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Think ‘strategy’ to safeguard your future

By Hal Rogers     

In 1992 economist Harry Dent, author of The Great Depression Ahead, Free Press, 2009,Crossing out Plan A and writing Plan B on a blackboard. predicted the greatest economic boom the United States would ever see—and he was right on target.  Dent hitched a caveat on the tail end of his prediction, however.  He said the boom would be followed by an economic downturn that would be worse than 1929 and last longer

Dent correlates demographics with financial markets to make his uncannily sound predictions. The essence of his theories is this: As baby boomers reach their peak spending years, the financial markets should likewise increase and peak. But, as the number of people in their peak spending years decreases, so should the economy.

The recession we have been experiencing was a significant downturn—but it was not the one Dent predicted. That one, unfortunately, may still be on the horizon; the demographics have not changed. Bottom line: If the correlation Dent assumed is accurate, there are worse times coming.

The solution: Strategize now on how to minimize the impact of those anticipated worse times.

In financial, tax, and estate planning, strategizing essentially means long-term planning. And that is done in five steps:

1. Assess your risk-tolerance level. How willing are you to take risks with your money? How far will you go to secure your financial future?

2. Determine your investment objectives. What do you want your investments to do—both now and in the future? List all of the possibilities, then prioritize them according to their importance to you. Some things to consider:

• Provide an income now;

• Secure retirement income for life;

• Growth (if realized would provide more income in the future;

• Minimize income taxes;

• Provide an estate for heirs

• Protect against nursing home costs

Ability to cash out the portfolio and spend the invested dollars;

• Have your assets managed by a professional;

• Avoid probate.

3. Design your portfolio based on your specific objectives.  Design doesn’t just mean risk allocation; it also means strategic allocation based on what you want the money to do, given the possibilities noted above.     

4. Consider the unforeseen. Your objectives are what you expect to happen, but things don’t always go as planned. For example, you might need income sooner rather than later, or you might find yourself requiring additional money to tap into reserve funds (perhaps to put on a new roof or to buy a new car). Or, despite your planning, the stock market could drop; income tax rates could go up; or your health could deteriorate.

5. Develop strategies to cover the unexpected. Strategies are unique to individuals. A number of things affect the choice of strategies, including your estate objectives, income level, net-worth level, net-worth amount, tax bracket, and family situation.

Some tax-saving and estate-transfer strategies are simple and may even be cost free to implement. For example, depending upon your objectives, you could:

• Spend down certain assets before others, to minimize total taxation.

• Change account registrations to avoid probate.

• Establish “Payable on Death” or “Transfer on Death” designations to avoid probate and/or direct distribution.

• Upgrade beneficiary designations to ensure correct distribution to desired heirs. (Note: Simply filling in the blanks on beneficiary designation forms can lead to catastrophic results.)

• Take charities out of your will or trust and add them to your IRA beneficiary designations to increase tax-free distributions to your heirs.

Investment strategies can be complex and extend beyond the scope of a single financial article, but correlating seemingly unrelated investment accounts can make those accounts provide significantly improved value for account owners. (Correlating accounts means that one account gives you permission to use another, so the other can make your money work harder for you.)

When economic conditions worsen, income becomes harder to come by and assets tend to lose value.  If this is the direction in which the economy is going, it is going to be more important than ever to protect financial assets, minimize taxes, and increase financial security. 

Current data says times are tough and getting tougher.  Some strategic planning might be more than just a good idea whose time has come; it might be an economic necessity.

Harold J. Rogers, CFP, CSA, president of Retirement Services, is a registered representative with ProEquities, Inc., and an investment  advisor representative of Investment Advisors, a division of ProEquities, Inc.  Securities offered through ProEquities, Inc., a registered broker/dealer, member FINRA & SIPC.  His office is located at 8596 Arlington Expressway, Jacksonville, FL 32211, and he can be contacted at 888-720-0556.  Retirement Services is a sole proprietorship owned by Harold J. Rogers and is independent of ProEquities, Inc.


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