IRA’s – What you need to know

IRA

Many have heard of an IRA but do they really know what it is or how the different types work?  An IRA is an Individual Retirement Account.  IRA’s are a way for you to save for retirement; something like a savings account but with limits on deposits, tax deferral, and restrictions & penalties on accessing the funds. Also, an IRA is an account and not an investment. The money is in the account and applied to different investments depending upon your choice of investment. Typical investments are stocks, bonds, mutual funds and/or other assets depending upon the type of IRA you opened.

Here is a breakdown of different IRA’s:

  • Traditional IRA – Generally, you pay taxes on the money (what you put in) when you begin your withdrawals; the money you initially put in is therefore tax deferred. The thought process on this is when you begin your withdrawals (currently mandatory at age 70-1/2 but can start as early as age 59-1/2 penalty free) your income will be less so your tax bracket is lower therefore you will owe less in taxes than if you paid them as you earned the money. With the advent of the 401k many people that leave their employer with a 401k then move the money into a Traditional IRA account.

There are annual limits on how much money you can contribute to a Traditional IRA based upon your income and age. As an example, currently in 2016, if you are under age 50 you contribute $5,500 annually. If you currently contribute through an employer plan consult a tax advisor before contributing to your IRA as it many impact your tax deductions allowed.

You can request an early withdrawal from your account however it will be taxed and you will pay a penalty (currently 10%) if it is requested before age 59-1/2.

  •  Roth IRA – With a Roth IRA you pay the taxes on the money going into the account and then your future withdrawals, including earnings, are tax free. However, the account must be open for at least five (5) years and the distributions begin after age 59-1/2. There are allowances for penalty free withdrawals such as for a first time home buyer.  Also, other withdrawals can be made tax-free; however, you might still have to pay a penalty. Always consult a tax advisor before making a withdrawal.
  • SEP IRA – Generally just referred to as a SEP this is a Simplified Employee Pension IRA. The SEP IRA is used by business owners with one or more employee’s, those that are self-employed or have freelance income for a simplified method to save and contribute to the employee’s and their own retirement. A SEP IRA is opened for each individual and contributions are made to the IRA by the employer. The SEP IRA follows the same rules as a Traditional IRA.
  • SIMPLE IRA – This is also for small business owners/employers and provides a simplified method for them to contribute to their and their employee’s retirement. SIMPLE stands for Savings Incentive Match Plan for Employees. This differs from the SEP IRA. Here employees may chose to make salary reduction contributions and the employer then makes matching or non-elective contributions. Each employee has their own SIMPLE IRA set up and contributions are made directly to that account.
  • Self-Directed IRA – This is similar to the Traditional IRA. However, the big difference is that you have control of the investments.  To open a Self-Directed IRA you must contact one of several companies out there that act as the custodian for your account.  You work through the custodian on where you want the money invested.  There are many more options for investing using this type of IRA.  Some options are real estate, tax lien certificates, precious metals and so much more.  However, there are strict rules on the self-directed IRA so be sure to do your research. For example: No loaning of money to yourself, your spouse or any family member in your direct linear family chain.

If you are interested in knowing more about IRA options you can check out information available on Roth Conversions and a Perpetual Pension that I have available for you.  Also, there are two great videos from Frontline and 60 minutes for you to watch.

Why your teachers thought you were stupid – Part 2

This is a two part article that continues from Part 1 published last week.

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  • Interpersonal intelligence: Are you usually liked naturally by most people almost immediately? Have you been told you have “something” or have “charisma”?  That in itself is a form of intelligence and can in fact be one of the highest paid geniuses.  Do people seem to trust you almost right away, without a good reason?  This means you have a magnetic personality and might be a great candidate to sell goods and services that you believe in to others.  Good sales people are not born, they are trained, but if you naturally possess a want to be around people and are genuinely interested in what makes them tick, you might have a leg up in this arena.  Selling can be one of the highest paid, most rewarding careers for the right person.  No matter what you do in life, thank a sales person because nothing in this world happens until something is sold!  I personally have always been blessed with the ability to make friends and maintain those relationships over long period of time.  I made it a point to also study sales techniques and strategies, and combining those two have given me a solid measure of success and income. One caveat with this intelligence: charming people with no true moral compass or sense of right and wrong are sociopaths.  Many a pure sociopath has been super charming and able to bilk people out of money for their own greedy purpose.  Make sure you use your power for good and not evil.  You can make money, help people, and not end up in jail!
  • Intrapersonal intelligence: Are you extremely self aware and have a natural ability to sense things about yourself and others? Can you help others explore and find tune their own inner workings?  Are you particularly spiritual?  Could you help people make big changes in their lives as a coach or mentor of some sort?  There are many people who don’t possess this ability naturally and if you do there is always a big demand for these types of services from those of us who are not gifted in this area.  I enjoy teaching and helping people but don’t believe I have any extra gift in this area.
  • Entrepreneurial intelligence: Do you have the ability to see a need in the marketplace and quickly develop a way to satisfy that need or want?  Do you get excited about the thought of launching your own business enterprise?  Would you like to bring your own (or maybe help others) bring their own goods and services to the market?   Would you like to have equity in your own business venture?  Being an entrepreneur is almost never measured by traditional tests but can be a very high paying and rewarding expertise to possess.  There is a saying that whoever knows “how” can always find a job, the person who knows “why” will almost always be their boss.  I wasn’t naturally born with this form of intelligence but have been able to develop a reasonably good talent for it in my adult years.  Just because you’re not a born natural, doesn’t mean you cannot be a success and even genius at being an Entrepreneur.  It will just require passion and work on your part.
  • Intuitive intelligence: Do you have the ability to forecast and look ahead? Do you have a natural gift to just know what to do and be right most of the time?  Do you have the ability to recognize what problems are within relationships?  Have you always been the peacemaker or go to person when people have troubles? Have you ever heard “blessed are the peacemakers?”  The ability to be intuitive with people’s emotions and know what they really need at their core has tremendous value in the market place.
  • Abstract or conceptual intelligence: This is the kind of brilliance that Einstein had but people didn’t know it for many years! The ability to think and map out things that don’t even exist yet or conceptualize easily what most people can never see in a hundred years.  This would be what is traditionally considered genius but with Einstein (and many other traditional geniuses) their early teachers didn’t see them as geniuses and they struggled with regular class work.  This will be much rarer than the other 9 geniuses but if you possess this kind of ability you could be paid great money to think light years ahead for society.  I can make no claim at all to this kind of intelligence. Can you?

Decide what areas you naturally possess gifts in and play to those strengths and stop working on your total weak areas.  This goes against traditional thinking but traditional thinking gets you traditional results.  If I were to waste my time with intelligence’s I don’t actually possess I can only achieve below average results at best even with much hard work on my part.  What will that actually get me in life? Nothing but frustration!

However, if I work on strengths I more naturally possess I might be able to achieve genius level in one or several areas and let others play to their strengths to help my weakness and vice versa.  Spend time making your natural intelligence’s even better and you will achieve genius level and have a happy and productive life.

Why your teachers thought you were stupid – Part 1

More than test score

When I was in elementary and high school I was a terrible student. I was an average elementary student and beyond a terrible high school student.  There are many factors that contributed to those (mostly me as the only factor that really mattered) results that aren’t important to this discussion.

I recall taking standardized tests that were truly designed to put all of us into a few groups and classifications.  I believe most of this organizing is done with our best interests at heart but some are also done for the ease and convenience of the teachers and staff.  If you’re classified as a dope early on you seem to be put into classes with other dopes.  While this is necessary to keep students in classes with people who are at similar levels in their academics, it is dream crushing to most students in the “dope” classes.  It can also be fools gold for those students in the “smart” classes.

What teachers and administrators never tell you (because they can’t tell you what they don’t know) are that there are at least 10 areas of intelligence and only a couple can be determined by school and standardized tests.  If you’re diligent, a straightforward thinker, listen reasonably well, have a decent memory you should do well in traditional school.  If you aren’t particular good in some or all of those areas you can be made to feel stupid or inadequate.

Howard Gardner of Harvard University said there were 7 areas of intelligence and only a couple of areas were part of traditional education and tracked by schools.  Since that study, 3 more areas of intelligence have been identified by leading researchers in human development.  We will name them in a minute and spend time on each one is subsequent articles.

However, before we get into that it’s important to equip parents, children, and teachers (when possible) to understand that there are many talents children posses or can acquire in many areas that aren’t on the educational systems radar.  Children should be encouraged to do their best in the traditional world of studies but even more importantly they should be assisted in finding their other intelligence’s (we all have more than just one) and time and effort be given to those areas so they might achieve “genius” levels in a couple of the intelligence’s.

As a young boy I was always disappointed that I never achieved extraordinary grades as many of my friends and classmates achieved.  Many achieved these grades with seeming ease and others worked diligently to pull great grades.  I was always the classic C student and often less than a C student.  This meant I spent many years feeling less than my class mates in the intelligence department and many of my teachers were alright with me understanding my place (or their place for me) in the world.

I remember being 13 years old and taking a standardized test and at the end the test suggested 3 areas that I would be suited to pursue and I recall not being thrilled with any of the 3 as all were relatively low paying and none were anything near prestigious.  This was disappointing and at such a young age it could have shot my confidence straight to hell.

Keep this in mind; always remember the success of the person telling you that you probably won’t amount to much and not to get your hopes up.  That person will always be low on the success scale themselves.  How do I know that?  It’s simple, people who are positive about themselves and others would never presume to tell someone that they don’t measure up and to prepare for a future of struggle and being unfulfilled.  Only unsuccessful people would think they have the market cornered on possibilities and attempt to put clamps on your future and ability.

Successful teachers and school administrators (not necessarily financially successful because those jobs are only going to pay so much, but rather successful with thriving students and adoring parents) who are great at what they do will certainly discuss the academic results with their students but always in an uplifting possibility driven conversation.

If people in a non teaching capacity are telling you how to be successful always be careful if you accept their advice. Are they successful in their own right?  Should you be taking advice from them at all or in any capacity?  Were they at one time successful but not as much now?  What could you learn from their mistakes?  Always decide the source of the feedback you’ve been given to see if it has any legitimacy.

Here are 5 of the 10 areas of knowledge and potential genius: (I will give you my assessment of my own ability in these areas and I hope you will do the same for yourself)

  • Math skills (ease with numbers in engineering, problem solving, or with money math including percentages and pro formas and other projections and planning). In my own case I failed many traditional math classes but yet now am considered an expert in money math and financial strategies. Most teachers told me to stay away from any kind of math. This would have been a multi-million dollar mistake for me, how about for you?  My results changed with numbers once I found areas that excited my mind and I could then see how these numbers talents could help me down my own path of life.
  • Verbal skills: This must be broken down into two categories:
  1. Traditional ability to spell, dissect, place, and copyright the written language
  2. The ability to speak and present the written word but in verbal form for presentations. You might be lousy with the written word but very talented at speaking and presenting.  I am above average with the written word and very good at presenting from a platform and training and selling. You? In school you get a huge dose of topic A and almost none of topic B which is a shame because B pays much better.
  • Physical: The ability to be fleet of foot, coordinated, strong, and work diligently at your physicality. While it is true we are all born with certain physical gifts (or not born) those gifts can be made infinitely stronger with diligent practice. I was born coordinated and a decent athlete but never worked on any area diligently enough to go above a moderate level  of success beyond what I was born with at the beginning
  • Musical: The ability to sing, dance, arrange music, write music, or even produce music for others is an area given little attention in traditional education.  Many are born with a natural gift for all or some of the above and other learn how to be experts with many hours of instruction and practice.  I love all kinds of music but don’t know the first thing on how to create it or produce a show of music and or dance. How about you?
  • Vision and space: Do you have a natural talent to look at a space and envision what that space could be either on a small or large scale? To know how things fit into certain spaces?  Can you just look at a space or a piece of land and get a great vision of what its highest and best use could be and how to make it happen?  People will pay big money for people who are talented at this and very few have this gift.  I myself am a total incompetent at this and always hire people who have this gift to give me the physical vision of a certain space.

 

Tune into the next article when we cover the other 5 categories of potential genius and how to develop each area in which you have a gift.

Myths of Whole Life Insurance

Every time I hear someone say what a lousy place whole life insurance is to put money I always ask them to tell me why they think so……and I get the sound of silence.  They heard it from somewhere but don’t really know why they believe this myth. They believe whole life too expensive. Or it takes forever to build cash they can use.  Also, I am frequently asked about buying term and investing the difference in mutual funds instead.
Find out how much Bank of America and Wells Fargo, to name just two big businesses, think of the myths above.  You might be interested in this post I did on where money puts money as well.
After watching the quick video below, ask yourself, “Why haven’t I set this up for myself yet?” Think your too old? Nonsense! Think you can’t own a policy because your not insurance? Rubbish!
Enjoy the video and then reach out to us so we can help you put in place one of the most powerful accounts available to you to grow and protect wealth!

The Secret IRA

Self-Directed IRA’s are, unfortunately, a well kept secret… Well, this is one secret I won’t keep!

Do you know what at Self-Directed IRA is?  What it can own?  How it is different from a Traditional IRA?  I share with you some information on the Self-Directed IRA in this short video.

 

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Why lose a dime in the stock market again?

Did you know it’s not preordained that you must lose money in the stock market?  If you use the strategies of indexing and resetting you can grow your money without the risk of stock market losses. Enjoy this quick video explaining these two powerful yet little used strategies and let us know if we can help further.

Video – How to Avoid the Next Stock Market Crash

The Power of a Money Reset

This is a true story from a new client that describes almost everyone reading this today.

“John, I just got back to even this year on my retirement account after being down for about 8 years.”

Does this sound familiar?

I asked this client if he had ever heard about a reset and he said “no”.  If he understood a reset he would have never been in the tough situation of waiting for money to rebound to long forgotten high values.

You see, when your money has the power of a “reset” every year it is a game changer for the future value of your money.Reset buttonEx:  You place money in a program that allows you to track an index instead of actually owing the underlying security.  Let’s say for the sake of example that the index you follow is at the level of 100 on the day your money starts tracking that index.

Let’s also assume that one year later that index is now 80 instead of 100.  This is a 20% loss that because of the way you have your money structured you did not participate in any loss whatsoever.  Your cash didn’t lose any market value even though that index you track is down 20%!  This is powerful in and of itself but it gets even better.

Now let’s say from the first day of your second year until the last day of that same year the index that went down to 80 rebounds that year to 90.  If this was a share of a mutual fund or a stock you would still be underwater 10%.  However, since you took advantage of tracking the index your cash went up the second year because your base for determining an index’s gain or loss “reset” back to the 80 level which it was at the end of the first year.

So, in year two, instead of being still underwater on your investment your cash grew by a percentage of the index gain from 80 to 90!  Would this have changed my new client’s end results?  The results would have been very different over that 8 year period by utilizing the power of indexing with the power of a reset.

Do you have money in the market right now you are hoping will grow over time providing you with a great retirement nest egg?  If you knew your money could never go backwards, would grow any year the index was higher than where it started from by using the power of a “reset” why would you still take on all the risk of the market?  There is no need to lose large amounts of money needlessly.

You can be in the market with a chance at real growth but never the downside risk.  Your money can also be guaranteed to provide you with lifetime income no matter how long you live.  Another benefit is you can use your IRA money or new money for this kind of program.