Permissive Tax Planning
FROM: The Desk of Doug Andrew
Dear Friend,
If you’re planning on retiring in the near future (or are already in retirement), what you’re about to read has the potential to make your golden years the most comfortable and secure years you have ever experienced.
You’ve most likely done well financially in the past—you’ve been smart about your money, worked hard, and probably enjoyed great returns on your efforts during the 90s. But you may have been a victim of the harsh volatility of plummeting stock market and real estate values that followed.
Have you noticed that things aren’t the way they used to be? Those days of decade-long booming stock market growth are dead. Remember 2000 to 2010? I call that the LOST DECADE for a reason. For those who had worked hard and saved even harder, it was a crushing blow when retirement and home values hit the bottom with a heavy thud!
Most Americans lost 38% in the value of their IRAs and 401(k)s from 2000– 2003. It took four more years (until 2007) just to recoup what they lost.
To illustrate a common experience, let’s say a couple was planning on retiring in the year 2000 and they had a nest egg of $1 million. They saw that nest egg erode away to $600,000 by 2003; and it took until the end of 2007 for it to return to $1 million. Hoping to be able to retire on about $6,000 a month from their $1 million nest egg (assuming a rate of return of 7.2%), their dreams were shattered when in one single year—2008—they witnessed that $1 million nest egg lose 40%. Not only that, but their real estate values also plummeted.
“Enough already” is what they said, and like many Americans they transferred their money out of the market and put it in banks earning them 1% or less. Do the math. Now these retiring people are earning 1% on $600,000, which is $6,000 per
year, when just 12 months earlier they were hoping to have retired on $6,000 per month. They are down to one-tenth of their expected income. As a result they, along with many Americans, felt like they lost their future.