. Say you had an investment worth $100,000 in the Dow at the beginning of 2008. By the end of the year, it would have been worth $66,200 because you would have lost $33,800, or 33.8 percent. In order to return to a value of $100,000 by the end of this year, 2009, guess how much the Dow would HAVE to gain? The answer: 51 percent! So far this year, the Dow is up about 14 percent. It was at 8,776.39 on December 31, 2008, and as of October 16, 2009, it closed at 9,995.91. (Yes, you are correct. That was below the 10,000 mark – the psychological tipping point – just two days later.)

I have said this several times already, but I will keep on saying it. If you lost money in the stock market, that money is gone forever! Although other advisors may have told you they are simply “paper losses” and that you will “recover,” that’s simply not the case. You see, there is no such thing as a paper loss in investing. There really are only two ways to go: gain or lose. Period! When the market “recovers” and you start making gains again, it is entirely new money. Only someone who did not lose in the downturn will make NEW gains, IN ADDITION to their existing balance.

I hope you are beginning to see things a bit differently. I call it common sense – you have it so use it if you want to secure your future. In the interest of full disclosure, I must point out that not a single one of our clients has lost a penny on the stock market during this whole recession brouhaha. And, they are doing very well this year. You should NEVER gamble on your financial future. Check out our practical, unique approach and end your money worries today!

Home Value Less Than Your Mortgage Balance?

Home Value Less Than Your Mortgage Balance?

 Are you in trouble? Generally speaking, this is absolutely untrue! I understand this may sound contrary to what you have been programmed to think, but here is the financial fact:

Home values – including yours – are determined by market forces. The value of your home depends on real estate market conditions, so as a homeowner, there is absolutely nothing you can do about the ups and downs in the values.

There are those who think – wrongly – that if they aggressively pay down their mortgages and build a lot of equity (the value of a house less the mortgage balance), their home values will somehow be “enhanced.” Sadly, some in the financial profession condone and teach this illusory and completely out-of-touch-with-reality concept.

When home values drop or increase in an area by, say, 20 percent, all homes in the area experience the same loss or increase. In other words, the balance of someone’s mortgage is completely irrelevant here.

For instance, let’s assume Karen and David are next door neighbors with Marvin and Laura, and the couples have identical homes, valued at $350,000. Let’s also assume that Karen and David have a mortgage balance of $170,000, meaning they have $180,000 in equity (their home’s value of $350,000, less their $170,000 mortgage balance). Marvin and Laura, on the other hand, have $70,000 in equity because they still owe $280,000 on their home. Now, if values were to plummet by 20 percent, for example, the drop would affect both couples’ home values in the EXACT same manner. Karen and David would not escape that hit; neither would Marvin and Laura experience a heavier hit.

The idea that you will somehow escape or experience a lesser hit to your home’s value if you have a lot of equity in it is simply incorrect. Let’s look at this situation from two perspectives:

Homeowner’s Perspective

At least to this point, as long as you keep making your contractual payments, your lender cannot ask you to pay up because the value of your house has fallen to a level that is less than the balance owed. Have you heard of anything like that occurring since the Great Depression era, when mortgages were callable? Of course not!

So, you don’t have to worry about the value of your house, as long as you continue making your payments. Even if you do worry, you are frankly wasting your time and energy because worrying will do absolutely nothing to change the value of any piece of real estate you might own.

As a Lender

This is a bad position to be in, because the value of your clients’ collateral (in this case, their house) is less than the mortgage loan. Someone owes you $280,000, and the amount you can recover should they default is only $120,000. Oh, and in case you were wondering why certain people you know who haven’t been paying their mortgages for waaay more than 90 days still haven’t been foreclosed on, yet others were hurried into foreclosure beginning on Day 91, check out how much equity each of them had. You’ll likely discover that those in the latter example had a lot of equity – which, from the lender’s perspective, is called profit.

If you were a lender, wouldn’t you teach homeowners to strive to eliminate their mortgages quickly and aggressively? The reason? So YOU (the lender) will have a safe profit margin in the event that your borrowers become unable to make their payments for 90 conservative days and you have to foreclose.

So you see, it really depends on which side of the bargain you are. My opening answer to the question of whether or not you should be freaking out was “Absolutely not!” because I was addressing the issue from the homeowner’s perspective.

Take-Aways

• Don’t purchase an overpriced house. I know people who, a few years back, bought homes they clearly knew were overpriced. Some even offered more than the asking price. But you know what? This is America, so you can pay whatever you want, regardless of whether it makes sense.

• You would be smart to hire a savvy financial professional to help you to successfully manage your home’s equity, so that you remain in control and ensure that your home is paid "for" in the smartest, most appropriate, and tax-efficient manner.

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Visit our website or phone us at 301.949.4449 for your free consultation.

MYTHBUSTING: Putting an End to Financial Truisms, Once and for All

MYTHBUSTING: Putting an End to Financial Truisms, Once and for All

TRUISM is a noun that means “an accepted truth.” Consider these financial truisms:

• The amount of income tax you pay depends on how much money you make.
  

• The stock market is the best place for long-term wealth accumulation.

• Investments with the highest returns always produce the most income.

If your financial advisor has ever said any of these things to you, KEEP READING!

I’ve discovered that an overwhelming number of retirees experience huge disappointments and, more importantly, they usually realize it too late. – Samuel N. Asare

After spending many years helping clients plan for secure retirements, I’ve discovered that an overwhelming number of retirees experience huge disappointments and, more importantly, they usually realize it too late.

I meet them on an almost daily basis, and everyone seems to have the exact same story: “My advisor and/or CPA told me this was the right approach.” And yet, there they sit across the table from me – or on the other end of the telephone – flabbergasted that things did not turn out as they’d expected. Which seems to be suggesting that the traditional advice and approaches aren’t working for the vast majority of people.

In fact, conventional financial advice has been dead wrong for many years. What is deadlier is that most so-called advisors truly have good intentions, which means that they are not even aware that they are offering misguided advice (truisms) that amounts to little more than myth. They don’t realize that they are completely out of touch with reality.

I can, to a certain degree, understand why someone might believe the statements above, BUT they are completely inaccurate myths.

Our latest book, 5 Mistakes Your Financial Advisor Is Making, points out and dispels five such myths, including the three above. Our goal was to write in an easy-to-read, easy-to-understand format. The feedback we’ve so far received suggests we did just that. This is a short book you can take with you to read in the waiting room at the doctor or dentist, or something you can simply read while relaxing. It’s that easy to digest, and lots of fun to read.

This book is NOT a witch hunt project – we’re not about that, at all. Our goal is to ensure that, as an investor, you receive the best possible guidance in your quest for financial independence. We don’t want you to be one of the many who get to retirement only to realize you’ve wasted all those years – and dollars – believing in myths. If financial professionals truly want the best for their clients, this would be a goal we share with them, would it not?

The book is formatted with “Eyeball-to-Eyeball Questions” at the end of each section. These are very simple, direct questions we suggest you pose to your current financial professional – looking them directly in the eye, if possible – so you can receive the answers that will confirm the myths and affirm the simple truths we’re exposing.

This may take some chutzpah on your part – and it might make your advisor more than a little uncomfortable. But wouldn’t you rather know now that you’re hearing myths – or just plain bad advice? Otherwise, you’re very likely to end up in the same boat as all the others who didn’t find out until it was too late to set a new course.

We are giving away FREE copies of 5 Mistakes Your Financial Advisor Is Making. Follow this link to get yours now!