Friday, December 7, 2018

What do you do when the market falls?

What do you do when the market falls?
Sell or stay the course? Why do the non-commission advisors like Warren Buffett tell us not to panic when the market declines? Why do the smart investors use the decline to BUY, not sell? The only reason is they have the experience of seeing the losers after they sell. Here is what I do, even in retirement: I look at the past market behavior-- 2008=-37%, 2009=+27%, 2010=+15%; 2002=-22, 2003=+29; 1974=-27, 1975=+38, 1976=+24. Notice that when it falls, it rises. If that is not convincing you, look at the actual average earnings for advisor-assisted investors compared to the unassisted stock index fund: 3.79% vs 11%. Earning 11% a year (index accounts cost 0.04 % or less) over time beats 92.2% of the advisors and brokers unless they have illegal insider information. I use ‘perspective’: 2018 Jan 2=271; Dec 6=271 plus dividends. Last year I gained 22% tax free.

Is your ‘retirement’ account really an ATM?
Most (59%) of investors ages 18 to 34 say they already have taken money from their retirement accounts according to a survey. Yet most believe they will have enough to enjoy their retirement. Not long ago, only 31% had raided their future nest egg. What happens when our 401k or 403b is used as an ATM? The compounding effect is destroyed. Compounding is the effect of making money on our existing money without adding more. Invest $250 a month, $3000 a year for 33 years ($99,000) and compounding produces about $1,000,000: $900,000 was from compounding. When we interrupt the growth—just 5 years—by stopping the flow and ALSO reversing savings, we lose about HALF the final total.

Wages are up 3.7% Who is getting the raises?
The unemployment rate is now at 3.7%, the lowest since 1969. On a yearly basis, wages and salaries jumped 3.1%, the biggest increase in 10 years. But, which groups are getting the lion’s share of the increases? Corporate CEOs and upper management seem to have taken more than their share—perhaps from the corporate tax cuts. Most line workers seem to have given up more than they got—they will pay for the corporate tax cuts. The highest-rated employees earned 4.6% in raises in 2018, compared to the 2.7% average raise given to employees with an average rating. Although minimum wages were raised in some states, the big increases went to a few. Clothing manufacturing wages jumped 14% with only 116,000 workers. Refiners of petroleum and coal with 115,000 jobs saw the 2nd highest raises. Data miners are in demand. So most of the wage increase of 3.7% was for a sliver of very skilled workers and their bosses. CEO's have seen a 937% increase in earnings since 1978: Workers saw 11.2% during the same time. "CEOs are getting more because of their power to set pay, not because they are more productive or have special talent or have more education," says one report. Given cuts in corporate and wealthy taxes, paying for the narrow group of raises will fall to the working class only.

Do you need a REAL middle-income tax break?
The REAL tax break from the GOP and Trump is the removal of the income cap on conversions from traditional IRAs to Roth IRAs. The 1.6% income increase for the average household earning $50,000 to $75,000 has been eaten up by tariffs and health care costs. Compare the $thousands you save in taxes during retirement when most of your income is tax-FREE and you no longer have to take taxable RMDs from your IRAs. For many, the elimination of tax on IRA distributions means their income can continue to grow after age 70 ½ AND they will pay less tax or nothing on their SS benefits.

Advisor’s plan for retirement spending is impossible
The average spending for households headed by 55- to 64-year-olds was $65,000 in 2017, according to its Consumer Expenditure Survey. Spending dropped to $55,000 between ages 65 and 74, and after that it fell to $42,000. Housing costs remained steady and health care expenses increased, but nearly every other category — transportation, entertainment, clothing, food and drink — declined sharply. Retirement is NOT a fixed expense so putting all your money into an annuity or other fixed income vehicle is absurd. We all need flexibility unless we are going to watch TV for the rest of our lives. Advisors used to get off easy by telling us to take 4% a year. They were just lazy—it takes work to know how much to spend in the future. Chase bank created 4 profiles: homebodies, globe-trotters, health care spenders and foodies. Most advisors build inflation escalators into their financial plans but the data shows otherwise. For some, the huge bump comes with unexpected health care expenses. On the other hand, you should make that great trip or other retirement dream while you are able. Plan for flexibility!

Are trusts to avoid $10K cap on property tax right for you?
Wealthy folks in CA, CT, NJ, and NY are using trusts to hold their properties so they can avoid the cap of $10,000 on property tax set by Trump’s new tax bill. Those who previously deducted $50,000 or more for property taxes are moving ownership of their holdings to Alaska, where the tax is $0. Building and administering the trusts could cost about $20,000 plus you have to put investment assets in the trust that will generate enough income to balance out the $10,000 deduction. So this option will not work out for most taxpayers in the affected states. They will carry the load for the wealthy again. With a $20,000 property tax bill, the average homeowner will need to pay a larger chunk to cover Trump’s tax breaks for the rich.

Another way the wealthy avoid paying their fair share of tax
Feds just charged 4 people with helping the wealthy avoid US taxes using a law firm in Panama. The charges come from journalists getting records from the Panama Papers. One method: lawyers set up a fake investment into which a rich person could get the money out of the country. Then lawyers created a paper loss so the transaction could be called a non-taxable loss. The original money could then be returned to the US without a taxable event reported to the IRS. The rich could then use the untaxed money to buy a hard asset like a mansion with no questions asked.

This is how Jared avoids his fair share of taxes
Like papa, Jared uses other people’s money to buy commercial real estate. He pays himself well to run the business at a loss created from using the 'virtual' expense of building use and aging called depreciation. The losses mount up over the years and are added to this year’s loss. He earns $millions but never pays tax. We taxpayers actually give him a refund. Here’s an example from 2015. W-2 income: $198,000. Taxable interest: $536,000. Dividends: $1,000. Capital gains: $974,000. Deductions: Tax losses from real estate and other partnerships: $3.5 million. Tax losses carried forward from previous years: $4.8 million. Total adjusted gross income: Negative $6.6 million. Tax refund $4,000. A new Jared property just so happens to be located on one of papa’s US Opportunity Zones for another tax subsidy in Jared’s future.


Make America, “The Don”, Great Again



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Wealthy men follow Pence to avoid women instead of treating them with respect.
Loan sharks have turned legit: miss a payment and you wish you were dead: Boiler Room

Advisors who filed bankruptcy recently might cause you pause at your account.

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The ‘Leader’ violates every legal protection under the law: Obstruction and Tampering.

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Supremes protect Don’s ‘Orders’? – GOP: Sure, pres can change Constitution anytime.


Who owns your account now?’s disastrous gas options loss: clients owe brokers $35.3 million.
Start collecting your deductions now and file early Feb 15 for quick refund.
4% on your checking account? Are they crazy? Read details if it is for you.

Safest way to lose your future retirement nest egg: any of  these 10 ways to go wrong.
Brokers you might want to avoid: Check their history at BrokerCheck.


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Michelle tells women they just need confidence—everyone else is not really that smart.

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