Financial TO DO’s at 30, 40, 50

There are really only a few “To Do’s” and

Insiders tell "Why you DON’T get what you pay for"

Click inset for market returns

By age 30:

1. Pick your goals and form a financial strategy in 15 minutes. Our Simple, Easy and Wise Financial Guide is FREE. Set up automatic investing. Your first choice: tax-advantaged retirement plan at work. Second choice: create your own Wealth Reserve--$5.57 a day can become a $1 million using "assets that grow by themselves." [See Inset] Patience is all that’s required. Get The Insider’s Guide to Making Your Financial Future FREE below.

2. Protect your family and assets using our Insider’s Guides so you buy where financial insiders do. You can self-insure some of your risks like companies do. For instance, once your Wealth Reserve is started, you can raise the deductibles on your auto and home insurance. You can eliminate other insurance premium payments for non-catastrophic coverage. Instead of the insurer earning 10% on your reserves, you do. See our Insider's Guide to 'Living' Insurance below.

3. Plan your spending wisely. This is the time to establish the habit of spending less than you receive. All financially-independent people mentioned that trait as the one that helped them the most. Use your own Self-Funded 'bank' instead of credit cards. See our Insider's Guide to a Spending Plan below.

By age 40:

1. Refine your goals and update your financial strategy. If you have not been investing 10% of your income, catch up by investing 15% now. Cutting a few non-essentials now could mean having a Wealth Reserve of $1,000,000 or more to accomplish all your goals. Create your Wealth Reserve with the Guide below.

Forty-eight percent of employees rank "outliving their savings" as the greatest retirement fear, according to MetLife's Employee Benefits Trend Study. Almost as many (43%) are concerned that during their own retirement they will need to provide for the long-term care needs of others, such as a spouse or relative. Consequently, nearly half (48%) of workers believe they will have to take on full- or part-time jobs to maintain financial stability during retirement.

The Towers Perrin Retirement Study: Redefining Retirement in the 21st Century shows that most Americans don't expect -- and many don't even want -- lives of leisure in their later years.

2. Establish a business to do what you do well, but for your own benefit. Many financially independent people are self-employed. Business owners’ net worths average $245,000. The tax system rewards business activity. In the years 1996 through 2000, 61% of corporations did not pay taxes. USNews 5/17/4 Legal tax-shelters allow US firms to lease foreign (Dortmund, Germany) city sewers back to their city owners to eliminate US taxes. Wachovia (First Union) Bank alone avoided $3B in taxes that way. PBS 2/19/4.

GE got $136 million from tax-payers for using their own technology in 2004. Abcnews 2/8/5. You are three times more likely to be audited as an individual payer than as a business. The IRS found massive fraud at Enron in 1993 but officials let it continue, according to David Johnston, Perfectly Legal, p. 174. Business owners and executives enjoy several levels of benefits from their activities, including favorable tax-deferred compensation, wealth accumulation, and personal living accommodation in terms of low-cost loans, vehicles, planes, apartments, and entertainment. See how it’s done in Forbes 6/21/4 p.140. Also your firm can have US federal grants pay for security: cameras, fencing, and communications equipment. cbsnews 5/25/4.

The tax system allows higher income people to pay less as a percent of their income in income tax now than those of moderate means. Congress instituted the AMT thirty years ago to insist that the wealthy pay some income tax. However, Congress has not adjusted the AMT for inflation. Now the AMT does the reverse. You can only use business deductions to reduce taxes. According to the Congressional Budget Office, Report 4, APRIL 15, 2004,

"Taxpayers with AGI between $100,000 and $500,000 will be hit hardest by the AMT: in 2010, over 90 percent of them will have AMT liability. Much of their income is taxed at 25 percent or less under the regular tax, compared with the 26 percent and 28 percent rates for the AMT."

By age 50:

1. We are living longer. This requires more money to live on during the retirement years. Living to age 100, as many will, requires financial planning that most us have never had to do. Most professionals agree that a larger portion of assets with a growth rate above inflation will be needed to sustain us for 30 or 40 years. According to a Congressional Budget Office Report, MARCH 18, 2004,

"…roughly half of boomer households are on track to accumulate enough wealth to maintain their current standard of living if the heads of those households retire when they now plan to. At the other end of the spectrum, perhaps a quarter of the households--many of them low-income households with low-skilled workers--have accumulated very few assets thus far and are likely to find themselves largely dependent on government benefits in retirement. [Others] may face significant shortfalls: if they earn relatively low returns on their savings, retire before age 62, and never choose to draw on their housing equity, they may experience a significant decline in consumption during retirement.

As a result, households can make up for earlier shortfalls in retirement savings with surprisingly modest changes in behavior."

2. Most of us can make those “modest change in behavior” and use our extra time wisely. At 50 years of age, most people know what they want and can save and invest to obtain their goals. The financial planning retirement target age of 65 is a mistake. This is now the prime age of competency and effectiveness. It is still not too late to accumulate a Wealth Reserve to make sure you never run out of an income for medical care. See how your Reserve can grow with The Insider's Guide to Your Wealth Reserve below.

Entrepreneurship may become the vehicle for your new career in areas of service or invention. The cost of health care has risen to the level that may require most people to have some connection to a business just to maintain a reasonable level of health care coverage. For financial planning purposes, establishing an organization to carryout or maintain your activities may be the best move.

3. Most people want to help others. If you want to go beyond writing a check to charity once a year, a foundation that can support your activities is not as expensive as it used to be. Mutual fund companies will do all the paperwork for you, allowing you to make a contribution now, and then spread the giving over the coming years, allowing the money to grow in the interim. All the future growth or income earned on your contribution is tax-FREE. Your gifts are tax-deductible. If you have bigger plans, a nonprofit corporation can provide you with the full array of support services. See our Insider's Guide to Retirement Spending below.

By age 60:

1. Relive your college years. You can now go back to college and live the care-free life again. Study what you really want to. Go on that dig to South America or Africa. Or start a co-op. Live with others on a farm the way you wanted to when you were 25. Or, tour America with your favorite band or drive to every national park while they are still open. See our Insider’s Guide to Long-term Care Insurance for options.

2. Redefine your goals and update your financial strategy. You may live to be 100. That is 40 more years. Maintain stocks in your portfolio to fight inflation. According to many experts, you can withdraw about 4% of your portfolio and keep it producing income to age 100. See our Insider's Guide to Retirement Spending below.

Grow Your Wealth Reserve

Using the model of how businesses protect themselves, the Wealth Reserve is a self-insurance fund that grows from the money you save on all the financial services you buy using our Insider’s Guides. You can save up to $3,000 a year, control your financial services costs and provide protection from many kinds of risks. This method of protection is now possible because of recent changes in the financial services industry and the example of those who have become financially independent. People like you have learned to be self-sufficient--accumulating wealth and not having to worry about money. See inset above.

Our Insiders tell "Why you DON’T get what you pay for"

The industry hype claims “you get what you pay for” to justify high commissions and fees. This is MYTH.

Investigations by the New York Attorney General into illegal and improper trading by mutual funds and brokers and bankers indicates that even if we hire the most successful person at a respectable firm, we are not necessarily getting what we paid for. It is no surprise that studies show we are paying higher fees now even as our fund managers give us less total return than the low-cost indexes give, 88% of the time. Fund managers should be paid only when they do their jobs--beat their respective indexes, according to bond guru Bill Gross. However, Bill and his colleagues pay themselves over $400,000 on average, even if they don’t provide us with returns greater than a passive index would.

Even index funds, which don’t require a manager to pick securities, don’t always give us what we pay for. Some index funds, usually offered by banks, insurers and brokerage firms, charge fees above 1.2%. This is pure greed. Other firms charge less than 0.20% for the same fund. An index fund can only match the index. Low-cost index funds can save us $100,000 or more over time. Our federal lawmakers and staff have the best deal. Their index funds (the Thrift Savings Plan) charge just 0.07%. Plus, they mandate that those responsible for running the funds be disinterested leaders in their fields.

If you own a managed fund, you probably selected it for superior returns. For most funds, there was a period, especially early in its formation, when it had good returns. Once the numbers are posted, most managers move on to more profitable pastures. Star managers average only 3 years in a job. Only a few funds maintain superior returns for extended periods. From many studies it has been shown that the best funds in one year are the worst in the next. Plus, managers cannot predict the future. Their past strategies may not work in the future. Technology changes things so quickly now that managers can’t move fast enough.

If you purchased funds through your agent or broker or banker, remember that these products were chosen to benefit the seller, not you. Your financial situation is unique and you expect your advisor to give you the best funds for your situation. You are paying extra for the advice of these salespeople. However, they may not be able to sell you the best fund for your situation. You are paying extra for the soft dollar benefits, promotions, fine literature and sales contests that mutual funds give to the seller. You are paying extra so the funds can buy and sell securities through your bank or broker. You may be paying extra for the fund’s revenue sharing and marketing agreements. You may be paying extra so the fund family can create new funds of no value to you. Are you really getting what you paid for?

We work in the industry. We can assure you that the products offered are NOT the best available in the market place. The financial services industry is big business. Brokers don’t make money the “old fashioned way.” As more dollars are attracted, the costs of running the business have actually gone down, but the FEES have gone up. As your mutual fund becomes bigger, it becomes harder for the manager to find great securities to beat the market averages. You will notice that most managers sell every stock they own at least once a year. How can they hope to give you superior returns from their superior stock-picking if they don’t hold them long enough to benefit? Is the market a lottery or a casino?

Prudent investors make money by owning businesses (private or public) that grow over TIME.

If you are like the average investor, you don’t get the market-beating returns you pay a manager for. According to DALBAR.com, a respected research firm, the average stock investor earned a paltry 2.57% annually in the last 19 years. Compared with the inflation rate of 3.14%, you might have actually lost money. Your index fund earned over 12%. The average ‘player’ in the market will lose and the house will win BIG. As bond guru Bill Gross said, “professional money management is a gigantic rip-off.” It is better to own the whole market.

For instance, New Hampshire securities regulators have accused the personal finance advisory unit of American Express of defrauding investors by giving incentives to its advisers to push select mutual funds over other funds with better performance. American Express paid $7.4 million in July and must pay an outside consultant to review recommendations. Fees will have to be raised.

If these investors had unbiased advice, they would have purchased the whole market--like Vanguard’s Total Market index. They would have earned about 12% annually. An index fund owns a little bit of every business. Beating Wall Street “experts” is Financial Fun for you. If you had invested just $5.56 a day since 1980, your Wealth Reserve would have been over $350,000 by the end of 2005, compared with about $62,000 for the average ‘player.’ See for yourself--page 12 of the FREE Insider’s Guide to Making Your Financial Future is inset above. Average investors do NOT get what they pay for.

Or take life insurance. Let’s say you bought MetLife insurance because you believe the agent and company are the best. They are large and can last at least until you need them to pay the benefit. However, is it worth paying an extra $11,980 on your level term policy? There are customer-friendly carriers, rated the same as MetLife (A+), charging $384 vs. MetLife’s $983 for the same $300,000 30-year term policy. Moving $599 to your self-insurance Wealth Reserve for 20 years in a market index (average 12% annual return) can provide an extra $50,000 for YOUR dream not theirs. Do you get what you pay for? It is the same $300,000 benefit check.

Let’s try auto insurance. If you purchased your auto insurance through MetLife because you thought they would be there for you when you needed them, think again. On December 10, 2003, Proformance Insurance, in New Jersey said it would acquire business written in the state by MetLife Auto & Home. Proformance is rated ‘B’ by AM Best (Fair) NAIC # 10100. It is very small with less than 50 million in financial strength. Did you get what you paid for?

All your accounts are being bought and sold without your agreement or even knowledge. Companies are consolidating accounts/policies they think will make them the most profit. Your account may be in a business they do not want anymore. You do not get what you paid for. Members complain that their bank has been sold three times in three years. Their policy with Prudential auto went to Palisades, Household went to HSBC [Hong Kong], Sage Life went to Old Mutual [S. Africa], MONY to AXA [France], Kemper to Arch, Prudential brokerage to Wachovia, Keyport Life to Sun Life [Canada], John Hancock to Manulife [Canada], American Skandia to Prudential, Fireman’s Fund to Allianz [Germany], Royal & Sun Alliance to Friends Ivory & Sime plc [United Kingdom] See button "Who Owns Your Accont Now?" Our FREE email Alert, "FinancialRx", will warn you about your accounts. Send your email address to FinancialRx@yahoo.com.

If you purchased long-term care in the last few years because you wanted to “lock-in” the lower rates for your age, you are finding out now that you don’t “get what you pay for.” In 2003, 7 of 10 providers raised the premiums on existing policies—some by over 50%. Companies like C.N.A. raised the price by 15%, then 40% in 2004. According to the CBO, this has lead “many policyholders to cancel their coverage and in all likelihood deterring some potential purchasers from acquiring LTC coverage.” Others like John Hancock have been taken over by foreign conglomerates. Some, like Safeco have left the business altogether. GE has spun off its insurance business. Consumer Reports found that most states are giving insurers the whole rate increase requested. Adverse selection may eventually dry up reserves for claimants needing care later. See our Insider's Guide to Long-term Care Insurance.

We all need to be prepared for health care cost increases. However, it is hard to prepare when the information provided by the industry or even the government is biased by their own political agenda. For instance, in 2004, the Centers for Medicare & Medicaid Services actively sought to keep the true cost of the new Medicare law hidden from Congress while it was debated. According to an investigation within the U.S. Department of Health and Human Services, the Bush administration broke no laws in doing so. Independents must assume no source is factual. You don’t get what you think you get, even from the President’s men.

In the annuity market, you might have questioned why the ‘best product’ offered by your agent, banker or broker just LAST year has been replaced by even 'better' ones. Did you get what you paid for? The fixed rate of return or the indexed rate that looked attractive when you purchased the annuity years ago was followed by disappointing years. You may be locked in for 10 years. Did you get what you paid for? The guarantee of never loosing your principal is costing you 2-3% a year. You keep hearing about a better contract every time you talk to your advisor. You only need to pay 2% to switch. The new guaranteed variable annuities require you to keep them for 20 years to get the benefits. And why is the solid company that your broker sold last year not the same one this year? Why did the contract issuer sell your policy to another insurance company you never heard of? There are less expensive alternatives. See our Insider's Guide to Annuities.

Your retirement money: New York Attorney General Eliot Spitzer's probe into whether insurance companies paid retirement plans to offer their investments is expected to lead to lawsuits and settlements. Insiders said that insurers secretly paid brokers to recommend their annuities to pension plans. Pensions are already tax-deferred and don't need annuity tax-deferral.

Even business insurance customers with premium clout may not be getting what they pay for. Commercial insurers and brokers are being investigated for extra fees for business volume. According to one regulator, "the broker is presumed to work on behalf of the customer and the bonuses or commissions for volume sales, especially, can be a conflict in that they may cause the broker to divert business to an insurance company that may not provide the best deal for the insurance customer." NYTimes, 4/24/4.

You don’t get what you pay for in financial services because you are not the focus of the financial game any more. BE ON GUARD. Protect your assets. Be stingy with your financial relationships. Pick the companies that are customer-focused not market-focused. We think you get what you pay for only if you know what you are buying. We help you get to know the companies that have made YOU the focus of their business--not the marketplace. Keep the commission or fee yourself. Cut out the middleman. Buy DIRECT from the manufacturers. Make sure you get what you pay for. Over time, it can save you $300,000 or more.

See INFORMATION ABOUT US for more about our Insiders.

*Accumulation over 15 years averaged 12%. The information contained in these Web pages is designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that this Web presentation is informational in nature. We recommend that you request, obtain and review online offers from vendors before making any monetary commitment.


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