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Has Kiplinger’s Sold Out? Bad Advice and Bias (Part 1 – Retirement)

“Whereas mutual fund advertising accounts for 3.8 percent of advertising revenues at the Wall Street Journal and 1.1 percent at the New York Times, it accounts for 15 percent at Money, 16 percent at SmartMoney, and 28 percent at Kiplinger’s.”

– Jonathan Reuter and Eric Zitzewitz, “Do Ads Influence Editors? Advertising and Bias in the Financial Media,” Quarterly Journal of Economics

Kiplingers-2Last week, we spent three-and-a-half-days with like-minded colleagues at The Summit for Prosperity Economics Advisors. We discussed the importance of character, the value of privatization (as opposed to allowing the government to control our choices – and our money), and the problem with “typical” financial planning strategies.

It was a breath of fresh air, almost like we had created an “alternate reality” where “up” was actually UP and “down” was actually DOWN! And then, I grabbed the October 2014 issue of Kiplinger’s for the plane ride home and stepped back into the upside-down world of “typical” personal finance in America. Argh!

When I could find the articles wedged between the full and even double-page spreads of advertisements from financial corporations, they made me crazy! As a matter of fact, I couldn’t even get my reaction into one blog post, so next week the rant shall continue as I work to expose exactly what has gone so very wrong with the financial industry in the U.S.A.

Can You – and Should You – Retire?

The opening editorial on page 6, “Smile, You Can Retire,” quoted the frightening advice to be repeated again later on page 48 in the “How Much Do You Really Need to Retire?” article: “You might get along just fine with 60% of your pre-retirement income.”

As my husband Todd Langford is fond of saying, “Every day is a Saturday and you’re supposed to spend LESS!?”

Sure, there are expenses you may no longer have in your later years. Perhaps your home is paid off and surely your kids are long out of college and earning away. (Right?) But can you count on 3% inflation, good health, and only needing to fund a “25-or 30-year retirement,” as suggested in “How Much Do You Really Need to Retire?”

The article irresponsibly cites a survey of third-year retirees to prove that the need for retirement incomes of 70% or 85% of current income may be overstating matters, and to warn readers that they “could be over-saving now” and compromising lifestyle needlessly. Of course, this is terribly misleading, since relatively healthy 68 or 69-year olds have no need for assisted living, nursing care, memory care, or other services that may gobble up assets like a hungry wolf later in life.

Not only does the article under-estimate the true cost of health care (it does cite current costs, which will rise with both inflation and longevity), but who wants to fund a “25-or 30-year retirement” when they may live to be 100 – or beyond? In 2010, 53,364 Americans were centenarians, and more than 1.9 MILLION Americans were in their 90’s! That’s the populations of San Franscisco, Atlanta, and Seattle… COMBINED. Furthermore, that number is expected to reach 9 million by 2050, which means if you’re reading Kiplinger in your 50’s and thinking you’ve got almost enough for that “25-to-30-year retirement,” it might not turn out how you thought.

Perhaps you’ve seen the 114-year-old woman who had to lie about her age to join Facebook  – because the “year born” option doesn’t go back to 1900! She’s a hoot, updating her status and even making new friends in her homeland of Germany online! I don’t doubt that she has a few more years of skyping and “Facebooking” ahead of her, but let’s be honest, it’s also clear that she also needs a lot of help at that age, and quality care is not cheap.

Clearly, financial plans that urge you to accumulate now and spend later – without building ownership and equity, without creating cash-flowing assets subject to neither income taxes nor limited by current bank rates – just don’t create financial security.

Retirement plans that last until 85 or 90 are dangerously outdated, but then again, at Partners for Prosperity, we believe the concept of retirement itself is also dangerous, as I’ve argued in Busting the Retirement Lies.  

The article goes on to read like a classic case study in all that’s wrong with “typical” financial planning.

  • Give up control of your dollars and keep deferring your taxes by putting money into a government-controlled qualified plan to be taxed later at an undetermined rate.
  • Put even MORE of your dollars into your 401(k) plan using “catch up provisions.”
  • Balance those stocks and bonds and live on 4% of your assets -(if you can stand to still subject them to some market risk.)
  • Use guesswork and formulas that might not reflect reality to calculate needs and average life expectancy rates.
  • Rely on the government’s numbers for inflation,  which we know are skewed and under-reported for political expediency.
  • Use “typical” financial planning strategies that limit your flexibility and ability to use your own money.
  • Don’t differentiate between saving and investing – just put everything into mutual funds, which do a good job of neither.
  • Retire instead of finding work you love that allows you to contribute and be productive – financially, intellectually, socially – well into your 80’s, and beyond.

And that was just ONE of the articles that made me want to throw up my hands in disgust!

Saving for College – What About Other Options?

The article on “The Best College Savings Plans” was fraught with tunnel-vision, with no mention of the true cost of a college education (with opportunity costs included) or other options to the typical college savings vehicles. For instance, what about scholarships, grants, participation of the child through work, or cash-flowing real estate?

Some creative parents may even combine such Prosperity Economics solutions to save in their own or their child’s whole life policy (often at internal rates of return approaching 5%) then use or borrow against cash value for a down payment on a triplex or fourplex near their child’s college of choice. Their child lives in one unit while finding roommates and other renters to turn what would have been a college expense – housing – into a leveraged asset with cash-flow and built-in lessons in business, real estate, and responsibility! Now, rather than coming away from college with a diploma and drained accounts, the family now has an asset that can continue to produce cash flow and gain equity.

In contrast, typical college saving vehicles:

  • Assist your child in disqualifying for financial aid, should they have otherwise been qualified.
  • Trap dollars in accounts that can only be used for limited reasons with strict rules. (What if they decide not to go to college?)
  • Suffer the same problems as other “typical” investments, in terms of high risk, low reward, low control, and limited investment options, often with high or unnecessary management fees.
  • Ugh – now there’s even “age-based plans for aggressive investors” that share all the same issues as problematic target-date funds!
But wait… there’s more! 

The article that really made my head spin? I’m saving that for part 2 of my “Kiplinger Rant” for next week!

Busting the Retirement Lies

Busting Retirement Lies coverWe leave you today with a book recommendation and a fun video to watch. First is Busting the Retirement Lies,  Kim D. H. Butler’s most recent book that gives the opposite advice of the Kiplinger article. Rather than telling people to stop saving and go ahead and retire, Kim tells it like it is and gives real alternatives to the work-40-years-then-retire plan, which for many Americans delivers little more than unrealistic expectations.

And finally, please enjoy this video of Anna Stoehr, our 114-year-old Facebook heroine, who we hope hasn’t been following Kiplinger’s advice!

 

Posted in COLLEGE PLANNING, PRINCIPLES OF PROSPERITY, RETIREMENT PLANNING | Tagged , | Leave a comment

Living in a Complaint-Free World where “Life is Great”!

complaint-free-world

Every single person is 100% disciplined to their current set of habits.”
-Dan Sullivan, Strategic Coach

“Plant a thought and reap a word;
plant a word and reap an action;
plant an action and reap a habit;
plant a habit and reap a character;
plant a character and reap a destiny.”

– March 21, 1872, The Cedar Rapids Times

Live from The Summit!
We are writing this from The Summit for Prosperity Economics Advisors where dozens of industry leaders and forward-thinking advisors have gathered. We are sharing some of our favorite ideas and resources with our colleagues and fellow advisors, we wanted to share them with you, too.

I (Kim) stumbled on the concept of a A Complaint Free World recently and just love it! I have always insisted upon living and working in a positive environment, and as I’ve written about before, beginning each day (or meeting) with a Positive Focus. The Complaint-Free world takes this and puts it into a structure to develop that positive mindset into a HABIT. Continue reading

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Should You Liquidate Your 401(k) Early?

“I would blow up the system and restart with something totally different.”
- Ted Benna, “father” of the 401(k), as told to MarketWatch.com

Should You Liquidate Your 401(k) Early?As investors start to educate themselves about investing, many begin to realize that their 401(k) might not all they thought it was cracked up to be. After all, even Ted Benna, the man who popularized the tax loophole that became the 401(k) program, has all but disowned it.

But should you liquidate your 401(k)? It’s not an easy decision, and there are drawbacks as well as benefits.

The Pros and Cons of Liquidating a 401(k) Early 

There are good reasons to liquidate your 401(k) (or perhaps just put future savings and investments dollars elsewhere):

  • Highly restricted investment choices.
  • Legitimate fears that income taxes are on the rise.
  • Layers of never-ending and often hidden fees that drain “your” asset.
  • Limited access to dollars for limited reasons.
  • The fact that any dollars borrowed from 401(k) have gone into the account “tax deferred” but must be replaced with “after tax” dollars… that are taxed AGAIN upon withdrawal.
  • Lack of control over qualified accounts ruled by government decisions and policies.

In spite of compelling reasons to liquidate a 401(k), there are also important considerations and good reasons why you may NOT want to liquidate your 401(k) – or not right now. Before considering such a move, be well aware of the following: Continue reading

Posted in 401K's & IRA's, ALTERNATIVE INVESTMENTS, LIFE SETTLEMENTS, RETIREMENT PLANNING, WEALTH-BUILDING | Tagged , , , , | Leave a comment

Life Expectancy in America (You’ll Live Longer Than You Think!)

“You’re not getting old; you’re getting ready.”
-Ernestine Shepherd, the world’s oldest female competitive body builder.

ernestine-shepherdIt’s a Fact: Americans Are Living Longer

According to the CDC (Centers for Disease Control and Prevention), life expectancy in the U.S. now stands at 78.7 years.

Women continue to outlive men, with life expectancy being 76.3 years for males, and 81.1 years for females. Life expectancy varies according to race and ethnicity. It is highest for Hispanics, for both males and females, and lower for African Americans than for whites or Hispanics.

But don’t plug those numbers into a retirement calculator! It is mistake to assume that 78.7 years (give or take for gender and ethnicity) is YOUR life expectancy. Chances are, you’ll live much longer than you think you will, as we’ll explain. Continue reading

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6 Ways to Save a Life Insurance Policy (even if you can’t afford the premiums)

“I bought a new life insurance policy but the small print is impossible to understand. All I´m sure of is that after I die, I can stop paying.”

Insurance ConceptDo You Want to Stop Paying Your Life Insurance Premiums?

What happens when a policy has been started but the policyholder or payor doesn’t want to keep paying the premiums? Or when they can’t afford the premiums any longer?

If payments are stopped, they could lose the policy, just as a homeowner will go into foreclosure if they stop making mortgage payments before the home is “paid up.”

But there are other options to simply letting a policy lapse! These options are well-worth considering, especially because: Continue reading

Posted in CASH VALUE INSURANCE, FAMILY and FINANCES, INSURANCE ADVICE, INSURANCE AS AN ASSET, LIFE SETTLEMENTS, ORGANIZING YOUR FINANCES, WHOLE LIFE INSURANCE, WILLS and ESTATE PLANNING | Tagged , , , | Leave a comment

Busting the Retirement Lies – Now on Audible.com!

“This book is so spot on… Truly a must read!”
– Amazon review for Busting the Retirement Lies

retirement-audio-book-cover

Kim Butler’s Personal Finance Books on Audio
Busting the Retirement Lies is practical book for anyone open to re-thinking “retirement.” Perhaps you’re 50+ and feel panicked and “not ready” to retire, financially or otherwise. You could be any age and curious if your 401(k) will really work the miracles you hope it will. Or you might be almost-retired – or newly retired – and wondering what to do with yourself.

Get ready to reconsider everything you thought you knew about retirement and retirement planning in this uplifting yet highly practical book. From number-crunching to inspirational stories of role models of those who have busted the myths of aging, you’ll find yourself opening to new possibilities about what it means to “live long and prosper.”

Not only is Busting the Retirement Lies now available on Audible.com, but our book trailer is also out (trailers aren’t just for movies anymore!): Continue reading

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The Prosperity Economics Revolution

“Financial planning doesn’t work.”
- Kim D. H. Butler, author of Busting the Financial Planning Lies

time for changeFinancial Anxiety, Anyone?

Feeling nervous about where the stock market might be headed after its recent climb?

Nervous about where taxes might be going?

How about what might happen with Social Security? Or the economy, interest rates, the stability of our banking system and inflation?

You’re not alone.

Anybody who is paying attention can’t help but observe the similarities between today’s economic and market conditions and those preceding the Financial Crisis of 2007 – 2009. Last month Market Watch declared we are in Continue reading

Posted in PROSPERITY ECONOMICS, WEALTH-BUILDING | Tagged , , , , , | 2 Comments