FINANCIAL: Get a big mortgage BEFORE you retire

Saturday, March 25, 2017
AN EMAIL TO A FRIEND
 
 
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Please permit me to “pontificate” since I feel strongly about this bit of “whizdom”.
 
The desire to pay off the mortgage before retiring is based (imho) on a false paradigm and a obsolete meme.
 
The false paradigm (perception of reality) is that it’s “safe” not to have a payment in retirement when your earnings are reduced. While it’s not “safe” to have any “bad” debt ever (i.e., Macy’s at 21%; etc.), a mortgage is “good debt” (i.e., your living in an asset that will probably appreciate). Isn’t it safer to have a big chunk of cash, “safely” invested, that you can use when needed?
 
The obsolete meme (framework of thinking) is based on the pre-1940-ish mortgage where the bank could demand payment in full of the whole mortgage at anytime. That’s why depression era folks lost their homes or farms to foreclosure. After the New Deal (I believe) mortgages were not subject to the bank’s demand, so you can never lose the house due to foreclosure — as long as you make the payments.
 
The argument FOR a big long mortgage going into retirement is that you will have the cash, the house, and a very low tax deductible interest rate (i.e., 4%).
 
The argument for doing it BEFORE you retire is that you CAN NOT do it after you retire. So if you were to need money, then you’ll have to sell the house to get the cash or take a Home Equity Loan at a higher and variable interest rate.
 
I invite you to talk to my “finance guy” to get the scoop. He loves to chat with all my friends and relatives who are all broke and don’t have two nickels to rub together. Laugh! The Edelman Group’s philosophy is they to help everyone get rich.
 
Now I don’t have to rant next time I see you. 
 
Laugh!

 
 
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FINANCIAL: What is the defined-benefit pension plan alternative?

Friday, March 17, 2017

FROM THE WALL STREET JOURNAL “The 10-Point”

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Jerome Schmid of South Carolina commented: “Sad to see defined-benefit plans slip away into history. But employers no longer care about employee welfare (despite volumes of acclamations in various mission statements), as once-paternalistic corporations have been reduced to financial schemes, manipulated like exotic derivative securities. It is probably a very good idea to turn over the plans to insurance companies who are staffed with people who are (thought to be) competent risk managers, and who are far more likely be around 10 years from now.”

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Well, I’m no Ric Edelman, but here’s my suggestion.

Remember the history of defined-benefit plans and take action accordingly.

Remember “benefits” — that is employer supplied and paid for “entitlements” — is a vestige of the World War II wage and price controls. Prior to that, the employer just paid you what you had earned. What you did with it was up to you. To get around the WW2 wage and price control, employers offered “benefits” which were found to not be wages — probably due to Crony Capitalist bribing the politicians. Of course, as an expense to the company they were tax deductible. Unfortunately, if the employee bought the very same “benefits”, then they paid with “after tax dollars”. (That’s how the whole “pre existing conditions” and “health insurance tied to the job” disaster got started! Thanks to the Gooferment.)

So, the defined-benefit pension plan is a fiction. Some companies like AT&T were rigorous in their financial planning for it. To the extent of setting up a completely separate corporate entity, with its own Board of Directors, to manage the funds. (And, to insist that all liabilities be 100% funded.) Other, like Enron forced their pension and 401k plans to hold only Enron stock in the plans. (We all know how that worked out.) Also, look at Dallas where the city my have to file for bankruptcy because of the unfunded liabilitiesOther horror stories exist. Like CalPers underfunded by many trillions of dollars. Like some Union pension funds underfunded by 75%. And other pension making risky investments, like Puerto Rican junk bonds, to try and catch up.

My suggestion?

Easy. Take responsibility for yourself and your own future. The Gooferment is NOT your friend. Your employer is NOT your friend. Your insurance agent, your broker, and your banker are NOT your friends. So you have to treat them and their promises like a used car salesman’s as you driving off the lot. (At least, the salesman is “honestly” lying to you.)

You have to hire a “team” — lawyer, accountant, and registered financial advisor — that you WILL pay for out of your own pocket — to help you. Then, you figure out how much you will need in retirement to NOT be eating dog food and choosing between medicine or heat. How much you “discount” the promises of Social Security, Pensions, and Retirement savings is an important calculation. And, finally, you build your own “defined-benefit pension plan” with a well diversified investment portfolio that you save into. 

Hard, not really. Essential, absolutely.

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This is entertainment; not investment advice. Call Ric for help. 1-800-call-ric anytime.

Remember the sources of my education! I’m just a fat old white guy retired injineer who’d now a poor old senior citizen on a fixed income with:
* Law “degree” from watching Judge Judy;
* Medical “degree” from watching Doctor Phil;
* Building “degree” from watching “Holmes on Homes”;
* Investing “degree” from reading about Bernie Made-off;
* Finance “degree”from listening to Ric Edelman;
* sensitively managing Human Resources from watching Chef Ramsey; and
* creating loving / caring human relationships from studying the movie roles of Gunny Ronald Lee Ermey

http://www.recedelman.com

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FINANCIAL: LC$

Wednesday, March 15, 2017

A menagerie of fallacies
http://www.rationaloptimist.com/blog/statistical-fallacies/

 — via my feedly newsfeed

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Pretty funny stuff.
 
I have seen a lot of “hippos” in my career and completely agree about the coin flip risk — although in my case it’d be 10k$ to 10k$+100 before I’d puke. (I wouldn’t take such a risk unless it was for “life changing money” aka LC$). Hence my play of the lotto when it’s over 400M$. Then, I wouldn’t mind the 50% tax bite.
 
Less than that, shrug! It’s not LC$. Remember 85% of winners of more than 1M$ go bankrupt in 3 years.
 
1M$ at 5% is 50k$ per year forever.
 
Hmmm, maybe I need to lower my definition of LC$? I think I’ll move the selctor dial down to 8M$ — half for taxes, and that 200k$ per year. Have to check with Dan the Finance Man, but that would make different life.
 
Maybe I could afford another additional gal pal, better car, or even a plane.
 
Yup, that’s how folks go broke. Laugh!
 
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FINANCIAL: “THE TRUTH ABOUT YOUR FUTURE”

Monday, March 13, 2017

http://www.edelmanfinancial.com/promotions/the-truth-about-your-future?mkt_tok=eyJpIjoiTTJNeVl6UXlOVE5sWmpFdyIsInQiOiI4eHFVWWttNkdQdXIyVXNhTFlyVktPUDJXdHZSVnN4Qkh2SVk1MVlabTJ3ekF6N3hQTld1Q3o1NmJIbnd2eExKOEM2djRGM0JmTEsxdFZsb2Zvb0tEZXc5c01nbDNJTFwvRFQ2eGpFQVJpZkhQcEdDWWppR3hMY1wveCtPMUJZWWVIIn0%3D

 THE TRUTH ABOUT YOUR FUTURE

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Full disclosure. I am a fan. And, he’s sending me a book for free.

But I pre-ordered the book so I can share it with those who promise to return it.

On his podcast, he’s be teasing the book and I have  say I’m excited to get his insights on the future.

In the immortal words of my personal poetess laureate Taylor Swift “Everything Has Changed” !

Only the dullest Luddite wouldn’t want to know what he’s predicting.

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FINANCIAL: The federal government’s student-loan debt-relief programs?

Friday, December 2, 2016
I fundamentally oppose any “debt relief” program on the grounds of “moral hazard”. In the future, loans will be taken out with the expectation of forgiveness.  
 
As a little L libertarian, the Gooferment does not have any funds that weren’t forceable taken from Taxpayers. Hence there should NOT be any FEDERAL loan program in the first place.
 
Further, you can correlate the rising tuition and rising student debt with the increasing Federal student loan involvement. 
 
Argh!

fjohn reinke
keene NH
 
 
TODAY’S QUESTION
Going back to our story above, what are your thoughts on the federal government’s student-loan debt-relief programs? Send your comments, which we may edit before publication, to10point@wsj.com
 

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READER RESPONSE
Responding to yesterday’s question on the federal government’s student-loan debt-relief programs, Bernard Levine of Oregon wrote: “Solve this whole costly mess with one simple reform. Require colleges to co-sign every loan to their own students. Then if a student defaults, the college is on the hook to pay. Which is only fair, since it was the college, not the student, that received the proceeds of the loan. And it was the college that promised, implicitly or explicitly, to make its students employable and prosperous.” Cole Aston of Missouri said: “Forgiving student debt is merely a short-term fix to a long-term problem. Tuition is sky-high because of federal-government backed student loans. Until we get rid of these government loan programs, universities will continue to inflate their tuition cost. We can’t be half-free market and half-socialist; we need to pick one or the other and stick to it.” And Slade Howell of North Carolina commented: “The federal government forgiving student debt is a wonderful idea. It is exciting to think that tax-paying, working Americans can have the opportunity to fund a social interlude for our youth… This may well go down in history as the most ingenious welfare system ever devised to procure votes.”

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FINANCIAL: The FED is our enemy

Friday, September 23, 2016

https://www.lewrockwell.com/2016/09/thomas-dilorenzo/hillarys-sicko-relationship/

Hillary’s “Partner in Government”
By Thomas DiLorenzo
September 17, 2016

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What all of this means is that the Fed is an engine of political corruption and economic instability.  It has generated inflation rather than controlling it (the dollar is worth less than 5% of its value in 1913, the year the Fed was created); has caused endless boom-and-bust cycles such as the 2008 real estate market crash; hides the true cost of government, especially the costs of war; and generates what economists call a “political business cycle” as described by Robert Weintraub’s research.

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Yeah, and this article puts to rest the FED’s “independence”.

So what can’t we go to a REAL gold standard?

It couldn’t be any worse.

Argh!

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FINANCIAL: When does a wife become a widow?

Monday, March 28, 2016

http://www.edelmanfinancial.com/radio/march-19-2016#ep-nav

Why the Amount of Life Insurance You Have Could Be Misleading

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In this episode, Ric gives husbands a slap in the face. And wives a kick in the <synonym for donkey>!

When, at what age, does a wife become a widow?

On average?

Cue the final jeopardy themes … …

… … (don’t rush; we’ll wait; this is important.) … …

Ok? Pens down.

60!

To quote Ric: “aaaaaaaaaacccccccccccckkkkkkkkk!”

Half at least that 60 and half after 60.

How much life insurance does a family need?

And, another great Ric-ism, “In this decision, husbands don’t get to vote because they will be dead!”

Rick gives the rule of thumb: Take the about of life insurance, half it, and drop a zero. (For the not mathematically challenged, that’s a 5% withdrawal rate.)

500,000$ = 25k$ / year

1,000,000$ = 50k$ / year

2,000,000$ = 100k$ / year

Not very much. 

Rick good news is that life insurance is cheap.

My life’s lesson is that husbands need to insure their wives. Every try to hire a nanny; housekeeper; even a baby sitter? Wives are economically very expensive to replace!

My maternal grandmother used to say: “A man who, dies without life insurance, doesn’t leave his family; he abandons them”.

A word to the wise.

Great advice from Ric.

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  • Why the Amount of Life Insurance You Have Could Be Misleading

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