Paul Ferraresi

Many people think their retirement will consist of a leisurely life of traveling or playing golf after picking up their gold watch.

Soon to be retirees have many questions to address before showing up for their last day. First off will be when you retire. It will make a major difference in the amount of money you’ll actually have in retirement. Most people fall into the trap of taking Social Security too soon.

Data from the Bureau of Labor Statistics show Americans are increasingly taking early retirement. In the 1950’s the average retirement age was 67.6 years old. By the 1960’s the age dropped to 64.6 and by the 1990’s it dropped to 62.6.

It appears, according to a study by NEFE, those with combined pre-retirement income of $30,000 to $100,000 have NOT planned adequately for their retirement. With to much debt, not enough money saved and few plans for how they will decumulate their funds it is a time bomb ready to explode.

The key is more education and a desire to be self sufficient. Looking at the above statistics on retirement age I reflected that in the 1960’s the average person did retire around age 65. (This was mandated by the government as the “official” retirement age). Most workers died about 7-8 years after retirement with their spouse surviving about another 10 years. Their pension and Social Security made it a somewhat “comfortable” retirement. Today, the life expectancy for a healthy 65 year old male is near age 85. The surviving spouse is expected to live into their early 90’s. Wouldn’t it make sense for people to work to say age 78 or so? Then, following the above formula for the worker would live 7-8 years after retirement and still have a “comfortable” retirement. Isn’t that what is happening as you go to many stores and see countless senior citizens happily working?

This would solve all the financial problems for Social Security, keep people active and productive, and, provide society with dedicated hard working employees. The activity would keep people fit, possibly stop them from deteriorating mentally and physically and take a strain off our country’s medical facilities. Ah yes, as George Burns said “If I knew I was going to live this long I would have taken better care of myself.”

The response I get from most people on the above idea…. Paul, I hate my job and just want to get out. My response…. Who chose that job and why not get out now. “Well, I need the great pay and benefits” My response…. You have complained for 10 years saying the same thing. Why didn’t you set up a side business 10 years ago so you could walk away today.” Ten years from now you will probably say the same thing again, so, why not start to make changes now?

Ah yes, discipline or regret.

I hear from people that with the current mortgage crises in place it is very tough to refinance their homes. These individuals are distraught as many want to obtain a better interest rate or pay off their mortgage at a faster pace. Following the principles of Doug Andrew’s bestselling book Missed Fortune, I think one should keep the early payoff in perspective. Ric Edleman, who extols the same principles as Doug Andrew, has written many books and articles on the subject. One of them is…10 Great Reasons to Cary a Big, Long Mortgage.

Here are Ric’s top ten reasons for keeping a mortgage along with my thoughts. There is a link at the end of the article so you can read the whole article. I welcome your questions at any time.

Reason #1: Your mortgage doesn’t affect your home’s value.

True, your home value goes up or down whether or not you have a mortgage. Your home does not know it has a mortgage. Go ahead…stand in front of your home and ask your home if it has a mortgage or not.

Reason #2: You’re going to build equity anyway.

True, equity is built in two ways
• Through increases in the value of your home
• Through principal paid monthly. (which is very small in the opening years) Any cash put into your home earns a zero (0) rate of return. Stay with the home values increases to build your equity.

Reason #3: A mortgage is cheap money.

Also true, as long as interest rates are low. When inflation is high this leads to higher interest rate. Thus, your future mortgage payments in an inflated environment mean you are paying back in cheaper dollars. Thus, rates are cheap in most situations on a relative basis.

Reason #4: Mortgage interest is tax-deductible.

True again, as long as you can itemize deductions. If your income is too high, then these deductions are not available. To circumvent this, you can run the mortgage interest expense through your side business LLC, so it is deductable.

Reason #5: Mortgage interest is tax-favorable.

This is tied into #4 but holds true in that our government looks favorably on a mortgage deduction in order for that most people to participate in home ownership.

Reason #6: Mortgage payments get easier over time.

If you have held a mortgage for a long time then this is understandable. In the opening years of paying a mortgage most people are strapped with the payments. As years go by a person’s income goes up while the mortgage payment is a constant. Thus, as a percentage of the higher income the mortgage is a smaller percentage.

Reason #7: Mortgages let you sell without selling.

As your equity increases in your home do not sell the home to get out the equity. Instead refinance, take out the equity, invest those monies rather than leaving them in the home earning a zero (0) return.

Reason #8: Large mortgages let you invest more money more quickly.

The strategy is to place a small down payment and invest the remainder since any cash in the house earns zero return.
Reason #9: Long-term mortgages let you create more wealth.

Consider the after tax cost of your mortgage and invest the difference in a higher tax free return investment.

Reason #10: Mortgages give you greater liquidity and greater flexibility.

A 30 year mortgage gives you more flexibility than a 15 year mortgage. You can always pay off a 30 year mortgage earlier, but, you cannot stretch a 15 year mortgage into a 30 year plan.

See the whole article: http://www.ricedelman.com/cs/education/article?articleId=232

Life is like a marathon race. Many ups and downs. Pain from each step we take, yet, euphoria as we pass each marker. As you run and try to reach your goals for this year… why not sprint???

I find reading books helps one reach insights. Doug Andrew, author of many best selling books can help you “sprint” to financial independence. I am a trained advisor on Doug’s team and suggest a basic book from his collection…..

________THE______________________________________________

LAST CHANCE MILLIONAIRE

IT’S NOT TOO LATE TO BECOME WEALTHY by Douglas R. Andrew

 PRE – PAY YOUR MORTGAGE
 SOCK AWAY AS MUCH MONEY AS YOU CAN IN YOUR 401K!
 DIVERSIFY YOUR PORTFOLIO!

THAT’S THE GUARANTEED WAY TO A SAFE AND SECURE RETIREMENT!

BUT IS IT?

For the millions of Baby Boomers facing retirement, here is a brilliant – and refreshing contrarian – guide to accumulating wealth and security regardless of age, income, or current assets.

According to Doug Andrew, the bestselling author of MISSED FORTUNE 101, too many Americans are being led down the wrong financial path. Even worse, many Baby Boomers find themselves panicking – fearful that they’ve already fallen too far behind to ever catch up.

In this indispensable and eye-opening guide, Andrew provides fresh new pathways to reaching financial security – pathways that all Americans need to consider now. Centering on his Three Miracles of Wealth Accumulation: the Miracle of Compound Interest, the Miracle of Tax-Favored Accumulation, and the Miracle of Positive, Safe Leverage, Andrew explodes many of the commonly-held myths about 401ks, pensions, paying down one’s mortgage, and other forms of retirement planning. Along the way, Andrew offers unique strategies that will not only increase your wealth, but also help readers enjoy their best years while securing their future.

 Douglas R. Andrew’s first hardcover, Missed Fortune 101 (0-446-57657-3), was published by Warner Business Books in 2005 and has sold in excess of 500,000 copies.

 With an estimated 83 million Baby Boomers approaching retirement, books that focus on financial security are perennial bestsellers, as demonstrated by the blockbuster success of the #1 New York Times bestselling Rich Dad series by Robert T. Kiyosaki.

 Americans are perpetually striving to join the millionaire’s club, as evidenced by the continuing success of The Millionaire Next Door (Longstreet Press, 1996), which has sold more than two million combines copies.

Doug Andrew’s initial books Missed Fortune, Missed Fortune 101 and Millionaire by Thirty are other ones you need to read.

If you want more information email me at founders@foundersgroup.net or call 713-871-5919.