2011 Best Picks … if You Intend to Keep Your Roller-Coaster Investing Dilemma Intact

2011 Best Picks … if You Intend to Keep Your Roller-Coaster Investing Dilemma Intact

I am fully aware of the sarcastic nature of the headline, but in this instance, that seems the best way to get my message across. I’ll wait to see what you think after reading.

Right about now, almost every financial show, magazine, guru, blog, and what-have-you is offering investors advice about the products and places in which they should put their money so that they can become rich in 2011! I’m sure you've seen references to those hand-picked funds where all you have to do is purchase – and then start planning how you’ll live wealthily ever after, haven't you?

Depending on how you define smart, I may not be the smartest cookie around - but I have a ton of common sense. So perhaps I’m missing something in this regard, but here are two simple reasons I believe any serious person should not waste their valuable time, effort, or money on these so-called best picks.

Reason #1: There’s only one predictable thing about the stock market, and YOU already know what it is: the stock market will continue to fluctuate up and down. No one can predict exactly where it is headed next. I mean, if you seriously think about it, where have these prediction gods been these past couple years while folks were taking a spanking with their portfolios?

My guess is that they have always been around, introducing unsuspecting, naïve investors to “smoking hot picks” that turned out not to be so hot after all. Before you fall for any of these (in my opinion) silly moves, do yourself a big favor and look at how your favorite expert's most recent "best picks" are doing today, just for track-record purposes to see how smart their advice really was. What kinds of testimonials do you have from folks who are actually getting anywhere financially by following these “smoking hot” leads?

Reason #2: All of these experts would rather be retired, enjoying their ultra-wealthy status, than marketing to YOU. Something also tells me that if these prediction experts really knew what the heck it was that would make you a gazillion bucks tomorrow, they’d have used those abilities to make fortunes for themselves, too. In which case, they’d be so super rich that they’d probably be retired to their own private islands, cruising the open waters, and drinking an endless supply of piña coladas. They're not doing that, though, are they? No - they are working for their paychecks by showing you the “best picks,” which change from year to year.

I could be absolutely wrong, but common sense, the facts on the ground, and reality tell me otherwise. I won't deny that it's possible to become rich overnight, but from what I have seen, most folks only build true, lasting wealth over time, with a real plan and the assistance of a professional with a proven track record.

If you'll be in the D.C. area on Saturday, January 15, 2011, please join me for a special financial workshop. You can visit our Web site or call or call 301.949.4449 to reserve your seat now. Feel free to invite anyone you know who might be interested. Sorry, I can’t promise you any hot picks, but you will walk away with proven, legally sound, practical steps you can begin using immediately to help regain control over your retirement.

Wishing you a safe, happy, and prosperous New Year!

Ho! Ho! Ho! Three Cheers of Gratitude!

Ho! Ho! Ho! Three Cheers of Gratitude!

Wow I cannot believe how quickly Christmas rolled around this year. It sure seems to me like last Christmas was just yesterday, although my daughter thinks the complete opposite - and I’m guessing that’s probably true for your kids, too. Anyhow, as we take some time to look back over this past year and glance ahead to the coming year, I’d like to ask you to take a few minutes to ponder the one word I believe sometimes gets lost as we slog through our busy lives.

That word is GRATITUDE.

Without a doubt, 2010 has been an especially challenging year for many in this country. Far more than usual number of people are without employment, as the economy tiptoes out of the recent recession. And lots of folks with jobs are under pressure to stretch their paychecks far enough. Many have been forced to forego the pleasures they have come to enjoy. In such an environment, it is very easy to lose sight of the fact that there is always someone else (many people, for that matter) who would consider it heaven just to have somewhere warm to sleep at night, breathe fresh air on their own, wake up pain-free in the morning, take a warm shower, put clean clothes on their back, have breakfast, and most importantly, have the health and strength to do all of these things.

If you have the luxury of reading these words, you almost certain realize that you are enormously blessed, do you? In that case, I just successfully made my point regarding gratitude. As we go through this holiday season, please take some time to carefully consider the gifts with which you have been blessed, rather than focusing your energies on what you do not have.

From all of us here at Laser Financial Group, have yourself a wonderful Christmas and a safe holiday season!

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.

Pay Now or Pay Later?

Pay Now or Pay Later?

[Jackie (not her real name) made this request via the “Ask the Advisor” tool on our website. I obtained her permission to share it on this blog because it has such an interesting educational twist to it.]

Hi Samuel,

I inherited about $55,000 of my father’s IRA and was intending to pay all the taxes this year and be done with it. But my father’s financial advisor and another advisor at my bank think I will pay too much in taxes by doing that. Instead, they suggest that I do a stretch IRA. I am 49 years old, a single mom with two teenagers, and I earn about $68,000 a year. Would you give me your thoughts on this? 

Thank you.

Those who read my columns regularly are quite likely to know my initial response: Let’s gather the facts, and then you can make your own decision. The main issue here is that this lady (or probably anyone, for that matter) does not want to pay “too much in taxes.” Let’s clarify the point by agreeing that not only does she not want to pay “too much” today, but in the future as well. Now that we’ve established that, let’s drill down to the two alternatives, shall we?

The “Pay Now” Alternative

As a head of household earning $68,000 a year, Jackie will have a standard deduction of $8,400 and $10,950 of personal exemptions (for herself and the two teenagers at $3,650 each). This will result in a taxable income of approximately $48,650 ($68,000, less $8,400, less $10,950). Notice that this is the lowest number. However, should she itemize on her Schedule A because she has more deductions to claim, like mortgage interest, charitable donations, property taxes, and the like, that $48,650 taxable income will be even less still.

Here’s a key statement: According to published IRS tables for 2010, a head of household with taxable income between $45,550 and $117,650 will be taxed at a 25 percent marginal rate.

So as it stands now, Jackie’s marginal rate is 25 percent. If she recognizes all of the $55,000 inheritance as income in 2010, her taxable income moves up to $103,650 ($48,650 plus $55,000). Now, the real revelation: What bracket does the new taxable income of $103,650 put her in? You are smart, so you can see that it is the exact same bracket of 25 percent. Incredible, isn’t it? But I told you it has an interesting twist…

Given this scenario, she would pay 25 percent tax ($13,750) today and could save the remaining $41,250 in a completely income-tax free account going forward, and know for certain that she is done and does not have to worry one bit about future tax rates. Not to mention that – under current law – if she happens one day to pass this money on to her children, they’ll owe no income tax whatsoever.

What About the Advisors’ “Stretch” Alternative?

According to the IRS’s Single Life Expectancy Table for Inherited IRAs, this 49-year-old woman will be permitted in 2010 to withdraw $1,567, as opposed to the entire $55,000. The question – and this is a really good one – is: At what tax rate will this little tiny, itty-bitty amount be taxed? The shocking but 100 percent correct answer is – are you ready for this? – 25 percent (or $392). Yes – the same 25 percent! Pretty interesting, isn’t it?

That therefore leaves the rest of the money still untaxed, and therefore yet-to-be-taxed at future (and unknown) tax rates. Again, you are smart, so you realize that by doing this, Jackie would be making a very unwise gamble that her tax rate will remain that low (or somehow even lower), because otherwise she would have made a very bad move. Remember she is claiming two teenagers today who, in a few years, will no longer serve as a tax break for her. But guessing by what these two advisors are proposing, they seem pretty sure that today’s incredibly low rates will stay that way for a very long time – or even better, they expect tax rates to be lowered in the near future. All I can do is to wish them good luck on that frankly naive gamble.

My bottom line in situations like these is that you decide for yourself. But make sure you talk with professionals who have a real track record of knowing how things really work, because a large number of advisors apparently live on another planet.

Visit our Web site to ask YOUR question or call us today at 301.949.4449 to schedule a complimentary session with one of our knowledgeable advisors to discern the best move for your inheritance or other retirement income planning needs.

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.