STOP THE BLEEDING...IN YOUR RETIREMENT ACCOUNTS
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Case Studies

Mr. Fixit & Mrs Paralegal

The Problem:

  • Both are 62 years old, approaching retirement
  • 2 years into a 5 year ARM Mortgage at 5.875% rate
  • Over $63,000 debt, average interest rate 23%
  • Not enough EQUITY to refinance high interest rates
  • $2,200 positive cashflow… but paying all to interest
  • Only $23,000 in Retirement… dropped over 40%
  • Fears of never being able to retire

Their Needs:

  • STOP the Retirement Account Risk Exposure
  • DROP the sky-high interest rates
  • Create “Breathing Room reserves”
  • SLASH Mortgage costs without Selling Home
  • Accelerate build-up of Equity
  • Accelerate recovery of Retirement Accounts

Our Solutions:

  • Reduce Average Interest by OVER 18%
  • Accelerate and Move over $30,000 EACH YEAR into SAFE growth at a 6-8% reasonable rate
  • Protect their Social Security benefits from getting hit with unnecessary Income Taxes
  • Create REAL retirement OPTIONS, where none previously remained

Ms. High School Teacher

The Problem:

  • 60 years old, approaching retirement
  • Divorce left her with an Mortgage at 6.875% rate
  • California home dropped 30% in value
  • $2,200 more costs than income (dipping into savings)
  • Savings Nest Egg accounts dropped over 40%
  • Fears of never being able to retire
  • Beach-house rental for grandkids from annual savings

Her Needs:

  • STOP the Retirement Account Risk Exposure
  • STOP the need to raid Nest Egg for expenses
  • Create “Breathing Room reserves”
  • SLASH Mortgage costs without Selling Home
  • Accelerate build-up of Equity
  • Retain ability to host grandkids at beach-house

Our Solutions:

  • Reduce Total Interest by 4% overall
  • Move $69,500 into SAFE Accounts to prevent further loss & add 6-8% reliable growth
  • TEMPORARILY Reposition $137,600 of underperforming retirement equity INTO secured home equity (for stability & savings)
  • Create $27,000/year Additional Cashflow SAVINGS ($2,250 savings monthly!)

CAREFUL who you take your ADVICE from

  • She HAD been advised by her CPA to “sit tight & wait for the housing market to return!”
  • He told her “You’ll have to skip your summer beach-house with the grandkids!”
  • He told her “You need the tax-deductions on that 6.785% mortgage, don’t move your money out of your managed accounts!”
  • “Sitting and waiting” was costing her… her security, her retirement future, and worst of all… her precious time with her grandkids!
  • When we showed her the facts, she wondered WHY her CPA would tell her such things…
  • He was NOT managing her growth accounts,
  • BUT his office neighbor (stockbroker) WAS!

Mr. Contractor & Mrs. Consultant

The Problem:

  • Rebuilding careers after corporate America gave them a “new opportunity”
  • She’s 60, has business consulting clients
  • He’s 64, starting property service business
  • Retirement accounts underwater 60%
  • Income down 65% (but future IS looking bright)
  • Current Income was HALF their costs of living (dipping into accounts that have already lost money)

Their Needs:

  • STOP the Retirement Account Risk Exposure
  • STOP the need to raid Nest Egg for expenses
  • Create “Breathing Room reserves”
  • SLASH Overhead costs without Selling Home

Our Solutions:

  • TEMPORARILY Reposition $220,000 of battered retirement funds INTO secured home equity (for stability & savings)
  • Establish over $91,000 of safety reserves
  • SLASH interest costs, creating $73,140/yr SAVINGS (6,095 savings monthly!)
  • NO NEW ACCOUNTS REQUIRED!

Our Results:

  • Previous Effective Interest Cost = 6.39%
  • Previous Savings Account Losses = -20%
  • Rebalanced Interest Cost = 2.96%
  • GUARANTEED Savings = $73,140
  • APR BELOW 3.2% (Total Interest cost-side)
  • 33.2% (RISK-FREE Returns on Savings)

Family of 4

Situation

  • He’s 47 – Software (sole breadwinner)
  • She is 43 - Mom
  • 10 year old Son #1
  • 3 year old Son #2

Their Dreams:

  • She wants to return to school to get a Professional Degree (6 years tuition)
  • They want to build College Tuition Funds for both sons
  • They want freedom from Retirement worries
  • They want a tax-advantaged plan that provides FLEXIBILITY

RESULTS Of Our Plan:

  • NO CHANGE to Lifestyle Money budgets
  • $20,000 Saved annually in Interest Alone!
  • Wife can IMMEDIATELY begin University Studies
  • Both Sons’ 4-year tuitions ($25,000/year) FULLY-FUNDED
  • Full Flexibility – No Restrictions on Funds Usage
  • NO CONFLICT with potential for grants or low-cost loans.
  • Complete control for Wife’s tuition, and/or either Son’s tuitions, AND/OR retirement use, NO PENALTIES
  • NO required distributions, at ANY age
  • Tax-Free $150,000/yr Income available age 65 to beyond 100

ULTIMATE RESULTS:

  • Perpetual Retirement Income (even AFTER Tuition Exp.)
  • Put To Work $497,000 Under-Performing, “Lazy” Money
  • 100% Principal Protection (ZERO MARKET RISK)
  • 8.81% Estimated TAX-FREE Indexed Growth
  • Emergency Liquidity As-Needed (“Just In Case” money)
  • Funds-Use is COMPLETELY at Their Discretion
  • At husband age 90, Value STILL holds $1,782,000
  • At husband age 100, Value STILL holds $4,500,000

Maria & Jonathan

Trouble

  • 1 House
  • 2 Incomes
  • 3 Teenagers
  • Late 40's
  • Big fans of radio financial gurus...
  • Got convinced to aggressively accelerate mortgage elimination
  • Oldest daughter "Troubled Child"…
    • Ultimately had a baby w/o a father
  • Maria & Jonathan now have cash flow trouble
  • Almost at risk of foreclosure
  • No safety reserves, growing bills
  • Tiny retirement accounts, shrinking hope,
  • Exhaustion, depression, approaching desperation

Solutions;

  • Separated accumulated home equity,
  • Paid off all "surprise expense" credit balances,
  • Reduced monthly costs by $2,000
  • Max-funded retirement accounts
  • On track for 1 FULL income replacement in 20 years, both by 30 years.

Matt & Liz

Matt & Liz refinanced their home and put themselves in a position of financial safety.

Setup

  • Two incomes
  • One 18-month-old
  • Two ROTH IRAs
  • One growing liquid account for emergencies
  • Two mortgages

Implement

  • Home increased in value $80k
  • Refinanced from a 100% Interest-Only to a 90% Option ARM and pulled out $34k
  • Invested cash out:
    • $8k went into EACH of their ROTH IRAs to max out 2006 and 2007 (refinance was completed before April 15)
    • $15k went into another investment account, $8000 of which is earmakred for daugher's collage
    • Remaining went into a liquid emergency fund earning ~7%
  • Lowered monthly mortgage payment by ~$200

Result: Safety

  • ONE WEEK after refinance was completed Matt lost his job.
  • Bright side:
    • Lower monthly payment
    • No mortgage payment first month after a refi
    • Full emergency funds
    • Investments "taken care of" for the year
  • Without tightening the budget, Matt & Liz could survive off of their emergency funds for at least six-months.

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"Two Brothers"

Let's look at Sam and Nick.
  • Both earn $75,000 a year
  • Both have $50,000 in cash
  • Both buy a $250,000 house

Nick wants to minimize his mortgage, so he uses his $50,000 in his savings as a down payment and he opts for a 15-year loan at 6.75 percent. His monthly payment is $1,770 -- but only 74 percent of that payment is tax-deductible interest; the rest in principal. Therefore, Nick's net after-tax cost for his mortgage is $1,489. And to pay off his mortgage even quicker, Nick sends in an extra $100 with every payment. Of course, these payments are devoted entirely to principal, and therefore provide no tax deduction.

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