Why 401(k)s and mutual funds are the path to retirement disaster

Ask yourself honestly, “Are You an Investor or a Gambler?”

Many people who have a 401(k) plan consider themselves to be investing for retirement. Yet, they often have no idea what they are investing in, and in many cases, have no idea how those “investments” are performing. Rather, they mindlessly put money aside into these retirement vehicles, often justifying the passivity of these efforts because they get a match from their employer.

My question is, if you don’t know what you’re investing in and you don’t really know how your investment is performing, how can you really consider yourself an investor? And even more, how can you know if you are secure for retirement?

The short answer is: you can’t and you don’t.

Call Today to Schedule a Complimentary 

​​​​​​​20-Minute Phone Consultation

This consultation is being offered at no cost or obligation
and is for educational purpose only.

Take advantage of this unique opportunity to learn exactly what type of cash value life insurance provides you the highest level of tax free retirement income without the risk of market volatility.

Some of the topics we will discuss:

• How to Protect Yourself Against Rising Tax Rates as National Debt Exceeds 18 Trillion.
• How to Avoid Out Living Your Assets
• Little Known Strategies to Potentially Increase Future Social Security Benefits.
• How to Protect Yourself Against Rising Tax Rates as National Debt Exceeds 18 Trillion.
• Methods to Protect Retirement Assets from Economic Uncertainty
• What to do if Your Retirement Accounts are Not Keeping Up with Inflation.
• How Eliminating Income Tax from Your Retirement Can Double Your Income.

Check if you qualify for the earned income tax credit

The earned income tax credit, which applies to low- and moderate-income taxpayers, can offer credit as high as $6,000. Karl Frank, author of the book, “Go Tax Free,” urges anyone earning less than $50,000 to investigate whether this credit applies to them; he qualified when he became a new parent, and he points out that many people qualify but don’t realize it they so lose out on the benefit.

Use the EITC Assistant to find out your filing status, if your child is a qualifying child, if you are eligible, and estimate the amount of the credit you may get.

EITC has special rules for members of the military, members of the clergy, and taxpayers with certain types of disability income or children with disabilities.

Basic Rules

Social Security Number

You, your spouse and any qualifying child you list on your tax return must each have a Social Security number that is valid for employment that was issued before the due date of your return (including extensions).

Filing Status

You must file:

• Married filing jointly
• Head of household
• Qualifying widow or widower
• Single

You can't claim EITC if your filing status is married filing separately.

If you, or your spouse, are a nonresident alien, see Publication 519, U.S. Tax Guide for Aliens, to find out if you are eligible for EITC.

Income Earned During 2016

• Your tax year investment income must be $3,400 or less for the year.
• Must not file Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion.
• Your total earned income must be at least $1.
• Both your earned income and adjusted gross income (AGI) must be no more than:

Filing Status	Qualifying Children Claimed
	Zero	One	Two	Three or more
Single, Head of Household or Surviving Spouse	$14,880	$39,296	$44,648	$47,955
Married Filing Jointly	$20,430	$44,846	$50,198	$53,505

For previous years, see EITC Income Limits, Maximum Credit and Tax Law Updates.

Additional Rules

I Have a Qualifying Child

If you, and your spouse if filing a joint return, meet the criteria above and you have a child who lives with you, you may be eligible for EITC. Each child you claim must pass the relationship, age, residency and joint return tests to be your qualifying child. See the Qualifying Child Rules for guidance.

I Don't Have a Qualifying Child

If you and your spouse, if filing a joint return, meet the basic EITC rules for everyone,you qualify for EITC if:

• You resided in the United States for more than half of the year; AND
• You cannot be claimed as a dependent or qualifying child on anyone else's return; AND
• You must have been at least 25 but under 65 years old at the end of the tax year.

A Family Saved from a Retirement Shortfall

Life is full of uncertainty. We don’t know what’s ahead of us and we certainly don’t know what the future holds.  Though we don’t want to think about it, unexpected illness or death of a providing family member can turn a financially stable situation into a crippling one. Thankfully, there are ways to protect yourself and loved ones, as one couple fortunately figured out.

Lance and Diane Wilson of Tustin, California, were well on their way to retirement with a 401 (k) plan and a teaching pension when they realized it wasn’t going to be enough for them to retire in their home town in Orange County as they had originally planned. They began to discuss their options, which included postponing their retirement and moving to a more affordable location, none of which they wanted to do. Not happy with their solution, they chose to meet with retirement planning expert Steve Sousa to see if anything could be done. As managing director of Advanced Savings Concepts in Tustin, Steve created a financial plan that not only maximized their current retirement funds, but also reduced any market volatility and reduced taxation.

Under Steve’s financial plan, the Wilson family significantly increased their retirement income. Not only were they able to retire with more income, but they also were able to retire earlier than first thought, all while remaining in Orange County! When Lance announced his early retirement, his co-workers couldn’t believe the difference the new financial plan had made in his retirement.

Not long after announcing his early retirement, Lance suffered a health diagnosis that would prevent him from working any further. Had the Wilsons not taken the steps to improve their retirement when they did, their financial stability would have been in jeopardy. Without the ability to work, they would not have been able to retire when they did and where they did.

The Wilsons credit Steve Sousa with the success of their financial stability. By creating a plan that resulted in significantly increased retirement income, reduced taxation, and reduced market volatility, the Wilsons were able to retire at a time when they needed it most. They are forever grateful to Steve and the financial security he provided their family.

"If it weren't for the financial strategies developed by Steve Sousa, we would not have been able to retire in Orange County near our children and grandchildren" - Lance & Diane Wilson

It pays to be prepared. With so much uncertainty in this life, it’s a relief knowing that you and your loved ones are financially cared for. 

If you are approaching retirement and are concerned about how market volatility or rising tax rates may affect your retirement, please call or schedule an appointment to learn the unique strategies that we have developed to help you protect and accelerate the growth of your retirement savings.

Steve Sousa has been helping Southern California families protect and grow their retirement savings since 1978. He was motivated to help friends and family innovate and enhance the way they saved money for things like real estate, college tuition, weddings and retirement. He also has wanted to see his friends and family pass more of their wealth onto their families. Watching families lose money in the market in 2001, 2002, 2003 and finally in 2008, inspired Steve to develop the most innovated strategy yet. This strategy not only protects families from losing money to stock market volatility, it also eliminates the burden of paying income taxes when you want to access your money. To learn more about this revolutionary strategy, schedule a free consultation. 

Wall Street Journal: Gamble the market or convert to cash. Really?

After reading the Wall StreetJournal’s article "As Stock Prices Keep Rising Should Investors Moveto Cash?” I was stunned to find that investors fall for such black-and-white thinking. 

I understand the perspective of those investors who are either approaching or are already in retirement. With little time to recover from a significant market loss, their viewpoint makes sense. However, these are not the only two choices people have.

It's one thing to consider cashing out of the market. It's an entirely different thing to let that cash sit in the bank earning less than one-tenth of a percent. However, due to low interest rates, we are seeing some of the lowest returns in history.

Another conservative option would be to invest in a fixed indexed annuity. This option would allow you to get a better return than CD's and money market accounts without sacrificing principle. Your gains would be locked in rather than your retirement being gambled away in the stock market. This strategy also allows you to create a tax-free retirement income.

Investors looking for a guarantee alongside some level of liquidity may want to consider dividend-paying whole life. The returns are quite conservative, but you can still maintain access to a portion of your cash via tax-free policy loans. The downside to this strategy is that you sacrifice the ability to earn higher returns in exchange for more guarantees.

The strategy that has the most upside potential is indexed universal life. Although it has the least amount of guarantees, it has historically out-performed the other two strategies by a minimum of 2 points. This strategy has a guaranteed minimum return of 0% to 2% (depending on the insurance company). Because this is the most versatile strategy available, it is essential to work with a financial planner who is experienced in designing and managing this type of strategy. This strategy also allows you to access a portion of your cash through tax-free policy loans. It will typically produce the highest potential retirement income. 

If you are approaching retirement or are already in retirement, these strategies could help you eliminate the uncertainty of market volatility and provide you with a tax-free retirement income. To learn more about any one of these strategies you can attend one of our free one-hour private financial education workshops in Southern California. To check for availability call 1-800-546-2499 or click on the link below.

The Shocking Historical Performance of Mutual Funds

Dalbar just recently released their 21st annual Quantitative Analysis Of Investor Behavior study which continues to show just how poorly investors perform relative to market benchmarks over time and the reasons for that underperformance.

It is important to note that it is impossible for an investor to consistently "beat" an index over long periods of time due to the impact of taxes, trading costs, and fees, over time. Furthermore, there are internal dynamics of an index that affect long term performance which do not apply to an actual portfolio. (For more on the reasons why benchmarking is a bad strategy click here and here.)

However, even the issues shown above do not fully account for the underperformance of investors over time. The key findings of the study show that:

• In 2014, the average equity mutual fund investor underperformed the S&P 500 by a wide margin of 8.19%. The broader market return was more than double the average equity mutual fund investor’s return. (13.69% vs. 5.50%).
• In 2014, the average fixed income mutual fund investor underperformed the Barclays Aggregate Bond Index by a margin of 4.81%. The broader bond market returned over five times that of the average fixed income mutual fund investor.(5.97% vs. 1.16%).
• Retention rates are
  • slightly higher than the previous year for equity funds and
  • increased by almost 6-months for fixed income funds after dropping by almost a year in 2013.
• Asset allocation fund retention rates also increased to 4.78 years, reaching their highest mark since plummeting to 3.86 years in 2008. Asset allocation funds continue to be held longer than equity funds (4.19 years) or fixed income funds (2.94 years).
• In 2014, the 20-year annualized S&P return was 9.85% while the 20-year annualized return for the average equity mutual fund investor was only 5.19%, a gap of 4.66%.
• In 8 out of 12 months, investors guessed right about the market direction the following month.Despite “guessing right” 67% of the time in 2014, the average mutual fund investor was not able to come close to beating the market based on the actual volume of buying and selling at the right times.

Read the Full Dablar Report

Result: Investors are flocking to alternative investments to save for retirement

Stephen Gandel from Money magazine, Nancy Altman from the Huffington Post and Fox Business News all agree that Americans need a new type of retirement savings. We need a retirement savings plan that can mitigate the risk of market volatility, decrease the tax burden during retirement while maintaining the investors flexibility to increase their earning potential.

Watch this free investigative report to see what investors are doing to protect and grow their retirement savings.

401(k) - The Danger of Hidden Fees

"There are a lot of reasons that 401(k)s are coming up short, like the stock market's steep decline from its all time high in October 2007. A less obvious reason, in fact a hidden reason, are all of the fees that can take a big chunk out of your investment returns." - Mike Schnieder, Bloomberg News

Most employees choose to invest into their company's 401(k) plan without ever questioning the cost associated with their investment. For those employees lucky enough to have an employer match their contribution, they are one step ahead of the rest of us. Unfortunately, most people have no idea how much they are paying in fees according to Bloomberg News,

"What they don't know can hurt them!"

Click HERE to Watch the Full Report >>


A survey done by AARP in 2007 (click here to download the study) showed that eight out of ten respondents with 401(k)s didn't know the cost of their plans. That's because many of the fees (all of which are legal) are either buried in the fine print of obscure documents or are so confusing they might as well be written in a foreign language.

"It's a complicated puzzle. By the US Department of Labor's Count there or at least 17 different fees that can be charged to your plan. Right now you'd be lucky to find even one of them listed by name on your account statement. What you don't know can hurt you. If you're paying for the same amount of your 401(k) as some of the people in this program after 40 years of investing, you can say goodbye to over half of your potential nest egg." - Mike Schnieder, Bloomber News

How can you protect yourself against hidden fees?

A new law went into affect three years ago allowing you to now get a 35-50 page disclosure document. The law requires that the 401(k) plan's administrator provide plan, investment, and fee information to all employees. As a result of these new rules, a person can determine the reasonableness of the costs they are being charged to save for retirement and compare the costs associated with different investments. Although this is a step in the right direction, most administrators don't understand the disclosure document let alone help their employees make sense of it.

Now that the first generation who invested in 401(k) plans are entering into retirement, we are beginning to see the disadvantages. After the stock market crash of 2008 and the exposure of unregulated fees, many Americans are looking into alternative investments to balance out their portfolio. If you are going to balance your portfolio, make sure you enlist the resources of an adviser you trust who can help you determine the investment strategies that work best for you.

To learn more about the options available to you, click below for a free consultation:

Why Gold Will Never Out Perform The Market

Whenever I turn on the radio I hear another ad persuading people to invest in gold as protection from another stock market crash. These ads remind me of graduating from college back in 1974. I had just started in the business and was looking forward to profitable investments. Then the economy tanked. With the stock market falling and runaway inflation increasing, there was evidence of financial stress everywhere. Lines even formed down streets simply to buy gasoline. The Dow Jones dropped to a record low of 587. I remember seeing the headline in the Wall Street Journal saying "The Dow is Dead." Analysts were predicting that fall to be the end of our stock market. Financial advisors told everyone to take all that they had out of the market and invest it into gold. Although gold may have been a safe place to invest money, it has failed to deliver on the promise of growth. The value of gold has only increased six times its value since 1974, while the Dow Jones has grown over thirty times its value as of 2015.

This leads us to today. What if you had the ability to combine the safety of investing in gold with the earnings of the stock market alongside the tax advantages of a Roth IRA?

Sounds unbelievable? It’s not. I have worked with experts in the financial planning industry to develop a retirement savings plan that provides you the advantages of all three. This retirement savings plan is unlike any you have ever heard or read about. We have taken common financial tools and have combined them into a unique design that allows investors to take full advantage of all of the benefits available today. If you would like to have a plan designed for you, simply fill out the request form below. We look forward to showing you how to take advantage of all the financial benefits available to you today.

Advanced Savings Concepts, Retirement Savings, Investing, Retirement Funds, Roth IRA, 401(k), Qualified Retirement, Retirement Planning