Your Wealth is Under Attack!
There is a 3 Headed Monster lurking in the shadows and it is hoping to consume all the wealth that you have worked so hard to accumulate. Each of the Monster’s Heads can strike at any time without warning, and they all work together to reduce your pathways for escape.
The first Head on this hungry beast is Tax Law, and it can transform itself at the desires of the governing body depending on economic and social pressures. Because our Nation is funded primarily through taxes, additional taxation is often triggered by priority changes in spending for things like National Security, Infrastructure Maintenance, Education, National Debt Reduction, and Special Interest Groups. We have recently seen the elimination and capping of tax deductions and a failed attempt to eliminate the Capital Gains exemption on a Primary Residence. It is quite likely that we will see more taxes in the future to correct our history of government overspending and to pay back the monies taken from the Social Security reserves. Protecting your wealth from the Tax Law Head will require the re-positioning of your investments into assets not under attack. A good example may be downsizing an expensive luxury home and creating multiple income producing properties where Interest and Taxes are deductible business expenses.
The second Head is Inflation. History has shown that inflation can be managed, but not controlled. It is a by-product of economic strength and tends to rise with economic growth. When there is a strong demand for money to purchase goods and services interest rates rise, and so does most everything else. However, when the cost of capital exceeds appreciation values economic chaos can ensue and financial markets often decline significantly from the uncertainty. Inflation while holding Real Property generally results in a growth in equity and income, and does not come into play if you do not sell the property.
The third Head is Health Care, and it is the most voracious Head of the three! It is emboldened by Time and it tends to consume your wealth with ever-increasing speed. The scope of Health Care has wide boundaries and it includes a much broader spectrum of circumstances than merely injury, illness, and disease. Aging takes an undeniable toll on the well-being of every Senior, in one way or another, and is a common factor in most of the needs for Health Care. In brevity, Aging contributes to the loss of physical function and mental capacities which creates the need for services and care to assure ongoing safety and health.
You might think that cost factors like Inflation, Government Regulation, and Litigation would be your biggest concerns in controlling Health Care expenditures. However, the alarming projections of Human Longevity Increases outweigh all of the other factors combined. And keep in mind that what we are seeing Today is only the Tip of the Iceberg! Scientific discoveries are tested over many years before they are released to the Public, and the technologies currently being tested in secret would probably seem like Science Fiction. So, if Health Care keeps increasing in Cost and Need over Time, and Time is increasing rapidly with regard to Human Life Spans, the cost of Healthcare becomes an exponential threat to your Wealth.
So how do we evade the Hydra? Logic tells us the Best Way to protect your wealth is to have it invested in Real Property assets that generate rental income and take advantage of Tax saving options. You must resist the urge to sell those assets for any reason, especially when there is a perceived lower asset value. No Sale equals No Loss. A better strategy to access your equity while maintaining income flows would be to borrow the money secured by the equity instead. Income from Real Property is influenced primarily by Demand for Housing, and NOT Consumer Confidence which is difficult to predict, and impossible to understand. Renters will always need Rental Properties and their Demand will grow as Home Purchase options are reduced by Inflation and rising construction costs. And if Human Lifespans increase rapidly, so will the population and the total demand for housing.
Be realistic in your Real Property strategies and Always Do the Math! It is highly recommended that your CPA or Tax Attorney be an integral part of the Strategy determination process, and that your Strategy achieves the perfect balance between your Financial and Lifestyle goals. Funds can be obtained in many ways including purchasing Real Property inside your 401k or IRA. Income flows achieved within your Retirement Accounts are not taxable until they are withdrawn. Take advantage of the powerful leverage that financing provides, and make sure your lending source is aware of, and comfortable with your Strategy. Determine your comfort level for dependable Cash Flow and adjust your down payments accordingly. Let your renters pay the costs of ownership including the property’s financing and consider using a top-notch Property Management firm to reduce your efforts and provide an additional layer of protection. Your equity will build from appreciation and mortgage pay-downs, and you will have an income source that will overcome the appetite of the 3 Headed Monster, regardless of how long you are blessed with life.
There is a 3 Headed Monster lurking in the shadows and it is hoping to consume all the wealth that you have worked so hard to accumulate. Each of the Monster’s Heads can strike at any time without warning, and they all work together to reduce your pathways for escape.
The first Head on this hungry beast is Tax Law, and it can transform itself at the desires of the governing body depending on economic and social pressures. Because our Nation is funded primarily through taxes, additional taxation is often triggered by priority changes in spending for things like National Security, Infrastructure Maintenance, Education, National Debt Reduction, and Special Interest Groups. We have recently seen the elimination and capping of tax deductions and a failed attempt to eliminate the Capital Gains exemption on a Primary Residence. It is quite likely that we will see more taxes in the future to correct our history of government overspending and to pay back the monies taken from the Social Security reserves. Protecting your wealth from the Tax Law Head will require the re-positioning of your investments into assets not under attack. A good example may be downsizing an expensive luxury home and creating multiple income producing properties where Interest and Taxes are deductible business expenses.
The second Head is Inflation. History has shown that inflation can be managed, but not controlled. It is a by-product of economic strength and tends to rise with economic growth. When there is a strong demand for money to purchase goods and services interest rates rise, and so does most everything else. However, when the cost of capital exceeds appreciation values economic chaos can ensue and financial markets often decline significantly from the uncertainty. Inflation while holding Real Property generally results in a growth in equity and income, and does not come into play if you do not sell the property.
The third Head is Health Care, and it is the most voracious Head of the three! It is emboldened by Time and it tends to consume your wealth with ever-increasing speed. The scope of Health Care has wide boundaries and it includes a much broader spectrum of circumstances than merely injury, illness, and disease. Aging takes an undeniable toll on the well-being of every Senior, in one way or another, and is a common factor in most of the needs for Health Care. In brevity, Aging contributes to the loss of physical function and mental capacities which creates the need for services and care to assure ongoing safety and health.
You might think that cost factors like Inflation, Government Regulation, and Litigation would be your biggest concerns in controlling Health Care expenditures. However, the alarming projections of Human Longevity Increases outweigh all of the other factors combined. And keep in mind that what we are seeing Today is only the Tip of the Iceberg! Scientific discoveries are tested over many years before they are released to the Public, and the technologies currently being tested in secret would probably seem like Science Fiction. So, if Health Care keeps increasing in Cost and Need over Time, and Time is increasing rapidly with regard to Human Life Spans, the cost of Healthcare becomes an exponential threat to your Wealth.
So how do we evade the Hydra? Logic tells us the Best Way to protect your wealth is to have it invested in Real Property assets that generate rental income and take advantage of Tax saving options. You must resist the urge to sell those assets for any reason, especially when there is a perceived lower asset value. No Sale equals No Loss. A better strategy to access your equity while maintaining income flows would be to borrow the money secured by the equity instead. Income from Real Property is influenced primarily by Demand for Housing, and NOT Consumer Confidence which is difficult to predict, and impossible to understand. Renters will always need Rental Properties and their Demand will grow as Home Purchase options are reduced by Inflation and rising construction costs. And if Human Lifespans increase rapidly, so will the population and the total demand for housing.
Be realistic in your Real Property strategies and Always Do the Math! It is highly recommended that your CPA or Tax Attorney be an integral part of the Strategy determination process, and that your Strategy achieves the perfect balance between your Financial and Lifestyle goals. Funds can be obtained in many ways including purchasing Real Property inside your 401k or IRA. Income flows achieved within your Retirement Accounts are not taxable until they are withdrawn. Take advantage of the powerful leverage that financing provides, and make sure your lending source is aware of, and comfortable with your Strategy. Determine your comfort level for dependable Cash Flow and adjust your down payments accordingly. Let your renters pay the costs of ownership including the property’s financing and consider using a top-notch Property Management firm to reduce your efforts and provide an additional layer of protection. Your equity will build from appreciation and mortgage pay-downs, and you will have an income source that will overcome the appetite of the 3 Headed Monster, regardless of how long you are blessed with life.