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Missed Fortune – Your Future Should Be Bright

Posted on | July 22, 2012

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The Shape of Things to Come

With the upcoming election and the continued attempts to stimulate the economy, it’s helpful to recount some of the mileposts we’ve recently passed.

In the last three years, we’ve seen an additional $4 trillion added to the national debt. This means a grand total of more than $5 Trillion in debt has piled up in just the last 4 years alone. It’s getting crystal clear that the time to protect yourself and your serious cash is at hand.

Just five years ago, every American taxpayer would have had to write out a check for $92,000 just to pay his or her equal share of the national debt. Today, thanks to continued government spending, that amount would be closer to $156,000 per person to pay off the national debt.

Do you recall giving our government leaders your explicit permission to keep on spending and to allow that amount to balloon as it has?

Keep in mind that this is not all of the debt hanging over our heads. A visit to usdebtclock.org reveals that there’s nearly $120 trillion in unfunded liabilities in America. These represent the benefits owed to those who have faithfully paid into Social Security and Medicare. That money is obviously not currently in the government’s coffers by virtue of the fact that it is labeled “unfunded.”

With the Supreme Court recently ruling that Obama Care is constitutional, there are twenty or more serious tax increases just around the corner or already in place.

Spelling out these dangers isn’t intended to scare or upset you, but to point out those factors that could rob you of a brighter future if you don’t take control of your financial well-being.

Americans are traditionally very optimistic about the future, but recent polls reveal that less Americans feel that way. The key to having a vision of a brighter future is to take control and eliminate the obstacles that would slow you down or prevent you from reaching this goal.

Kick These Three Obstacles To the Curb

Right now the three biggest obstacles or dangers that are standing in the way of a brighter financial future are:

  • Market volatility and uncertainty
  • Higher taxes
  • Rising inflation

Of these, the first obstacle has been a challenge for over a decade now. This is why we refer to the past 11 years as the Lost Decade in which many individuals lost 30-40% of the value of their IRAs and 401(k)s not once but twice.

Of course, there were those who followed the Missed Fortune strategies of Indexing and Rebalancing during that worst decade since the Great Depression. These folks not only didn’t lose anything in 2008, but also realized 2.6 times the amount of money they had a decade earlier in their retirement savings. This means for every $100,000 they had at the start of the decade, they’d have had $260,000. For every $1 million they had in 2000, they’d have had $2.6 million in their savings.

But the other two dangers are about to burst onto the scene.

Taxes are poised to go up dramatically. The Bush Tax Cuts will likely expire at the end of this year. When they do, the Congressional Budget Office (CBO) estimates that the average American taxpayer will be paying roughly 29.6% more in taxes than they did just last year. This means that for every $3,000 you paid in taxes last year, you’ll now owe $4,000 on the same income.

This is why it’s essential that you get your serious money to where it can grow tax-free thanks to certain grandfathered sections of the IRS Code. Not only should it grow tax-free, but also it should remain tax-free when you access it and transfer to your loved ones tax-free at the end of your life.

The third danger is inflation. The return on your retirement savings must grow at a rate greater than that of inflation, in order to offset the rising cost of living.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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