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April 2008
Index of all
past
Affiliate Corner columns
Foundations laid today are building blocks for solid future
By Bert Hermelink
Strategic Advantage Financial
When the market recovers, how do we avoid a repeat of what we have been going through financially?
If we lay our foundations correctly, we are usually able to withstand hard times like these. Plan ahead! Build and keep a liquid reserve fund equal to 6-12 months of our average expenses. This will carry us through the worst part of most market corrections, and other emergencies as well. The right kinds of medical insurance and long term disability insurance will protect against medical catastrophes so we don’t see our investments and assets being devoured. As self-employed business people, we are our business; it’s all up to us. It’s great to have a terrific investment portfolio, or a real estate empire, but our first priority must be to correctly set our foundations: the unglamorous, uninteresting life insurance, health and disability insurance, provisions for long term care, and liquid savings, the things which primarily serve to protect ourselves, our families, and all that we are building, against the loss of our ability to earn.
Next come retirement plans. When we are no longer able to be at work, even if just because we’re ready to lay it down and move on to the next stage of life, who, or what, steps up to bear the load? Who provides our income? In part, it’s the unglamorous, uninteresting, foundational programs: the liquid savings account, the insurance programs, the trust plans, the things that no one really sees or admires until they come into play. But your retirement plans will have to be there for you also. A couple, age 65 today, has a 50 percent chance that at least one of them will live into their 90s.
Retirement for many of us is now starting later, but life expectancy is increasing every day. So the third leg of the planning stool is retirement planning. IRAs, simple IRAs, SEPs, pension plans, and 401(k)s, both individual and group, are tax deductible retirement plans available to you. The “individual 401(k) programs” will allow a self-employed person over age 50 with no employees (sounds like a REALTOR®), to set aside and deduct as much as $51,000 this year. You can actually do this from an income of $157,500/year.
Most self-employed people have put away much less money than will be necessary to fund a comfortable retirement. Again, foundations are unglamorous, unexciting and somewhat expensive. Retirement plans are a major part of your foundation. With a home, we tend to admire elevations, interiors, and landscapes. Take a step back, check your own foundations, and evaluate the path you are on. When the storm comes, it’s the foundation you’ve built that will keep your life standing.
Bert Hermelink, CLU, ChFC, RFC, Strategic Advantage Financial. Registered Representative of and Securities offered Through QA3 Financial Corp., Member FINRA/SIPC. Investment Advisor Representative of and Advisory Services Offered Through QA3 Financial, LLC. an SEC Registered Investment Advisor. Strategic Advantage Financial is not affiliated with QA3 Financial Corp.
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