The 3 Secret Pillars of Wealth: Book Trailer

The 3 Secret Pillars of Wealth: Book Trailer.

Actuary urges caution in the use of life settlements – FTAdviser.com

Actuary urges caution in the use of life settlements – FTAdviser.com.

Saving Money On Life Insurance in Orange County, CA.

There are many people who get duped annually on whole life insurance. Don’t get this wrong if you want to overpay for death benefit that goes to your family then Whole Life has merit. However, don’t ever get seduced to thinking it has any serious cash build up and that you’ll have all kinds of money tax free.

Life insurance is one of the last great tax-free strategies for an uncertain tomorrow on retirement. Under the tax code we can put money away tax deferred and take that accumulation out tax-free. It gets even better if the policy is linked to one of the indexes like the S&P500 which is the benchmark for all investments and fund managers try to stay on track with it.

You can learn in 3 minutes how this works by going to the link below:

www.taxfreepersonalpension.com

For most people they would be best served to take out a 15, 20 or 30 year term policy and just lock in the rate as young as possible and while you’re in good health. Insurance can be a great vehicle despite what some of the guru financial planners say when they state it is horrible. Do you think a business owner with partners and one dies and they face having the spouse as a new partner appreciates the cost of life insurance? I can tell you they love that because dealing with a spouse or trying to buy them out can go to court and get real costly in a hurry. Business owners need a buy/sell agreement funded with life insurance or they are missing a critical tool for business and acting like novices.

Term Insurance is so costless and can pay to keep your family stable if you go down, it can pay to put your kids through college or it can even absorb the cost to bury your body. I hate to be morbid but your body has to be properly disposed of and you can’t just say “I don’t care when I’m gone.” Why place the financial burden on your family to struggle and try to find a way just to send you off when you can take care of that from $10 to $30 per month.

If you are serious about finding out how much life insurance you need, how much it will cost then we invite you to connect with us and we’ll help you since we have access to over 200 carriers and many have some great prices that will NOT cut into your monthly cash flow and stop you from being responsible.

James Burns

White Diamond Insurance Services, Inc.

(949) 231-9979

Retirement after the great recession – will it still be possible?

I wrote an article a few years ago that was published in the OC Metro in Orange County, California called “Uncle Sam’s Snake Oil.” This article was designed to wake up all the sheeple (that is a half person half sheep) that is just following along and believing that what you’ve been told to be true is true.

There used to be the 3-legged stool for retirement but then the company funded pension went way and the last two legs which were only supplemental have been used to fund a lifestyle after work and has become disastrous. The other two legs are Social Security and the 401k plan which was designed to supplement your retirement and can be decent if you get a significant company match but those are going away.   The real key here is that as our deficit rises beyond $14,000,000,000,000 trillion that is a long number isn’t it? As things rise ever second, we know the only solution is to raise taxes and most likely back to the tax brackets of the 1990s where the top was at 39.6%. If you add your state tax, in California it is another 9.3%, your at 48.9% of your income just to taxes to pay this incredible debt down. That means anyone earning $250,000 or more was taxed as this rate and we hear a lot about that $250,000 income today. However a family of 3 or more needs at least that much just to stay above water in their live in various parts of California s housing and goods and services are explosively high. The proposed Obamacare or the Patient Protection and Affordable Care Act (PPACA) is going to send our taxes to at least these levels. We now have Homeland Security costs, War, underfunded benefits (Social Security, Medicare, Medicaid) and this is a recipe of inevitable higher taxes. In 1993 the family filing  jointly and earning $89,000 to $140,000 was taxed at a 31% rate which is just 4% shy of the highest current tax bracket for multi-millionaires and we are destined to go back to such a rate.

All of this legwork does not even account for how things really work on deferred pension plans and few Americans realized how they are going to be taxed on their retirement plans until they arrive at retirement only to be horrified. Millions run out of money and end up work in their eighties in fast food restaurants or as greeters in front of discount department stores.

So here is a break-down of an average person putting away $4,000 per year for 30 years and reaping that huge tax-deductible benefit and how he ends up paying 10x in taxes back to the government.

Break down of taxes on deferred program

This link depicts what it would look like to save $40,800 over the 30 years prior to retirement only to pay $532,800 in taxes over the time from age 65 to 85. As you can see that little savings in tax was no where near what you still end up paying, hence the perception of the deferred plan is snake oil.

How do these numbers stack up

We want people to know you have to start finding some form of tax-free strategy or you’ll be penniless in a few years into retirement and back out looking for work just to make ends meet. Most do not qualify for a ROTH and you can only put away $5,000 per year which takes forever to get any real build up but there are strategies for the small business owner or solo practitioner to use 401k ROTH strategies…this is way too long of a conversation for this article.

There are muni bonds but which municipality do you feel comfortable with? Most of them are running their budgets like a ponzi and robbing Peter to pay Paul. Even though the interest paid on a municipal bond is tax-exempt, a holder can recognize gain or loss that is subject to federal income tax on the sale of such a bond, just as in the case of a taxable bond. I see a little too much risk in these going forward but a few might not be a bad thing. Unfortunately some folks have turned 95% of their wealth holdings into these which could give a whole new meaning to the word “junk bond.”

The last frontier is exploring tax codes to find access to places to build tax-free and we find that in 7702a which is for life insurance. Now contrary to popular opinion, insurance is not all about you dying. In fact it can provide one of the last vehicles to grow money tax deferred and access it tax-free if designed properly. The caveat is that you must fund for a few years and be consistent like anything else in life. Many let their policies lapse and then the cash values go to paying insurance costs rather than being allocated to a savings component linked to one of our stock indexes.  As I’ve shown before, if you understand the equivalent taxable yield, you’ll understand that if you only did 5.5% in return tax-free that is the equivalent of 7.65%, depending on your tax bracket…it could be a little better if your in a higher tax bracket.

The insurance approach also allows you to pass on a death benefit to loved ones and if you don’t have anyone who loves you then think about it as a final expense policy to cover the costs of sending you to the great beyond which can cost anywhere from $15,000 and UP.  You can be covered for disability and terminal illness and have supplemental tax-free retiree income all with one policy. For folks who don’t qualify for ROTH IRA, can’t do the solo 401k ROTH or have already done as much muni bonds as you’re going to risk; the properly structured ‘savings grade’ life insurance policy may provide a unique combative tool to slay the retirement dragon.

Unpoverishingly,

James Burns

Tax Free Now

Why Sabotage your Retirement?

There are five destroyers of wealth.

1. Taxes

2. Inflation

3. Procrastination

4. Expenses

5. Debt

So if we know these five exist that eat away our gains and slow our progress, then we know where not to invest. Debt and procrastination are personal things but the other three can be avoided. The typical vehicle most people use are mutual funds. There are now more mutual funds than there are stocks on the exchanges so one has to ask why. This is because of the tremendous money that is harvested off of them by greedy financial institutions.

How do fund expenses affect you? Well, with the expense ratio, which averages 1.6% per year, sales charges of 0.5%, turnover generated portfolio transactions costs of 0.7% and opportunity costs of 0.3%—when funds hold cash rather than remain fully invested in stocks— the average mutual fund investor loses 3.1% of their investment returns every year just on fees. While this might not seem like much on the surface, costs and fees alone could consume 31% of a 10% market return. Think about that. You could be losing almost a third of your return before it’s even taxed. You’re losing a third of your return just for the cost of maintaining your investment. Add in the 1.5% capital gains tax bill that the average fund investor pays each year and that figure shoots up to 46% of your return being lost to fees and expenses, nearly half of a potential 10% return. When you hear that, don’t you feel like you’re taking one or two steps back instead of going forward?

Taking what we now know, the best place to avoid expenses would be an index fund but if we buy the index inside a life insurance chassis, then we can eliminate the taxes under the Internal Revenue Code Section 7702 which allows tax-free build-up and tax-free distributions back to yourself because it is characterized as a loan. Now that we’ve eliminated two more destroyers the only one is inflation. As long as you can earn an internal rate or return that out paces the 3% of inflation which is possible when you have the right product you can eliminate all 5 destroyers of wealth and get so much further ahead.

If you want more information look for the book “The 3 Secrets of Wealth” on Amazon or contact the author of this blog.

Save Tax Free Now

Accountability in your Personal Retirement Planning

As the author of “The 3 Secret Pillars of Wealth” I have identified what I think are seven to eight steps all Americans need to respond to and become accountable to right now. Accountability is when you’re going to get serious about what you’re doing and where you’re going. Jeff Combs, a great coach and trainer says “your word is your bond” and what is your word worth to yourself? Do you constantly procrastinate and fail to examine your finances because your fearful, don’t understand them or you are addicted to poverty consciousness rather than prosperity consciousness? Some people are addicted to struggle so much that they get in their own way of success.

It is shocking how many Americans are not accountable for their own retirement and do not do the things it takes to be financially independent. The Wall Street Journal recounted on how much apathy is out there and there is no room for slip-ups or lackadaisical attitude.

Here are the 7 things you absolutely must be doing to get the type of result you’re looking for which is financial independence in your retirement.

1. Build up cash flows
2. Build an emergency fund
3. Eliminate debt – (bankruptcy, short sale or debt settlement)
4. Rebuild credit if necessary
5. Create an emergency fund (all families need this for unexpected events)
6. Protect what you have (protect your principal from market loss
7. Build a plan for long-term income and savings
8. Have an estate plan in place to care for your affairs

It is very effective to just have steps or a checklist. Some of the most complicated machines (aircraft) and computers are run on systems and they have checklists to keep them functioning optimally. Why avoid this evident fact of how to keep things in order and follow a checklist? Everything you need is in 8 steps to financial freedom. Sure, there is a little bit of work in each step but things are now isolated and broken down into manageable pieces and that is problem solving.

To your success,

James Burns

Wealth Strategies – click here

Uncle Sam’s Snake Oil

Uncle Sam and his band of merry-men, better known as Congress, have been pushing snake oil on the unsuspecting public in the form of retirement plans. But wait, isn’t a pension plan one of the perks we look to when shopping for an employer? Well, not all pension planning is created equal and in most cases, quite disastrous.

Distributions from all qualified plans must begin no later than April 1st of the calendar year following the year that the participant attains age 70 1/2, or the calendar year in which the employee retires. Special rules apply if the distribution is made to a 5 percent owner of the business. The purpose of minimum distribution rules for retirement plans is to force the owner or participant of the pension plan to withdraw money from the plans, thus triggering an income tax on these monies. On April 16, 2002, the Internal Revenue Service issued final regulations as to these distributions.

Generally, the idea pursuant to the regulations is to have the owner or participant of the pension plan begin taking the money out of the pension plan beginning at the later of when he finishes working or age 70.5. One purpose of this is to insure that these monies will be subject to income tax prior to the death of the owner.[1]

Based on the current system the government has created with pension plans, the average retired couple will pay eight to twelve times more in taxes on their IRAs and 401(k)s during their retirement years than they saved during their contribution and accumulation years.[2] Generally, it is understood that you put money into your pension plan and tax is deferred and this is a great thing. Unfortunately, you may well be in a higher tax bracket if your pension accumulation is done right.

In addition to a higher tax bracket upon reaching retirement, many people find themselves with a free and clear home; they no longer have mortgage interest deductions to offset income tax. Many Americans find they are now paying back everything they saved in taxes during their accumulation and contributions years within the first two years of distributions. Therefore, there is an insidious income tax awaiting most people and if they didn’t plan their estates, double taxation in the form of both income and estate tax.

Many postpone the transfer of their qualified funds until age 59 ½ in order to avoid the 10% tax penalty. Sometimes by delaying the payment of taxes, retirees will find themselves in a higher tax bracket after age 59 ½ because Congress could raise tax rates because of a political change. Inevitably, one must pay the piper now or later.

What is the answer? Simple, savings grade life insurance. This type of life insurance is not the same as the one you get countless letters about in the mail. This is life insurance that is focused on building up a triple compound because it is tax deferred. The difference between the deferral that life insurance experiences and pension plans is that when it comes time for payout, life insurance is received as a loan. This is a powerful concept because the proceeds will not be taxed; loans are not a form of taxable income. However, as a loan you will have interest on the payments. Most people mistakenly think they are going to pay interest on their own money with life insurance. While in theory that is true, the best insurance carriers provide for zero wash loans where the interest basically is forgiven or taken out of the death benefit when a person passes on. We are talking about real life insurance not the typical death insurance that most people have because you use it while you’re alive.

The best candidates for creating amazing wealth with Savings grade life insurance are those in the age rages of thirty to fifty. Once committed and in the proper product it is foreseeable they will retire wealthy and without the annoying taxation that surrounds a pension plan. There are even strategies to start a contribution plan to your investment that only requires repositioning your current finances.

Social Security received a 2.7 percent boost in 2005, but Medicare will continue to eat up much of the increase and when the 79 million qualifying Americans sign-up – for Social Security look out below. This does not even account for the bail out with TARP funds that President Obama awarded bankers and the fact we are headed for Debtflation.

Long Term Nursing Care – are your prepared?

Many states have a high cost for long term care and nursing but California is very explosive in expenses.

State Median Annual Care Costs for 2010 are:

Nursing Home Care

1. Private Room                                                      $87,345
2. Semi-private Room                                          $73,000

Assisted Living Facility

1. Private, one bedroom                                     $42,000

Adult Day Health Care

1. Adult day health care                                    $20,020

Home Care

1. Home health aide                                           $46,904
2. Homemaker Services                                   $45,646

The statistics are that 7 in 10 people will require one of these types of long term care in their senior years. The question is what have you done to take care of this potential problem?

You need to look at a long term care policy or better yet, an insurance policy that provides for supplemental retirement income but also has living benefits if you need them like nursing care. To ignore the numbers is to ignore a fact like you’re going to get old and that everyone has to pay taxes. You need to be responsible to your loved ones and in order to preserve all that you are and have worked for from going out the window to pay for this.

James Burns, Esq.

www.jamesgburns.com

Domestic Financial Terrorism – How do we defend?

The level of destruction on our financial system is incredible compared to what even Timothy McVee did as a domestic terrorist. You have to ask yourself who do some of these bankers and investment firms work for when you look at what they’ve done to the once wealthiest nation in the world.

Right now we’ve got $2 trillion in short-term debt that has to be refinanced this year of 2010 and China, India and Russia are not buying. This is not counting the extra deficit spending which should top $1.35 trillion this year…more or less. The fact the countries we’ve relied on are not buying means we have to fire up the printing presses again. We would already acknowledge that we are at a 10% inflation but the money folks have been using tricky phrases like “core inflation” which ignores half the things we spend money on so that way they can keep the numbers looking low.

A great book called This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhard and Kenneth Rogoff shows that EVERY TIME a nation’s debt went above 90% of GDP or Growth Domestic Product…the nation failed. The book studies 25 countries over 800 years and there were NO exceptions to the 90% rule. Every nation that ran their deficits to this 90% ratio is now off the map or turned Third World.

Right now, the US is above 90% and there appears no way to bring it down for decades unless some obscure genius comes out of the woodwork as they are not in the White House, Treasury or Fed.

It is unclear what Americans will do, especially for their retirement as the very tool our bankers use against us (stock market) they expect us to hand over our life’s savings and just be ok with negative 30 or 40% loses. You know, its just the market reacting and it goes up and down. Why is that Ok? Why should we accept losses that take us forever to recover just to get back where we started be considered alright?

We need to redo some of the Healthcare Reform Act that President Obama so valiantly promoted before 2013 when our investments could be ravaged with a sur-tax just because we are in a certain income bracket and that bracket is not hard to be in if you live in a state with a high cost of living. Where is Sarah Palin and the Tea Party when we need them.

It is time to look at guaranteed opportunities that does not go down when the market goes down. When Wall Street was once honorable a man named Benjamin Graham (mentor to Warren Buffet) extolled what was an investment. It preserved principal and gave an adequate return. We need to get back to this simple idea and quit trying to find home runs since base hits get you to home plate just as well.

We also need tax-free strategies to weather the storm our own government and their brainy bankers have left before us. It was like turning on the gas to an already smoldering economy.

James Burns

To Dream the Impossible Dream – Beating the Stock Market

A few years ago after reviewing some portfolios for clients that tried their hand in stock market trading it was obvious to me that they were gambling as if they were at the roulette table in Vegas. As someone who has worked for a billionaire and observed the asset class relative to stock, the investments were safe blue chip stocks, bonds, Treasuries and Index funds because it is next to impossible to beat the market.  I then wrote my first book The 3 Secret Pillars of Wealth that discusses the fundamentals of what is an investment and what to look for every-time you start to consider an investment.  Benjamin Graham who was the mentor of Warren Buffet stated an investment was something that preserved principal and provided and adequate return.

In the book we also discuss John Bogle, the founder of Vanguard Investments, views on investing and trying to beat the market. Mr. Bogle’s academic research proved that virtually no one could consistently beat the market over long stretches (like the 35 years we have to invest for retirement). The best you could hope for was to meet the market, which gave you returns that weren’t half bad. in my book we recount the research of looking at 355 mutual funds over the 35 years and that only 3 of them did anything compelling and that was in line with what the S&P 500 did. Hence, the idea is that going forward how would the average person who works uncover those 3 funds out of the masses; you can’t is the answer.

To this end, Mr. Bogle said we need to invest in a broad swath of stocks and bonds through low-cost index funds and forget about your portfolio. Spend your time living your life instead of researching stocks and bonds. That’s much more fun than sweating over investments anyway. If you’re going to research anything it would be real estate and starting your own business as other assets.

The other pundit of the idea that almost no one beats the market is Terrance Odean, a Berkeley professor who proved Bogle’s theory from another perspective. The more you trade, the more you lose, Odean discovered by examining the real-life portfolios and trading patterns of thousands of investors. His paper, Boys Will Be Boys, is a must-read for anyone who is trying to retire in comfort and not run out of money and for those who think they’re going to outsmart the stock market. You know the guys who have a super large screen in their office and they seem to be following the market and making trades. What they are really doing is creating taxes with capital gains and many of them short term which costs more, all for what?

Steady and consistent gets to the finish line if we remember what Aesop tried to teach us in the story of the Tortoise and the Hare. The best way to invest with success is to get base hits and not try to get a home run all the time. If we look at baseball, a home run is great but really you accomplish more if you get a base hit and move it one base at a time to home plate; this is better than striking out.

James Burns, Esq.