Retirement Dreams Disappear With 401(k)s

As more and more people have their lives devastated by their diminishing 401(k)s, more and more reports like this 60 Minutes piece will be produced. The havoc that Wall Street has wrought in the name of profit is beyond scandalous and borderline criminal. It's only a matter of time until the current retirement sytsem is radically altered to do what it was initially designed to do....help people save for retirement! Do yourself a favor and watch this 10 minute segment on CBS's website. You could also read the transcript here.

An entire generation's retirement dreams have been wrecked due to their blind faith in the stock market. And why wouldn't they? Brilliant marketing campaigns convinced them equities were the best way to grow their retirement accounts. Then the retirement accounts themselves (IRA's and 401k's) were structured so stocks and mutual funds were the ONLY investments allowed. Starting in the '80s, TRILLIONS of post-pension dollars were pumped into the market via mutual funds and IPO, tech-stock mania. The market responded with the best 15 year run in it's history averaging 17% year-over-year growth. A generation was hooked, line and sinker.

But then the tech bubble emphatically popped losing 35% in early 1999. That was followed 8 years later by last year's 43% clubbing. Will the market recover? Probably, but to what extent?

What if the next generation learns from their parent's and peer's financial decisions and become more savvy to the pitfalls of stock market investing? What if they start building diversified retirement plans that aren't predominantly invested in the market? What if trillions of dollars are permanently moved out of the market and invested in commodities, real estate, cash or other investments? Warren Buffet predicts the growth that happened towards the end of the 20th century was the heyday of Wall Street and the chances of a repeat performance are slim.

I believe our current unregulated, falsely reported, hedged and ponzi schemed system has permanently soiled Wall Street's reputation for an entire generation. I'm sure one on them. Without the mass capital, hidden fees and blind faith necessary to build their financial house of cards, Wall Street will have a tough time reproducing last century's results.

Do yourself a favor NOW and begin building a better retirement portfolio. Don't rely on the stock market to be the sole provider of your retirement dreams. True diversification is possible through self directed retirement accounts that allow you to spread your risk over multiple investment classes. And more importantly, they can prevent your retirement from being wiped out or delayed by an unexpected bear.

Change in Employment = Change in Retirement Strategy

The most unfortunate consequence of the current recession is the incredible loss of jobs. Since it began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. While having to look for a new job means making a lot of hard decisions, what to do with your existing 401k should not be one them.

If your entire retirement portfolio has been invested in the stock market, now's the time to make a change...for the better. Roll your 401k from your previous employer to a self directed IRA. A 401k to IRA rollover is very easy to accomplish and will allow you to finally diversify your retirement savings account. Here's why:

1. True Diversification: When your portfolio is diversified, it can provide consistent performance in a range of economic conditions. The only way to truly diversify your retirement portfolio is with a self directed retirement account.
2. More Investment Choices: A self directed IRA works like your current 401k with one major difference. You're allowed to invest in anything that is legal by the letter of the law and not limited to the investments that your current custodian profits from.
   
3. Real Estate Is Proven: A self directed IRA allows you to use tax-sheltered dollars to purchase real estate with no withdrawal penalties. Once converted, you can own a range of real estate investments including commercial, multi-family, raw land, trust deeds and tax liens.
4. Gain Control: With a retirement portfolio purely invested into mutual funds, control lies in the hands of those that manage it. How have they been doing? Not well. Check out this story from the Chicago Tribune and read how Congress is finally calling these guys out to the mat. You and you alone should be responsible for your retirement. Don't leave it in the hands of someone you don't know.
   
5. Comprehensive Retirement Planning: Retirement planning should be a comprehensive approach covering the financial planning process including insurance planning, investment planning, tax planning, planning for college, employee benefits, and estate planning, as well as retirement planning. If you've ever reached out to your current Wall Street custodian and asked for guidance, they probably only offered advice on the products they sold. With a self directed IRA, you can get comprehensive advice from a qualified Certified Financial Planner.
   
6. Beneficiary Advantages: Named beneficiaries of an IRA other than a spouse (like your children or grandchildren) have tax advantages not available with 401k plans. Named beneficiaries of an IRA are able to stretch the required distribution over their life expectancy deferring income tax and allowing funds to continue to compound exponentially. Beneficiaries of 401ks do not have this option.

Losing your job is always tough and the silver linings are hard to see. But what you do with your retirement plan right now could drastically alter when and how you retire. Use the time you have to research the self directed world and possible investment scenarios. It may end up being a blessing in disguise.

If Only I Had More Time

As I speak with folks about investing in real estate using their IRAs, I hear one common concern, “I love the idea of self-directing my retirement money and investing in real estate but I just don’t have the time to do it.”

We understand and appreciate this sentiment which is one of the main reasons we started Freedom Growth. Americans are extremely busy and have little time left over after family and work commitments to plan for their retirements. It’s true that self-directing a retirement portfolio does requires some time and effort but it’s not nearly as much as you might think.

Real estate investors short on time have access to a free source of information, research, and advice. These are the services provided by your real estate broker. Real estate brokers representing investors as buyers are typically paid by the seller so they don't charge you a dime. It’s important to contact a broker who specializes in IRA real estate investing and tell him or her what results you’re looking for. If the broker does not already know of specific real estate investments that fit your needs, he or she can probably find one or more that do. This means you initially spend 20 – 30 minutes with a broker discussing your situation and needs.

The broker then finds opportunities that you might like and presents them in a clear, concise way. With real estate investing, the focus is not on how cute the property is, but on hard numbers, especially the ROI (return on investment). Your broker probably has opportunities for you but he or she might also need to find others which might take a few days or weeks. Ideally, your broker presents you a comparison of the various opportunities allowing you to quickly and easily make a decision. Done properly, this only takes a few hours of your time.

Now it’s time to make the investment. Documents are drawn and signed. In a matter of days (sometimes weeks,) the deal closes and the IRA now owns a real estate asset. You have diversified your retirement savings and paid nothing for the services provided by your broker. I challenge anyone to find a better deal.

So don't let time be an obstacle to building a better retirement plan. An IRA real estate specialist will gladly minimize your time involvement and give you great real estate investment advice...for free!

10 Reasons Why You Need an IRA Real Estate Specialist

As we continue to help people diversify their IRAs and 401ks with real estate, we've come across this question more than once: "Why should I work with you instead of representing myself or working with my local real estate agent?" A fair question so I thought I'd formalize our response to it.

Using your brother, uncle or the neighborhood residential specialist as your real estate agent when investing your IRA in real estate is not a good idea unless they have specialized knowledge and experience with this type of transaction. What's needed is the combination of a good real estate lawyer, a real estate agent specializing in investing and a CPA that either does, or is willing to understand self-directed investing. Here are ten reasons why you need a specialist like Freedom Growth when making IRA real estate investments.

1. Not the usual real estate deal. Real estate investing is a specialty much different than buying or selling your home. Beware of residential and commercial agents claiming to know about IRA investing especially now that the market is tight and agents are hungry. You could get stuck in a binding agreement with someone who is not equipped to handle these transactions.
   
2. Property selection. The factors used to select the right owner-occupied home are driven by subjective and emotional motives. Real estate investing uses business and finance principals to locate the right investment. Your agent needs to crunch the numbers to make sure it’s the right investment for your needs.
3. Who is the buyer? When investing using your IRA, you are not the buyer. You need to understand what role you, your IRA and the self-directed custodian play in the deal.
4. Prohibited transactions. Very few real estate agents understand anything about the perils of making the wrong investment. The consequences can be rather severe so it’s best to work with someone who understands real estate investing and the rules on self-directed investing.
5. The offer. After finding the right investment property, writing a good offer using your IRA requires specialized knowledge that many real estate professionals do not have. Doing it wrong can result in delays and missed opportunities.
6. Joining Forces. Thinking about investing with a family member or friends? Getting solid advice about joining with other investors is crucial to avoiding the pitfalls that can result in trouble for you and your retirement account.
7. Commissions. Who receives a commission on an IRA real estate deal matters. This is especially true and dangerous when agents represent themselves or a family member is the agent.
8. Titling the property. How should title to the property be taken? Your real estate agent probably does not know. The answer depends on several factors. Some are legal. Some are practical.
9. Financing. Is financing available? If so, you need to understand the merits and drawbacks associated with leveraging the property. Again, specialized IRA real estate knowledge and contacts are required here.
10. Liability. Let’s assume you’re buying a four-unit income property. What happens if someone is injured on the property? You need to understand how your IRA handles insurance claims, negotiations, and settlements.

Freedom Growth brings together the real estate, legal, and financial skills required to assist its clients in making successful IRA real estate investments. If not us, be sure the team you enlist has what it takes to keep you and your retirement account on solid ground.

"Finance Companies are Better Off With Customers Being Financially Illiterate"

Financially illiterate consumers are good for the financial sector according to Adam Levin, chief executive of the consumer education website Credit.com in yesterday's LA Times story entitled "Rescuing Teens from Economic Ignorance". In his story he talks about how adept kids are today with computer literacy, social networking and cell phone mastery. But they have no idea what balancing a checkbook, setting a budget or saving for retirement means.

Here are the highlights of the story, or low lights if you're a teenager on the verge of adulthood in today's economic environment.

• Millions of Americans are learning the hard way about the pitfalls of teaser mortgage interest rates and runaway credit card debt. Sadly, their children may be doomed to repeat the mistakes of their overdrawn elders.
• "We've been going for years without that education, and it's one of many factors contributing to the whole mess we're in," said Karen P. Varcoe, a consumer economics specialist for the University of California.
• "It's kind of scary, thinking about doing this on my own," said Steffy Sulub, 17. "People our age are just let out on our own when we don't even know what to do."
• Nearly all young people agree that acquiring good money habits and setting financial goals are crucial to success, surveys and studies show. But high school seniors correctly answered fewer than half the questions on a 2008 test of basic finance knowledge, said the Jump$tart Coalition, a financial literacy group.
• And, although most young people attribute their financial knowledge to their parents, only 30% of students surveyed for Charles Schwab said their parents tried to provide some economic education.
• It's a dangerous cycle, said Adam Levin, chief executive of the consumer education website Credit.com. Parents are so preoccupied with -- or embarrassed by -- their financial affairs that they don't take time to mentor their children about money.
  
• The good news, Varcoe said, is that teens are keenly interested in learning about money. Arming them with some fundamentals may help them weather the next recession better than their parents are faring now.

As Levin stated, financial institutions make huge profits from the fiscally uneducated masses. So do your kids a huge favor. Besides teaching them how to drive a car, respect their elders and to do unto others as you'd have them do unto you, teach them about managing their money before they have any to manage. Few of us received that education growing up in the '60s, '70s and '80s and were forced to learn the hard way. Make sure your children fare better.

And while you're at it, treat yourself to a little updated financial knowledge. What's happening with today's economy is wreaking havoc on everyone's portfolio. Make sure you're better prepared for the next financial downturn since it may appear when you're on the cusp of retirement. There are plenty that are willing to help, but YOUR future financial independence starts with YOU taking the reigns.

As dire as the news is coming out of Wall Street and Washington, opportunity exists. Looking past the headlines to find it takes a little moxie, but you have the power to shape your financial future right now. If you don't see the opportunity, find someone who does and listen to what they have to say. Even if you don't agree, at least you took the time to explore options and listen to alternative theories to staying put and waiting for the market to rebound. You may learn something that you can implement at another time...and maybe gain knowledge that you can impart to your children.

Mistakes To Avoid in Today's Market

Did you happen to notice what the stock market did yesterday? Of course you did. It's nearly impossible to avoid the never ending stream of dire news about our economic slow down...er, recession...wait, depression? Whatever history will deem worthy for this economy, the question remains: What should you be doing with your retirement account to survive?

Here are six mistakes to avoid with your retirement account...sprinkled with a dash of opportunity. Now is not the time to let your retirement statements remain unopened, stash money under the mattress and ride out the economic malaise. You only get one retirement, so the time to take action is now.

1. Quit Contributing: Most would argue that a lack of personal (and institutional) savings is at the core of this current financial mess. Without savings, we sustain our supplement our standard of living by borrowing, usually via credit cards and home equity lines. The plan is to pay that debt with future income increases or home appreciation since time is on your side. But when you’re retired, your future income potential is at best limited and probably non-existent. And we’ve all seen that counting on unlimited home appreciation is a bad idea. Unlike other business ventures we may engage in or entertain over the course of life, there’s no “recovery” from poor retirement planning since time is no longer on your side. Saving for your retirement should always be a priority, no matter what the condition of the economy. So continue to save as much as you can, especially if your employer offers matching funds. Why would anyone pass up free income?

2. Convert All Assets to Cash: As the market has gone from bull to bear to vulture, the natural instinct is to convert all of your retirement nest egg to cash to eliminate losses. While there’s merit in that approach for a short period of time, keeping your money in cash over the long haul is just another way to lose money. Assuming your custodian pays you a 1% - 2% return on your cash or money market account, your money will continue to rise year over year. But also assuming inflation will remain steady at 3% - 4%, you are “losing” money every year.

3. Un-diversified Portfolios: How many people had all of their retirement savings strictly in equities? Nearly 80% of all retirement assets were invested in mutual funds and stocks according to the Investment Company Institutes’ US Retirement Market report published in Q3 of last year. True diversification is NOT owning different stocks and mutual funds no matter what your brokerage tells you. True diversification involves spreading your retirement beyond equities to include investments in asset classes such as fixed-income, cash, commodities and real estate. A well diversified portfolio helps to reduce the risk of substantial losses in a range of economic conditions and provides steady, proven growth to your retirement account.

4. Ignore Opportunity: It’s very easy to get caught up in the hysteria of what’s happening each day to the stock market, our banking industry and key economic indicators. But don’t get so overwhelmed that you miss the opportunities around you. People are having a hard time borrowing money these days? Why not use your retirement account to make trust deed loans? Investors are using their IRA, 401(k) and pension plans right now to make loans to other investors, secured by real estate, that are producing double digit returns. People are having a hard time paying their property taxes? Why not use your retirement account to purchase tax liens? Investors are using their accounts to purchase tax liens at public auctions and again are making double digit returns on their retirement savings. Are these types of investments guaranteed to produce returns? No...no investment ever is. But the current market IS providing opportunity if you're willing to look beyond the headlines and the norm.

5. Go It Alone: Most individuals have a very passive attitude about their retirement account. They’ve historically trusted their “diversified” stock market portfolios to provide for them and now too overwhelmed with everyday responsibilities to find a way around the current mess. We’re all busy, but your retirement is your responsibility alone, so take control. You need to develop your own personal recovery plan that unfortunately will not involve any Federal bail out money. If you don’t have the desire or inclination to develop one on your own, there are professionals out there to help. Find a “fee based” certified financial planner or CPA that isn’t beholden to a singular financial institution and will design a diversified portfolio for you to help survive...and maybe even thrive...in this market.

6. Keep Everything In the Market: It will come back, right? Yes, it probably will. But when? Waiting for Wall Street to rescue you from the mess that it created is like trying to lose weight by switching from Quarter Pounders to Big Macs. You need to alter your behavior and build a stronger portfolio today, not once the market comes back. Don’t cash out of everything, but other investment classes are offering opportunity right now while the market continues to decline. There are plenty of self-directed custodians out there that offer a range of investment accounts that will allow you to take full advantage of ALL investments that are possible by the letter of the law. So don’t limit your personal recovery plan to the investments offered by your current retirement plan. There are options out there, it’s up to you to find them.

10 Questions With - Ace Capital

Today's installment of "10 Questions With" offers an overview of land banking with Ace Capital. We love land banking in a retirement account since it is by nature a long-term appreciation building investment with very little maintenance. And this particular company is offering land banking in the Antelope Valley area of Los Angeles, which we feel is about to explode with clean energy development. Check out this segment from NBC news that outlines the vision of the Valley from the current political leaders.

I invite you to learn more about land banking with Ace Capital. Please take a read and let me know what you think.

1. Tell us a little about you and your company.
ACE Capital Group is a real estate company. We are not real estate brokers or financial advisors. We are the principals who purchase and sell carefully selected California pre-developed real estate.

2. Please tell me about your real estate opportunity.
Our programs and services are offered with the primary purpose of using land banking as an easy, secure and superior alternative for building sustainable wealth:

• We effectively use the strategy of long-term appreciation in land ownership by purchasing and selling property in the growth path of major metropolitan centers.
• We help qualified retirement account holders to roll over their funds from the volatile stock market into more predictable California real estate. Of course, we also work with cash. In addition, 1031 Exchanges are an ideal way to move money into a Land Banking strategy.

3. Where does your opportunity exist?
Ace Capital Group has perfected the formula for making sure the land we purchase in indeed in the path of growth and will be in a position to appreciate at a safe and predictable rate. The best place we have found is right here in Southern California within a sixty mile radius of Los Angeles.

4. How long have you been offering this real estate opportunity?
Our business has evolved from the extremely successful personal investments of our founders. Since 1974 their enterprises have helped over 10,000 individual buyers build their personal wealth with land banking. Our proven three step formula provides individuals and business owners with an innovative option to secure a better retirement, a legacy for their children and grandchildren; and we have voluminous testimonials from our buyers attesting to their satisfaction.

5. Does your opportunity help investors build long term wealth, immediate cash flow or both?
Land Banking is a term used by both individual investors and corporate land developers. It is the strategy of purchasing a parcel of land and holding (or banking it) it for typically five or more years for future sale or development.

Land banking is a proven long-term appreciation strategy for building wealth and providing individuals with a safe and profitable alternative for building their retirement nest egg. But, successful land banking requires planning and patience

6. Is financing available for your opportunity?
At this time there is no financing available for our process. We focus on helping people make their retirement funds work smarter and harder than they can in traditional methods. Therefore, it is cash that is already available but performing at less than the optimum capacity.

7. Are there any special tax advantages?
If using retirement funds then the tax advantages are great, especially if held in a Roth account.

8. Why is your opportunity ideal for self-directed IRA investing?
IRA monies are already set aside for long term wealth building. This is exactly what Land banking is all about. It is a long term strategy that blends perfectly in the IRA model.

9. How does your company make money?
ACE Capital makes it‘s money at the time of purchase. Our acquisition department is second to none in finding properties that meet our specific formula specifications that ensure appreciation. We buy direct from private owner with cash so we are able to strike great deals. We do not buy from the MLS or brokers so the prices are much better. As we are able to purchase the properties at well below market value we are able to cover our expenses and still offer the properties back out at below fair market value. The appetite for profit is low as we are able to help many people move into Land Banking. Therefore, volume sales help keep the prices where we can put people in equity position right away.

10. What type of results can investors expect with your opportunity?
First and foremost, we have never lost anyone’s money. It is a tangible, grant deeded, title insure piece of property. We have statistical data provided by an outside source that shows the appreciation rates in the area where we focus has been able to provide consistent 18-20% compounded annual appreciation for years. Specific information is available upon request.