Friday, January 24, 2020

How much income in retirement?


How much income can we expect in retirement?
The older folks I talk to have been saving all their lives. Their parents learned from practical experience (during hard times and before Social Security benefits started flowing) that if they didn’t save themselves or work at a place that gave pensions, they would have a hard time later. They learned to make sure part of their incomes was saved for later. Today, many have all types of income including SS benefits which they earned. Some men in Congress think our SS benefits are ‘entitlements’ that can be cut to pay the rich. They encourage the free subsidies some of their constituents receive for NOT growing crops or NOT finding oil or NOT having a bank reserve. Of course for some folks, it has always been hard to save for later—they never had a high paying job or their wages have stayed the same since the 1960s. So 40% of us over age 60 live on (try to live on) SS benefits alone. I don’t think all those folks threw their wages away and deliberately did not save. Their wages just did not reflect their increased productivity. Their share went to senior management. Their job didn’t offer matching 401k contributions. Their savings went to an emergency. Most of the folks I now help as an AARP Tax-Aide have a pension and SS benefits only. One in 10 has personal investments they cash in periodically. Most average less than $40,000 total income—a combination from both spouses. Most learn to cope with less. Trump now says Medicare and SS benefits may be cut since his tax cuts have NOT reduced the deficit as promised.

Complete your tax filing for FREE
If you meet certain criteria and have your documents already, federal and state can cost you nothing at https://apps.irs.gov/app/freeFile/. The software helps you avoid common mistakes before you file. Even if you make a tiny mistake, the IRS usually catches it without penalty. I have used most of these programs for years even though my income is above the limits. Most charge nothing for the federal and state. Some charge only $12.95 for the state. In 2019, NJ has kept the ObamaCare mandate tax if you don’t have health care cover so that state return may get complicated. Once you file your first year, your previous years’ data is there and pre-fills your forms: Saves a lot of time and money. Try it before you spend $200-300 at a for-profit preparer. No refund? File to keep your ID from scammers.

Which is better: ETF or Mutual Fund?
ETFs are index funds you can buy and sell every minute. Some brokers charge commissions. Are you surprised to learn the largest ETFs are offered by Vanguard? Since most ETFs and Funds charge almost nothing and use the same index of stocks/bonds, why invest in one or the other. First you don’t need a brokerage account to own a Fund. Second, you may be able to reduce your taxable income with one over the other. Third, it is much easier to buy and sell an ETF than a Fund. Fourth, one or the other may provide an index of securities you favor. There are now at least 5,000 ETFs trading globally, with more than 1,750 based in the U.S. There were 9,599 mutual funds in 2018. However, here are only 3,671 domestic stocks today, down from 7,322 in 1996. There are 108,790 listed companies around the world. Remember, Warren Buffett won his bet with hedge fund options by holding just one low-cost Fund for 10 years.

Why does Warren Buffett credit COMPOUNDING for his wealth?
Compound interest: making money on your previous earnings. Warren Buffett wrote:
"My wealth has come from a combination of living in America, some lucky genes, and compound interest." Compounding is the Miracle of Finance. Unfortunately, the financial services industry does not allow schools to teach compounding of high earnings from index funds as Buffett advises. He proved Bogle’s idea: costs matter and are the most important factor in investing success. He bet the Vanguard 500 Index would beat the 5 hedge funds run by a Wall Street ‘professional.’ Indeed if you look at the past, most equity investors earn much less than a low-cost index fund: 3.79% vs 11.06%. The only requirement is that you must give up the vain search for the top stock or fund and just wait. We all want to be rich quickly so we don’t know how to wait. Fast trading is the myth of Wall Street since trading is the only way they make money. Make money the old fashioned way—Wait—and let the Miracle of Compounding work for you.

Are ‘thematic’ funds right for you?
These mutual funds “hunt for tomorrow’s winners based on today’s emerging trends.” Using tea leaves and propaganda from the companies they buy, these well-paid gurus of Wall Street buy into stocks with 1000 to 1 chance of being the next Amazon, Apple or Facebook. Assets under management doubled in three years to reach $175.2 billion at the end of December. When interest rates are declining, investors tend to make more dangerous bets. Often you lose with larger wagers. People who have made this bet usually forget that the huge winners like Amazon have taken years to win support: 1997 price $1.73; 2020 price $1,884. Few gave Jeff $1.73 for his bookstore stock. 11% a year is easier money.

**********ACCOUNTABILITY**************

Like 1776, this period is a test of democracy—do we really want ‘low-IQMobster?

Trump admits there is a growing totalitarian impulse …
Trump kills foreign leader because he was “saying bad things
His power comes from fear that they may be next

Trump cancels Obama’s vegetables and fruits in public school lunches: Perdue’s menu
Social Security benefits will be saved or lost in the next election: 2100 Act v TRUST Act

Trump kills Obama water rules: dump whatever you like into rivers and streams.
Trump to cut California health funding: Going for the Evangelical vote


SCAMS/SPINS:
MO parents can have librarian jailed allowing certain books in ‘public’ library: Rev lawmaker.
How to beat the high cost of textbooks: 3 firms make 80% so monopoly pricing capitalism.

John Stumpf WellsFargo caught pumping sale bogus accounts for profit: first Fed charge banker

John Kapoor Insys Therapeutics caught drug dealer gets 5 years jail—first corp dealer in jail! 
One pill replaces workout benefits: Sestrin appears to mimic the effects of exercise … on mice!
Telephone replaces human communication: loneliness from screen time; few make real contact.


Nathan Duane Oeming Commonwealth Financial caught soliciting a minor

Honda recalls 2.7 million 1996 through 2003 for airbag inflator

Gray hair: we use up the limited supply of hair dye in our cellular make-up if we get too scared.

Jobs

Who owns your account now?

Miracle:

IAN
41 Watchung Plaza, B242
MontclairNJ   07042
973.746.2014
Alert

Friday, January 17, 2020

File taxes for FREE


Complete your tax filing for FREE
If you meet certain criteria and have your documents already, federal and state can cost you nothing at https://apps.irs.gov/app/freeFile/. The software helps you avoid common mistakes before you file. Even if you make a tiny mistake, the IRS usually catches it without penalty. I have used most of these programs for years even though my income is above the limits. Most charge nothing for the federal and state. Some charge only $12.95 for the state. Since its 2003 debut, Free File has served nearly 57 million taxpayers, saving an estimated $1.7 billion calculated using a conservative $30 tax preparation fee. In 2019, NJ has kept the ObamaCare mandate tax if you don’t have health care cover so that state return may get complicated. Once you file your first year, your previous data is there and pre-fills your forms: Saves a lot of time and money. Try it before you spend $2-300 at a for-profit preparer. No refund? File to keep your ID from scammers.

Who knows what markets will do in 2020?
Despite what commentators and investment gurus say, no one knows. Given that employment remains strong, it is likely that your retirement account is safe for now. However, because we are all human and sometimes sell at the wrong time, it may be prudent to check how diversified your assets are. Since no person made perfect predictions in the past, don’t listen to the paid fortunetellers now. Look at the long-term statistics for guidance: 11% from a low-cost index: https://investor.vanguard.com/mutual-funds/profile/VFINX since 1976 and over 30 years: https://www.dalbar.com/Portals/dalbar/cache/News/PressReleases/DALBAR%20Pinpoints%20Investor%20Pain%202015.pdf  The one fact we have to keep in view: the more you pay the less you earn. If we give up 2% of our account value each year, compounding will make sure we will accumulate less over time. Here is my favorite example: Let’s say you add $250 a month to your retirement fund. If your firm or advisor offered a low-cost stock index fund at 11% average for 40 years, you would retire with $2,169,740. If trading and fees take 2% a year over time, you would retire with only $1,179,107. You gave about HALF to your employer or advisor just because they did not offer the best options for you. They chose the best options for themselves. No one advisor has ever beaten the market over time except Warren Buffett’s 20.5% and he doesn’t charge.

Use Warren Buffett as your advisor
Since he has been successful over time and you are investing for the long-haul, you should make Buffett your advisor. His advice is free so you keep everything your money earns. Depending on your goals and timeline, Buffett could make you wealthy. How wealthy? Well, take the example above. Buffett tells everyone who listens to him to use a low-cost 500 index fund as their primary strategy. He used the Vanguard 500 Index Fund in his win over a hedge fund manager. You notice that over time you earn over 11%. Using a compounding calculator like this one you can see how much you can accumulate.  http://www.moneychimp.com/calculator/compound_interest_calculator.htm  Most of us would rather know how much we can spend in retirement with that total accumulation. Use the ‘Monte Carlo’ calculation that most advisors use to do the calculation 100,000 times depending on many market historical outcomes. This provides you with a probability of success depending on how much you spend each year for a certain number of years. In the example of $1 million fund over 30 years in retirement, you will have on average $45,000 a year to live on. This is an average so some years you will have less and some more—you must keep some excess in your Wealth Reserve. https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf


**********ACCOUNTABILITY**************

Like 1776, this period is a test of democracy—do we really want ‘low-IQMobster?


US violates Iraq sovereignty: we will keep 5,200 US troops in your country uninvited

SCAMS/SPINS:
Trump gets applause from his fans for killing Iran’s favorite son: embassies don’t feel threat
Trump advisor Flynn says he is not guilty now: sentencing delayed.


American intelligence staff fear reporting on threats: Trump blasts analysts if disagree with him.
Putin is fast-tracking work on constitutional changes that could keep him in power: Shows Trump

WI GOP to cancel 209,000 Dem votes before cast: Trump won by 23,000 in 2016.

Scammers for hire: “end-to-end online manipulation system” to get you elected anywhere
Choices’ in policy are just marketing gimmick to keep profits high and options low. 1 size for all

PointState Capital hedge fund: traders decline to give investors money back now their fees spent
US Bank pension plan caught overcharging and self-dealing retirement options: $750 million lost
Northrop Grumman caught overcharging employees, taking kickbacks, fine, deny liability

Tax preparer registered to do your taxes? https://irs.treasury.gov/rpo/rpo.jsf
Refund Advance to $3,500 filing today: HR Block misleads cost of loan from your tax refund!
Co-pay higher than buying direct: $35 out of pocket instead of $120 using insurance Drug tricks!

Fix errors in your credit reports FREE: https://www.annualcreditreport.com/index.action
WINDOWS 7 support ends: Free WIN 10 update?

Pay taxes on SS benefits: For income in excess of $44,000 up to 85% of benefits may be taxable.

Jobs
New law protects employer if worker picks annuity & payouts less than full amount later.
CVS to expand health services at low cost covering up to 80% of what PCP offers

Who owns your account now?
Voya Financial (ING) selling rest of biz: already sold annuity and life
NJ another state to run its own health insurance exchange: $40 million for GetInsured

Miracle:
Prince Harry gives up ‘public funds:’ escape bullying with Meghan: Who’s next to work?
Seattle restricts foreign-influenced companies’ (Amazon) spending on local elections: Trend?

IAN
41 Watchung Plaza, B242
MontclairNJ   07042
973.746.2014
Alerts

Friday, January 10, 2020

We pay $3,000 to subsidize taxpayers who avoid paying what they owe


We pay $3,000 to subsidize taxpayers who avoid paying what they owe
The Treasury Inspector General for Tax Administration and outside groups claim that the IRS isn’t effectively auditing corporations and high-income individuals with complicated returns. Even with Trump’s generous tax cuts to the rich, some are not satisfied and avoid paying since there is little downside. With fewer audits/staff, 14.2% of the taxes owed are never paid. On top of that, most corporations pay nothing. Actually, we give them our money in the form of subsidies, grants, deferrals and credits. Congress and its lobbyists are the beneficiaries and are unlikely to give it more money to do the tough audits. Actually, a poor parent with EIC is more likely to be audited. It is easier to garnish the wages of someone making $30,000 than sue GE, Boeing, or Apple. Two thirds of corporations pay NO tax. They use shells, non-US headquarters and asset manipulation to avoid taxes on income earned in the US. Even the president uses tricks to pay nothing.

Does it really make a difference to cut advisor commissions/fees?
Is it really important to move your investments to the lower priced generic? For instance, Trader Joe employees are suing because they are paying more for their 401k retirement than needed. It may not seem that the 2% you pay for managing your money and keeping a record of your shares and earnings is a problem. If you earned 25% every year like you did in 2019, then of course it isn’t worth suing your employer. However, they don’t earn 25% every year for you. The 2% of your balance EVERY YEAR is a big deal when you earn only 4% average over time. Let’s say you add $250 a month to your retirement fund. If your firm or advisor offered a low-cost stock index fund at 11% average for 40 years, you would retire with $2,169,740. If they charged 2% a year over time, you would retire with only $1,179,107. You gave about HALF to your employer or advisor just because they did not offer the best options for you. They chose the best options for themselves.

Reducing income tax by contributing to traditional IRA
Congress passed laws changing the IRA rules: you can contribute $6,000 ($7,000 over 50) to your traditional IRA and take a deduction from income. The law ends the prohibition on contributing to an individual retirement account (IRA) after 70½. Individuals may continue contributing to an IRA at any age, as long as they have ‘earned’ income. BEWARE NEW LAW: If you were pumping up your Roth IRA so your heirs could have tax-FREE income for life you may have to change your estate: NO stretch ROTH. All IRAs must be exhausted in 10 years unless disabled/illness. Even though you have paid tax on this money if you converted your IRA, you may have to use a trust to create legacy income for them. You may also want to use your lower income years to convert your IRA to a Roth since your rates may be lower now with a deductible IRA. Also new: Part-timers can make pre-tax contributions to a 401k and an IRA.



MA fighting lobbyists to re-install fiduciary standard
The broker-dealer and insurance industries agree: They don't like the broad-based Massachusetts fiduciary proposal, which would blanket their respective industries with a fiduciary standard they’ve been successful in avoiding up until now. Trump responded to the industry lobbyists immediately after election to kill the Obama version of the duty that sellers must give us the best deal regardless of size of commissions. Now MA Galvin wants bad products to be off limits: MA would “deem it an unethical or dishonest conduct or practice for a broker-dealer, agent, investment adviser, or investment adviser representative registered required to be registered in Massachusetts to fail to act in accordance with a fiduciary duty to any customer or client.” Lobbyists claim small investors would be hurt by this rule because industry would avoid helping those with limited funds—folks who need help the most. MA GOP Gov caves to lobbyists.

Is your ex still the beneficiary of your pension, insurance, etc?
This is important. When you forget to change your beneficiaries on your pension, brokerage or life insurance, you may have a long legal fight to fix it. And your current spouse and children may hate you. Choices made in your former life may come back to bite you. Most people are not always completely thorough during their separations/re-marriage/divorce. They miss changing beneficiaries they named 20 or even 10 years ago. It could be a pension account at a former employer that is due to go to your ex at age 65 or a forgotten paid up policy with last marriage kids as beneficiaries. Sure, with a legal fight you may get it changed but who needs the fight. This new tax season is the perfect time to look at your overhanging past life choices. Safe than sorry.  

Advisor trend: retainer fees to avoid ‘hawking proprietary products’
Is your advisor acting as a fiduciary? Are they recommending what’s best for YOU or maximizing the leverage they have over you? How do you know the difference? As your portfolio grows, does your advisor reduce the standard AUM fee? 1% of $1 mil is better for you than 1% of $1.5 mil this year: the market went up 30%; not their IQ. Advisors use much more automation and model portfolios now. Subscription-based services are becoming common for clients with large non-tradable or business assets or the need to offset market volatility. Time to ask for a better price for ‘advice.’


Why most investors don’t need an annuity
Many are DIY investors—they have jettisoned their advisors since learning the John Bogle and Warren Buffett investment lessons: advisor costs detract from your earnings. Advisors and annuities can take up to HALF your earnings in fees and trading costs. Here are DIY's results for 2019. They are total return investors—selling shares equally across all 10 funds for their monthly RMD income in retirement. Some want protection from a down market and so they overweight Wellesley Income instead of buying an annuity: Wellesley’s 9.7% a year is not too bad to live on.

2019 Total Return Fund                    Long-term Return      Longevity
31.5% 500 Index                                             11.2% since 1976
13.2% Energy                                                    9.9% since 1984
28.0% Extended Market                                  10.7% since 1987
22.9% Health                                                   16.2% since 1984
31.4% International Growth                              10.6% since 1981
27.9% PRIMECAP                                         13.4% since 1984
27.4% Small Cap Index                                    10.6% since 1960
16.4% Wellesley Income                                    9.7% since 1970
30.4% Windsor                                                11.3% since 1958
29.0% Windsor II                                            10.7% since 1985
25.8% Average                                                11.4% *
            *Average Annual Returns as of 12/31/19.




**********ACCOUNTABILITY**************

Like 1776, this period is a test of democracy—do we really want ‘low-IQMobster?



IRS is “letting billions of dollars annually go uncollected, even as budget deficits rise”
Wealthy avoid taxes with Trump’s new investment scam: help poor by gentrification.
GOP decided keep higher drug prices for US: lobbyist won again: no negotiating


SCAMS/SPINS:
Christian health cost-sharing ministries: Scam or just low benefit alt for religious?

William Glaser, National Planning, caught selling worthless promissory notes to elderly.
Jason Rhodes Sentinel Growth caught stealing $20 million promised hedge returns


Student loan debt-relief services charged with fraud: Multiple defendants, no jail time.

2020-24 War: Who will buy your vote?
GOP follows Putin propaganda: Obama never buddies with Iran prez as in fake foto: ‘fake news’.
Facebook claims they got Trump elected: 2020 will be more of the same?
Trump Bloomberg buying Super Bowl ads for 2020 election: will you be bought for Nov 2020?


Trump ignores veteran complaints about Russia meddling/misinformation/propaganda.

Jobs
Study says flex hours greatest job perk: more loyal, more productive, and cost less.

Boeing staff: “This airplane [737] is designed by clowns, who are in turn supervised by monkeys
Environmental law rollback: “executive branch is run exclusively by lobbyists” 
Yum restaurant manager. Competitive salary: $100,000 Free tacos!

Miracle:
‘Fast radio’ bursts, strong as century of sunshine: UFO or galaxy stars forming?
Cancer death rates drop: smoking down, treatments up so Trump takes credit???

Iran shot down passenger plane taking off from a big airport … by ‘accident’ Really?

IAN
41 Watchung Plaza, B242
MontclairNJ   07042
973.746.2014
Alerts

Friday, January 3, 2020

Why most investors don’t need an advisor any more


Why most investors don’t need an advisor any more
Many are DIY investors—they have jettisoned their advisors since learning the John Bogle and Warren Buffett investment lessons: advisor costs detract from your earnings. Advisors can take up to HALF your earnings in fees and trading costs. Here are DIY's results for 2019. They are total return investors—selling shares equally across all 10 funds for their monthly RMD income in retirement. Some want protection from a down market and so they overweight Wellesley Income instead of buying an annuity: Wellesley’s 9.7% a year is not too bad to live on.

2019 Total Return Fund                    Long-term Return      Longevity
31.5% 500 Index                                             11.2% since 1976
13.2% Energy                                                    9.9% since 1984
28.0% Extended Market                                  10.7% since 1987
22.9% Health                                                   16.2% since 1984
31.4% International Growth                              10.6% since 1981
27.9% PRIMECAP                                         13.4% since 1984
27.4% Small Cap Index                                    10.6% since 1960
16.4% Wellesley Income                                    9.7% since 1970
30.4% Windsor                                                11.3% since 1958
29.0% Windsor II                                            10.7% since 1985
25.8% Average                                                11.4% *
            *Average Annual Returns as of 12/31/19.


If you already had your legacy planned, you may have to change it
Congress just passed SECURE which makes your non-spouse heirs un-SECURE since they must take all your IRA (ROTH IRA) money out and pay the IRA distribution taxes within 10 years. If you were planning to leave your $500,000 IRA (Roth IRA) to your daughter to supplement her SS benefit, she will need to pay the IRA income taxes on $50,000 not $15,000 a year as you had planned. The Roth has no income taxes but your legacy still ends in 10 years after your death. You can no longer guarantee your son a SS supplement in 2035 when SS benefits will be cut by 25%. The same 10-year limitation will apply to your “conduit” trust. They won’t have payments over the trust beneficiary’s life expectancy. We had planned to leave our IRAs and Roth IRAs to our children so they could have supplemental income for the rest of their lives—20-40 years. Now we will have to create an expensive trust to do that. HOPE 2021 new Congress could change it.


New law takes away food stamp funding
Congress cut $5.5 billion in SNAP funds over the next five years, forcing 10,000 families to lose all food stamp benefits. Congress cuts benefits to SSI may put more disabled persons into homeless status. We were tricked by Trump’s party: they promised that under the 2017 tax bill working families would see a $4,000 - $9,000 benefit both in individual tax cuts and through investments made by corporate America. Now Trump wants to claim he paid for the wealthy tax breaks. Nothing remotely close to this has occurred. Now median family income has risen just $514 while corporations enjoy their lowest effective tax rate in more than 30 yearsjust 11.3%. Trump claims he got Congress to cut $426 billion in further wealthy tax breaks. We pay subsidies to many profitable companies already. We’ve seen skyrocketing CEO pay and stock-buybacks that enrich wealthy shareholders. Stockholders spent dividends on private planes and bigger yachts not on new factories. The already wealthy gained another 25%: $1.2 trillion in 1 year. Many middle class saw their taxes go up NOT down.

Changes to retirement plan law require some re-thinking
The Secure Act raises the age for RMD (required minimum distributions) to start to age 72 beginning in 2020. It also removes the age limit for contributions to traditional IRAs beginning in 2020. This 2019 legislation does not affect the rules for 2019. If you’re at least 70½ in 2019, you must take a required minimum distribution. And you’re not allowed to make contributions to your traditional IRA for 2019 after age 70½. Put them into 2020 and beyond. You can add to IRA all your home health payments, grants, fellowship, stipends and awards. For those who don’t save: “IRA holders can use money in their account for child birth and adoption cost without penalty,” The bad news is that insurers can now sell annuities to employers so bosses won’t have any responsibility when your retirement income loses its buying power. There are better ways to gain steady income and keep your nest egg growing than giving your earnings to an annuity seller.

The rich have plans to avoid DEM wealth and income taxes. Do you?
Consider if DEMs win in 2020 and are able to change any laws, what are your plans to avoid the new taxes on the middle class (wealthy already have avoidance plans)? GOP has run up huge deficits by using our children’s future income to give themselves one of the largest tax breaks. Many of us did NOT receive a benefit from Trump’s tax cuts. Trump’s friends in the tax-credit class did. Because of the staggering $22 Trillions owed in our name, Congress will have no choice but to raise taxes. Since the wealthy already have ways to avoid taxes, those without offshore or corporate tax shelters will be paying. Right now the wealthy pay under 17% tax while most working people are paying over 30% total. We don’t have the accountants, lawyers and companies to hide our assets or income. The IRS doesn’t have staff to chase down all the tax havens around the world. We middle class will end up paying more, not less—unless we use the only legal shelter available to us. There is only one free LEGAL tax shelter.


**********ACCOUNTABILITY**************

Like 1776, this period is a test of democracy—do we really want ‘low-IQMobster?


Everyone needs a gun in TX, even in church: churchmen kills gunman; way of life here.


Trump reverses ban on vaping products: lobbyists win and kids continue to die. 

SCAMS/SPINS:
Wealthy added 25% more: Zuckerberg gaining $27.3 billion; Gates adding $22.7 billion.

Pentagon warns against using DNA tests: security and accuracy of data in question


Oppenheimer caught excessive sales charges: unit investment trusts (UITs). Fine no jail 

United Capital accounts to Goldman Sachs so Goldman can learn independent retail operations

Tesla autopilots only work if you guide them: 13 crashes 2 killed when drivers don’t guide ‘pilots

Jobs
Russians will ring in 20 years of Vladimir Putin: may our ‘Czar’ go back to real estate!
WV prison guard trainees go Nazi: whole class is fired
Uber/Lyft drivers: follow the new operating rules and save on taxes.


Miracle:
Cure for sickle cell by fixing genes in bone marrow for new blood. Gene editor jailed.
Bishop’s list of sex abusers not complete: Bishops still protecting fellow abusers

IAN
41 Watchung Plaza, B242
MontclairNJ   07042
973.746.2014
Alerts