Can I take Hardship Withdrawals from my 401k?

10 09 2013

Jonathan N. Castle, MSFS, CFP

Jonathan N. Castle, MSFS, CFP

We recently had a question from a client about taking hardship withdrawals from his retirement plan. Essentially, the question was – what are they, and how do I do it? So, here is the answer we gave:

First, if you are past age 55, and are NO LONGER working for your employer – AND you have not taken the 401k and rolled it into an IRA – then you can make withdrawals from that account without the normal 10% early withdrawal penalty that typically accompanies these accounts. This is a special rule for qualified retirement plans and does not apply to IRA’s. In fact, if you roll the money to an IRA, you lose this provision and have to wait until age 59 and 1/2.

First – you must know that employers are not REQUIRED to offer hardship withdrawals – but usually they do because the plans are often “turnkey” and this feature is built in to turnkey plans. So, if you are still employed and need money from your employer retirement plan – then the simplest answer is that each plan usually has a feature to accomplish this. In many plans, you go onto the plan website, and look for “loans or withdrawals” and merely follow the procedure. If your employer plan does not have a website, or the website does is not set up to facilitate these online, then you probably have to complete a form with your HR department and/or the plan sponsor. You must certify that the Hardship withdrawal is for a purpose that falls within the allowable rules:

To buy a primary residence
To prevent foreclosure of eviction from your home
To pay college tuition for yourself or for a dependent
To pay un-reimbursed medical expenses for yourself or a dependent

Now there are also “exceptions” that do not fall into the hardship withdrawal category. They are literally as they sound – “exceptions” to the 10% penalty:

Medical debt for expenses that exceed 7.5% of your AGI
A court order for alimony or child support
You set up “substantially equal payments” for your life expectancy.

This last one – substantially equal payments – apply to IRA’s too, and are known as 72t distributions. Do not try to set this up yourself, consult with a CPA or a CFP because they are complex and the penalty for messing it up is quite harsh.

I hope this gets you onto the right path. Good luck with the obstacles you are facing!

Jon Castle

This blog is for informational purposes only. This is neither an offer to purchase nor sell any securities. All investing involves the potential of loss – including invested principal. Indices quoted are general barometers of security price movement. You cannot invest directly in an index. All information is obtained from sources deemed reliable but not guaranteed. Past performance is not a guarantee of future performance. No tax or legal advice is given nor intended.

Investment advisory services provided by Paragon Wealth Strategies, LLC, a registered investment advisor.

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256 (904) 861-0093

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements


Calm Before the Storm?

8 10 2012

Jonathan N. Castle, CFP®, ChFC®

The financial markets – both stocks and bonds – have been relatively calm for the last 4 months, nicely rewarding investors who avoided the urge to “Sell in May and Go Away,” and instead remained invested with a sound and prudent investment policy. Since the short but abrupt 10% correction that ended on June 2, the global stock markets have steadily advanced, packing on about 15% of value in the US markets and almost 18% in overseas trading. Our strategy of skewing portfolios heavily toward large stocks and high-yield bonds has generally paid off, allowing our investors to capture most of the market’s gains, commensurate with each individual’s risk tolerance.

However, based upon our own observations of financial news, as well as multiple discussions with clients, there is a nagging feeling of unease that persists in the financial markets. Nearly every client we meet with displays at least some level of concern about the economy and the financial markets going forward, despite having reaped solid returns from investments so far this year.

The financial markets are merely a reflection of the perceptions of hundreds of millions of investors, some of whom are highly sophisticated and understand the implication of governmental policies and economic data, and others who invest more by feel or intuition. Recently, there has been lukewarm (but not upsetting) economic news on the domestic front, a continuation of monetary easing by the Fed, and some positive developments in Europe that have led to a generally positive experience in the capital markets. Despite the calm, past experience has taught us that investors behave like lemmings and the stock market typically sets itself up to hurt the most people at any given time. I am reminded of Murphy’s Laws of Combat. There are several that presently come to mind:

• Murphy’s Law Number 26: The easy way is always mined.
• Murphy’s Law Number 38: If your attack is going really well, it’s an ambush.
• Murphy’s Law Number 32: In a crisis that forces people to choose among alternative courses of action, most people will choose the worst one possible (this one in particular may apply to Congress and the upcoming election)
• Murphy’s Law Number 44: After things have gone from bad to worse, the cycle will repeat itself.
• Murphy’s Law Number 145: Opportunity always knocks at the least opportune moment. (which takes courage to exploit…)

There are several very good reasons for unease – but it appears that there may also be a chance for opportunity to knock as well. Let’s take a look at the major issues that will be impactful on the economy and the financial markets over the next year or so.


Europe: The European Union seems to be finally getting its act together. The European Central Bank appears to be putting forth believable policies that may just keep the Union together and allow a “soft landing” for a number of the countries that are in deep fiscal trouble.

QE3 and Bernanke’s Printing Press:  The Fed’s announcement of QE3 is, in the short term, positive for the stock market and for the economy. Fortunately (for now) it does not appear that all of the ingredients for hyperinflation are present. QE3 does not cause the US to directly incur any more debt – but it does cause the Fed to print more money which can eventually lead to a weak dollar and inflation. Since other Central Banks are printing money as well, the Fed’s act of printing more money does not necessarily mean that the dollar will weaken against other currencies. So – for the short term, this is positive. For the long term – once the economy does truly begin to recover – this open-ended quantitative easing could be a catalyst for extreme inflation if fiscal tightening measures are implemented too slowly at some point in the future.

China:  It appears that China may have engineered a “soft landing.” If this is the case, it will have a positive impact upon our economy, as China is a significant trade partner with the US.


Fiscal Cliff:  The most dangerous upcoming challenge that we have to watch centers around the expiration of the Bush Era Tax Cuts. Originally scheduled to sunset in 2010, these tax cuts represent an aggregate economic impact of over $500 Billion dollars and are currently scheduled to expire at the end of 2012. If these tax cuts are allowed to expire abruptly, it would shock the economy and immediately push the US economy back into a harsh recession. It is likely that unemployment would rise quickly, every household in America would feel the impact, and the stock market would sharply pull back.

2012 Presidential Election:  Despite Romney’s good performance in the first debate, the markets currently still appear to be factoring an Obama victory. If Obama is reelected, then we believe that the markets will perhaps move sharply in one direction or another – but only for a very short period of time and for less than several percentage points, as amateur investors knee-jerk to the news. The impacts of governmental policy on industry sectors are some of the most widely studied economic subjects, and “bets” are placed months in advance. In fact, a number of studies have shown that the markets have a greater impact on presidential elections than presidential elections do on the markets. However – that being said, the consensus is that a Romney election will likely be better for the markets in the short term than would an Obama second term. Romney is a fiscal conservative, disagreeing with the Keynesian approach that the Obama administration is following. Historically, a Keynesian approach has not been particularly successful in creating economic prosperity, but has proven very effective at creating government debt and citizen’s dependency upon the government. Unfortunately, at some point, “production” must occur – which only occurs in the private sector and the free markets.

2012 Congressional Election:  It is likely that the Congressional and Senate elections will be more impactful to the economy than the Presidential election. If either side wins a mandate and can actually move forward with the responsible governance of the country, then we may see some of the more troublesome issues resolve themselves. It is our hope that Congress feels it has a mandate, and is empowered enough to move forward with “smoothing out” the expiration of the Bush Tax Cuts to the point where the US economy can avoid the upcoming fiscal cliff. If that is the case, then we may avoid recession and reap significant profits from the capital markets over the next several years.

So – in short – what do we see and what do we plan to do?

1. We are watchful. If we actually do hit the Fiscal Cliff, we will likely have time to react before everything goes to heck in a handbasket. In the event that the Bush Tax Cuts do expire, AND we begin to see the effects in the markets and on the economy, we will shift to Defensive Portfolios where appropriate. The Defensive Portfolios are designed to perform quite well under extreme market stress. However, if the stock market ends up providing a strong return, the Defensive Portfolio will miss out on most of it. Consequently, we do not want to shift to the Defensive Portfolio unless we feel that the odds of a serious market correction are high. Unfortunately, one cannot have it both ways. Safety and high returns rarely go together. Additionally, changing portfolio structure will have significant tax consequences on non-IRA type accounts.

2. In the event that we avoid the Fiscal Cliff, we expect several opportunities to arise if the situation in Europe continues to improve. Having reduced our exposure to international and emerging markets nearly 2 years ago, their impending recovery will likely present us with significant opportunity for profit. Currently the consensus from most analysts is that it is too early to buy into these markets – but perhaps soon.

3. High Yield Bonds and Large Growth Stocks continue to appear more attractive than usual. We intend to keep these in the portfolios in percentages well above what we would hold normally. So far, this has played out well for portfolio performance.

4. Interest rates: Rising interest rates are the least of our concerns right now. Yes, rising interest rates do cause the price of existing bonds to fall – but interest rates will only rise if the Fed does a complete 180 degree turn from its present policy of quantitative easing. Likely, we will have plenty of warning – and a very robust stock market – long before we need to adjust portfolios to protect against rising interest rates. Once that occurs, however, we will make the necessary adjustments to insulate portfolios against falling bond prices.

As always, we appreciate the faith that you have placed in us by allowing us to advise you during these most “interesting” times in our lives. It is our hope that our watchfulness and our attempts at distilling complex and often confusing information adds value to your overall financial situation.

Jon Castle

This blog is for informational purposes only. This is neither an offer to purchase nor sell any securities. All investing involves the potential of loss – including invested principal. Indices quoted are general barometers of security price movement. You cannot invest directly in an index. All information is obtained from sources deemed reliable but not guaranteed. Past performance is not a guarantee of future performance. No tax or legal advice is given nor intended.

Investment advisory services provided by Paragon Wealth Strategies, LLC, a registered investment advisor.

10245 Centurion Pkwy. N. Ste 105, Jacksonville FL 32256 (904) 861-0093

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements

How can I protect my 401(k) from the European Debt Crisis?

25 04 2012

Jon Castle, CFP, ChFC

What a question, huh?  This question seems to be on the minds of many investors these days.

Most economists are predicting that the European zone will suffer a period of slower than usual growth – or even short periods of shallow recession – as they try to work their way out of the debt crisis that they are currently in. Since we are, in reality, a global economy, this means that markets both here and abroad will likely be volatile and moderately stagnant for the next several years. It may well feel like we take 3 steps forward in the market, only to be followed by 2 steps backwards – for a while.

Morgan Stanley did a wonderful study called “The Aftermath of Secular Bear Markets” in which the authors of the study tracked the 19 major bear markets over the last century (only 4 were in the US). All major bear market corrections (defined as a market drop of 47% or greater) were followed by a rebound rally, (2009) then a mid-cycle correction (2010 & possibly 2011), followed by a period of 5-6 years of volatile, sideways behavior, before a new bull market started. So, based upon that historical precedent – we are about 2 years into the sideways part. (if you Google this study, you can read about it directly. Here is a link to see it visually:  Trading Range.  Note that the chart on this link was published in 2009, so the “we are here” mark is has moved 3 years to the right .  It was right on as far as predicting the mid-cycle correction(s) in 2010 and 2011.

The sideways part (the trading range of 5.6 years, on average) is the period of time where the economy heals itself, and goverments try to “unscrew” what went awry in the first place.  This is where we are now.  Likely you see daily evidence of this natural process – Democrats and Republicans squabbling over policy but not really changing anything, the Fed printing money, banks hoarding cash and trying to get their books in order, finger-pointing, governmental gridlocks, and daily predictions of great bull markets or terrible bear markets. While difficult to live through – this is actually part of the NATURAL healing process of a free-market economy. Once you realize where you are in the cycle, then it becomes much easier and far less confusing to stay the course.

So – to answer thequestion – the secret to being a successful 401(k) or other retirement plan investor in which you have to save money over time, and have, say,  10 or 12 or more years to retirement, would be:

1)  Build your portfolio to a risk tolerance that even if the market drops 20 or 30%, you will NOT freak out and will NOT stop investing.  That means you may have to have 30%, 50%, or even 70% of your money in the “safer” investments like government bond funds, or even cash.  A good rule of thumb is – whatever percent of your portfolio you have in the stock market – that is the percent that it will go down when the market corrects. So – if the market drops 20% (which it does every 3 years) – and 50% of your money is in stock funds – then your portfolio will drop by about 10%. (50% of 20% is 10%.)  If you can hang through a drop like that – but no more – and keep investing, then that’s your risk tolerance threshold (limit).  If your personal limit is more like 20%, you can build your portfolio more aggressively – like 70% stock funds, or maybe even a little bit more.  With 10 or 12 years to retirement, you’ve got plenty of time to make it up, so you can afford to be more aggressive.

2) KEEP INVESTING.  When the market goes down – and your portfolio goes down – but you keep investing – you are buying up shares of the funds ON SALE.  If you see a sale at a store – you wouldn’t throw away everything you bought previously, would you?  Then why do people do this with stocks or mutual funds?  If they are on sale – buy more!! Keep buying over time – during that volatile period that I mentioned above – and when the steady bull markets DO come back (they will – we just don’t know when) then you will likely be extremely pleased with your investments.

This blog post is not personal investment, financial, or tax advice.  Please consult your financial professional for personal, specific information.  Indexes mentioned are a general barometer of the stock or bond market they represent.  You cannot invest directly in an index.  Past performance is no guarantee of future results.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services offered by Paragon Wealth Strategies LLC, a registered investment adviser.

So I’ve Been Saving…Now What?

4 04 2011

 Michael Carignan, CFP®, CRPC®

Have you ever wondered how to get a clear picture of all of your current financial resources and how much retirement savings you need to provide your vision of retirement, taking into account your potential health or market risks?  This is just one of many questions people ask when thinking about personal retirement planning.  If you find your self in this boat, there are a number of solutions for you.  First, with some time, research and diligence, spreadsheets and of-the-shelf software, you can creat your own retirement plan.  However, it is likely that if you are asking these questions, you probably don’t have one of those key ingredients to success, or you would already know the answer.  A more comforting solution may be to get some professional help.  WebMD can help you diagnose some medical conditions, but most people feel better having a trained medical professional give them their expert opinion and recommend a treatment if warranted.  In a similar fashion, finding the right financial professional to help you can be a key step in the right direction on your path to financial success.

Just like finding the right doctor is important, (you don’t want to go see your dermatologist if you have a cough) finding the right kind of financial professional can be equally important.  There are many financial professionals out there; selecting the right one may be the most important factor in ensuring you have a favorable planning experience.  There are some questions you need to ask when looking for a professional to help you construct a retirement plan.  The first question should be, “are they qualified to provide the answers I’m looking for?”  One good resource in this search is where you can search for a local Certified Financial Planner™.

Most people are more comfortable dealing with a doctor that has the same philosophy on treatment and they personally like.  By “same philosophy on treatment,” I mean do they recommend a diet and exercise regimen or a or do they push a diet pill to help lose weight?  If you and your doctor disagree on the basic philosophy of medical treatment, you probably will have disappointing results, since you won’t follow his or her advice.  In the same way, it is very important to look for a financial professional that has the same general philosophy that you do when it comes to investing and money management.  If you believe that it’s possible to outsmart the financial markets and pick the best performing mutual fund or stock next year, then you need to find a broker who believes that as well.  If you believe that investing involves taking some prudent risks and adhering to a long term plan with a scientifically designed portfolio, you likely should  find a different advisor.  Neither philosophy is necessarily wrong, but making sure you select a financial professional that has the same philosophy as you have is of paramount importance to a successful planning relationship.

Some additional specific questions you should ask are:

    • Do you prefer fee based or commission based compensation for your advisor?
    • Do they have experience with other clients like you?
    • Can they advise you on all aspects of your financial life or will you need several advisors to get the answers you need?
    • What is the charge for the plan?  In most cases, you get what you pay for; if it’s free there is going to be a sales agenda you might not know about right away.
    • What is included in the service they provide?
    • Will they be able to help you implement planning suggestions?  If so, is it a requirement of the planning process?  Be careful of the solutions that can only be done through them.
    • Do they make “suitable” recommendations or are they a “fiduciary”?  (For more information on the difference click here)

Finding a professional that you can understand and trust is critical when choosing to have a retirement plan constructed for you and your family.  You are unlikely to follow the advice, good or bad, if you do not trust the person providing the advice.  Once you find your ideal fit of personality and capabilities, be ready and willing to provide answers to all of their questions, since a retirement plan is only as good as the information you provide.  Don’t hesitate to ask them probing questions and provide honest answers if they ask you some difficult questions.  When dealing with the money you have worked so hard to accumulate, stumbling into retirement without a carefully crafted plan can be a dangerous prospect at best. Once your retirement plan is complete, then it becomes time to “work your plan” if you have a few more years, or “live your plan” if you are already retired.

The earlier you start planning for retirement the better, becasue finding yourself in retirement and unsure if you’ll be able to live it how you’d like is a scary proposition.  It has been my experience that those who are most successful in retirement have taken the time to get the advice that helps them sleep well at night and knowing they have done everything they could to create the retirement they wanted for them and their family.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame logo) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investment advisory services offered by Paragon Wealth Strategies LLC, a registered investment advisor.

How to own a property or business in an IRA?

8 02 2011

Occasionally we get this question – how can I use my IRA assets to buy a rental property or a business of some sort?  Many people over the years have accumulated assets in their company 401(k) and rolled them to an IRA,  or saved money in their IRA throughout their working years, but may have not accumulated any assets in other accounts – accounts not directly considered retirement accounts, and as such, not subject to all the special rules that govern retirement accounts.  As a result, they find it difficult to to invest in rental property or to finance a business startup because of a lack of readily accessible funds. 

So, the question is – how can I use the money in my IRA to buy these types of assets?  Can I?  The answer is – sort of.

The laws governing an IRA are designed to limit IRA’s to saving for retirement – but in exchange for following these sometimes burdensome rules, IRA’s allow for investors to accrue funds while enjoying some significant tax advantages.  Since retirement is the primary purpose of IRA accounts, IRA rules intentionally make it difficult to use IRA funds for any other purpose without suffering a 10% early withdrawal penalty (for withdrawals prior to age 59 and 1/2) and income taxation on funds withdrawn from the IRA.

There are specific exemptions from the 10% early withdrawal penalty, such as the exemption that allows an investor to use up to $10,000 for a first-time home purchase or for education purposes.  However, these exemptions typically do not really allow an IRA owner to finance a business or to buy a real estate as an investment tool.

Fortunately – for savvy investors – there ARE ways to get the job done.  As long as the IRA does not engage in “prohibited transactions,” or own “disallowed” investments – then an invesor can use IRA funds to start a business or to buy investment real estate – if he or she does it correctly.

First – the following transactions are considered prohibited within an IRA:

  • Borrowing money from your IRA
  • Selling your own property to your IRA
  • Using your IRA as security for a loan
  • Buying property within the IRA for personal use

Any of these transactions could result in your IRA being disqualified by the IRS – resulting in a forced distribution of the IRA with all taxes and early withdrawal penalties becoming immediately payable! So, first and foremost, an investor needs to carefully play by the rules governing IRA’s to avoid running afoul of the IRS.

Secondly – certain types of investments cannot be held within an IRA:

  • Collectibles (such as art, antiques, most coins, stamps, etc)
  • Life insurance contracts
  • Derivatives (other than covered calls on stock owned within the IRA)
  • Real Estate from which YOU directly benefit (ie – receive rents directly)

So – back to the original question – How can I use my IRA assets to buy rental property or finance a business startup?  The key to success is to remember that anything purchased by the IRA – and any benefits (such as rental income or appreciation) derived by investments within the IRA –  must be owned by the IRA and remain inside the IRA, lest it be considered a distribution from the IRA.  

So – in order to buy rental property or a business with your IRA – here is what you must do:

  1. You must find a custodian that allows these types of transactions, and has expertise in getting these transactions done effectively and legally.  Most custodians (ie – brokerage firms) do NOT handle or allow these transactions.  You must choose a custodian that specializes in these types of transactions to hold your IRA.  Additionally, you should expect to pay top dollar for their services; you will not get a “free” IRA at one of these firms.  Expect each transaction to have a significant fee, and expect an annual fee on the account.
  2. Once you choose your investment, the custodian of your IRA will then direct your IRA to purchase the investment property or the business within the IRA.  Therefore, the investment property or the business effectively becomes an investment within the IRA itself, and is considered a part of the IRA portfolio.  As long as it is not a prohibited investment – then it is allowable.  Remember – as far as real estate being a prohibited investment – the prohibition is against YOU getting a direct benefit from the property (such as having rental checks made out to you directly).   The prohibition is NOT against your IRA owning a rental or investment property as an investment in an arms-length transaction.
  3. Any mortgages on the property, repair costs, or financing for your business, must be conducted within the IRA itself.  Therefore, the mortgagee on the property bought within the IRA is NOT you – but your IRA.  Any business loan to the business is made to your IRA – not to you.  Generally custodians that specialize in these type of IRA transactions can assist investors in finding lenders who have experience loaning funds to IRA-owned businesses, or for the purposes of repairs or rehab operations on properties owned by IRA’s.  Do not expect these loans to be particularly competitive. 
  4. Essentially – the IRA – under the supervision of a custodian who specializes in these types of transactions – becomes a legal entity conducting business for itself.  Your IRA can even loan money for investment purposes (ie – make “hard-money loans” to other real estate investors), finance the rehab of homes for later resale, and own the business within which you work. 

Many people ask about using their IRA for purposes such as these – but few people ever actually do so because of the complexity of the planning required.  From a financial planning standpoint – conducting these types of investments within an IRA can be profitable – but are also considered to be quite risky, as they introduce additional types of risk (such as liquidity risk, default risk, and business risk) that most investors do not wish to see within their IRA’s.  Additionally, owning a business within your IRA can subject your IRA to what is called “UBTI,” – Unrelated Business Taxable Income.   It is for these reasons that you should always consult with tax and financial planning professionals who are completely familiar with your particular situation, risk tolerance, investment experience, tax situation, and financial goals before actually trying this. 

Many custodians who specialize in these types of transactions advertise how “easy” it can be, and how profitable it can be – but in my experience, few investors whom I have seen actually try these types of strategies have been overly pleased with their results.  Most of them have not significantly improved their financial situation above and beyond what their situation would have been had they merely practiced good financial planning behaviors and invested their IRA funds in a fully diversified, properly constructed portfolio that was appropriate for their risk tolerance.

Information in this article does not constitute a recommendation or solicitation for any product mentioned.  Mutual funds may only be sold by prospectus.  Past performance is no guarantee of future performance.  All investing – including the investing discussed within this article – involves risks of loss.  Consult your financial advisor for specific recommendations.

Looking Forward to 2010!

12 01 2010

 By Jon Castle, CFP®, ChFC®

It is with a tremendous amount of optimism, hope, energy, and commitment that we at PARAGON feel as we look forward to 2010!  Those who know me well would NOT say that I am a rose-colored-glasses wearing optimist – but more of a pragmatic, “let’s move on with what we need to do” type of optimist.  No doubt, we as a society and as a nation have a good bit of work to do – but from a historical perspective, things have never been better.  I believe 2010 and the years beyond will be great, great years!   Despite the “Great Recession, as a human race, we are still undergoing the greatest creation of global wealth of all time.   New and previously unimaginable inventions are being made almost on a daily basis.   On a global scale, our collective knowledge is estimated to double every 11 hours within the next few years.1   And as Americans, whatever your political leanings or frustrations with our government or our health care system may be – you have to admit – things are even better here than in most other places in the world.

As far as the economy goes – Capitalism is still functioning.  The creation of wealth through innovation, invention and distribution of goods and services continues.  As 2010 unfolds, new inventions, products and services will be unveiled – as will the jobs and benefits that accompany them.  Economists who are “down in the mouth” about our future are looking rearward and crunching old numbers – but our world continues to march forward, and in most cases, the old math simply doesn’t apply.   Just to put this in perspective, I thought I’d take a little trip down history lane.  While I’m not a historian per se, I do enjoy drawing comparisons and parallels to what has happened in the past with what is happening now, or may be likely to happen in the future.  So, let’s have a look, shall we?

Today – most Americans enjoy luxuries beyond the imaginings of even the most powerful kings who ruled 500 years ago. Indoor plumbing.  Heated living quarters.  A car instead of a carriage.  Medicine and scientific health care, versus wizardry and leeches.  A life expectancy of 80 years instead of 45.  Great kings of yesteryear would sell their kingdoms in a heartbeat to live as an average family lives in America today!  Yet many people think we are “on the wrong track…”

Today – we hear and worry about the H1N1 Virus – the “Swine Flu.”  Yes, we should be concerned – so far, the CDC has reported 13,915 deaths from the Swine Flu (data as of 12/09/2009,  But consider this: In the summer of 1918 – only 92 years ago, the “Spanish Lady” flu swept through the world, killing 22 Million people across the globe. 22 Million people! From the flu!  One half of all of Philadelphia died!  One half of a US major metropolitan city wiped out from an illness!  The Spanish Lady killed 6 million more people than all of World War I!

Today – we text, e-mail, and call each other using cell phones anywhere around the globe.  We are frustrated whenever our e-mail doesn’t work, someone doesn’t return our text immediately, or we have to leave a “voice mail.”  Yet only 20 years ago – no one had cell phones, e-mail was brand new – and it was customary to handwrite letters which may (or may not) even reach our pen pal within weeks of sending them.  In 2010 the number one source of internet access will be… you guessed it… a cell phone which has ten thousand times more computing power than the entire world had in 1960!

Today – we can order a pizza online and have it delivered to our home in 30 minutes or less.  We shop online and are frustrated when it takes longer than 3 days to get our package or we have to pay for shipping.  Yet only 20 years ago, it was commonplace to order from the fall or spring Sears catalog, add money for shipping and handling, and wait up to 6 weeks for delivery – which was in the store and you had to go and pick it up anyway. Which I remember vividly from my childhood, by the way.

Here are some interesting bullet facts:

  • It took 38 years for radio to reach 50 Million people.  It took TV 13 years.  Facebook, however, added 100 Million users in 9 months!  If it were a country, Facebook would be the 4th largest country in the world!  For more info on that, check out this link: ·
  • Cars are being developed now that, once on the highway, will drive themselves in convoys with other cars.  Time to take a nap… on a long road trip! 
  • Thought controlled robotics have been invented, and initial uses are now under development.  Think of the applications for the handicapped!
  • In June of 2007, a patient successfully received a whole organ transplant – grown using her own stem cells and without the need for anti-rejection drugs. Can you IMAGINE the medical implications of this in 20 years?!?
  • Nerve controlled bionic arms and legs are now in prototype stage. Remember the $6 Million Dollar man? From the looks of it, it appears that he’s about 10 years away!
  • More video was uploaded to YouTube in the last 2 months – than NBC, ABC, and CBS have aired – since 1948! Collectively, the networks have been around over 200 years.  YouTube didn’t even exist 6 years ago.  The world is changing with incredible speed.  And finally – take a look at this video.  It truly is an example of the speed with which the world is changing.

Now what does this have to do with Wealth Management? Global wealth is primarily created through capitalism – where new ideas and products are capitalized by investors.   Many innovations come out of necessity – after recessions, when people turn to themselves for support, create new businesses and generate new ideas because their old paradigms failed to provide them what they needed.  Historically, the periods after recessions have been tremendously profitable ones.  Remember the 80’s boom after the recession of the 70’s?  Remember the 90’s boom after the recessions of ’91 – ’93?  We are now finishing up one of the worst recessions in a long, long time.  As the “Great Recession” winds down, I can only imagine the wonders that await us! 

Happy New Year, everyone! Hang on – I believe it will be a wild, wild ride!! 1 IBM Global Technology Services. “The Toxic Terabyte – How data-dumping threatens business efficiency.” July 2006

This blog is for informational purposes only.  This is neither an offer to purchase nor sell any securities.  All investing involves the potential of loss – including invested principal.  Indices quoted are general barometers of security price movement.  You cannot invest directly in an index.  All information is obtained from sources deemed reliable but not guaranteed.  Past performance is not a guarantee of future performance.  No tax or legal advice is given nor intended.

Investment advisory services provided by PARAGON Wealth Strategies, LLC, a registered investment advisor. 

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