April 2016


HOW MANY WONDERS OF THE WORLD EXIST?


The Wonders of the World are typically considered man-made structures. Throughout centuries of time the top 7 wonders list has changed as new wonders come into existence and ancient wonders disappear. Additionally, with seven being such a small number in comparison to how many wonders there really are, categories were created—Ancient Wonders, Modern Wonders, Natural Wonders, among others.

Some students were asked to list what they considered to be the top 7 wonders of the world.Their top choices were:

  1. Egypt’s Great Pyramids
  2. The Taj Mahal
  3. The Grand Canyon
  4. The Panama Canal
  5. The Empire State Building
  6. St. Peter’s Basilica
  7. The Great Wall of China

One girl was having trouble with her list.One girl was having trouble with her list.

  1. To see
  2. To hear
  3. To touch
  4. To taste
  5. To feel
  6. To laugh
  7. To love

Perhaps you will find some new wonders in the money ideas presented below.


OUT-OF-THE-BOX THINKING ABOUT MONEY



1. Is your money compounding inside your investment account?

    • The account increases in value as a result of rising market conditions.
    • Dividends are declared, and the proceeds are put into the investment account.
    • Money is added to the account.

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2. What type of account creates compounding? Compounding happens in interest crediting accounts. Accelerated compounding often is delayed until at least 15 years. Maximizing compounding works when the money stays in a tax-free account for a long period of time and is uninterrupted. Taxation and withdrawals interrupt compounding.


3. What is an example of an ideal compounding account? A high interest crediting over funded life insurance contract creates compounding. If you have a need for cash and the life insurance is the source then you can borrow from the life insurance company and use the cash value in the contract as collateral. The compounding continues un-interrupted inside the contract because the insurance company is the source of the funds not your cash value!


4. Mortgage rates continue to remain at historic lows! Why is that significant? You can borrow the money and make low mortgage and interest payments for the duration of the loan. Interest rates on fixed instruments will rise in the future if mortgage rates rise. You will have access to that money to take advantage of rising interest rates, and at the same time only pay the fixed rate on the mortgage at the lower rate.


5. Is mortgage a debt? It depends on your situation. If you have enough money in an accessible side fund, and you can use it to pay-off the mortgage at a moment’s notice, then it is not a debt but a financial obligation similar to paying your water and electric bill. It is a debt when you don’t have enough money sitting in an accessible side fun.


6. Don’t overlook the changes the changes in Social Security as a result of the Bipartisan Budget Act of 2015. If you were born on or before May 1, 1950 (turn 66 for Social Security purposes in April 2016), you have access to voluntary suspension in order to grow your benefit until age 70. Additionally, your spouse may collect benefits at 50% of your full retirement age benefit, as long as your request for voluntary suspension occurs prior to April 30, 2016. The changes could cost thousands of dollars in Social Security benefits, depending on your date of birth and marital status. It is important to review your situation with a competent advisor experienced with the new rule on Social Security, and consider doing it as soon as possible. D-Day is approaching!


7. What is your exit strategy for receiving funds from your IRA or 401K? Many people want to delay taking the money as long as possible to avoid taxation. It seems right on the surface, but what if you are also maximizing your benefits on Social Security and elected to delay your benefit until age 70? Mandatory distribution is required at age 70-1/2. By taking both qualified money distributions and Social Security benefits you may be put into a higher tax bracket. At that time, it will be too late to formulate a strategy for tax savings.


8. What is a fixed indexed annuity? Fixed indexed annuities are deferred annuities that earn an interest rate determined in part by the performance of a specific stock market index, often the S&P 500, not including dividends. If the index gains value during the specific time period set in the contract, your indexed account is credited with a return that’s linked to that gain. This provides an opportunity for your account value to grow. If, on the other hand, the index loses value in the specified period, as it may do, your indexed account is credited with 0% interest rather than a negative return.

Source: Lightbulb Press “Guide to Understanding Annuities”


9. Financial entertainers and financial press don’t always get it right? They supply us with a ton of opinions and advice. There are two sides to every story, similar to the two sides of a coin. The entertainers and press usually express just one side of the story without much consideration to the other side. Counter intuitive thinking should be used, and verification of opinions is necessary to find the truth. A lot of money could be lost if you listen strictly to their opinions.


“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark Twain


10. The Truth About Taxes: Here’s How High Today’s Rates Really Are. Let’s begin with a look at the top income tax bracket since the federal income tax was started in 1913. As you can see from the graph below, relative to history, it’s currently very low. Where do you think taxes are headed? Planning now could make a big difference in the amount of taxes you may pay in the future! There is more to be gained by avoiding losses than by picking apparent winners.

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US Income Tax Brackets 1913-2011


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