Monday, March 22, 2010

Your Assets are under attack by THEI.R.S.

Your retirement assets are currently under attack. The Baby Boomers have an estimated $45 Trillion dollars waiting to be accessed for Retirement. The low end of this estimate is around $15 trillion and the high end is close to $100 Trillion. These funds are residing in various types of Qualified Plans(401k, IRAs, 403bs, 457, TSPs, etc). These funds many people have prudently saved and invested during their entire working lives. These assets are under attack by: THE I.R.S or THEIRS.
Here is why these assets are under attack: Social Security/Medicare is financially unsound, Increasing Deficit spending by the Federal Government, and a brand new Health Care entitlement program. These problems, PLUS the increase of Tax rates, these funds are under attack. These obligations must be meet, and the Politicians will grab at any type of cash to pay for these programs. $45 trillion is a large enough amount of Assets that will qualify as a target.
Funds inside of a qualified plan will be taxed, even if the tax payer received tax deduction for the contribution into the plan. If your income was TAX exempt, and you contributed towards a TSP, that is double stupid. The tax payer will be taxed at the current tax rates. Based on recent events with the health care program, do you think that rates will stay low, OR go up? My bet is that the tax rates are going up, and many Baby Boomers will lose most of this $45 Trillion to taxes. They will outlive their money, and die broke, UNLESS they find out the parts in the tax code that provide TAX FREE RETIREMENT! Call us to find out which parts of the Tax Code can be used to your advantage to receive a tax free retirement! Once you find out what the tax codes are, you must begin a plan NOW!!! Call 919-352-9260 and cover your assets NOW!

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Healthcare, IRA Conversions, and Retirement what do they have in common?

The US Congress just passed the major change to the Health Insurance industry. As anyone who understands how Government works, these plans are paid for using one of several things: Increased Taxes or sell more Government Debt(Bonds) or asking the Federal Reserve to print more money(or combination of all three). My bet is that Taxes will be increased. That may be a good or bad thing for some, but how does all this impact your retirement? Let's explore this. We will start with the current Income Tax situation.

Here are the current Tax Brackets(assuming you are married filing jointly):


These Tax cuts that were signed into Law by President Bush, will expire the end of 2010. The top two brackets (33% and 35%)will go to 36% and 39.6% respectively. If you are making more than $209,251 per year, your taxes are going to go up...maybe more.

There is a March 21, 2010 article in Yahoo Finance on the amount needed to save for retirement named: " 1 Million Doesn't Cut it for Retirement" In this article, some industry experts state that more than $1,000,000 is going to be needed for retirement. I would agree with this premise also.

So let's add these two things together. Let's say that you have $1,000,000 in your retirement plan. Let's supposed that you have done real well with your 401k plan and invested and saved prudently. You followed Money Mag's recommendations. The instant that you turn 60, you start to withdraw this money, or you want to roll it out into an Annuity that will stretch out the money for the rest of you life. At this point, you will pay the IRS a check of $396,000! How long can you live off of $604,000 at age 60? This is based on a person retiring THIS YEAR BEFORE 2011! Also it assumes that this person will have $1,000,000 in the 401k plan. What happens if it is less? With inflation and increase Taxes, who can afford to live off of less especially when you are older?

People are living longer, and will have different needs as they get older. Most folks will run out of money before they turn 70 if the previous scenario is followed(which most people it is less than $1,000,000, and will be dependent on some form of Government Welfare. There is a better way. We can show you how to convert those dollars while Taxes are lower to accounts that can potentially provide a TAX FREE RETIREMENT! Call us at 919-352-9260 to find out how to have this TAX FREE RETIREMENT!

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Tuesday, March 16, 2010

Two "Free" Things the IRS Gives You

That is a Statement! Two FREE things the IRS gives you! What are those two things? Let's explore them in more detail. Free things can be very important, especially during your retirement years. Once you have retired, you want to be able to enjoy your retirement years with peace and limited amount of financial drama. There are only two things in the code that provide TAX Free retirement and/or Tax free transfer at death.

Roth IRA

The Roth IRA is a vehicle that allows you to withdraw your accumulation for retirement, Tax FREE! The contributions are placed into the account AFTER taxes, but once you are older than 59 1/2 you can withdraw your money tax FREE. There are income restrictions and the money MUST be taken out before you are 70. This is a very cool feature that you can have millions in your Roth IRA, and at retirement never taxed on that money!

Life Insurance

I hear you saying, "Wait a second..Life Insurance?" Yes Life insurance! The death benefit proceeds are TAX free to the beneficiary. If you have a beneficiary listed on your policy, the money goes directly without any questions asked by the Tax man. Now you are saying, "Wait a second, I have to die to use it? It makes no sense to give away money to something that I can't use?" That makes sense on the surface, but there are many uses for Life Insurance. It can be an excellent way to store cash for the long haul. It also can be withdrawn tax free. It also can be structured in a similar fashion to a Roth IRA, with the additional feature of having a Tax Free Death Benefit!

It makes sense to talk with your advisor to move from accounts that will tax you at retirement, to accounts that allow tax freedom at retirement! There are some pitfall in making the conversion, so choose a professional that understands how to make that conversion work. It is well worth the conversion to have TAX FREE income at retirement.

Thursday, March 11, 2010

Debt Free and Being "Self Insured" is Risky

"Become Debt Free then Eliminate your Insurance! Pay off your home, then you dont need the insurance! Once your home and kids are grown, you dont need more life insurance! Stop paying all that additional insurance, its a rip off! You can save on the cost of insurance and invest in the Stock Market. You will grow your paper assets to the point where you are self insured." All of these concepts are given out by prominent Financial Advisors and TV Finance Gurus. They may not say these items verbatim, this is the underlying theme of this philosophy. In my opinion, this type of thinking is like betting on horse racing. Let's look into this stupidity in more detail.

Let's suppose you have a home that is worth $300,000. The mortgage is paid off, and you are DEBT FREE! You have accumulated in your 401k plan $1,000,000. You follow the advisor's advice and take off your homeowner's insurance since you have enough assets to be "self-insured". A violent tornado hits your local town, and destroys your home. It is totally eliminated. Nothing is left. What happens?

These kind of scenarios take place all the time. If you don't believe me, ask the people that were victims of Hurricane Katrina. If this scenario happens, your 401k plan must be used to pay for all the expenses related to the destroyed home. Keep in mind, the house will not be rebuilt in one day. The cost to rebuild the home will be around $300k, but you must stay in a hotel, or must have alternative living arrangements while the home is being rebuilt. Since the home was not empty, the items inside the home must be replaced:i.e jewelry, Electronics, furniture, guns, appliances, etc. After its all said and done, you may spend around $600k to move back into a "normal" life with the home rebuilt. Your hard earned cash that was accumulated in your 401k plan is now been reduced to $400k. This scenario can be avoided IF the proper Hazard Insurance was still on the property. The accumulated wealth in the 401k would have been preserved without having to use those funds to rebuild the house. The annual premium for the Hazard insurance is a VERY TINY FRACTION of the overall value of the house and belongings.

How about the assets inside the 401k plan? How are you insuring those assets against risk of loss? No one ever really ponders that question, they just dollar cost average through the scenario or assume that they will be in a lower tax bracket at retirement. In 2008 people on average lost more than 40% in their 401k plans! What "insurance" was used to protect the assets against losses? With these 401k type plans, it is similar to purchasing a home, but not having hazard insurance. You have no insurance against downside risk, and the investor bears 100% of the risk, but the Mutual Fund company gets paid regardless of what happens.
Taxes is another form of risk. The contributions into a 401k plan is tax deductible, but what happens at retirement? You are taxed at your earned income tax bracket upon withdrawal of the funds after 59 1/2. I know what you are thinking, "I will be in a lower tax bracket at retirement!". Really? Are you paying attention to all the bailouts and stimulus packages? How about the Health Care debate? What about the unfunded liabilities of Social Security and Medicare? The Govt is going to raise taxes, since taxes are the lowest currently in decades. If you withdraw your money from the 401k plan after 59 1/2, look for your money to last around 5-9 years, then you will be out of cash.

Suze Orman talks about life insurance as only a temporary need. Wealthy people do not have a philosophy of ANY TYPE insurance as a temporary need. The see insurance as a permanent need regardless of what type of insurance it is. Its an integral part of the over all investment plan and strategy. They may adjust how much risk or insurance is needed relative to the price of the insurance, but they will NEVER stop purchasing insurance. In fact, the more wealth they accumulate, they purchase more insurance to protect their wealth from loss or taxes. They don't see the PRICE of insurance as a hindrance in investing. They don't just dollar cost AVERAGE to wealth, they grow wealth with planning while taking in account all aspects of the ownership of that asset. They leverage the use of insurance to transfer risk to reduce or mitigate losses. They don't get "debt free" to only become self insured.

How does one insure the assets inside of a 401k plan? These plans provide no ability to mitigate risk for the average investor. The Mutual Fund company can make money regardless if the investor loses or gains money. Statistics show that the average stock market investor LOSES money. What insurance are they purchasing from their stock broker? I hear you saying now, "Robert, there are no guarantees in purchasing stock?" I agree their are none, but I will make sure that the situation has more risk sharing than the average investor. The average investor is satisfied with purchasing a Mutual Fund in a 401k plan, pick the mutual funds that the employer picks for him, hand over his hard earned money to a mutual fund manager; someone that he will never meet. If the investor loses money, the losses are passed to the investor 100%. The Mutual Fund company still makes money. That does not seem fair.

It makes no sense to not have your fixed assets uninsured. It is equally irresponsible to have your liquid assets "naked" or uninsured also. The risk management piece must be taken into consideration when placing capital into any asset. Typically, people are excited the acquisition of the new asset, but a novice just looks at the potential earnings, while an expert looks at all aspects of the deal. All of your assets must have some form of insurance, so coveryourassetsnow!

If you are seeking to protect your downside risks in your wealth building strategy, call me directly at 919-352-9260. If you lost money in your retirement plan, and you are seeking shelter from the storm, call! We will perform a free analysis to show you strategies that will allow you to sleep better at night!

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Monday, March 1, 2010

Who,What, When, How and The Why?

Starting a business is an exciting thing. The dreams of financial independence, freedom, wealth, etc all the trappings of a "successful" business are the things that motivate us to start a business..really? If that were the case, then most of us would have successful businesses. Being a business owner is one of the keys of success in the Free Enterprise system.
When I sit down with business owners and ask them, this simple question: "What do you want out of your business?"; they provide all the things they DO NOT WANT! What happens? The business owners get exactly what they do not want. Its no wonder many businesses fail within the first 1-5 years of operation. I think its because many business owners fail to plan properly. Why do they fail to plan properly? Its for a variety of reasons, but ultimately it is typically the lack of understanding of how to ask the right questions.
In my opinion, the following questions must be asked then answered by the prospective business owner: Who, What, When, How, and Why?


If you are in business, someone must purchase your product or service. Who is your customer? Depending on your product/service or business model that answer may vary. You must clearly define who your customer is. Who is the ideal customer? Where is the customer located? How much money does this customer make? It must be clearly defined in your mind, so you can zoom in like a laser on that customer. If not, you will totally waste your time with customers that are not suited for your product or service.
Depending on what type of business model you participate in, the customers can be retail, wholesale, or internal customers. You clearly must identify who those persons are in order to have a successful marketing campaign. Marketing is the life blood of any business. Two thing that should take place everyday: Flossing your teeth and Marketing. It can not be just some random marketing program, but focused marketing.

A second part of the question "Who" is knowing the competition. This is very important. Clearly identifying the "enemy" helps define your product or service in the marketplace. If you know how the enemy is positioning himself in the marketplace, then you can counter or lead by focusing on the weakness of the competition. With your USP(unique selling proposition..discussed below), you can position your product above the competition. Knowing who the enemy is and how they market, will provide you insight on how YOU should market. If they are Big, you may have to attack with a guerrilla style marketing campaign. If they are small and you are larger, then you may take a more mass marketing approach. This can be accomplished once you identify WHO the "enemy" is.


What are you selling? What is your product or service? Sometimes this may sound very simple, but many people really don't know their product or service. They just look at the profit potential. You must be a student of your product or service in order to transfer the enthusiasm to a prospect. Why should I your product from you? What makes your product better than your competitors? What is your USP or Unique Selling Proposition?
It is amazing how many people approach me about their product or business opportunity, and they have not the slightest clue what the USP is for their product. For example, if I am in a network marketing company, my product is not the product or service the Parent company manufactures. It is the business opportunity! Most Network Marketing people have zero clue on their USP, thus the high failure rate. The same problem exists in direct sales also. The parent company spends millions of dollars on branding the company name in the marketplace, but people by the product from the Individual sales person. That sales person needs to have his/her USP! What is your product? What separates it from every other product of its kind in the marketplace? This question is vital. Going back to the network marketing example, a person must be able to differentiate himself versus other network marketing companies AND other network marketing associates.

The question of "When" falls more into goal setting. When do you want to accomplish your sales goals? When provides some timelines to look back and monitor your progress. Many people have short term, intermediate goals and long term goals. It is well documented the success of having timelines attached to your goals.
The Goals should be detailed to the point that your mind can zero in on them. Your daily goals should be something that is reviewed several times per day, without exception. This will program your mind to focus on the the important things and not become distracted.

This is the part that separates the "men from the boys". Successful business operations have a system. They have processes in place where by the business owner can measure the results or the output. For example McDonald's or WalMart. Their approach to distribution is very systematic. They can measure the cost per unit or revenue per unit. That is why they are successful companies due to the turn key system they implement in the operation. Employees must have straight forward clear objectives and duties laid out before them. Managers and owners must have the ability to see the entire process from beginning to end, and hold employees and staff accountable for any success or failures along the way. The more systematic the approach, the more predictable the business becomes.
The How answer should direct you to work flows, and also how your business will be detailed. How will the accounting systems be set up? Inventory: how will it be delivered to the customer? How will productivity be measured? All of these things must be thought through when answering the "How".

I saved the best for last. As stated before, most people start into business for a variety of reasons:Wealth, Freedom, Time, Vacation, etc. All of these are good reasons. Going into business can be a difficult and challenging endevor. During those lean times, there must be something that pushes you through those difficult times. It has to be a part of your being or your passion.
The passion will drive you over the finish line. If you are doing something you are passionate about, it will not be difficult to answer the previous questions. It will not be difficult to tell prospects your USP. That passion will be passed to your employees. It will become like a virus! The why must be solid and a deep burning deal deep inside your being.

In conclusion, you must have a laser type focus to be successful in business.Having these questions answered in the beginning provides an excellent start. There are many more questions that need to be answered also. Starting a business requires, guts, determination, hard work, moxy, and the ability to have a real good street sense. Its not a sprint, but a marathon. The rewards can be worth it.

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