The largest block of retirement savings in America is in ERISA qualified defined benefit and defined contribution plans: totally tax deductible. But as a consequence of using an ERISA plan comes the loss of recoverable basis. All ERISA qualified plan income is taxed at ordinary income rates and is included in the provisional income test for Social Security benefit taxation. Taxes are the number one expense in retirement and can erode the cash flow necessary to meet essential retirement spending as well as restrict discretionary spending, i.e. no fun money  To combat the present 20 trillion dollar debt and 60 trillion in future obligations, taxes must go up and that’s not factoring in any budgetary spending increases. It is inevitable that Millennial retirees will pay a significant portion of their retirement plan dollars and Social Security benefits to taxes, perhaps up to 40%!  None of this includes the true cost of living that could impact the purchasing power of your retirement dollar. The qualified plan trap will ensnare many unsuspecting seniors fifty years from now. Many Millennials are convinced there must be a better way. And they’re right.  There are some little-known tax favored funding vehicles that you can take   Read more…

The Millennial generation sometimes appears conflicted. They voted for Obama but would rather pay the penalty and not participate in Obamacare. Many Millennials love the socialism of Bernie Sanders but are as materialistic as their Baby Boomer parents. The Millennial generation believes in pro-government programs, but they also believe they will receive little to nothing from Social Security. The Millennial generation is just now discovering that they are going to be saddled with the 20 trillion dollar burden their parents racked up over the last generation and are coming to the conclusion that they are going into retirement all on their own. In the 2015 LIMRA Secure Retirement Institute Study, 70% of Millennials don’t know what funding vehicle to use for retirement. Most just follow the same retirement methods of their Baby Boomer parents. 40% of Millennials save only 10% of their income. And that’s not necessarily targeted for retirement. Keep in mind with Millennial tuition debt exceeding one trillion, most can’t secure a mortgage with that kind of debt, much less think about a retirement plan 30 to 40 years from now. And that’s because they’re living in the now and the present presents its own monetary problems. The   Read more…

Most retirement plans have not incorporated the longevity risk. Mortality risk is a risk multiplier that acerbates other retirement risks. Without mitigating mortality risk, many middle class retirees could exhaust their 401(k)s and be left with Social Security and a little equity in their homes. The possibility is based on the sequence of returns, the math principle of withdrawing from your retirement plan in down markets. The sequence of returns during that period of the Great Recession left some retirees reeling with cash shortages and a future some are still recovering from. Living longer may affect the quality of life because medical bills and long term care costs will absorb discretionary dollars. 70% of seniors today use some long-term care assistance. Living longer will only compound the problem and the expense. If the baby boomer generation gets tight with their money, it could cause a rippling affect on the economy as spending grinds to a halt. Inflation is a real and ever present danger to seniors. It doesn’t matter what the declared rate of the CPI is or any other inflation indicator, if it doesn’t include the commodities of life; it’s a worthless gauge. The purchasing power of your retirement   Read more…

Gen X may only receive 75% of its stated benefits. The Millennials … it may be zero! Even if Congress raises the FICA contributions and eliminates the cap, the future retirement of those under age 40 is in jeopardy. And that’s just the Social Security program – that doesn’t include the mess Medicare is in. Guaranteed defined contribution plans are almost exclusively for government employees and military personnel funded by taxpayers who are left to fend for themselves with market risk defined contribution plans. Even with an employee match, it won’t be enough to retire on at age 75, which could eventually become the new benchmark for Millennial retirement. So the generation that lived with their parents will be very much on their own in retirement. But there’s an alternative, a radical departure from the traditional approach to retirement. A revolutionary retirement model that can combine five tax advantaged products, programs and strategies for a tax-free retirement future (providing Congress doesn’t alter the current legislative landscape.) Presently, the country’s debt, guaranteed social safety net costs and government retirement obligations are over $120 trillion, so higher taxes in retirement are already a foregone conclusion. Taxation is the enemy for present day   Read more…

“Sanctuary, sanctuary,” cried Quasimodo, the hunchback of Notre Dame as he ran into the church with the convicted woman Esmeralda to escape the lynch mop who had tried her and found her guilty. Back in the day the sanctity of the church was a safe harbor for those fleeing the law.  Today many of America’s affluent, upper middle class and even seniors in retirement are fleeing taxes. What tax shelters remain can help you keep more of your money. Here are the most popular for retirement. Health Savings Accounts: Contributing to a qualified health savings account is tax deductible, accumulates tax deferred and is distributed tax-free for medical expenses and medical insurance premiums for coverage like disability, health, Medicare and long term care. The annual contribution limits for 2017 are $3,400 for individuals, $6,750 for married couples and $7,750 for married couples over age 55. There is also a once in a lifetime transfer from an IRA or Roth IRA to an HSA tax free up to $7,750 for married couples over age 55 in a non-contribution year. Roth IRAs: These accumulate tax deferred with tax-free distributions after age 59½. Under the five-year rule you could access part of your   Read more…

At Harbor Private Equity, your challenge is our goal. We understand that raw land developers may have a difficult time getting approved for traditional financing on new raw land. Most banks and conventional lenders want collateral in case the borrower walks. We understand the unique situation that you are in and want to help you get approved so you can break ground on your new land. Call Harbor Private Equity today at 404-965-3625 to start your application for your South Carolina raw land hard money loan. Almost any construction and development of property or expansion starts with the acquisition of new raw land. The problem many borrowers face is that they can not get approved using traditional financing venues. Fortunately, at Harbor Private Equity, we understand the specific circumstance that you are in and want to help you get the capital you need to break ground on your new construction. We have over 75 years of experience in the commercial hard money raw land marketplace, making us the trusted choice for your financing needs. We have competitive rates on hard money loans, which do typically come with higher interest rates than conventional financing. However, hard money loans are great for   Read more…

Throughout your retirement Uncle Sam will demand his share of your hard-earned savings. Often this includes taxing your Social Security benefits. The whole marginal progressive tax system is correlated to take Sam’s cut right off the top. Many seniors have plans to take up hobbies, sports and volunteer activity to enjoy the time they’ll have in retirement. But every senior should take up a little course on taxes and learn how to game the system. Surprisingly, retirees are shocked to learn that the government is their retirement partner and it wants its share. Over your retirement years, the accumulated taxes paid throughout retirement will be the biggest expense in your golden years. It can be disheartening to discover that state and federal taxes can deplete your assets faster than any other risk in retirement. So taxes in your senior years can turn your retirement dreams into a nightmare. The first thing you need to understand is the effective tax bracket or blended tax rate that you pay. Second, you need to take inventory of all your income resources and categorize them by their tax status, i.e. taxable, tax deferred and tax-free. You may be able to construct a strategy that   Read more…

In February 2012 The Department of Labor published guidelines for ERISA retirement plan to disclose expenses and fees under 408(b)(2). This was an eye opener for everyone involved in the sale of mutual funds and ETFs in qualified plans. But most advisers were not awake at the wheel when the regulation went operational. It was curious to me to discover qualified plan administration and custodial care charging on average were around 25 to 29 basis points depending upon the assets under management. That seemed reasonable to me. But the biggest revelation came from the disclosures of the cost of funds themselves. For most security licensed representatives and RIAs, the fund’s prospectus was the only discussion point for internal expense loads addressed with a potential buyer. The average fund expense load cited in the prospectus is generally around 90 basis points and most RIAs were charging an additional 100 basis point. Resulting in a traditional talking point that funds and management cost to consumer are little less than 2%. But then an economic epiphany occurred when some (not all) qualified plan administrators included the transaction costs listed in the fund’s statement of additional information. For whatever reason the document is not   Read more…

You can start investing for retirement when you earn income for the first time. That’s when you can begin contributing to an individual retirement account (IRA). You can participate in retirement plans that your employers offer. If you work for yourself or own a small business, you can establish your own retirement plan. In fact, ideally, you’ll take advantage of several of these ways to accumulate retirement savings during your working life. These dedicated assets, in combination with your taxable investment accounts, Social Security, and an employer pension if you have one, are the foundation of a financially secure future. In 1900, retirement wasn’t a hot topic. Employers didn’t offer pensions, there was no Social Security, and the average life expectancy was 50. More than a century later, everything’s changed. More than 44 million people collect retirement benefits, and that number is expected to reach 72 million by 2030. And people are living much longer: Current estimates suggest that a million or more people now in their 40s can expect to live to be 100 or more. The truth is that retirement age is relative, not fixed. Some government workers retire after 20 years of service— sometimes as soon as   Read more…

To generate a tax-free income stream from cash value life insurance a few major caveats need to be in place. First any cash value policy needs to be designed as a non-modified endowment contract compliant with the TAMRA regulations or Cash Value Accumulation Test. Secondly, the policy must remain in force for the life of the policy insured. There are four cash value life insurance policies. Each policy has a different crediting method and needs to be qualified for the policy owner for product suitability. So every prospective purchaser needs to undergo a risk tolerance test to discover which policy fits his or her profile and financial goals. Participating Whole Life is an interest rate crediting method. Each year the board of directors declares a dividend, a return of unused premium. Guarantees are published in the illustration proposals. These types of polices are for conservative investors with long time horizons. Universal Life is an interest rate crediting method which has been consistently low for a decade.  As a result it has fallen out of favor among financial professionals for its low crediting rate. These type of polices are for conservative investors with long time horizons. Indexed Universal Life is an   Read more…