Early Retirement Planning

What you look for in a Fixed, Indexed Annuity

2009-11-09T13:16:00.000-08:00

There are lots of fixed, indexed annuities on the market today.

They have some things in common but they are not all alike.

Chief among the similarities is that you can never lose money

in an indexed annuity due to market declines.

The way the product works is that if the market declines during

the policy year you simply get a statement that shows that you

earned zero for that policy year. The main thing is your money

was protected from a falling market. Your balance is the same as

it was a year previous. No headaches or pains for the annuity

owner like some of his friends who are directly in the market

and have big losses. That is a good thing.

But the products are different on what they can do for you on

the upside. In other words, you need to look at the strategies

offered. The ideal plan allows for you to choose an index strategy

that will allow you to make double digit gains in really good years.

The best way to do this in my view is with a monthly average no

cap strategy. If you can find one.

I only know of one and it is going to be discontinued very soon.

Contact me for more information if you are interested.

Tax rates must rise to pay for this. Click here to see how to protect your income from tax increases.

2009-09-22T09:16:00.000-07:00

How to Reduce or Eliminate Tax on Your Social Security Retirement Benefits

2009-08-14T07:25:00.000-07:00

Did you know that up to 85% of your Social Security benefits could be taxed depending on your income and marital status? If you want to see some anger from Seniors, just start talking about taxes and Social Security Income.

The basic rule is that social security benefits are taxable if your modified adjusted gross income (adjusted gross income plus tax exempt interest plus exclusions per IRS publication 915) exceeds the following limits:

% taxed 0%----------- if single < $25,000-------------- if married < $34,000

% taxed up to 50% -- if single $25,001-$34000------- if married $34,001-$44,000

% taxed up to 85% -- if single More than $34,000---- if married More than $44,000

Now that you know whether or not any of your Social Security benefits are taxable, and if so, how much, the next step is to take a look at the ways you can reduce or eliminate this tax. There are three solution categories:

1. Reduce your interest earnings. The most common is interest on CD’s.

2. Reduce your dividend income.

3. Reduce your tax-exempt interest income.

IF you can engineer your includable income below the limits above, you may be able to reduce or eliminate taxes on your social security income. How do you do that?

An excellent way to accomplish this is to reposition your assets that are included in the provisional income formula ie. CD’s, assets that pay taxable dividends, and municipal bonds into fixed, tax-deferred annuities.

The reason you want to do this is because TAX-DEFERRED ANNUITIES ARE NOT INCLUDED IN THE PROVISIONAL INCOME FORMULA and therefore, tax-deferred annuities could lower your taxes and possibly reduce or eliminate your taxes on Social Security Income.

You can also use Split Annuities which is the combination of a Single Premium Immediate Annuity and a Fixed, Tax-Deferred Annuity to generate an income stream that is mostly non-taxable and thus lower your taxes and possibly reduce or eliminate tax on Social Security income.

FOR a FREE ANALYSIS on whether or not you can use this strategy to reduce or eliminate taxes you pay on your social security income JUST COMPLETE THE FORM AT THE TOP OF PAGE. Wouldn’t it be nice to lower your taxes every year. It adds up real fast. So go ahead and send in the form. There is absolutely NO OBLIGATION

Double-Digit Inflation or Deflation and Economic Depression?

2009-08-14T06:00:00.000-07:00

I think we’re factoring in some pretty major inflation,” the chairman and CIO of Dreman Value Management told CNBC. The Treasury is issuing billions of dollars of bonds to finance the budget deficit, the Federal Reserve “has been printing money 24/7/,” he says.

“That’s been going on pretty much worldwide, and it’s got to have its toll. Not now, but two, three, four years out. I think we’re going to see inflation probably as bad as say the 1977 to 1981 period, when it was about 12 percent annually.”

He also believes that inflation is very good for stocks and real estate over time. “Markets stay up with inflation, even hyperinflation” Dreman believes stocks will go up much higher over the next 3 to 5 years.

On the other hand, there is Robert Prechter of the Elliot Wave International. Prechter correctly predicted the 1987 crash and last year’s peak in oil prices. He now says we are going to see a year or two of UP in the dollar. He claims that the Elliot wave pattern indicates that the dollar has just completed its 5th wave down and the next cycle is therefore UP. He also indicates that sentiment has reached an extreme at 3% bulls, a level reached only 5 times in the last 20 years.

Prechter also sees the biggest risk as deflation not inflation. Prechter thinks the bursting of the latest bubble will lead to a major economic depression. This will mean significantly lower stock prices in the coming years.

So there you have it- two completely different views from two so called “experts.” The question is, which one is right?

#1 Worry of Retirees- Longevity Risk-"the fear of outliving your money".

2009-08-11T06:19:00.000-07:00

Everyone who is retired and those who are approaching retirement need to understand the importance of “the science of risk management” and how the emerging risks that are present in retirement could be catastrophic if not planned for and taken into account. The time to do something about risk is before a crisis develops when there is time to prepare for the worst case scenario.

For investors, the risk is about the probability of losing money, so planning for the unexpected should also be considered. “How much could I lose in a really bad year”? I think that most investors were totally unprepared for what happened in 2008 and now have learned that there are severe consequences if things don’t go according to plan and you don’t have your risk covered.

There are six major risk factors facing those who are in retirement. They should all be carefully planned for before retirement because it is more efficient and easier to manage than to have to solve the problems after retirement takes place. And if one waits too late, it is even likely to become impossible to manage some of the risks as one reaches older ages. Procrastination is extremely costly almost without exception. And ignorance is no excuse. The time for solving risk problems is today.

Today we are going to focus on the number one worry the majority of retirees have today. That risk is LONGEVITY RISK or the fear of outliving your money. Planning to live to a certain age is risky and planning to live to the life expectancy will be inadequate for about 50% of the population. Retirees want to make sure their money will last a lifetime without changing their lifestyle. In reality, however, unexpected events make this very hard to accomplish.

So how long do we have to worry about? It’s hard to say because we are all individuals and the life expectancy numbers are based on averages. But at least they give us some idea of what we need to plan for. Let’s look at the numbers.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Likelihood that

xxxxxMale Currently Age 60xxxxxxxxxxxxxAllocated Pension will be depleted

1 in 20 chance of dying before age 66 xxxxx 0% chance of fund being depleted

1 in 4 chance of dying before age 78 xxxxx .5% chance of fund being depleted

1 in 2 chance of dying before age 86 xxxxx 46% chance of fund being depleted

3 in 4 chance of dying before age 92 xxxxx 80% chance of fund being depleted

19 in 20 chance of dying before age 100 xxxx 93% chance of fund being depleted

You can see that LONGEVITY RISK is a real problem. The meltdown of retirement accounts, rising medical costs, uncertain entitlement programs and higher taxes have added to the risk. Facing 30 years of retirement living on past savings and Social Security is a scary reality.

Consider what some are going through now and what they are saying. Edie Stark is a retired nurse and is age 84. She and her husband lost 50% of their retirement assets since the stock market tanked. “I have fixed expenses so I can add it up and tell you how many years we can live unless the market comes up”, said Stark. “We wanted to have money to leave our children. That’s not possible anymore.”

Dorie Ryder, 89, a retired school teacher and neighbor of Stark has lost about 25% of her assets due to the stock market decline. “I just do the best I can and I’m worried. I don’t know how long I’ll be able to stay here.” Coping with financial fears is not unique to the elderly but it is especially painful to the elderly. “Money anxiety when you’re older is just different than when you are young. You don’t have a chance to recover.”

“I predict that this spike in anxiety around the security of money is actually going to lead to more sickness. People are going to die of worry.” Experts say millions of middle-and-upper class retirees across the country face mounting insecurity due to exposure to stocks instead of ‘safe money’ investments like short-term bonds and fixed annuities.

The US is the only developed, industrialized and democratic country in the world where traditional pension plans with a nearly guaranteed stream of income are being replaced by 401k plans in which retirees bear many risks from volatile market investments. “It’s disastrous” says Alicia Munnell, director of the Center for Retirement Research at Boston College, referring to the outlook for retiring or soon-to-be “baby boomers.”

Late boomers will fare far worse than their parents and grandparents in terms of replacing their income in retirement, mainly because of the erosion in the employer pension system. The idea that we have people increasingly and solely dependent on accounts which vary with the ups and downs of the stock market just doesn’t make for a very sensible retirement arrangement.”

In addition to the meltdown of retirement assets, there is also rising medical costs. This is a very real worry. What heavily contributes to running out of money when it does happen is that unexpected events occur: like a major sickness that becomes chronic. Not only can it be very expensive to treat but chronic conditions that lead to supplemental care over long periods of time can wipe you out.

If that were not enough, you also have inflation and taxes to be concerned about because they both erode your purchasing power and dilute your savings. And the entitlement programs we have now like Medicare and Social Security are not on sound footings and have to be restructured in a few years if they are to be sustained. How this will effect your situation is unknown at this point in time.

These major risk factors are what make up LONGEVITY RISK. Managing the risk factors is critical to our knowing that we have security and will always have money for as long as we live.

The major risk factors are: Investment Risk, Health-care Risk, Long-term Care Risk, Inflation Risk, Entitlement Risk, and Tax Risk. We will be discussing each one of these in detail over the coming weeks.

Be sure and put your email address in the subscription form box so you will not miss any information on this vital information.

Things aren't what they seem-Don't let stock market fool you

2009-08-10T12:24:00.000-07:00

When the SPX closed above 1000 this month, it was the first time since November that it closed 15% above its Simple Moving Average since 1999. The SPX has not closed 20% above its 200 day SMA since 1983.

In no way do I think today’s economic conditions are similar to what we were looking at in the early 1980’s. In fact, conditions are just the opposite. Then the Chairman of the FED had brought inflation down from double digit levels by raising interest rates to over 16%. Today the Chairman of the FED, Helicopter Ben, has interest rates at all time lows and creating money out of thin air with the “printing press running full time.” This is highly inflationary.

Click here to view SPX and Simple Moving Average

Richard Russell:Rally is well within the confines of a bear market

2009-08-06T10:50:00.000-07:00

Everyone has always heard about the day the market crashed in the Great Depression and how there were men jumping off tall buildings. We also were told that people lost everything and in fact the investors in the market did lose almost 90% of their money. BUT what most people don’t know is that the market rallied significantly after the crash and that people did not lose their fortunes until after the bear market rally. They had become bullish again and lured to stay in, even add more. Sound famliar?

Richard Russell, in his Dow Theory Letters has just stated:

“ We tend to forget that every move, large or small, in the stock market is entitled to a correction. I believe that the rise form the March lows is simply a correction of the huge bear market decline which preceded it.”

“Normally, a secondary correction will recoup one-third to two thirds of the ground lost during the preceding bear leg. To refresh your memory, the preceding bear leg carried from 14164.58 on October 9, 2007 to 6547.05 on March 9, 2009-- a total loss of 7617 points. A one-third correction would carry the Dow to 9083. A two-thirds recoup of the bear market losses could take the Dow back to 11619.”

“Subscribers should know that following the famous 1929 crash which took the Dow from 381 to 198, a correction took the Dow back to 294 in early 1930. That correction turned the entire investment community bullish. The public piled back into the market. However, the correction had nothing to do with an improving economy. In fact, the great 1929-1030 correction was followed by the greatest market-wipe-out and economic depression in history.”

So buyer beware. If you want to have your cake and eat it too, buy the right fixed, indexed annuity along with a basket of gold stocks. That is what I think. And may everyone be wise enough to take action.

What to Look For in a Fixed Indexed Annuity or EIA

2009-08-05T05:18:00.000-07:00

Not every fixed indexed annuity, (EIA) is equal. How do you
know which equity indexed annuity (EIA) to buy. You have
to know what to look for when purchasing a fixed indexed annuity
product.

Here is what I want today in a fixed indexed annuity (EIA):

1) Issued by major company with strong rating and preferably
a leader in selling fixed indexed annuity products. They are usually
a leader for a good reason. A company like Allianz, the all-time
industry leader, or ING, or Lincoln Benefit, an Allstate company
come to mind.

2) You want to have multiple Index Strategies so that you can always
have a choice to choose the best one for a particular market environment.

3) You want to have an index strategy that will allow you earn extremely
high interest rate in years the market takes off. My favorite strategy for the
last couple of years had been the Monthly Average with NO CAP. Most
companies do not have a NO CAP strategy. But it is important to have one
so look around even if it takes you a long time to find one.

4) The Income Riders which provide for lifetime income without annuitization
are important if one thinks they are going to use the annuity for an income
stream at some point and want security for life. One company is a winner
hands down on that one. Ask me for details at:
murray.john13@gmail.com

So you see the company you do business with, the details of the specific index
annuity you buy are very important. If you your homework, you will be
EXTREMELY pleased as these fixed indexed annuities are ideal for retirees
to own today. If you have the best one, it’s icing on the cake.

33% Interest locked in so far in a special Fixed Indexed Annuity.

2009-08-03T05:52:00.000-07:00

A fixed index annuity is a beautiful thing. If you know what to look for there
isn't a better place to invest your money . In a fixed index annuity you cannot lose money due to market declines. They are safe, conservative fixed annuities and
great places to put your money for tax-deferred growth.

Some brokers question the ability of a fixed index annuity to earn high enough
interest though in the good years. However, I know of one fixed index annuity
that has already earned 33% interest since March plus it had a 10% bonus on
the initial premium. If nothing happened good in the market from here out or if the
market goes into a severe decline and gives back much of its gain, this annuity will
credit 33% next March. With the bonus, that is over a 43% rate. Pretty good for a
no risk product, don’ you think? Great for early retirement planning!

Not just any fixed index annuity will do though. You must have one with the right
parts. All fixed indexed annuities are not the same. They all will keep you from losing money in market declines and that is a very good thing. But only some will make you big money in the good years.

If you want the ability to earn high interest in UP years and also have total protection in DOWN years, you need to know which kind to buy. To find out, please send me an
Email at murray.john13@gmail.com

Suppose you had a negative net worth of $19 billion- Could you make it?

2009-07-30T10:26:00.000-07:00

There were very interesting truths revealed in the July 30th edition of MoneyMorning in an article written by Shah Gilani entitled, "Why Ben Bernanke's 'Exit Strategy' Could Lead to a Decade-Long Downturn."

Basically the article was about the fact that unless the FED in their exit strategy to unwind these bailouts and stimulus packages, include Fannie Mae and Freddie Mac in them the recent gains in the market will be reversed. And they are not in the plans.

That means the US taxpayer is on the hook for over $5trillion of GSE debt. According to the 2008 Congressional Research Report on the Fannie Mae and Freddie Mac Conservatorship, " the US Treasury has put in place a set of financing agreements to insure that GSE's continue to meet their obligations to holders of bonds that they have issued or guaranteed."

Fannie Mae and Freddie Mac have become huge fiscal and monetary policy levers and are indispensable. They act as a sponge. The only hope the US government has for wholesale purchase of new mortgage pools and in stimulating and accelerating the velocity of mortgage money is these two monsters. They are levers.

The problem is they are both broke as in DEAD. The US government is their "life support." Fannie and Freddie both draw on the US government to function. Fannie Mae lost $23billion in the first quarter, their 7th straight quarterly loss. They have a negative net worth of $19billion. Freddie Mac lost $9.9billion in the first quarter.
They pay a 10% dividend on all money drawn down from the government pool and now totals $51.7billion. That means they pay interest every year of $5.2billion which is more than they earned in 9 of the last 10 years.

Taxpayers are being tricked into believing the mortgage market is recovering and that money will be flowing when the time comes that they want to buy another house again. Alright, Fannie and Freddie are not making it now. Can you imagine what will happen if interest rates were to suddenly spike? Then it will be MEGA BAILOUT TIME.

"Unless the government weens itself off its own tainted tonic and makes a concerted effort to create a financially viable private sector mortgage organization and investment outlet- the US stock market will remain weak for decades" so states the author.

Based on what is going on in the stock market now, and after reading these FACTS, it makes you wonder who is in charge of the storehouse doesn't it? What is going on?
What do you think?

$100,000 401-k Lum Sum/ Out of job and what to do?

2009-07-29T06:32:00.000-07:00

I just read the following on another post:

Problem:
I am 49 and recently laid off. My husband is employed and we need advice on what to do with the pension from my former employer. I selected a cash-out option, since I will have a small pension from another employer. I can roll this cash into a traditional IRA but wonder if there is a different way to invest this money?

We have no debt, except for our $240,000 fixed-rate mortgage. I have a 401(k) valued at $100,000 and a variable annuity of $120,000. My husband has an $80,000 IRA and a smaller one at our bank. We have a joint stock plan of about $10,000 and a 529 plan for our son, who is 10.

I wonder if investing the $43,000 pension monies into a business for me wouldn't be a good idea. No one is hiring right now, unless I work for 50 percent to 70 percent less than I was earning. Is there a way to avoid tax penalties if the pension money went into starting a business?

My husband is risk-averse so I also wonder if buying some rental property would be an option, instead of investing in a business? I heard there are ways to structure an old 401(k) as a real estate IRA (buying specific properties we would manage). I had also thought about using some of the money to help fund our household expenses while I get my master's degree. Help!

My Suggestion:

Since you are 49 and you state that your husband is risk-averse, what I would do
if I were in your situation is roll the 401-k money into an IRA and put it into
a fixed, indexed annuity that has a variety of index strategies including a no cap strategy. I would also do away with the variable annuity by rolling it into an IRA also.

Why have money in a Variable Annuity if you are risk averse? In a Variable Annuity, the customer, YOU, take all the risk. And many investors found out in the last couple of years what that means. (OUCH) My preference is the fixed, indexed annuity for accumulation. It is tax-deferred, and provides total safety in bad markets yet
lets you make above average gains in up markets. I have a client who is half way to making over 28% in her FIXED annuity this year. It all depends on the strategy and if you are in the right annuity. Check it out. Your husband will be happier.

I consider at this time, rental property and/or starting a business filled with risk. The only good thing is you may be able to buy some properties at a discount due
to what has been happening in real estate the last couple of years. It seems to me that would allow you to get in and make the rents reasonable and perhaps in the future it could turn out to be a good deal. But you got to find somebody to rent it to first. Personally, I like the annuity better.

Today's S&P 500 Chart- What does it tell you?

2009-07-28T13:12:00.000-07:00

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2009-07-28T11:59:00.001-07:00

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Market Recovery Sustainable?

2009-07-28T10:18:00.000-07:00

Here are some key points from Mortimer B. Zuckerman's article entitled " 9 Reasons the Economy is Not Getting Better."

1. June's total employed included 185,000 who were ASSUMED to be at work but in reality the government could not identify them. They made an assumption about trends. But many jobs in industries with No Job Creation like finance.

2. More companies are asking employees to take unpaid leave. Even teachers are having to take furlough days.

3. 1.4 million or more people were available for or wanted work in the last 12 months and were not counted because they had not searchded for work in the 4 weeks preceding the survey. ( Many have become discouraged and given up. )

4. The number of workers taking part-time jobs has doubled in this recession. ( I checked local Home Depot out today and was told few full time jobs avaialbe all wanted by part-time workers. Part-time workers only working 6-8 hours a week.

5. Average workweek for production is around 33 hours per week. Full time workers being downgraded to part-time workers.

6. Number of long-term unemployed has now jumped to 4.4 million, an all-time high.

7. Average worker saw no wage gains in June.

8. The sector producing goods is losing the most jobs- 223,000 in the last report.

9. Likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers to full-time
status.

In spite of this, the stock market has roared back at a record pace since March. Of course everyone is still way under water in spite of this recovery. The question is this: is the recovery sustainable given the economic conditions?

What do you think?

Is Your Social Security Income all Tax-FREE? or taxed up to 85%?

2009-07-28T10:09:00.000-07:00

Some people pay tax on their Social Security Benefits. Others pay no tax. It is possible to pay tax on up to 85% of your Social Security Benefits. How about you?

The rules are straightforward: If your provisional income exceeds $25,000 and you are Single, you pay tax on at least 50% of your Social Security Benefits. If married, if it exceeds $32,000 you pay tax on at least 50% of your Social Security Income. And it is on up to 85% if your provisional income is over $34,000 single, or $44,000 married.

So the objective is to lower your provisional income to the base limits to make 100% of your Social Security Income TAX-FREE. You do that by changing the way you take your income. If you want to know how to do that, send me an email and include your name and phone number with email address and fax number. Ask for " How to Lower Provisional Income" report. Specify how you want it delivered: fax or email. Email to pensionrecovery@aol.com

2009-07-23T06:56:00.000-07:00

Amazing Internet Marketing Opp for Retirees

2009-07-22T12:38:00.000-07:00

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make money FAST

Send and Receive FAXES via e-mail over Internet for $10 per month FREE 30-day TRIAL

2009-07-22T12:13:00.000-07:00

Retirement Calculators

2009-07-21T06:02:00.000-07:00

In planning for ones retirement, it will be extremely helpful to use various financial and retirement calculators that are available in order to accurately show the level of your assets and income as time passes. The calculators also make it easy to look at variable growth rates which is necessary because under certain scenarios, your rate of growth could be dramatically different.

The calculators will also make it easier to see how long your money will last and what effect inflation has on the purchasing power of your dollar. And don't forget about taxes. Tax rates are at the lowest they have ever been and can only go higher. So calculators will prove to be valuable in your planning endeavors.

Examples of the calculators are: 401k savings calculator, asset allocator, required minimum distribution calculator, social security benefit calculator and many more. We will be looking at these in more detail over the next few weeks. Here is the link to my favorite calculators:

http://www.finance.cch.com/sohoApplets/index.html

Your Retirement Toolbox

2009-07-20T15:44:00.000-07:00

Welcome to the Early Retirement Planning blog and Your Retirement Toolbox.

The toolbox consists of a number of financial calculators that can be used to help in retirement planning. We will use them to find the best solutions to retirement problems and to assure that we meet our retirement objectives.

First, we must focus on the important core of our retirement plan. The core of the plan is to manage the 8 risk factors that effect retirement. Do you know what the risk factors are?

For a FREE report on How to Manage the 8 Risk Factors of Retirement, please make your request for a copy by sending an email to: pensionrecovery@aol.com Be sure and include your name, phone number and email address.