Financial Literacy Tips and Information

Breakfast!

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Here's a little known fact in regards to group life insurance benefit. Most believe it is tax-free. But only the first $50,000. The difference is taxed as normal income.

I wanted to share a story about a prospective client:
I just got off the phone with a prospect that reached out for help. 73 years old with $1.4M at Edward Jones. He is taking out $12,000/mo which he needs for his obligations including his mortgage. Edward Jones told him it's fine and that he will still have around $600,000 left after 30 years. I crunched the numbers with him and here are the results, he will need to have a annualized return of 13.7% since EJ is charging him 1.7% for doing nothing (returns has not outperformed the overall market). So he needs a net of 12%/yr. His account also just went down over $200,000 the last few months. This is what I have to deal with on a regular basis. The misinformation these advisors are giving. Without any changes he will run out of funds way before 30 years. Using the Annualized (NOT Average) returns of the S&P 500 the last 21 years (without dividends is 5.49%/yr). He will be out of money around the 14th year.

Imagine thinking your money will last at least 30 years and then getting to your 14th year and your funds are close to being depleted.

It's my job to set realistic expectations and let him know what he can expect for income so he can adjust his accordingly. Also share with him how to create a lifetime personal pension.

Education never stops. When you stop learning is when you start dying.

TheMoreYouKnow

The S&P 500 as of a few minutes ago year to date is down 21.01%. Have you checked your 401k/403b/TSP/IRA accounts? How much are you down? Can you afford to lose even more? Since everyone is telling you to wait until it comes back, how much time will you lose in earning by waiting? Can you afford to wait?

For my clients I helped who did not want the market volatility anymore (guaranteed no loss provisions), had a loss of exactly 0%. They are not worried at all what the market is doing. And when the market goes back up, they also gain.

For my clients' whose 401k/403b accounts I manage through their current company (company needs to be part of the program) and those that insisted on being in the market. The downside loss is around 8-9%. You can't prevent losses in these type of accounts, but you can mitigate them. Is it easier to make up a loss of 8-9% or 21.01%?

To put it into perspective. If you have a loss of 9%, in order to break even you need a return of 9.9%. If you have a loss of 21% you need a return of 26.6% to break even. And if you have a loss of 50% you need a 100% return to break even. Which one would you rather have? Who's account will recover faster and gain more over time?

What you don't know will hurt you. The more you learn the better your retirement and financial future will be.