Friday, April 21, 2017

How much does your advisor really cost you?

How much does your advisor really cost you?
Your advisor may have given you a choice between paying commissions and paying a 1% flat fee to manage your money. This may seem like an easy choice but it is a false choice that can cost you $80,000 a year. My client Lisa M. had over $1 million in her IRA account at Fidelity. She rolled over her 401k from work. She was offered a ‘managed’ account for 1% per year or $10,000 or a per trade commission account. She met with her advisor when she transferred her money to Fidelity and agreed that it was probably cheaper to pay a flat fee than commissions per trade. When I met with her about her tax situation, I went through her brokerage statement in detail. Fidelity was buying and selling fixed income securities so fast they had churned $250,842 in 2016 alone. What was the net result? Fidelity lost $16,278 of her money plus the $10,256 in fees.
I showed her that a low-cost (0.08%) balanced fund would have earned 8.77% in 2016 and cost her only $864. A balanced account with 60% bonds 40% stocks would have averaged 6% a year even with the losses in 2008. Over the next 15 years, she may have gained $1.5 million in a low-cost balanced fund managed by a licensed advisor on salary and backed by the largest mutual fund company in the world. If she had stayed in a 1% “managed” Fidelity account, she would have lost at least $150,000 in fees and perhaps another $1.5 million in possible gains from a low-cost balanced fund. Since her Required Minimum Distribution (RMD) for the IRS was $60,456 last year, her account will keep falling. In 15 years her account will be reduced to about $100,000. Churning trades and account fees are killers.

Missed the tax filing deadline?
If you are due a refund, Uncle Sam will hold your money as long as you want. Taxpayers due a refund have no penalty for filing a late return. If you owe, file as soon as possible and pay as much as you can. Avoid the $200-$300 preparer charge: Use IRS Free File. Nearly everyone can use IRS Free File to e-file their federal taxes for free. My favorite is FreeTaxUSA. Deadline for extension filers is Oct. 16 but you must pay what you think you owe now. Tax bill too big? Get a payment plan: https://www.irs.gov/individuals/payment-plans-installment-agreements.


Why are investors leaving “managed” investment advisors?
Your advisor and the traditional retail Wall Street firms are being put out of business. Vanguard has scooped up about 8.5 times as much money as all of its competitors combined. Vanguard must invest $2 billion a day. It does it without the theater of the famous Wolf of Wall Street. It turns out that it is impossible to predict the future so Vanguard invests in WHOLE markets. Vanguard’s investors are betting that most of the companies in the market will continue to grow. Vanguard is efficient: you get to keep almost every penny you earn. Vanguard means low cost. When your advisor recommends a buy, they are assuming a rosy future for their picks. Stock picking is difficult and predicting the market forces is even harder. That is why the best stock picker, Warren Buffett, with over 20.8% a year earnings, does not trade. He buys companies with value and holds them. Vanguard’s low-cost investing is Buffett’s choice.
  
The Don could be a great president
Trump has a GOP House and Senate to support him. He could make a lasting legacy in American history. He could settle health care for all Americans by working out a Medicare type plan for everyone. Almost everyone who has Medicare likes it. Most Americans appreciate the fact that they can receive care and not have to fill in a ton of forms and pay more than a week’s pay to get better. Most Americans who are NOT millionaires want to pay one price for everything—hospital, doctor, meds and devices. Most Americans understand that Walmart pays less for the stuff they sell because they negotiate the price with manufacturers in bulk. We appreciate the fact we don’t have to negotiate the price of each item at Walmart by ourselves. Example: Walmart buys big TVs at wholesale for ALL their stores around the world so I can buy one at a discount.
Why can’t our Leader do that? Wouldn’t America and Trump be better for it?


Is waiting to take Social Security benefits worth it?
If you have a choice about when to sign up and you have parents/family with a normal life expectancy, you would do well to wait. If you take it at age 70, the age with the highest payout, you can expect to receive a lot more. Here is an example. Abigail worked her whole life in the social service field making an average salary. She worked and paid FICA to age 70 and then began her monthly benefits of $2,769 in 2016. If she lives to age 90, as per this formula, https://www.ssa.gov/oact/population/longevity.html, she will collect $911,340 in today’s dollars assuming inflation factor of 3%. If she had started at age 62, she would lose one fourth of the benefit every year. She would have received $1,485 a month in 2016 or $782,431 total in today’s dollars by age 90. She would have benefits for longer, 28 years, but the higher amount (by waiting) makes a big difference. Plus we don’t know for sure she will live to age 90. There is some evidence that working longer will increase your lifetime. If we die early, it is better to receive the higher amount each month. And her benefits are recalculated every year she worked and paid into the system. The formula uses the last 35 highest salary years so she raised her benefit every year after age 62 because her salary increased every year.   
If you do not have this situation and know you must supplement your SS benefits to have enough, use your tax-FREE account while you are working: https://www.amazon.com/ Forget-Social-Security-Medicare-Lifestyle/dp/1466394285


GOP creates America’s next phase: national sales tax; low income tax for the rich
The Ryan tax structure would move America to the economic structure favored by South American countries: tax our spending. Ryan pushes the border tariff which means we pay more when we buy imports, including cars that contain imported parts. Trump would claim Mexico paid for The Wall this way. Ryan could then slash income taxes for the wealthy and their corporations. But wait! Let’s look at the results of taxing our spending. According to the experiences of countries using this method, revenue falls because everyone evades tax by using the black market. Consumption taxes hit the poor hardest. Most of us spend all of our income so we would pay this regressive tax—more spent, more tax, higher tax rate—20-25%. Wealthy people save or invest most of their income so they pay the least tax rate. They have many ways to avoid income and consumption taxes. For instance, their business could buy expensive items so they would pay no “consumption” tax. Their firm could provide home, cars, air travel, clothes, etc etc. Right now, a corporate CEO does not pay tax on most of their compensation because most of it is in a deferred comp plan, percs, benefits, severance and stock options. Exemptions, deductions and loopholes we don’t even hear about cut their share of taxes even more. Avoid paying THEIR taxes.


How do you invest for retirement?
Long-term investing is about TIME not about smart stock picking. Fidelity found that the accounts that did the best were the ones owned by the dead because they never SOLD. Few managers can keep producing top returns for 10, 20 or 30 years. The largest public pension is the one for CA public employees. Recently they decided to stop wasting employees’ money on advisor fees and picked low-cost funds. Their reasoning is simple: reduce expenses, keep more. And what type of securities do they invest in? 61% is in Growth stocks (growing companies), 20% in bonds, 10% in real estate, 10% in infrastructure. Using this asset model, you can earn 10-12% per year on average. Over the last 30 years, clients who used a market index fund earned 11% as measured by the Vanguard 500. This is the one Warren Buffett recommends.


Where did The Don’s post-truth world come from?
Remember the film about “teaching” the scientific theory of evolution with Spencer Tracy? The teacher, John Scopes, was found guilty of violating TN law. The law, which changed only recently, said any school or university could not discuss any science about the history of man. The Butler Act prohibited teachers from denying the Biblical account of man's origin. The law was repealed on free speech grounds not on evidence of evolution grounds. In fact, the point of the movie was that Scopes was not allowed to think—to teach the act of examining any theory about man’s origin. In effect, facts were and still are, not recognized by people of many states who were taught in this way. Biblical accounts of phenomena were not explained by science. They learned that the “sun stood still” and the earth was not affected. (p 44, http://www.davis.k12.ut.us/ cms/lib09/UT01001306/Centricity/Domain/385/Inherit%20the%20Wind%20PDF.pdf ). Today’s evangelical Christians are taught “The deep distrust of the media, of scientific consensus — those were prevalent narratives growing up,” Christian writer Rachel Held Evans tells writer Molly Worthen. Evans was taught to distrust science and media elites. Trump and the Alt Right use this historical trend to manipulate those who do not know the scientific method. The doctrine of biblical inerrancy is the official alternative and today Christian schools drive out those teachers who promote a questioning mind. If you are raised on Rush Limbaugh and Glenn Beck, you distrust the mainstream news media. You do NOT revise your conclusions based on evidence available to everyone. You think TN was right to punish Scopes for questioning the Biblical account with real evidence.
Why does this matter? Trump’s education head is a proponent of religious schools for all.
"Trump is much more likely to bring Christ into the world," DeVos friend explained. Observe Saturday’s March for Science. Prepare for TrumpWorld:  https://www.amazon.com/Your-Retirement-Income-Checklist-TrumpWorld/dp/1544703260

Are ETF ‘model portfolios’ right for you?
JPMorgan has just offered their suite of exchange traded funds to their customers. Using their version of the index funds that trade daily, Morgan hopes to capture new money and keep customers from moving. This multi-asset set of funds are also offered to advisors through GeoWealth’s online platform. You will probably pay two advisors’ fees and since a model portfolio follows a set formula for all takers, you are wasting your money. Model portfolios mean no stock picking for you personally. Since these funds have little track record and fees have not been disclosed, we see no value in changing from funds with low-costs and a proven history. JPM diversified equity ETF has provided 14.54% in one year ended 3/31. A comparable fund provided 18.07% and cost 0.05%.


Fact: Maserati, Mercedes, Land Rover make bad cars too
Consumer Reports has its list of 10 worst cars for 2017. The reviews are not good. If you are into nameplates, take the bad reviews to the dealer and see if you can cut a better deal. Or better, take the reviews and negotiate on a used version. The used versions have probably lost more value than most cars—30-40%. Each company has their Alt-facts but the evidence from owners and drivers carries more weight if you have to live with their defects. Car companies spend more on marketing than engineering so you need the real facts about a car’s poor engine, ride, parts, and reliability. Poster child for poor quality is Fiat Chrysler. Buy the Warren Buffett way not the Don Trump way. Facts matter. True evidence in transportation.
Don’t forget to claim your car insurance discounts: https://www.amazon.com/Vehicle-Insurance-Beware-Double-Coverage/dp/1480027634






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We have entered the Twilight Zone:
"There is a fifth dimension beyond that which is known to man. It is a dimension as vast as space and timeless as infinity. It is the middle ground between light and shadowbetween science and superstition, and it lies between the pit of man's fears and the summit of his knowledge. It is an area which we call the Twilight Zone" where “alternative facts” and illusions of conspiracies are lived out. Lies are considered true. Incompetence is praised. Truth is what the loudest voice says it is over and over.  
Rod Serling

Trump GOP budget
GOP cuts programs of folks who have no power to oppose cuts. Cowardly. The Don does not like diplomacy, aid to poor, US environment or culture, finding cures for disease, transportation and education programs.
19 Agencies you may use being cut from American society: The Don does not like Meals on Wheels, Sesame St. NPR radio, Arts, Miners retraining, Seniors volunteers for poor, Americorp youth help poor,  62 in all for $343 billion.
Trump’s budget man wants to cut Medicare and delay Social Security benefits to age 70.

What GOP does NOT cut:
No cuts to subsidies to Boeing, GE, Intel, Nike, Shell, Fiat, GM, Ford, hundreds more.
No cuts to United Airlines subsidy even after rip a paying customer from his seat.

Tax returns do matter:
Trump and GOP are working to cut their own taxes which average 12% now. Yours?
Americans in 150 cities show up for The Don’s taxes to see how Russia helps him win.
Trump says he is under another new audit so can’t show taxes: continuous audit?
Trump may owe $ millions to Putin’s banks. Trump wants permit to build in Russia.

Tea party founder denounces Trump: He is now “head monster of the swamp.”

Little Dictator congratulates Turkey dictator in limiting democratic rights.

Why did The Don pick Exxon’s Tillerson for Sec State? Tillerson after many years of service received the medal of honor from Putin. Putin suggested him?
Exxon’s Tillerson is ending sanctions for invading Ukraine; Exxon gains largest oil field.
Why did Trump pick DeVos, Blackwater’s Prince’s sister after Prince meets with Putin’s man in remote Indian Ocean Island?
Why did Trump pick Wilbur Ross for Commerce?—he ran the Cyprus bank known for laundering Russian money for oligarchs like Manafort.
Why did Trump pick Flynn, Page, Manafort for his regime?—all are paid foreign agents with ties to Putin. Why would Putin put Flynn at his RT table except control?
What happens if the FBI finds evidence of Russian collusion/influence? Putin puppet?
Will Trump resign or be impeached


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More Americans say Trump doesn't keep promises: poll Apr 9  Promises broken.



Crazy Don complements Italian PM on Pavarotti “a great friend of mine” Dead 2007

Little Dictator claims N. Korea will be ‘taken care of.’ Armada did not go to Korea! because it was “lost”. Actually in Indian Ocean. Jared needs GPS on armadas.


The Don will let churches and religionists pay for candidates. Gov to subsidize GOP?


The Don’s Justice Dept wants to stop democratic process for certain Americans.
IN cuts 10% of Dems from voter rolls to increase voter participation rate

The Don shows his bigger one to impress instead of fixing our tunnels/bridges/roads. N.Korea Kim shows his to impress. Presidents act like children on playground.

Trump supporters love him—now he runs The Swamp—even McCain loves bombing
Even though he has flipped on a series of economic and foreign policy issues, including relations with Russia, NATO’s relevance, Federal Reserve Chief Janet Yellen's future, whether China is a currency manipulator and the usefulness of the Export-Import Bank.


The Don to downgrade renewable energy sources helps coal oil gas industry.

The Don using KS voter suppression laws to keep all Dems from voting.

The Don is cementing his family businesses in China—‘friends’ in high places helps. "Ivanka has so many China ties and conflicts, yet she and Jared appear deeply involved in China contacts and policy. I would never have allowed it," former WH ethics officer.


The Don’s promise of respecting DACA protection for kids is lie. 11 million more to go.

The Don promised to end Iran nuclear ban deal and yet Iran kept its word: no nukes.

ObamaCare replacement without 10 key protections gains with House ‘Freedom’ group.



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Regulators are the only protection against corporations since we can’t sue anymore

Supremes tilt toward wealthy and big business already: violators get pass on illegal gains.
Ocwen Financial caught injuring mortgage customers in every possible way; enjoin.

We need regulation—GOP wrong—companies/cities wouldn’t fix bad products on own
GM killed 124 because ignition switch pin not replaced after knew it killed first in 2006.


Police want gun control.
When everyone has guns; your chance of being killed goes up. Police don’t know who to shoot. They assume everyone has one and shoot first. You and thief have guns. CO schools now allow teachers/administrators to carry guns in the classroom. Kid lesson! Since 2015, police have killed 86 people with realistic looking FAKE guns--suicide?



SCAMS:
Wealthy are paying to change our Constitution in TX. TX GOP wants to limit federal power and jurisdiction, and create term limits for federal officials and members of Congress. Midland oilman Tim Dunn helps pay for this convention. marginal reactionaries!

Does the IRS really come to your house? Yes, but not unannounced.

Ignoramus Award:
MS rejects 11,717 low-income residents for $170 month temporary federal aide.

How our government wastes our money:
Big bomb hit Afghanistan costs us $314 million to develop and $16 million per hit—perhaps $1 million per terrorist  to scare terrorist. "… weapon will have a substantial psychological effect on those who witness its use." No terrorist surrendered or ran.

Where have all the jobs gone?
Mining employment rose by 11,000 in March, largely in support activities for mining (+9,000). Since a recent employment low in October, mining has added 35,000 jobs. But you don’t get full time: average weekly hours were unchanged at 34.3 hours in March.
Obama grew more jobs in health care than manufacturing.

Which job board sites are best for your job search?



Cancel Robo calls with Mr NoMoRobo: https://www.nomorobo.com/


Miracle: WOW—police try new thing!
LA Police Commission now requires officers to try to defuse encounters before shooting.


IAN
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