Brick House Savings
Your Guide to: The $even $martWeatlh $aving $trategies
Strategy Three
Tax-Free Life-Time Income $trategies™
Chapter 2
What Do You Really Want?
The 12 Things Everyone Wants in Their "Perfect" Investment
The 12 Things Everyone Wants in Their "Perfect" Investment
When you begin planning for retirement, it's like starting a game you've never played. First off, you need to now all the rules. Otherwise you'll find yourself getting a penalty and you didn't even know what you did wrong. So let's start off with some very enlightening "behind the curtains" information you have to consider before investing in a qualified plan such as a 401(k).
Author's Note: SmartWealth Accounts come in 12 different varieties. Here the chart is referring to either Max Funded Indexed Universal Life Insurance or Specially Designed Dividend Paying Whole Life Insurance for Privatized Banking.
Foot Note: The above Featured Article was adapted from charts, graphs and information first developed by Len Renier and offered through his Wealth and Wisdom Institute. This information has been used with his permission by several insurance carriers.
“Over 80% of financial advisers are not fiduciaries. They are merely brokers or salesmen. A fiduciary is a professional who by law is supposed to put your interests ahead of their own. Broker dealers are not under that obligation. They have to conform to a suitability standard: which means they can’t put you into something that is totally unsuitable for you. It doesn't have to be the best thing… just something ‘suitable’ for you. They try to sell you the most profitable products for who… for you? For them! In the fall of 2010, the department of labor proposed putting into place a requirement that advisers take on a fiduciary role in putting their customer’s interest before their own whenever dealing with retirement accounts. The financial services industry lobbied hard against the new rule. The Labor Department pulled back their proposal. Over the past couple of decades we've handed over more than 10 trillion dollars of our retirement money to the financial services industry. They've built a pretty good business out of it. But how well is it working for you and me? So far, most of the efforts to reform the industry have fallen flat. Recently the government has forced through some new rules on fee disclosure and the department of labor says it will try and reintroduce new fiduciary rules soon. Saving for retirement remains a bewildering challenge for millions of Americans.
10 Things Your 401(k) Provider Won’t Tell You
Editor’s Note: I can’t find this article
anywhere on the internet now. Hmmm…
wonder why? I don’t know… maybe Wall
Street DOESN’T want you to know these facts?
I’ll make the whole article available to you by simply requesting. Send
a quick email to SmartWealthNewsletter@gmail.com
with “10 Things” in the subject line.
1. "We're making a mint on
your 401(k) -- even if you're not."
2. "You're buying wholesale,
but we're charging you retail."
3. "No one in his right mind
would buy these funds -given a choice."
4. "Our 'target-date funds'
may miss the target."
5. "We offer tons of
investment options. Too many, in fact..."
6. "...but you still aren't
diversified."
7. "If you quit your job,
you'd have to pay to keep your 401(k) here."
8. "You'd be better off in a
Roth 401(k) –too bad your plan doesn't offer it."
10. "Your nest egg could be a
whole lot bigger."
CHARACTERISTICS
OF WEALTH
ACCUMULATION
VEHICLES
The twelve things that
Americans want in a “Perfect Investment.”
In today’s financial industry, there are many
financial products, or vehicles, which can help you accumulate wealth. Some
offer tax deferred options, while some others offer guarantees, etc. With so many vehicles out there, it can get
confusing and that’s why it is so important to have a trusted advisor to help
guide you along the way so that you achieve your financial needs and goals.
Let’s break down the several characteristics that
Americans want in a financial vehicle so that they can experience the most
financial gain possible. Your answers might be different from your spouse.
We now have the appropriate characteristics of
what you want in a wealth accumulation vehicle.
Next, let’s take a look at some of the most popular financial vehicles
out there.
Next, let's look at the most popular answers in our national survey are shown. Are they different than yours? Why do your answers not match your chosen
Accumulation Vehicles?
The diagram below illustrates seven
financial vehicles and compares their characteristics with the characteristics
that most Americans want. The green
boxes reflect the characteristics our national survey found you likely prefer
while the red boxes show how that vehicle cannot offer you that certain
characteristic you probably desire.
As you can see, there are a
variety of ways to save for retirement.
We specialize in working with you to have a tax-diversified portfolio – comprised of assets in various types of accounts including taxable, tax-deferred, and tax-free. That way you are best positioned to manage cash flow during
retirement. Isn't it time to consider a
SmartWealth Account?
When you are driving you pay attention to the stop lights. Red means stop and
Green means go. Pretty simple. Every 1st grader learns this basic rule. Now let's consider what these colors mean in regard to your investment strategies:
Which do you want? You
decide. You can have both or
either. It’s your choice. Be sure to choose wisely. Author's Note: SmartWealth Accounts come in 12 different varieties. Here the chart is referring to either Max Funded Indexed Universal Life Insurance or Specially Designed Dividend Paying Whole Life Insurance for Privatized Banking.
Foot Note: The above Featured Article was adapted from charts, graphs and information first developed by Len Renier and offered through his Wealth and Wisdom Institute. This information has been used with his permission by several insurance carriers.
“The Retirement
Gamble
Will your IRA or 401(k) ensure a safe retirement?”
On April 23, 2013 PBX aired a special Frontline report on "The Retirement Gamble - Will Your IRA or 401(k) Ensure a Safe Retirement?" The show was hosted by Martin Smith, an independent journalist and correspondent. Following are excerpts from that TV show:
In 1970 42% of employees had a pension. Workers didn't have to understand how to
manage their retirement accounts. About
60 million Americans have signed up for their company’s retirement plan. Companies are expecting their employees to
manage their own retirement plans. Only
about one half of companies offer a 401(k) plan.
In
1981 no one knew about Mutual Funds. A
decade later everyone was betting on the market. In the 90’s it seemed you could not lose
money in the market. Everybody was
making money.
“The 401(k) is one of the only financial
products in America buy where they don’t know the price of it. It’s also one of
the products Americans buy that they don’t even know its quality. It’s one of the products that Americans buy
that they don’t know its danger. And it’s because the Mutual Fund industry has
been able to protected themselves against regulation that would expose the
danger and price of their products."
~ Professor Teresa Ghilarducci, Economist
at The New School
“(Your
pension plan in the 1970s) was very simple. The employee didn't need to know
any of the mechanics behind it. They just knew when they came close to retirement
that they were promised a benefit, a secure income over their entire life. So they had this income until they died.” MS
– What was wrong with that system? “Absolutely nothing! To be honest, it was a great system. The problem was over the last decade, the
rules of the game changed.” With the
introduction of the ERISA laws all the risks and burdens of investing for
retirement fell on the employee. “We wanted them to know how much they needed
to save for retirement, how to investment that money, and then (when they had a
lump sum when they retired) how to withdraw their money so they didn't outlive
their assets. So that’s three different
risks.”
~ Robin Diamonte C.I.O., United
Technologies
“I have a 401K(k).
I save in it. It hasn't seemed to go up.
It’s awful. I kept checking the
statement. Why does this thing never go
up. This is weird. I mean, I knew the stock market was up and
down but I still should be seeing some returns.” Hiltonsmith decided to make a
research project of this anomaly. He started by looking at the investment
options in his 401(k) – 22 funds in all.
“You've got all these (fund) names and the names tell you nothing. You
know… it’s a “balance” fund it’s a “growth” fund… yes, it’s lingo for a broad
investment strategy but really… what the heck does it invest in?” As he dug
deeper, he found one fund that invested in mortgage back securities (the kind
of security that caused the collapse of the housing market) but that’s not what
worried him. “I was digging into all the
aspects of it and I kept coming back to fees.
Here’s the first mention of fees – EXP Ratio – why would you think that
EXP Ratio means fees.” Hiltonsmith found
over a dozen different kinds of fees including: Asset Management Fees, trading
fees, marketing fees, record-keeping fees, and administrative fees. “Fees when you withdraw money, fees when you
take loans, fees when you get money out when your actually retired which I
actually didn't even know about… this fee was a sub-type of this fee and oh that
covers that… oh that’s another name for that… It was very opaque.”
~ Robert Hiltonsmith, MA Economics and
Employed by a NY Think Tank
He (Hiltonsmith)
spent well over a month just going through all 22 of his own 401(k) funds just
trying to digest all the information.
The average actively managed account averages 1.3%. Some funds charge a fee of 2% and even as
high as 5%. “That may not seem very
much… but when you add that up over 20, 30, 40, or 50 years in a 401(k) plan,
all of a sudden you’re well be into the six figures… That’s the difference
between running out of money before you die and having a little money to pass
on to your heirs.
~ Ron Lieber
– The New York Times “Your Money” column
John “Jack” Bogle, CEO, The Vanguard Group
1974-96, says that an account getting a gross annual return of 7% would reach
63% less with an annual fee of just 2% over a lifetime of saving. “Costs are a
crucial part of the equation. It doesn't
take a genius to know that the bigger the profit of the management company –
the smaller the profit that investors get…. What happens in the fund business
is (that) the magic of compound returns is overwhelmed by the tyranny of
compounding costs. It’s a mathematical
fact. There’s no getting around it. The fact that we don’t look at it (is) too
bad for us… Do you really want to invest in a system where you put up 100% of
the capital… you take 100% of the risk… and you get 30% of the return?” Jack Bogle has been a long term proponent of
low cost, long term savings in indexed funds.
You own and hold the whole market at an annual cost of 1%. They are much cheaper because there is no
active manager.
~
John “Jack” Bogle, CEO, The Vanguard Group 1974-96
In the spring of 2012, Robert Hiltonsmith came out
with his study on the impact of fees charged to 401(k) plans. He reported that an average American
household will pay $155,000 in 401(k) fees in the course of a lifetime. “All
the costs of retirement are being shifted to the individual investor. IRAs and 401(k)s have been sold to us as safe
products over the years… The point is this system isn't built for individuals
at all… it certainly isn't built for their benefit.
~ Robert Hiltonsmith, MA Economics and Employed by a NY Think Tank
~ Robert Hiltonsmith, MA Economics and Employed by a NY Think Tank
“Over 80% of financial advisers are not fiduciaries. They are merely brokers or salesmen. A fiduciary is a professional who by law is supposed to put your interests ahead of their own. Broker dealers are not under that obligation. They have to conform to a suitability standard: which means they can’t put you into something that is totally unsuitable for you. It doesn't have to be the best thing… just something ‘suitable’ for you. They try to sell you the most profitable products for who… for you? For them! In the fall of 2010, the department of labor proposed putting into place a requirement that advisers take on a fiduciary role in putting their customer’s interest before their own whenever dealing with retirement accounts. The financial services industry lobbied hard against the new rule. The Labor Department pulled back their proposal. Over the past couple of decades we've handed over more than 10 trillion dollars of our retirement money to the financial services industry. They've built a pretty good business out of it. But how well is it working for you and me? So far, most of the efforts to reform the industry have fallen flat. Recently the government has forced through some new rules on fee disclosure and the department of labor says it will try and reintroduce new fiduciary rules soon. Saving for retirement remains a bewildering challenge for millions of Americans.
~ Helaine Olen – Author, Pound Foolish
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