Frequently Asked Questions

How can I find out how you can help me specifically?

Contact us and we will schedule a quick and easy appointment to give you a free financial "X-ray". There is no cost or obligation on your part. This "X-ray" will tell us everything you're doing and want to do financially and how we can help you. From there we can create a plan and get into more details.

What is the best way to schedule an appointment?

Contact us by calling us at 253.582.6505.

"DISCOVERY CONSISTS OF SEEING WHAT EVERYBODY ELSE HAS SEEN AND THINKING WHAT NOBODY ELSE HAS THOUGHT."

-Nobel Prize Winner … Albert Von Szent-Gyorgyi 1893-1936, Irving Good(ed)
The Scientist Speculates (1962) http://www.quotes.net/quote/15946

Disclaimer: The materials and information contained herein are intended for educational purposes, to stimulate thought and discussion so as to provide the reader with useful ideas in the area of wealth management planning and should not be relied upon as the basis of an investment or liquidation decision. These materials and information do not constitute and should not be considered to be tax, accounting, investment, or legal advice regarding the use of any particular wealth management, estate planning, or other technique, device, or suggestion, nor any of the legal, accounting, tax, or other consequences associated with them. While the content herein is based upon information believed to be reliable, no representation or warranty is given as to its accuracy or completeness. Investments involve risk. You are gambling when you invest. Investments are not guaranteed against lost. You can lose part of or all of your money.

Efficiency requires strategies. Strategies require Uncommon Thinking. Uncommon Thinking is what we provide to our clients. We are paid to see things our client's don't see. Thornewood Advisors provides you the tools and education to think uncommonly.

Our mission in part is; To put people, not institutions in control of their own hard-earned money. We practice "holistic, evidenced based financial planning".

  • No one or even a few individuals can be an expert in everything financial. To bring our clients expertise in every area we have access to among the top minds and most highly credentialed specialists in every area financial. In essence these resources are like having a team of over 400 of highly credentialed financial specialists with degrees from schools like the Wharton School of Finance at the University of Pennsylvania, Harvard, Yale, The University of Chicago School of Business, The Kellogg School at Northwestern and others. One is a Nobel Prize Laureate. Many are MBAs. Some are PhDs. Others are attorneys and CPAs, some are economists, and some are professors at the country’s best business schools. Many of them are published. All are among the most brilliant minds in the financial universe.

  • It's not how much you earn... its how much you keep!
  • In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.
    -Theodore Roosevelt Last found August 7th , 2015 at http://en.proverbia.net/citastema.asp?tematica=303
  • Hope is the foundation of the typical approach to investing.
  • Hoping you don't suffer losses in years in which you can't afford them is not an effective strategy for securing your financial future.
  • I have enough money to retire comfortably for the rest of my life. Problem is, I have to die next week.


IF WHAT YOU THINK TO BE TRUE
IS NOT TRUE
WHEN DO YOU WANT TO KNOW ABOUT IT?


The following is from the book “Money Master the Game” by Tony Robbins

It is a jungle out there. ….. Our financial institutions are set up to make a profit for themselves not their clients.

  • Brokerage Firms, Banks, Mutual Funds, Securities Dealers, Stock Brokers, Registered Representatives, etc. advertise “Your Goals are our goals” or are they? Are your interests really aligned?
  • The fact is that these institutions are out to make money for themselves, not for you. Where are the customers’ yachts?
  • You have to learn the rules of the game, and then you have to play it seriously with all your heart like a professional.
  • The system is riddled with land mines that can blow up your financial future.
  • Beware of Mutual Funds. They are heavy laden with fees; 3.17% on average. They also are not generally tax efficient. According to Charlie Farrell of CBS Market Watch, "So although their marketing material encourages investors to buy and hold, the managers certainly don't practice what they preach. What they really mean is buy and hold their mutual funds while they trade your retirement savings like crazy."
  • Many salespeople who work for these firms are caring people of the highest integrity who truly want to do what is in the best interest of their clients. Unfortunately most are operating in a closed circuit environment in which the tools at their disposal are pre-engineered to be in the best interest of the house and they do not know this. These institutions are not your friends. Their sales people may intend to be but they are not your friends either.
  • Your broker or registered representative is a sales person. They will look you in the eye and tell you he has your best interest at heart. Because more than likely, he sincerely believes he is helping you. He doesn’t understand. His education and information comes from the company he works for. He has not been independently educated. He or she is a "follow the herd" planner.
  • “It is difficult to get a man to understand something when his salary depends on his not understanding it.” - Upton Sinclair
  • In 1954 Darrell Huff wrote a book entitled How to Lie with Statistics. Today the mutual fund industry uses tricky & shady, but legal calculations to calculate and report returns.
  • Most of the sellers of investment products practice; "one size fits all" planning. They follow the herd and hope things will work out using popular thinking at the time strategies which are nothing more than wild guesses. For example:
    1. In 1994, William P. Bengen expressed in an article, journal of financial planning that the "safe withdrawal" rate was at 4%. Mr. Bengen along with many others in the 90's developed what we know of today as the "4% draw down rule". This rule revealed that a person could "drawdown" up to 4% annually from their portfolio without fear of out living their money.

      Recent studies and recent history have proved the 4% rule has only a 50% chance of working. One study showing this was done by morningstar and published January 21, 2013.
    2. Another example is a catchy rule which simply quantifies how much of your money should be in the stock market based upon your age. It became popular and is widely used by "follow the heard planners". It is called "The Rule of 100". This rule theorizes you subtract your age from 100 and the number you arrive at is the percentage of your money you should have in the stock market. The rest should be in low risk or no risk investments. This sounds good but it is also a wild guess and doesn't work for most investors.
  • You have to learn the rules of the game, and then you have to play better than anyone else – Albert Einstein

(Remember how the person who introduced you to the game of Tic-Tac-Toe always won. That is because they knew the secret of how to play the game and always win.)

  • The chef doesn’t eat his own cooking. In a 2009 study Morningstar found that 49% of the managers owned no shares in the fund they manage. The question is; if the people who manage the fund aren’t investing in the fund they run why in the world should I?
  • Most of the danger in the financial jungle lies in the fact that what you don’t know can hurt you.
  • Risk comes from not knowing what you are doing – Warren Buffett
  • Casinos make a lot of money because the house has the edge. Wall Street and especially mutual funds are playing with a stacked deck. They are guaranteed revenue whether you win or not. It is the ultimate casino.

The above is from the book “Money Master the Game” by Tony Robbins. Published by SIMON & SHUSTER November 2014

Do You Know Quiz?

Answers below. Don’t Cheat and peak ahead. Take a moment and really guess at the answers.


AVERAGE RATE OF RETURN - HOW IS IT CALCULATED?

  1. A person tracked 4 years of returns in his mutual funds. The returns during the 4 years were 100%, -50%, 100%, -50%. He started with $100,000 in his account.
    • How much money did he have at the end of 4 years?
    • What was his actual return?
    • What was his average rate of return?

    2. TIME WEIGHTED RETURN – HOW IS IT CALCULATED?
  2. Now that we see that the average rate of return is not a true representation of what we earn sit back and relax. The grand illusion isn’t over yet. The math magicians on Wall Street have managed another way to calculate their returns to look better than they are. How do they do this?
  3. What is the real - world calculation, (what you actually get to keep) called?
  4. How do mutual funds make funds that are losers look good?
  5. What are the two different types of planners you encounter when investing and doing financial planning? Can you tell the difference?
  6. What is the difference between an independent fee only Registered Investment Advisor, who is a consultant and a sales person; all others who are biased salespeople selling financial products and biased advice; Brokers, Registered Representatives, Financial Planners, Advisors, Wealth Managers, RIAs who are also Broker Dealers, Agents, etc.?
  7. Which of the two types of planners do you think is the wiser choice for you to use?
  8. What is significant about 1942 in the Federal Income Tax Thresholds?
  9. What is the definition of “conventional wisdom”?
  10. What does a person do when faced with a problem that seems overwhelming like retirement planning?
  11. If you have one dollar and you double it every year for 20 years how much do you have at the end of 20 years in a tax free account?
  12. Same question as #9 only this time deduct taxes at 33%. So what is the impact of taxes on the same scenario? How much did Cesar take?
  13. There are two stages of financial planning in general and in retirement planning. What are they?
  14. Which stage of the two financial planning stages has the most risk?
  15. We have two twin brothers. Brother #1 starts putting away $4,000.00 per year at age 20. At age 40 he stops contributing the $4,000.00 per year but left the money in his account to grow in a tax free environment at the rate of 10% per year. Brother #2 did not start a plan for retirement until age 40, funding it with $4,000.00 per year also in a tax free environment until he was age 65 at which time he stopped. Each brother earned 10% per year return on their plan. In sum, brother #1, the early starter invested a total of $80,000.00 ($4,000.00 per year X 20 years at 10%) While brother #2, the late bloomer, invested $100,000.00 ($4,000.00 per year X 25 years also at 10%) So which brother had more money in his account at age 65?
  16. How much is a billion dollars?
  17. How much is a trillion dollars?
  18. What is our national debt now? And
  19. How much is it increasing every day?
  20. What is the best way to become misinformed?
  21. How much money did the tax payer lose in 2014 from the government bailout of the automobile manufacturers?
  22. How much did the politicians and their parties gain from using the tax payer’s money to bailout of the automobile manufacturers?
  23. Are you retirement ready? What is the definition of "Retirement Ready"?
  24. Over a lifetime of investing how much of your money do you give up for each 1% you pay in fees?




Quiz ANSWERS

    • $100,000.00
    • The actual rate of return is 0%.
    • The average rate of return is 25% (100/4 = 25). Very misleading isn’t it.

    2. Here is the problem with "Average Rate of Return": The market doesn't give you an average annual return each year. It gives you actual returns that work out to an average.

    Actual rate of return is a money calculation. Whereas average rate of return is a math calculation and as you can see it sounds great but is not a truthful report of how your account performed. It is misleading making the performance look better than it really was.

    Math is Math. Money is Money. Math is not Money. In this case it is slight of pencil. Always follow the money.

  2. Time weighted returns are also misleading. These can report double your actual return. Here is how it works; the fund manager tells the salesman who in turn tells you, if at the beginning of the year we had a $1.00 and at the end of the year we had a $1.20, we are up 20%. But in reality, investors rarely have all their money in the fund at the beginning of the year. Typically contributions are made throughout the year. In the case of a 401K a contribution is made from each paycheck. We have incorrectly learned to chase returns so we contribute more when the fund is doing well and less when it isn’t. Therefore we are going to have a much different return than the sales brochures and advertisements say. In short when the mutual fund advertises a return it is not the return you will actually earn.
  3. A Dollar Weighted Return calculation reports what we actually get to keep. A dollar weighted return also called an internal rate of return takes all contributions, withdrawals and fees into consideration. It is important to do an after tax internal rate of return calculation because that is the return you really get to keep. Before tax is interesting but meaningless. This of course will be different for each tax payer.
  4. They merge them into funds that have a good or better rating. Every year many funds disappear this way. If the fund they merged the dog into gets dragged down they will merge its latest incarnation into one with a 4 or 5 star rating.
  5. This is a two part question & answer. Part 1. Answer. There are sales people like you encounter at the appliance store, the auto dealership and so on. These people go by many names, for example: Banks, Broker Dealers, Registered Representatives, stock brokers, financial planners, investment advisors, agents, Wealth Managers, to name a few. ….. And then there are independent (RIA) Registered Investment Advisors who are not sales people. They are consultants and are also called Fiduciary Advisors. The pure and true form of this type is an independent professional free from all conflicts of interest who work for you, like your typical doctor, dentist, CPA, etc. These people have to meet the highest standards in the financial services industry. Much higher than banks or any others. Simply put they have a legal requirement to put your interests ahead of their own. No other entity has this high of requirement. This is a simple definition of the word “Fiduciary”. Caveat Emptor’ Almost all large financial institutions who are Broker Dealers have also become RIAs as a marketing ploy. Unfortunately it pollutes the designation. Any entity that is both a Broker Dealer & an RIA is a sales organization. They are not a true independent RIA working for you without conflicts of interest. Part 2 answer. The key to telling them apart is; are they a fee only independent Registered Investment Advisor not owned by a bank, insurance company or other financial institution.
  6. An independent fee only Registered Investment Advisor; RIA is a fiduciary advisor. They have a fiduciary responsibility to their client. They work for you. No other entity in the financial services industry has as high of a responsibility or standard to meet. Beware though. Some RIAs are actually still sales people. Any firm who is also a Broker Dealer and an RIA is a sales organization like an auto dealership. An independent fee only advisor is the only true “fiduciary advisor” and not a sales person. They are a consultant. In essence a true advisor without conflicts of interest. Another very important thing is a fee only RIA has every security there is available to use in your behalf. All others have only some. If an RIA is affiliated with or it is owned by an insurance company or brokerage firm they have conflicts of interest and have a limited array of tools. They do not have every financial product made, available to help you.
  7. This is a no brainer. Obviously a professional who has no conflicts of interest and legally speaking, works for you and has a legal requirement to put your interests first and brings every financial tool in the universe to bear on helping you …. Is a much wiser choice than a sales person with limited tools and conflicts of interest.
  8. The maximum tax bracket in 1942 was re-set to kick in at $200,000.00. Previously it had been $5,000,000.00.
  9. Information that is stated as a fact and repeatedly presented to us as fact until it becomes unquestioned as truth.
  10. Behavioral scientist have found, we freeze and do nothing. For example we know we need to save more and invest more. We need to understand what we are doing. But we don’t. This results in what is called the “default decision” or deer in the headlights decision. We tell ourselves we are in control but we are actually giving up control and allowing whatever doing nothing chooses for us; the deer is killed.
  11. $1,048,576.00! This illustrates the incredible power of compounding.
  12. $28,000.00! This illustrates how devastating taxes are; a difference of over one million dollars. And this doesn’t account for estate taxes. It also doesn’t account for the certainly higher taxes in the future. You can expect the after tax total to be significantly smaller in the future.
  13. Stage one is the accumulation stage during which you are accumulating and or saving money. ….. Stage two is the withdrawal stage during which you are using the money accumulated in stage one. For example, retirement; supporting your lifestyle for the rest of your life. This is the time when baby boomers come face to face with their #1 fear; outliving their money.
  14. The distribution or withdrawal stage; stage 2 has the most risk. Just like in the world of mountain climbing the vast majority of people who die, die on the way down. Your retirement plan must have a good exit strategy or withdrawal strategy. You can run out of money before you die if you don’t.
  15. Brother #1 who’d started sooner and invested the least money had more. Hold onto your hat now, brother #1 had 600% more! $2.5 million vs $400.000.00. This advice applies to you no matter where you are on your timeline. Also whether you are just getting started or re-doing what you have been doing. The Moral Is: Get going now! Once time is spent it is gone forever. You can never get it back.
  16. Most people cannot picture this in their minds so here is some help. If you were given one billion dollars 2,000 years ago, you could have gone along spending one thousand dollars ($1,000.00) every day since and you would still have money left. ….. It is one thousand million. ….. A billion seconds ago was 32 years ago!
  17. A trillion dollars is one thousand billion. A trillion seconds ago it was nearly 32,000 years ago (31,689, to be exact)! Human beings were not even called humans!
  18. Go to http://www.usdebtclock.org/ to view this in real time.
  19. Go to http://www.usdebtclock.org/ to view this in real time.
  20. Listening to and giving credence to financial entertainers. These people are in the entertainment business. Their main objective is remaining on the air and to make money by selling whatever and being entertaining. They often employ a highly emotional appeal tactic. They know little if anything about what they are saying. … Listening to and giving credence to financial advice on network news. These programs are a form of entertainment. The anchor people know little if anything about what they are saying when it comes to financial advice. They are following a script given to them and they sensationalize everything, distorting all information. … Listening to and giving credence to any company that advertises financial products and or services. A product or service that is advertised has to have the very high cost of advertising included in the cost of the product or service making that product or providing the service more costly to the consumer than ones that are not advertised. Things you have never heard about or maybe you have heard about, provided by entities who don’t advertise are the best deals.
  21. 9.26 Billion dollars, ($9,260,000,000.00)  USA Today 2014-12-30,  Car Scoops 2015-01-04,  4 Traders 2015-01-01,  Auto Blog 2014-12-30
  22. It may be 50 years or more before this information is made public, if ever.
  23. The definition of being "Retirement Ready" is; When you have a guaranteed lifetime income that meets or exceeds your income needs.
  24. You give up 20% of your money for each 1% you pay in annual fees. If you’re paying 2% you’re giving up or in other words losing 40% of your money. Pay 3% fee, give up 60% of your money.
    25. (Note the average mutual fund charges 2 1/2 %. The average 401K plan charges 3.17%. That’s a whole lot and after taxes it really mounts up.)

IT PAYS TO LOOK BEYOND CONVENTIONAL WISDOM

Stepping Outside the SQUARE
  • In the words of David Swensen, one of the most successful institutional investors of our time, “to have unconventional success you can’t be guided by conventional wisdom”.

David Swenson is the chief investment officer at Yale University and author of “Unconventional success”. He turned one billion into 23.9 Billion boasting 13.9% annual returns along the way-a 27 year record unmatched by many of the world’s top hedge fund manager and investors. He is called the Warren Buffet of Institutional Investing.

Feeling good Jack Lalanne died in 2011 at the age of 96.

The New York Times reported, "Jack Lalanne, whose obsession with grueling workouts and good nutrition, complemented by a salesman's gift, brought him recognition as the founder of the modern fitness movement." He started working out with weights early in his career. He opened the model for the fitness spas to come - a gym, juice bar and health food store. All of this took place in the year 1936.

"People thought I was a charlatan and a nut," he remembered. "The doctors were against me - they said that working out with weights would give people heart attacks and they would lose their sex drive."

The New York Times also reported that Jack Lalanne was an exercise celebrity long before the likes of Richard Simmons and Jane Fonda, not to mention the plethora of more contemporary fitness gurus.

Jack of course was all about Physical health whereas our focus is on your Fiscal health. Our obsession has been and is focused on what works the best. We practice holistic, evidenced based financial planning. What has proved to work the best throughout all time. The medical and dental professions call this “evidenced based”.

Costco is a great example of a company that has achieved tremendous success by doing things outside the box. They have gone from opening their first warehouse in 1983 to becoming the second largest retailer in the US & the 3rd largest in the world with annual sales exceeding 64 billion. Much of their business model flies in the face of conventional retail sales wisdom. For example, they don’t advertise.

  • Conventional wisdom is what we have been taught to think is true by the advertisers and the media repeatedly saying whatever they want you to think. Even if something isn’t true it takes on the ring of truth after you hear it often enough. The advertising industry attests to this.
  • The financial service industry continues to chase rate of return as the best solution for clients creating wealth in their lifetime. The salespeople in the industry are paid based on making transactions. The more transactions the greater their income. You and they are on opposite sides of the fence.
  • Brokers and advisers continue to tell their clients, "my product is better than your product for building wealth. Work with me and you will have a better portfolio." Little if any attention is paid to plugging the holes in the leaky bucket (wealth transfers, like taxes) and working on making money more efficient.
  • I often use the golf analogy; the salesperson at the store or pro-shop tells you, “If you buy these new and better clubs you will score better”.

“There are three steps in the revelation of any truth: In the first it is ridiculed; In the second resisted; in the third it is considered self-evident.”

-Arthur Schopenhauer, German philosopher, 1760-1860 Last found August 7th , 2015 at https://signalvnoise.com/posts/2175-all-truth-passes-through-three-stages-first

  • The man on the top of the mountain didn’t just fall there. - Vince Lombardi, Last found on September 9, 2015 at http://www.goodreads.com/quotes/19425-the-man-on-top-of-the-mountain-didn-t-fall-there
  • IF IT LOOKS TOO GOOD TO BE TRUE ... IT MIGHT ACTUALLY BE TRUE!
  • Behavioral scientist tell us that most people, even intelligent people have a closed mind when it comes to understanding their finances. Instead of taking responsibility and control of their fiscal health they stop thinking and default to following the herd. The herd is controlled by those who they make wealthy. These "herd" folks are emotionally comforted by the heard in spite of the fact the herd is being led over the cliff. ..... Isn’t this amazing!
  • YOU CAN BE LATE TO THE PARTY AND STILL WIN THE GAME!
  • Social Security is not simple. You can loose major amounts of money by making wrong choices. It has become the cornerstone for the average person's retirement planning. Make sure your advisor has specific expertise on Social Security planning. Ask to see their certification. Social Security employees are not allowed to give you advice according to the rules. They are only suppose to; allowed to answer your questions stopping short of giving you advice.
  • You can increase your Social Security income by as much as 76%.
  • Social Security filing is highly complex. There are over 700 different filing options and 2,728 rules. Forbes Magazine 2012-07-03
  • Most people overestimate what they can do in a year, and they massively underestimate what they can do in a decade or two. ... The fact is: you are not a manager of circumstance, you are the architect of your life's experience.
  • Money is a game of emotions.
  • You must take yourself out of the picture and automate your investing. You have to try and get yourself on autopilot so your emotions don't kill you.
  • Many people won’t even look at their financial picture and make a plan to sustain their lifestyle for life without working.
  • This is even true of people who have earned millions. Why? Our friends the behavioral scientists tell us they are afraid to know.
  • It’s like stepping on the scale or going to the doctor for a checkup.
  • It’s a form of denial; a way to put off making a change.
  • In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.
    -Theodore Roosevelt Last found August 7th , 2015 at http://en.proverbia.net/citastema.asp?tematica=303
  • There is a 50% chance that among married couples , at least one spouse will live to the age of 92 and a 25% chance that one will live to age 97  Fidelity.com 2013-09-24
  • The probability that at least on spouse will live to*.....
    Age 80……….95%
    Age 85……….62%
    Age 90……….64%
    *Ibbotson 2005,  morningstar 2012-09-21, Center for Retirement Research
  • According to the Center for Retirement Research at Boston College, Last found August 7th 2015 at http://crr.bc.edu/special-projects/national-retirement-risk-index/
  • 52% of American households are at risk for not having enough money in retirement to maintain their living standards.
  • It is not realistic to finance a 30 year retirement with 30 years of work. You can’t expect to put 10% of your income aside and then finance a retirement that’s just as long. –John Shoven, Stanford University professor of economics Last found August 7th , 2015 at https://economics.stanford.edu/faculty/shoven
  • According to the EBRI, the Employee Benefit Research Institute,  48% of all working Americans haven’t even calculated how much money they’ll need to retire. Almost half of us haven’t taken step one toward planning for their future. Last found August 7th , 2015 at http://www.ebri.org/research/?fa=genretire
  • 77% of Americans say they have financial worries, but only 40% report having any kind of a spending plan. From the book; MONEY Master the Game by Tony Robbins, Nov 2014
  • One in three baby boomers has less than $1,000.00 saved for retirement.  U.S. News 2011-02-11
  • Currently 46.1% of americans pass away with less than $10,000 in assets.  The Motley Fool 2013-02-05
  • The no.1 fear of baby boomers is out-living the money they have saved. (Death, by the way, checked in at second place.) U.S. News 2013-05-28
  • According to an Ernst & young study, 75% of Americans can expect to see their assets disappear before they die. From the book; MONEY Master the Game 2014
  • According to Forbes the average yearly fee for a mutual fund is 3.17%. Forbes 2014-02-19
  • The average yearly fee if it is in a 401K plan is …… 4.47% - 4.67% From the book; MONEY Master the Game 2014
  • In my experience I calculate the average person is paying 1/3 of their after tax income in interest to lenders. Just giving it away.
  • If you want financial freedom you must stop being simply a consumer and become an investor as well as a consumer.
  • If you don’t want to work forever you have to work to earn enough money so you don’t have to work.
  • You must also think about the tax you have to pay on what you make. Like fees taxes are another guaranteed loss.
  • Taxes are very destructive. Just how destructive are they? Few realize how big a bite they take. Let’s illustrate this using a metaphor called compounding: Take a dollar and double it every year for 20 years. At the end of 20 years you have $1,048,576.00 before tax. After tax at 33% you only have $28,000.00. That is a difference of over one million dollars. Don’t overlook the impact of taxes.
  • Most folks do not realize it but to a large extent TAXES are elective.
  • Over the course of our lives the average American pays more than half of his or her income in an assortment of TAXES: income tax, property tax, sales tax, at the gas pump, etc. Experts estimate we currently pay 54.25% of what we earn in taxes.   From the book; MONEY Master the Game 2014
  • Becoming more tax efficient is one way to get back some of that 54.25% we have given away.
  • If you are a high income earner living in a high tax state your total tax bill is 62%.  Wall Street Journal 2011-05-26
  • This means that you're only keeping 45-38 cents out of every dollar your taxable investments return.
  • Now subtract average fees of 3.17%  Forbes 2014-02-19
  • A tax free investment only has to earn half what a taxable investment has to earn to return the same.
  • The law requires us to pay tax and as Americans we should be proud to pay what the law requires however there is no law requiring you to tip Uncle Sam.
  • Nobody has a public duty to pay more than the law demands.
  • What if you learned that a small amount of tax knowledge could save you from needlessly paying 30% to the tax man? How much faster could you achieve your financial goals?
  • It's not how much you earn ... it's how much you keep that counts.
  • Tax efficiency is one of the simplest ways of achieving financial freedom.
  • Your fiduciary advisor and your tax expert working together can help you save years or even decades in achieving financial freedom.
  • The 3 most important elements in growing your circle of wealth are
    1. Asset Allocation
    2. Diversification
    3. Tax Efficiency
  • The best estate plan is one where the individual controls everything but owns nothing. If we want to legally avoid taxes we have to think outside of the square.
  • "If you don't know where you're going every road will get you nowhere." -Henry Kissinger August 14th 2015 quote.com/quotes/authors/h/henry_a_kissinger.html
  • "The only person you should try to be better than is the person you were yesterday." -Anonymous
  • "It is only the first step that is difficult." -Marie DE VICHY-Chamrond izquotes.com/author/marie-de-vichy-chamrond August 14, 2015

THE 401K Plan OFFER

(For those of you who have or want a Regular or Roth 401K Plan we have every single one made) (For the rest of you we have every alternative.)

Here is the 401K offer.

I want you to imagine that someone comes to you with the following investment opportunity: he wants you to put up 100% of the capital and take 100% of the risk, and whether it makes money or not he wants 60% - 77% of your account value as a fee. Fees are a guaranteed loss and are charged until you run out of money in your account.

Would you do this?

I am sure you don’t need any time to think about this. You would say, “No Way”. “This is absurd.”

However if you are like 90% of American investors, and you participate in a 401K plan, believe it or not these are the terms you agreed to.

  • There are over 20 significant drawbacks to 401K plans.
  • Conventional wisdom is to max out your 401K and IRA contributions.
  • WARNING: the department of labor; The DOL found three-fourths of the 401K plans were not in compliance. Seventy five percent of the 401K plans audited last year; 2013 resulted in plan sponsors being fined, penalized or forced to make reimbursement for plan errors. The average fine in 2013 was $600,000.00 per plan.  Forbes 2014-02-11
  • It is the law that you have your plan “benchmarked” annually against other plans. Last found August 7th 2015 Department of Labor http://search.usa.gov/search?utf8=%E2%9C%93&affiliate=ebsa&query=Benchmarking&x=25&y=11
  • We will provide you with a free analysis and this complimentary benchmark. If the DOL walks in your office don’t just stand there like a deer in the headlights. You want to confidently hand them your plan benchmark.
  • The average total fees in a 401K is 4.47% - 4.67%.  From the book; MONEY Master the Game 2014-11
  • Over a lifetime of investing you give up 20% of your money for each 1% you pay in annual fees. If you’re paying 2% you’re giving up or in other words losing 40% of your money. Pay 3% fee, give up 60% of your money. (Note the average mutual fund charges 3.17 %. The average 401K plan charges 4.47% to 4.67. That’s a whole lot and after taxes it really mounts up.)
  • 401K plans investments are mutual funds
  • 96% of the actively managed mutual funds fail to beat the market over any sustained period of time!  From the book; MONEY Master the Game 2014
  • According to industry leading research firm, DALBAR - Over a 20 year period, Dec 31st 1993 – December 31st 2013, the S & P 500 returned an average of 9.28% but the average mutual fund; (401K plan) investor only made just over 2.54%. A nearly 80% difference.  From the book; MONEY Master the Game 2014
  • Back testing over the same period of time, I found you could have had all your money in a guaranteed no loss account with zero market risk and beat the S & P 500 after taxes. - Jonn T Mason
  • Given the way things are going in Washington, what direction do you think taxes are going? Are they going up – are they staying the same – or are they going down?
  • In a regular 401K plan you are deducting your contributions from your taxable income, deferring the tax until you withdraw it or die. So you save maybe 10 cents on the dollar today only to pay God knows how much, 50 cents, 70 cents, 90 cents on the dollar when you take it out. This alone could cause you to run out of money before you die.
  • At age 70 1/2 you have the required minimum distribution, (RMD). This alone could also cause you to run out of money before you die.

Here is another part of the deal you made: So now I want you to imagine you went to the bank to borrow money. The bank determined you are a good risk so they agreed to make a loan to you. However they didn’t know how much interest and loan fees they wanted to charge you so they said; we’ll give you the money and at the end of the loan period we will decide how much to charge you.

Would you make this deal?

I am sure you don’t need any time to think about this one either. Again you would say, “No Way”. “This is absurd.”

However if you are like 90% of American investors, and you participate in a 401K plan, believe it or not these are the terms you agreed to. Nobody knows what tax rates are going to be in the future, and therefore you have no idea how much the government will leave you to actually live on.

  • People frequently tell me they are saving for retirement in a 401K plan … however in reality they are not saving they are gambling on their retirement and they are doing this blindly.
  • There are over 20 significant drawbacks to 401K plans.

Almost none of the participants in 401K plans, that I have examined, know how much they are paying in fees. In fact 67% think there are no fees and of course nothing could be further from the truth.   Robert Hiltonsmith - Policy analyst at Demos. The Retirement Gamble For your benefit I have reproduced the link for this program below and urge you to watch it. http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

These fees can be substantial: About 30%. Over a lifetime, fees can cost a median-income two-earner family nearly $155,000 and consume nearly one-third of their investment returns. FOX NEWS, the Willis Report https://www.youtube.com/watch?v=ra-_RaMKsHw Robert Hiltonsmith AND Robert Hiltonsmith - Policy analyst at Demos. The Retirement Gamble For your benefit I have reproduced the link for this program below and urge you to watch it. http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

  • When I go over a person’s 401K statement with them and point out that 1/3 to 1/2 of the balance shown actually isn’t theirs. It belongs to their partner; Uncle Sam, it takes a while for them to swallow this pill. Then I ask them how much will be theirs if the tax rate goes up to 60%. OUCH!
  • This is just a peak under the sheets of a system designed to separate you from your money.
  • Theresa Ghilarducci a nationally recognized expert at the New School for Social Research and an out spoken critic of the system says a 401K plan is a do-it-yourself pension plan and a failure.
  • Theresa Ghilarducci authored a brilliant article in the New York Times titled “Our Ridiculous Approach To Retirement” In it she managed to pack all the challenges we face into a single paragraph.
  • Not yet convinced that failure is baked into the voluntary, self-directed, commercially run retirement plans system?

    • Consider what would have to happen for it to work for you.

    1st Figure out when you or your spouse will be laid off or be too injured or sick to work.

    2nd Figure out when you will die.

    3rd Understand that you need to save 7% of every dollar you earn.

    (Didn’t start doing that when you were 25, and you are 55 now? Just save 30% of every dollar you earn)

    4th Earn at least 3% above inflation on your investments every year. (Easy just find the best funds for the lowest price and have them optimally allocated.)

    5th Do not withdraw any funds when you lose your job, have a health problem, get divorced, buy a house, or send a kid to college.

    6th Time your retirement account withdrawals so the last dime is spent the day you die.

    7th You are lucky combined with living a lifestyle well below your means.


    GOOD NEWS! IF YOU WANT GUARANTEES ..... YOU CAN HAVE UPSIDE WITH DOWNSIDE PROTECTION!

    DISCLAIMER: Insurance products are sometimes referred to as “safe money investments”. They are not investments by definition since they do not involve market risk. Insurance Agents are salespeople. They are not fiduciaries. Insurance companies and their agents are regulated under insurance regulations.

    • LIFETIME INCOME STREAM KEY TO RETIREMENT HAPPINESS
    • Having a secure retirement is all about cash flow; having guaranteed monthly income sufficient to support one’s lifestyle needs for as long as they live.
    • All but one of the major banks in the United States has the all of or the majority of their liquid assets invested in a particular type of life insurance.
    • Upside without the downside. Create a guaranteed lifetime income plan, never take a loss. How because there are financial tools that make this possible. It sounds too good to be true but in reality it's the ultimate in creating a portfolio that truly offers peace of mind.
    • This exciting strategy allows you to make money when the market goes up yet it simultaneously guarantees you will not lose your original money invested nor your gains, (retain your principal), (retain your gains) when the market goes down.
    • The catch is that is that you don’t get to capture 100% of the market gains.
    • Most are in disbelief when I tell them there are strategies and tools that will guarantee that you don’t lose while still allowing you to participate in market, “wins”. Why haven’t you heard of them? There are three main reasons.
      1. There is not enough profit to pay to advertise and market this to the general public. It is too good of a deal for the consumer.
      2. It is outside the box because it is not advertised.
      3. Comparatively few licensees in the financial services industry know about it and because it is not a high profit product it does not pay as high of compensation to a licensee so you won’t have salespeople beating down your door.

    ANNUITIES

    • Are annuities the best thing since sliced bread or just a good deal for the insurance companies and agents selling them? The answer? Annuities are a financial tool. There are around 1,600 iterations of annuities so it depends on the type of annuity and how it is being used. If it is a good annuity and the best tool for a particular job it may be the best thing since sliced bread. Any tool used or applied improperly can cause damage and or a loss of money.
    • Annuities date back to Julius Cesar, 2,000 years ago.
    • Don’t get sucked into the myth all annuities are equal. This is as far from the truth as something can get.
    • All annuities are not created equal.
    • Two Foremost Authorities on annuities are;
      1. DR David Babbel, with multiple PhDs, former advisor to the US Secretary of Labor on investment products, professor at the Warton School, arguably the best business school in America and
      2. Jack Marrion MBA. Author, Researcher famous for his annuity expertise, research and his doctoral studies in the area of cognitive bias in decision-making. President of “Research Consultancy”, also connected to the Warton School, frequently referenced by regulators, the SEC and the National Association of Insurance commissioners. These two gentleman (but not the only ones) represent a new paradigm in the development of retirement products.
    • There are annuities you should indeed hate, but to lump all annuities into one category is to thoughtlessly discriminate against the only financial tool that has stood the test of time for 2,000 years
    • They have tax advantages.
    • They guarantee a lifetime income you cannot outlive.
    • When combined with certain strategies you can create a lifetime tax free income. This means that no matter what the government does with tax rates you can rest assured that the entire amount you receive is spendable income, with no moving parts or worries about market volatility.
    • Except for Variable Annuities, they guarantee your principal and a lifetime income.
    • Some are indexed to a stock market index like the S&P 500.
    • Some offer income riders which can increase your monthly income for life.
    • Variable Annuities are invariably bad.
    • They are basically a mutual fund inside an annuity wrapper.
    • Variable Annuities contain fees on top of fees. They will average approximately 4.7% per year
    • I caution you to use a fee only independent RIA who also is an annuity specialist for guidance. If you have an annuity already have them review it. We do this as a complimentary service.
      1. Discover the pros and cons of your current annuity
      2. Determine the actual fees you are paying
      3. Assess whether or not the guarantees are the highest available and
      4. Decide whether to keep it or get out of your current annuity and exchange for a different type of annuity

    MYTH; YOU GOTTA TAKE HUGE RISKS TO GET BIG REWARDS

    An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Anything not meeting these requirements are speculative.

    -Benjamin Graham, The Intelligent Investor, Last found on September 9, 2015 at https://en.wikipedia.org/wiki/Benjamin_Graham#cite_ref-11

    HAVING YOUR CAKE AND EATING IT TOO

    One of the most important phrases in my life is; “protect the downside”. Richard Branson founder of Virgin, From the book, “Money Master the Game” by Tony Robbins

    Warren Buffett’s top two rules of investing are:
    Rule #1. Don’t lose money.
    Rule #2. Don’t forget rule # one.

    Last found on August 7th 2015 at http://www.ruleoneinvesting.com/blog/warren-buffet-quotes-on-investing-success/


    I DON'T GAMBLE BECAUSE WINNING $100 DOESN'T GIVE ME GREAT PLEASURE. BUT LOSING $100 PISSES ME OFF.

    • Financial freedom or independence is defined as having all your basic needs covered for life plus the ability to add two or three significant luxuries.
    • The investment world will tell you that you must risk your financial freedom to become financially free. This is freighting and not true.
    • It is unwise to take huge risks, especially blind risks. They almost never pay off. Your chances of getting struck by lightning is better.
    • The goal is to win. You can make the game winnable.
    • To guarantee you will win you must play with a stacked deck.
    • By combining proven strategies with products you can have your cake and eat it too.
    • Weigh all the risks. Often time’s people don’t do this. What are the risks we know about?
      1. Tax Risk. This continues to increase. Investment Income is taxed higher than regular income. It is a guaranteed loss.
      2. Fee(s) Risk. Another guaranteed loss.
      3. Market Risk (on average there are three (3) bear markets every ten (10) years. Some are significant like –Black Monday. The dot–com bubble. The 2008 (52%) meltdown.
      4. Return risk. Will it go up?
      5. Inflation risk.
    • How would you like to create a Guaranteed Tax Free income for life with zero market risk? You can do this! This means that no matter what the government does with tax rates you can rest assured that the entire amount you receive is spendable income, with no moving parts or worries about market volatility.
    • I caution you to use a fee only independent RIA who also is a specialist in this for guidance. Ask to see their plan. If they know about this they are doing it themselves.

      • HISTORY OF MAJOR BEAR MARKETS AND TIME TO RECOVERY

      1901-1903

      • The Dow fell 46%
      • Recovered by July 1905.
      • Total time to recovery: two years.

      1906-1907

      • The Dow fell 49%
      • Recovered by September 1916.
      • Total time to recovery: nine years

      1916-1917

      • The Dow fell 40%
      • Recovered by November 1919.
      • Total time to recovery: two years

      1919-1921

      • The Dow fell 47%
      • Recovered by 1924.
      • Total time to recovery: three years

      1929-1932

      • The Dow fell 89%.
      • Recovered by November 1954.
      • Total time to recovery: (22) twenty two years.

      1939-1942

      • The Dow fell 40%.
      • Recovered by January 1945.
      • Total time to recovery: Three years.

      1973-1974

      • The Dow fell 45%.
      • Recovered by December 1982.
      • Total time to recovery eight years.

      2000-2002

      • The Dow fell 36%.
      • Recovered by December 2006
      • Total time to recovery: four years

      2008-2009

      • The Dow fell 52%.
      • Recovered by April 2011.
      • Time to recovery: two years.

      SECRETS OF THE ULTRA WEALTHY THAT YOU CAN USE TOO!

      IF BILLIONAIRES DO IT, MAYBE YOU SHOULD TOO!

      Certain Forms of Life Insurance, are an asset class of its own.

      Upside without the downside. Create a guaranteed lifetime income plan, never take a loss. How because there are financial tools that make this possible. It sounds too good to be true but in reality it's the ultimate in creating a portfolio that truly offers peace of mind.

      It’s viewed as an insider’s secret for the affluent: A legal way to invest ….. all without taxes on the gains. (You don’t have to be wealthy. Anyone can do this.) New York Times, Feb 9 2011

      In 2014 the Guinness Book of World Records announced that a new world record had been established. It was a record that went largely unnoticed. "Mystery Billionaire Buys Record-breaking $201 Million Dollar Life Insurance Policy." CNBC 2014-03-14

      “Mystery Billionaire Buys Record-breaking $201 Million Dollar Life Insurance Policy.” CNBC 2014-03-14

      Why in the world would a billionaire buy life insurance? Won’t his kids be just fine if he passes away prematurely? Or was the media missing the point? Believe it or not the ultra-wealthy do indeed buy astronomical amounts of life insurance, but it’s not the billionaires who buy the most. The biggest buyers are banks and large corporations, from Wal-Mart to banks like: Bank America, Chase, Citibank, and Wells Fargo just to name a few. Wells Fargo’s balance sheet shows 18.7 billion of its Tier 1 capital is life insurance cash value (as of May 27th 2014). Larger banks have double what Wells Fargo has and more. Tier 1 capital is the core measure of a bank’s financial strength. What they want is a place to park their cash in an IRS-sanctioned vehicle that allows them to grow their investments tax free.

      If it’s good enough for billionaires, the world’s largest banks and corporations it is probably good enough for you and me.

      • Only certain types of life insurance are appropriate.
      • The US government copied this type of life insurance to create Roth IRAs & Roth 401K plans. However they also added a lot of restrictions and rules that the life insurance policies they copied do not contain.
      • Certain types of life insurance are a Roth without the rules and restrictions.

      Here are some of the outstanding benefits available to us all:

      • You can legally remove part of or all of your money from the tax system entirely and forever! Never again will you pay tax on growth of your investments or the money you access from this structure.
      • Unlimited deposit amounts (with no income limitations).
      • No tax on the growth of your investment(s).
      • No tax when withdrawn (if structured properly).
      • Any money left over for your heirs’ transfers to them tax free. It cannot be taxed as income (or any other way if structured properly).
      • Create a guaranteed, tax free lifetime income.
      • Achieve upside without downside risk with income insurance.
      • By taking taxes out of the equation you can achieve financial security or independence in half the time it takes in an account that is or will be taxed. …. OR
      • In the alternative double the amount of spendable cash you have if you keep the same investment horizon.
      • Spend all the money in your retirement account twice plus more! When used as a tax free retirement strategy the insured and spouse can actually spend all their retirement funds, the insured dies and the spouse receives two to four times what was in their account originally tax free!
      • I advise you to use a fee only fiduciary advisor who is knowledgeable and skilled in this area of advanced planning. We have access to top tier tax and legal experts who do nothing but this. Again I recommend you make sure of the person guiding you in this by having whoever you use show you their own personal plan. If they know about this they are doing it for themselves.


      WHAT IF - IN ONE FELL SWOOP, IN ONE SINGLE MOVE - YOU COULD SAVE HALF ON YOUR MORTGAGE PAYMENTS AND IT WOULDN'T COST YOU A DIME?

      • Do you want to know the bankers secret?
      • YOUR INTEREST PAYMENTS will tack on 100% or more to the cost of your home on a 30 year mortgage.
      • Cut your mortgage payments in half! The next time you write a check out for your monthly mortgage payment, write out a second check for the principle-only portion of your next months payment. You will have to pay it anyway in a couple of weeks.
      • Do this religiously and you will reduce a 30 year mortgage down to 15 years cutting the cost of your home in half.
      • There are several other mortgage strategies your fiduciary advisor can show you if he or she has expertise in this area.