Your Unbiased Advisor: We pay $3,000 to subsidize taxpayers who avoid paying what they owe

We pay $3,000 to subsidize taxpayers who avoid paying what they owe

The Treasury Inspector General for Tax Administration and outside groups claim that the IRS isn’t effectively auditing corporations and high-income individuals with complicated returns. Even with Trump’s generous tax cuts to the rich, some are not satisfied and avoid paying since there is little downside. With fewer audits/staff, 14.2% of the taxes owed are never paid. On top of that, most corporations pay nothing. Actually, we give them our money in the form of subsidies, grants, deferrals and credits. Congress and its lobbyists are the beneficiaries and are unlikely to give it more money to do the tough audits. Actually, a poor parent with EIC is more likely to be audited. It is easier to garnish the wages of someone making $30,000 than sue GE, Boeing, or Apple. Two thirds of corporations pay NO tax. They use shells, non-US headquarters and asset manipulation to avoid taxes on income earned in the

. Even the president uses tricks to pay nothing.

https://www.amazon.com/Most-U-S-Corporations-Pay-Zero-Taxes/dp/1514274116

Does it really make a difference to cut advisor commissions/fees?

Is it really important to move your investments to the lower priced generic? For instance, Trader Joe employees are suing because they are paying more for their 401k retirement than needed. It may not seem that the 2% you pay for managing your money and keeping a record of your shares and earnings is a problem. If you earned 25% every year like you did in 2019, then of course it isn’t worth suing your employer. However, they don’t earn 25% every year for you. The 2% of your balance EVERY YEAR is a big deal when you earn only 4% average over time. Let’s say you add $250 a month to your retirement fund. If your firm or advisor offered a low-cost stock index fund at 11% average for 40 years, you would retire with $2,169,740. If they charged 2% a year over time, you would retire with only $1,179,107. You gave about HALF to your employer or advisor just because they did not offer the best options for you. They chose the best options for themselves.

Earn 11% over time: https://www.amazon.com/You-Can-Beat-SoCalled-Wall-Street-professionals/dp/1986031373

Reducing income tax by contributing to traditional IRA

Congress passed laws changing the IRA rules: you can contribute $6,000 ($7,000 over 50) to your traditional IRA and take a deduction from income. The law ends the prohibition on contributing to an individual retirement account (IRA) after 70½. Individuals may continue contributing to an IRA at any age, as long as they have ‘earned’ income. BEWARE NEW LAW: If you were pumping up your Roth IRA so your heirs could have tax-FREE income for life you may have to change your estate: NO stretch ROTH. All IRAs must be exhausted in 10 years unless disabled/illness. Even though you have paid tax on this money if you converted your IRA, you may have to use a trust to create legacy income for them. You may also want to use your lower income years to convert your IRA to a Roth since your rates may be lower now with a deductible IRA. Also new: Part-timers can make pre-tax contributions to a 401k and an IRA.

Which is best for you? https://www.amazon.com/401k-IRA-Tax-FREE-Tax-Deferred-retirement/dp/1475057938/

MA fighting lobbyists to re-install fiduciary standard

The broker-dealer and insurance industries agree: They don't like the broad-based Massachusetts fiduciary proposal, which would blanket their respective industries with a fiduciary standard they’ve been successful in avoiding up until now. Trump responded to the industry lobbyists immediately after election to kill the Obama version of the duty that sellers must give us the best deal regardless of size of commissions. Now MA Galvin wants bad products to be off limits: MA would “deem it an unethical or dishonest conduct or practice for a broker-dealer, agent, investment adviser, or investment adviser representative registered required to be registered in Massachusetts to fail to act in accordance with a fiduciary duty to any customer or client.” Lobbyists claim small investors would be hurt by this rule because industry would avoid helping those with limited funds—folks who need help the most. MA GOP Gov caves to lobbyists.

We need sellers to follow fiduciary duty: https://www.amazon.com/Fiduciary-Rule-BEST-dont-anymore/dp/1530980275

Is your ex still the beneficiary of your pension, insurance, etc?

This is important. When you forget to change your beneficiaries on your pension, brokerage or life insurance, you may have a long legal fight to fix it. And your current spouse and children may hate you. Choices made in your former life may come back to bite you. Most people are not always completely thorough during their separations/re-marriage/divorce. They miss changing beneficiaries they named 20 or even 10 years ago. It could be a pension account at a former employer that is due to go to your ex at age 65 or a forgotten paid up policy with last marriage kids as beneficiaries. Sure, with a legal fight you may get it changed but who needs the fight. This new tax season is the perfect time to look at your overhanging past life choices. Safe than sorry.

Check your benes: https://www.amazon.com/Personal-Finance-Smarties-Not-Dummies/dp/1469973030

Advisor trend: retainer fees to avoid ‘hawking proprietary products’

Is your advisor acting as a fiduciary? Are they recommending what’s best for YOU or maximizing the leverage they have over you? How do you know the difference? As your portfolio grows, does your advisor reduce the standard AUM fee? 1% of $1 mil is better for you than 1% of $1.5 mil this year: the market went up 30%; not their IQ. Advisors use much more automation and model portfolios now. Subscription-based services are becoming common for clients with large non-tradable or business assets or the need to offset market volatility. Time to ask for a better price for ‘advice.’

Shop Advisor costs: https://www.amazon.com/DIY-Financial-Independence-Freedom-Workbook/dp/1088908500

Why most investors don’t need an annuity

Many are DIY investors—they have jettisoned their advisors since learning the John Bogle and Warren Buffett investment lessons: advisor costs detract from your earnings. Advisors and annuities can take up to HALF your earnings in fees and trading costs. Here are DIY's results for 2019. They are total return investors—selling shares equally across all 10 funds for their monthly RMD income in retirement. Some want protection from a down market and so they overweight Wellesley Income instead of buying an annuity: Wellesley’s 9.7% a year is not too bad to live on.

2019 Total Return Fund Long-term Return Longevity

31.5% 500 Index 11.2% since 1976

13.2% Energy 9.9% since 1984

28.0% Extended Market 10.7% since 1987

22.9% Health 16.2% since 1984

31.4% International Growth 10.6% since 1981

27.9% PRIMECAP 13.4% since 1984

27.4% Small Cap Index 10.6% since 1960

16.4% Wellesley Income 9.7% since 1970

30.4% Windsor 11.3% since 1958

29.0% Windsor II 10.7% since 1985

25.8% Average 11.4% *