Your Wealth Reserve: What type of portfolio to use for retirement income?

What type of portfolio to use for retirement income?

Most retail advisors have provided us with a formula for retirement income that insists on a high percentage of bonds and fixed income products like annuities. This old story has been updated by Warren Buffett’s advice. Today we have available a special computer analysis that helps us decide for ourselves. If you are near or in retirement, you need to use a nest egg calculator (‘Monte Carlo’ simulation) like the one from Vanguard: https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf

By playing with the level of stocks, bonds, and cash you can optimize your chances of having enough money for 30 to 50 years of income. Thus we found that over 65% stocks provided us with 91% probability of having enough income for 30 years. Usually, advisors tell us to sell stocks and buy bonds in the reverse percentages: 65-80% bonds. When you do this in 100,000 simulations, you only have 58% chance of making it for 30 years. That is because over time, bonds lose to inflation. Let your winners run.

Listen to Buffett not your advisor: https://www.amazon.com/Warren-Buffetts-Vanguard-Funds-Retirement/dp/1496148592

How to avoid being fooled by your advisor

Madoff tricked thousands into giving him their life savings. To prove his worthiness, he sent new investor money to old investors. None of his investors objected. Madoff took the Ponzi concept to extremes nobody had previously thought possible: $65 Billion. The key principles that allowed him to get away with what he did for so long: Fake statements look real and speedy refunds. Long-term steady returns are not what stock markets are known for. His very consistency eventually became statistically impossible to believe, but each individual year, in itself, was perfectly plausible. His sales strategy was what conservatives wanted for their money. His service was cloaked in exclusivity and secrecy: the ‘elect’ do not complain; they feel special. His explanation of success was vague. Madoff deliberately targeted charities and his own religious groups. Many of his ‘friends’ were cheated. Madoff ran his own brokerage firm. He was chairman of Nasdaq, a self-regulating organization. Since nothing has changed legally, there are Ponzi schemes going on right now. I find them every week (see below).

Buffett recommends Vanguard: https://www.amazon.com/Warren-Buffetts-Vanguard-Funds-Retirement/dp/1496148592

Make Warren Buffett your investment advisor

Warren Buffett is your investment advisor—without the fees! The greatest investor of our time with a proven record of $101 BILLIONS, Buffett has provided FREE lessons and guidance for many years. We were just NOT listening. His comments and letters to shareholders since 1977 are FREE. He has explained not only the management of his fund; he has taught us how to invest and provided guidance on the trends of the times. http://www.berkshirehathaway.com/letters/letters.html He has explained why we should NOT follow the advice of Wall Street. He has told us how to be successful investors. He has explained how to turn $9 a day into $1,000,000 over time. He told us the KEY to investment success is COMPOUNDING. “My wealth has come from a combination of living in America, some lucky genes, and compound interest.” Compounding is money earning money on its earnings when it is invested. We can reach $1,000,000 by investing our money in businesses sharing profits with us over time. A special account, available to most working Americans, makes our money tax-FREE. Tax-FREE is like a $300,000 bonus—We avoid paying taxes— federal and state income taxes on our earnings when we take them. Buffett shows us how to invest fee-FREE too. Set up your tax- and fee-FREE accounts in 1 hour.

Make Buffett your advisor: https://www.amazon.com/Warren-Buffett-Your-Investment-Advisor/dp/1518690963

Two Americas: millions lost their jobs and billionaires’ wealth rose 55%

Between March 18, 2020, and April 12, 2021, the collective wealth of American billionaires increased from $2.95 trillion to $4.56 trillion, a 55% leap. “Billionaires have been running up the score on average Americans for decades.” All of the productivity increases of American workers have turned into extra profits for the owners. Salaries of company exec used to be 20 times average wages. Now they are 386 times the average wages. CEO compensation has grown 940% since 1978 while typical worker compensation has risen only 12% during that time. Unskilled working people have few alternatives to being pushed into poverty. Most of us don’t know how to use the tax system to succeed in this economy. However, there are steps we can take to make our lives better financially.

Use your tax credits: https://www.amazon.com/Tax-Credit-Class-your-credits-ZERO/dp/1539462382

Why is there a waiting line to buy life insurance now?

Pandemic buyers were reminded of their mortality is one reason. Survivors of Covid have had their apps postponed especially older adults. But older adults also pay more for their coverage so it pays to consider your options. If you need to cover the cost of a funeral, you may be able to pre-pay with a reputable business. If you need basic coverage, there are small amounts available without medical tests. Policies that provide higher amounts for heirs or business buyouts need to be shopped since rates differ greatly. You may find it more convenient to use an aggregator selling multiple policies in your state. If you have other assets—IRAs, pensions, or endowments, you may not need more coverage. Check the current beneficiary designations to make sure your assets are left to the right loved ones. Many firms offer life insurance to retirees at high cost. This may be called group life conversions. There are other options.

Shop around: https://www.amazon.com/Life-Insurance-Need-Save-right/dp/1480002178/

What are the “safe investments” in retirement?

Some media writers boast about “safe investments” for your retirement money. Don’t be fooled. There are no investments without negative possibilities. First rule for any investor: there are no “safe” investments. 1. Municipal bonds may be tax-FREE but they can raise overall taxes. They also provide little protection from inflation. 2. Peer-to-peer lending may earn more than bank CDs but you can lose your money or earn less than advertised (as I did). 3. Annuities are useful in that the monthly amount paid is guaranteed by an insurer. However, as your expenses rise, the monthly check remains the same and your heirs get nothing if you die early. There are better ways to assure income for life. 4. Treasury inflation-protected securities provide some protection but with low payouts, you can’t live on the interest from TIPS. 5. Rental real estate is less “safe” than stocks. “You can turn any property into an investment that will provide income for years to come.” I tried this for years and you must give up income when tenants default and when repairs and maintenance are required unless you can do it all yourself. Live close! 6. Taking SS at age 70. It is tough to beat an inflation-adjusted monthly payment that is good for life and backed by the government. Few people can afford to wait to age 70 and fewer can stretch the enhanced payments to cover all expenses. Finally, you must plan out your income strategy in retirement. You will have more income by avoiding your high-cost advisor.

Plan wisely: https://www.amazon.com/What-your-RMD-much-spend/dp/1718946716

How can we protect ourselves from money scams?

Scams to induce us to give our hard-earned cash to others are on the increase. Technology has made it easier and safer than holding a gun to our heads in the parking lot. So we have to learn how to protect ourselves in new ways. First, most scammers are coming to you via phone and computer. Few use a letter or personal visit. Scammers are avoided by not responding to un-initiated contacts—no matter what they say or look like. Scammers wear ‘disguises’: they fake a logo from banks, IRS, FBI, Amazon, Microsoft, your local advisor’s firm. I get offers for money and computer, tax and legal help every day. I did not initiate any of them. No govt agency calls you about arrest warrants for you or your relatives, SS benefits or taxes. Unless you gave your info to the caller, how’d they get your info except by theft. Before responding to any contact, do your Google search: Scam: ‘I can fix your computer for $300” AARP.org/aboutFWN shows real scams. Giving scammers access to computer to steal your money: watch real scam office. The most difficult scams to detect are from those we trust with our money. Most people are losing $3,000 a year to sellers who have earned our trust. Sales people win your trust so you will feel comfortable giving them your money when you don’t need to.

Beware ‘trust’ scams: https://www.amazon.com/Money-Scams-2014-insurance-financial/dp/1505437962

Where is that refund?

The Internal Revenue Service today reminds taxpayers that the most convenient way to check on a tax refund is by using the “Where’s My Refund?” tool at IRS.gov or through the IRS2Go Mobile App.

Where is the stimulus 1 or 2? If you did not receive stimulus 1 or 2, start filing here: https://www.irs.gov/newsroom/recovery-rebate-credit.

Stimulus 3? https://www.irs.gov/coronavirus/third-economic-impact-payment

Estimated tax payments are still due April 15. If you are self-employed or do not have enough withheld from a paycheck, pension or Social Security, you may have to send quarterly payments to the IRS. Tax returns for 2020 are due May 17 not April 15 but the estimated tax payments are still on schedule.

IRS will redo your taxes and send refund if you paid tax on Unemployment 2020 or you paid ObamaCare’s excess advance premium tax credit repayment.

Have tax forms; will file … for FREE but WAIT . . .

If you have unemployment income, ObamaCare coverage you should wait to file since the IRS has not yet implemented tax-FREE provisions of the new Covid law. If you already filed and paid tax on your unemployment income, IRS says it will send you a refund of the tax automatically. DO NOT FILE an amended return to obtain a refund on this tax. Taxes due MAY 17 not April 15. Input the W-2, unemployment, SS benefits, IRAs, pensions, RMD, brokerage, etc. forms you have. You can file for FREE online. If you didn’t receive a correct form, file a Form 4852. Usually filing your state return costs as little as $15 unless you buy the Pro helpline. Avoid $300-400 paid preparer fees—new IRS forms mean higher fees. Unemployment insurance is TAXABLE on the Federal income tax return; not on some state returns. Some states do not tax your SS and pension benefits.

Retirees did not have to take their RMDs in 2020 so taxes may be less: it was a good time to convert IRA to Roth IRA for tax-FREE future. Unless you were self-employed, you can’t deduct home office expenses of working from home. You can deduct as medical expense all Covid prevention supplies. Some states continue the health insurance mandate and penalty unless you have an exemption. Since the IRA contribution deduction has no age limit now, you may reduce your income/taxes by making a contribution of up to $7,000. The standard deduction went up to $12,400 single; $24,800 joint. Jan 15 last day to make 2020 estimated payments. You have to report your April/May and December/January stimulus payments even though they are not taxable. Some of us receive a bank credit; some a debit card; some a check. Even if you don’t have to file, you should file so scammers can’t use your SS number to mess up your IRS file. Tested E file software ratings. Efile Jan 15; IRS processing Feb 12.

E file avoids covid at your preparers’ office: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

What to do if you can’t pay by May 17?

Avoid the penalty for not paying estimated tax. Ask for an automatic extension to file till October. If that does not work for you, you can apply for a payment plan. An individual can setup an IRS installment plan if you owe $50,000 or less and can pay back the amount owed in 3 years. If you are a business owner, you can setup an installment plan if you owe $25,000 or less. The IRS will charge a one-time fee of $105.

If you own less than $25,000 and can pay the amount owed within six years, ask the IRS for a streamlined payment agreement. The IRS will charge a one-time fee of $102.

Request an Offer in Compromise if you cannot pay the total amount owed. This allows you to settle your tax debt for less than the total amount owed if you will be unable to pay back the total amount owed within 10 years. The IRS will charge a one-time fee of $150. Given the pandemic economic hardship, apply for the extension to file now: https://www.irs.gov/pub/irs-pdf/f4868.pdf

Special circumstances help: call the IRS Taxpayer Advocate Service 1-877-777-4778 for free assistance.

More ways: https://www.irs.gov/newsroom/heres-how-people-can-pay-their-federal-taxes

IRS has $1.3 billion refunds for 2017 tax returns

Unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 return, according to the IRS. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on May 17.” If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. Filing instructions are available on the IRS.gov Forms and Publications page or 800-829-3676.

You have 30 days to collect your cash!

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

Like 1776, this period is a test of democracy—We rejected an "American fascist"

Do police have a license to kill?

FL drivers get OK to run over protesters

Where ‘Truth and Reconciliation Commission’?

How Govt wastes our money:

We paid the bill to clean up after polluters fouled our country: will polluters get re-bill

Congress makes sure Puerto Rico helps wealthy avoid taxes: it will never be a state

GOP raises taxes quietly in FL: if we shop online, we pay $1 billion

SCAMS/SPINS:

GOP votes against equal pay: keep women earning 82 cents per male $1.00 for same job.