Investment Newsletter for the end of April, 2017

The market has continued to climb. The Dow is up about 277 points, roughly 1.3%. That is not a huge increase, but it has been steady. Sometimes it is good to be the tortoise and not the hare. Obviously, the market, at some point, will go back down, but we do not know when. It is best to stick to the long-term plan.

I have slightly lowered my fees for accounts north of $750,000. Also, I added a sliding scale. The fee as a percentage of assets gets lower as accounts get larger. I wish to stay competitive. However, my aspirations are bigger than that. I also want to dominate the industry. For more information read about it here. I’ll include the new fee structure at the bottom of this post.

Last month, I started discussing social security. I talked about when to start collecting, roughly how your benefit is calculated, and how spousal benefits are figured. To reiterate and expand:

Your benefits are based on the average of your highest 35 annual incomes. They are not based on the annual income of your last five years. Only incomes subject to social security tax count. Rental income, pension income, dividend and interest income, and s-corporation income are not subject to social security tax. Therefore, you will not receive social security benefits. I have clients with ten rental properties, investment dividends and capital gain, etc. They will not be able to collect social security unless they have wages or self-employment profit. There is a maximum income that is counted for social security. It is currently $118,500 per year. If you make more than that amount, you do not pay social security tax on the extra income. However, there is still Medicare tax.

Every spouse collects the higher of their social security benefits or 50% of their spouse’s social security benefits. In my case, my wife and I will collect a total of 150% of my benefits. There is no agenda here of increasing your spouse’s wage in a small business. Unless, the smaller wage goes over 50%, the extra income is wasted. A key point here is these rules count only if you are married to someone for over ten years. It does not matter if you divorced, remarried, divorced again, remarried again, and widowed. You collect 50% of your spouse’s number as long as you were married to that person for a cumulative ten years. If you were married less than ten years to one person, you have no rights to that account (with exceptions for disability situations). If you were married to several people for over ten years each, the government has a weighted average formula to calculate the benefits.

There is no simple answer about when to start collecting. You can start as early as 62 years old or as late as 70 years old. The longer you wait, the more money you collect each month. However, if you wait, you will collect fewer payments. To decide between the two options, you need to look at your own situation. Based on your health and family history, what is your life expectancy?

I do not know if social security will always be there. The program is extremely underfunded. In order for it to survive, the program will have to be modified within the next ten to fifteen years. I suspect the full retirement age will be raised to near 70 years old, inflation adjustments will be minimal, and the maximum earnings allowed will be raised. Social Security will be there for me when I retire in 15 years or so. I have no idea what the program will look like when my 28-year-old son retires.



New Fee Schedule

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the whole account. Compared to my old fee structure, under the new fee structure the cost for a $1 million account would be $500 lower per year and the cost for a $1.5 million account would be $1,500 lower per year. I will still waive personal tax return fees for accounts over $1 million. All services stay the same. I am just lowering my upper end fees. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

Questions for the comments

Did my newsletter make sense? Do you agree or disagree with what I said?

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