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Friday, May 31, 2013

I AM TOO CONSERVATIVE

Before I get started, two caveats are in order:
  1. Remember that these blog titles are Myths.
  2. By "conservative" I mean in terms of your financial security.  Politically I range from a Teapartier to a bleeding heart Liberal, depending on the issue.
First, take a look at this fascinating graph (I know.  That may be an oxymoron):



(If you can't read the small print, or if you would like to tweak the parameters yourself, click on the link directly below the graph.)  I love graphs because they make the invisible visible, the complicated simple, the hazy, clear.  Beginning in the year 2000 this graph measures 50 different data points which reflect consumer confidence.  The lower the score, the lower the level of "Consumer Distress".  The key take away:  note the peak in consumer confidence (i.e., lack of distress) just before each market crash.  Yet mildly rising consumer confidence is touted in the press as reason for optimism.  Which of course is circular thinking, "We should be optimistic because we are optimistic".  Sounds stupid when I put it that way doesn't it?
But here are the facts which should sober up your drunken revelry about the "record" stock market indices.  First of all, Americans lost $16 trillion in household wealth in the Bush recession.  It appears we've just about gotten it back.  But secondly, unless you factor in inflation & the increase in the number of households, you're dreaming.  The average family is only about halfway recovered and would need to double current asset values in order to be "even".  Ain't gonna happen.  Not because of consumer confidence.
My point here is not to put my elbow in the party cake.  My point is to emphasize the importance of not losing money.  Risk management is not only more important than chasing the Wall Street casino but it is also the only factor that is in your control.  This is both conservative and optimistic:  if you can reduce risk and have sufficient retirement income, why gamble with your future??  Why gamble at all?

Saturday, May 25, 2013

CAN YOU DO IT YOURSELF?

Retirement planning consists of much more than maximizing investment returns.  I think risk management is far more important.  And difficult.  Sure, you may be able to do a great job all by yourself.  But would it be worth $49 to see if you have what it takes, and, to be sure you leave no stone unturned?

My next series of Retirement Planning courses begins this May 30th, 6:30-8:30pm.  The materials & ideas presented are based on academic research; this is not in any way a sales presentation.  Student evaluations have been "Excellent".  And I've included a lot of humor to keep it interesting.

For your tuition you will receive:
  • Financial House in Order Guidebook
  • Managing Your Money in Retirement Guide
  • Getting Your Estate in Order Guide- this is a wonderful resource
  • Personal Wealth Index Scores/Report-it's not all about money.  Life is more than a math problem.
  • Social Security Analysis Report- avoid the most common HUGE, irreversible mistake I encounter.
  • Course Workbook and Essential Reports
 You Will Learn:
  • Optimal Asset Allocation in Retirement
  • Defining Core Priorities
  • How Money Affects Your Life
  • How to Develop an Income Plan
  • Sequence of Returns Risk
  • Questions to Ask a Potential Adviser
  • When to Take Social Security
  • 3 Reasons Retirees Run Out of Money
For more details and to register, go to http://www.richnessoflife.org/ccc/
Or call me at 503-698-4812
Gary 

Sunday, May 12, 2013

AARP is a reliable source of financial advice & evidence based public policy.

Once again, lest there be any doubt, the title of this post is a MYTH.  Current case in point is the recent AARP "BULLETIN" titled "Now's the Time for Tax Reform", written by Nina E. Olson, "National Taxpayer Advocate".  Not.  That is, if this is our advocate, who needs an adversary?
The upshot of Ms. Olson's article is that we have met the enemy of tax reform. And it is us.  Because we average Americans greedily cling to our "special interest" deductions such as mortgage interest and medical expenses.  She opines we must be willing to give up these deductions in exchange for "comprehensive simplification"of  the tax code.  The underlying presumption is that the complexity of the tax code causes "high" tax rates and simplification will cause our taxes to go down.
This is of course total nonsense.  And it is embarrassing (but not surprising) to read it in a massive marketing organization's (that's what AARP is) newspaper.  Here's why:

  1. The problem is not complexity.  That may have been the case before computers were invented.  They can handle it now.  Complexity is simply a symptom of the real problem.  The most powerful interests keep slipping abusive provisions into the tax code, which our few remaining ethical lawmakers then attempt to fix.  Which lobbyists then try to undo.  And so on.  This vicious cycle is responsible for the malignant growth of the tax code.  Ms. Olson cites required minimum distribution rules and Social Security taxation as examples of how  tax complexity baffles seniors.  But just about anyone can figure them out.
  2. The problem is inequity, that is, those who benefit most from government expenditures contribute the least to the Treasury, measured as a percent of their income.  No, I'm not talking about welfare cheats or those naughty seniors who keep whining for their meds so they can stay alive.
  3. The cheaters, the "winners" in the tax game are:
    a. Those wealthy individuals who are hiding $11.5 trillion off shore, strictly to avoid Federal, State and local taxes.  See http://www.taxjustice.net/cms/front_content.php?idcat=2
    b. Corporations are more difficult to assess.  Nobody seems to know the exact total trillions offshored by them.  It seems reasonable to guess that the total of individual and corporate tax dodging exceeds the entire GDP of the United States.
Want to eliminate the national debt in one fell swoop?  Make an offer to everyone with offshore income & assets:  Bring that money home this year, pay full taxes on it, and you will not go to prison.  And if you are an artificial person (corporation) you will be allowed to keep your corporate charter(s) and continue operation.