Case Studies

Why Isn’t Investing About Performance?

In this report, we’re going to explain some of the different factors, both positive and negative that can affect your financial security,
so you’ll be fully aware of the potential outcome.

Please consider the following:

  • A stock market that has historically had major corrections that have collectively cost investors millions of dollars! That same stock market has also made investors millions of dollars as well.
  • Why what’s happening on the other side of the world could affect you right here in your own backyard. Positively as well as negatively.
  • Many local governments across the U.S. face steep budget deficits as they struggle to pay off debts accumulated over a number of years. As a last resort, some filed for bankruptcy. http://www.governing.com/gov-data/municipal-cities-counties-bankruptcies-and-defaults.html
  • CD rates at banks, where are they headed? www.money-rates.com/advancedstrategies/cd/will-cd-rates-rise-in-2014.htm

Do you think things will get better or worse? Who do you think will pay for the huge federal deficit running at 50 billion a month? You think you’ve done all that you could to protect whatever you’ve already built up. But honestly do you really know if you have the best possible plan to for your future growth. Each of us has our own personal goals that we are striving for. Unfortunately, there are just as many factors in the world that could totally derail you reaching your goals.

We in the U.S. are no longer the only game in town. For years, the Untied States ruled all aspects of commerce and business around the globe. That is simply no longer the case. There are so many global issues that affect the market today that it would be truly arrogant of us not to realize that while we are still a major player, we are no longer the biggest kid on the block. Or, that we will always win no matter what.

As with anything in life, it’s all a matter of perception.

The real facts of what the economy is doing is not the issue. It’s the public perception of the economy that matters. Also, people’s perception of other’s views is a major factor in stock market movements. If people think that others think the market is fine, they will jump in, which will lead to a huge band wagon effect. We’ve seen a lot of this happening this past decade, with people just buying into the market based on the fact that everyone else is doing it. .

The key, we were told was to have proper diversification!

You have to spread out the risk appropriately. It’s critical not to put all your eggs into one or two baskets. Of course you can diversify through the different investments themselves. Such as: Cash equivalents, Stocks/equities, Bonds/loans, Real estate, Hard assets (e.g. gold).

 

However during the last market downturn they behaved pretty much same and went lower so perhaps rules of diversification need to be re-evaluated as well! Have the rules changed? So let’s now consider four investing issues

 

Issue Number 1:

THE CASE FOR NOT LOSING MONEY!

 Portfolio              Approximate Return          Years to break even
Is Down                  needed to recover            Assuming a Return of:

 

                                                                      3%       5%       8%       10%
   10%                               11%                      3.6       2.2       1.4       1.1
   20%                               25%                      7.5       4.6       2.9       2.3
   30%                               43%                     12.1      7.3       4.6       3.7
   40%                               67%                     17.3     10.5      6.6       5.4

 

As you can see simply look at any of the percentage losses in the left hand column. Take the 40% loss as an example.  You need 67% to get back to where you started from, if your portfolio returned 8% it would take you 6.6 years to recover. At a return of 10% it would take 5.4 years. Going forward should you need to re-evaluate the cost of losing money in your portfolio?

 

Issue Number 2:

The Lost Decade

 DEFINITION of ‘Lost Decade’

The 1990s for Japan, and the first decade of the current millennium for the United States. “Lost Decade” was a term initially coined to describe the Japanese economy in the last decade of the previous millennium. The bursting of a massive real estate bubble in Japan in the 1980s led to sluggish performance, not just in the subsequent “lost decade,” but in the following one as well. The term has also been applied to describe the state of the U.S. economy from 2000 to 2009, as an economic boom in the middle of that decade was not enough to offset the effects of two huge recessions toward the beginning and end of that period.

BREAKING DOWN ‘Lost Decade’

By most measures, the period from 2000 to 2009 was a true “lost decade” for most U.S. households, as steep declines in real estate and stock prices resulted in massive wealth erosion. The S&P 500 recorded its worst ever 10-year performance in that decade, with a total return including dividends of -9.1%, which was even worse than its performance during the 1930s depression.

Indices are un-managed and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock’s weight in the index proportionate to its market value.

Read more: Lost Decade
Follow us: Investopedia on Facebook

 

Issue Number 3:

Not Recognizing That Bear Markets Occur In a Historical Fashion

 The specific dates below coincide with points in United States history have impacted the stock market. Events such as world wars, recessions, depressions, and attacks on US soil. There are also many positive economic developments as the internet, the personal computer, the housing boom. These events have affected the stock market in a positive fashion.

September 1929 to June 1932

S&P 500 high: 31.86 Low: 4.4 Loss: 86.1 percent Duration: 34 months

May 1946 to June 1949

S&P 500 high: 19.25 Low: 13.55 Loss: 29.6 percent Duration: 37 months

December 1961 to June 1962

S&P 500 high: 72.64 Low: 52.32 Loss: 28.0 percent Duration: 6 months

November 1968 to May 1970

S&P 500 high: 108.37 Low: 69.29 S&P 500 loss: 36.1 percent Duration: 18 months

January 1973 to October 1974

S&P 500 high: 119.87 Low: 62.28 Loss: 48.0 percent Duration: 21 months

 November 1980 to August 1982

High: 140.52 Low: 101.44 S&P 500 loss: 27.8 percent Duration: 21 months

August 1987 to December 1987

S&P 500 high: 337.89 Low: 221.24 Loss: 33.5 percent Duration: 3 months

March 2000 to October 2002

S&P 500 high: 1527.46 Low: 776.76 Loss: 49.1 percent Duration: 30 months

October 2007 to March 2009

S&P 500 high: 1565.15, Oct. 9, 2007 Low: 682.55, March 5, 2009 S&P 500 loss: 56.4 percent Duration: 17 months

Courtesy NBC News

So let’s get real serious for a moment.  You have just read about the market conditions and potential political factors that could affect all of us, and our children. Mostly likely you remember the US bear markets of 2000 and 2007.

 

Now It Is Imperative That You Consider Three Key Questions.  You Need To Answer Them Honestly If You Expect To Be a Successful Investor!

Question 1:

Over your investing lifetime do you expect there will be more bear markets? I can’t answer that for you. You need to form your own opinion.

Question 2:

Do you believe that interest rates will head higher at some point in the future? And how would that impact your portfolio? Once again, you need to form your own opinion.

Question 3:

Now that you have been shown the potential cost of losing money, the frequency of bear markets (no doubt you have lived through one or two). Japans attempt to jump start their economy with record low interest rates and high debt. Do you have anything in your investing arsenal at this moment that can help deal with these issues?  Has your investment advisor mentioned these scenarios to you? Do you think they could be important to your financial future?

You have two choices as I see it:

Maintain the status quo and hope for the best, or schedule an appointment to discuss potential resolutions to the issues mentioned above. Please note there are no guarantees.

Or consider the definition of insanity by Albert Einstein:

Insanity: doing the same thing over and over again and expecting different results. Albert Einstein.  Brainy Quote

With this in mind, I am offering you at no cost, or obligation, an interview to determine if you’re in  perfect shape with no need of any help, or need some assistance with developing a strategy for your financial future!

These interviews are strictly information gathering. I will not try to sell you anything, or do anything other than ask you quite a few questions, listen to your answers, and mutually determine if there’s any reason for us to get together in the future. If I cannot help you, but other professionals could, I will tell you that. And, if I think I can help, and I think you qualify for my services, I will explain the circumstances of how that might work.

You’re free to, what you want to do from there since there’s no cost, and absolutely no obligation.

Many people take this offer to provide this free review. At a minimum you will potentially know more about your financial situation than you did before you came in.

You may learn what, if anything, is wrong with your financial situation based on your goals and objectives and what you can do to fix it now, before it’s too late.

So, why not call now, while this is fresh in your mind. If you really don’t know  your overall financial situation, take action now, before something happens.  What have you got to lose?   Isn’t it worth an hour or so of your time to give serious consideration to potential strategies for your financial future?  Call 610-292-0135.  I look forward to your call.

OR

Send Me Your Email Address and Phone Number and I Will Email our Latest Performance History Since The Last Bear Market In 2008. Then You Can Decide If We Should Set Up Personal Face to Face Meeting Or A Simple Phone Call Which Will Take No More Than 5 Minutes To Review The Performance Results, To See If This Is Right For You.

Sincerely,

 

David M. Warrick CFP, EA

Enrolled Agent

“Admitted to Practice Before The IRS”

J.C Warrick & Co.

1109 West Main Street

Norristown, Pa. 19401

610-292-0135

Securities and investment advisory services offered through Brokers International Financial Services LLC Urbandale Iowa, Member Finra/SIPC. Brokers International does not provide tax or legal advice and is not affiliated with J.C. Warrick & Co Inc.

By |2017-11-18T14:00:30-04:00November 18th, 2017|

Pay Less Income Tax for IRA Distributions

In the example below this client is taking money from their IRA’s. They would like to take more money and pay less income tax. This dilemma hits taxpayers each and every tax year.

Taking More Money from Your IRA While Paying Less Income Tax Example

Old Tax Return                                                                                     New Tax Return

$10,000                                    Interest Income                                    $ 0

$10,000                                    Dividend Income                                  $ 0

$10,000                                   Capital Gain Distributions                     $ 0

$5,000                                      IRA Distributions                                  $ 10,000

$20,000                                    Pension                                                $ 20,000

$17,000                                   Taxable Social Security                        $ 4,000

 (Social Security Received $20,000)

$72,000                                   Total Taxable Income                           $ 34,000

$8,321                                     Total Income Tax                                  $ 2,156

Tax Savings                                    $6,165

Would you like a better way to take money from your IRA’s and reduce your income tax bill? Call 610-945-1954 today!

If you fill-in the Tax Reduction Summary Form today, you will receive a Free personalized 30 minute Tax Reduction Summary Report which is valued at $750. It will show you specific ways to reduce your tax bill by thousands of dollars each year or more! And that includes the tax on your social security benefits.

For more information, call 610-945-1954 today! If you are an individual or business owner earning over $200,000 or are married and earning over 250,000, President Obama has a new tax plan for you and it’s not going to lower taxes!

Every day you wait; will cost you more and more in income taxes for 2012 and beyond.  Don’t procrastinate, fill-in the Tax Reduction Summary form today to see how much you can save on your taxes.

 

By |2014-12-10T17:42:38-04:00September 20th, 2012|

A Cash Transfer Strategy

The Bakers, ages 59 and 57, are still working and are currently in the highest tax bracket. They were seeking ways to reduce their current tax burden. They had accumulated $460,000 in various CD’s and money markets accounts that they wanted to set aside for either future retirement income or for their children’s inheritance. A TRn Legacy strategy providing a cash transfer proved to be a suitable option for the Bakers.  Here’s how it worked:

1. The Bakers transferred the assets to TRN Legacy strategy.

2. The TRN Legacy strategy was based on the current value of their assets.

3. The Bakers received an immediate income tax deduction which can save them money on their taxes this year, with a potential 5 year carry-forward.

4. The TRN Legacy strategy plan payments can be utilized to fund immediate life insurance premiums  as part of a wealth replacement plan.

5. A portion of the asset was eliminated from their estate.

6. The Bakers recommended their church to benefit from their transaction.

Current Value of Cash Assets $ 460,000

Initial Value of TRN Legacy Strategy $ 460,000

Tax Deduction with TRN Legacy Strategy $ 153,140

Tax Savings at 35% tax Bracket $ 53,599

Immediate Annual Payments for 30

Year Term Certain $ 21,000

Death Benefit from 2nd to Die Life Policy* $2,026,170

A TRN Legacy strategy term certain was issued for the Baker Family that provided an immediate charitable income tax deduction of $153,140, potentially saving them $53,599 in taxes. The TRN Legacy strategy was set up to pay out over 30 years and can be used to fund life insurance premiums that would provide a death benefit of $2.026 million for their heirs. They recommended their church to receive an immediate grant while supporting the charitable works of the legacy strategy. Their plan is re-insured with a major insurance company.

 

By |2014-12-10T17:44:50-04:00May 18th, 2012|

Annuity Transfer Case Study 2

Elsie Carter is an 81 year old widow who had an annuity valued at $274,000. Elsie did not need the income and planned to leave the annuity to her daughter. Elsie was concerned about the tax consequences that her daughter would inherit along with the annuity. She wanted something to go to her church too.

An Annuity Transfer Program also known as a TRN Strategy Plan proved to be a suitable option for Elsie. Here’s how it worked:

1. Elsie transferred ownership of her annuity to TRN Strategy Plan.

2.  TRN Strategy Plan based on the full accumulation value was issued.

3.   Elsie received an immediate income tax deduction which offset the 1099 gains inside  the annuity, helping her settle up with Uncle Sam now.

4. The TRN Strategy Plan will provide a structured inheritance for her daughter, addressing concerns she had about tax issues.

5. Elsie recommended her church to benefit from her transaction.

Current Accumulation Value $ 274,000

Current Cash Surrender Value $ 232,900

Original Cost Basis $ 225,000

Amount of Taxable Gains $ 49,000

Initial Value of TRN Strategy Plan $ 274,000

Tax Deduction with TRN Strategy Plan $ 127,518

Monthly Payments Beginning in 5 Years w/20 Yr Term Certain Payout $ 1,275

A Term Certain Strategy Plan for Elsie was issued that provided an immediate charitable income tax deduction of $127,518. Elsie’s current income is $53,000. She will receive a 1099 this year of $49,000 (on the gains inside the annuity), bringing her total new income to $102,000. The tax deduction reduces her taxable income by up to 50%, thereby bringing her taxable income back to $51,000. This allows her to offset the $49,000 of gain from her annuity AND save money on taxes this year. The remaining deduction of $76,518 can still be carried forward to reduce her taxes next year. Her TRN Strategy Plan is designed to pay out over 20 years beginning when she passes away. She named her daughter to receive payments from the TRN Strategy Plan and recommended her church to receive an immediate grant, while supporting the charitable works of LTF. Her plan is reinsured with a major insurance company.

 

By |2014-12-10T17:38:19-04:00May 18th, 2012|

Annuity Transfer Case Study

Mrs. Millie Cramer, a 78 year old widow, has owned a fixed indexed annuity for 5 years. She has other income sources and her LTC needs have been taken care of. Millie plans to leave the annuity to her heirs but she now realizes that all of the gains in her annuity will be taxable to her heirs.

An Annuity Transfer Program may be suitable. Here’s how it worked:  

1. Millie transferred ownership of her annuity to a legacy strategy.

2. Millie received an immediate income tax deduction which will offset the 1099 gains inside the annuity, helping her settle up with Uncle Sam now.

3. The TRN Strategy will provide a structured inheritance for her children, addressing concerns she had about two spendthrift heirs.

4. Millie recommended her favorite charity to benefit from her transaction.

Current Accumulation on Value $150,000 Original Cost Basis $105,000

Amount of Taxable Gains $ 45,000

Initial Value of the TRN Strategy $150,000

Tax Deduction with the TRN Strategy $ 69,578

Monthly Payments if Millie Passes Away in 5 Years $ 700

Total Benefit (payout plus tax savings) $ 185,395

The TRN Strategy Plan for Millie was issued that provided an immediate charitable income tax deduction of $69,578. Millie’s current income is $55,000. She will receive a 1099 this year of $45,000 (on the gains inside the annuity), bringing her total new income to $100,000.

The tax deduction reduces her taxable income by up to 50%, thereby bringing her taxable income back to $50,000. This allows her to offset the $45,000 of gain from her annuity AND save money on taxes this year. The remaining deduction of $19,578 can still be carried forward to reduce her taxes next year. Her TRN Strategy is designed to pay out over 20 years beginning when she passes away. She named her three children to receive payments from the TRN Strategy and recommended her church to receive an immediate grant, while supporting the charitable works of the TRN Strategy. Her plan is re-insured with a major insurance company.

 

By |2014-12-10T17:38:07-04:00May 18th, 2012|