Financial Planning Not Just For The Rich

Michael Clark-Dreibus can’t get people out of debt — they have to do that themselves — but he can tell them how to plan for inflation and avoid taxes.

“That is avoid taxes, not evade them,” he said.

Clark-Dreibus is the owner of Keep-A-Smile Insurance, part of Five Rings Financial, and he gave a presentation on “How Money Works” on Oct. 25 at the Tri-Lakes Business Incubator.

Using a series of stories, Clark-Dreibus showed the small gathering how they can protect their retirement funds from risk.

He said 401k plans, Simplified Employee Pension plans and Individual Retirement Accounts are all at risk in today’s market.

“Don’t think that financial planning is only for people who have money,” he said. “You probably have more money than you think.”

By way of example, he explained: “Most people have four types of insurance — auto, home, health and life. They often want low deductibles and pay the highest premiums to get them. Setting your deductibles even a little higher can save $100 a month in lower premiums.”

Another way to get more money is by setting income tax deductions at levels that will pay federal and state taxes without overpaying them.

“I don’t like loaning the government my money for 18 months at a time,” Clark-Dreibus said. “That’s another $100 each month on your paycheck — saving $200 a month at an average interest rate of 10 percent will raise $1.5 million in 40 years — don’t laugh, 10 percent interest is achievable.”

He added: “We’re all in a race — we’re all starting at different places with different goals and different needs but while we’re alive we never stop needing money.”

Clark-Dreibus described three hurdles everyone faces — debt, inflation and taxes. Getting out and staying out of debt is paramount, he said.

“You can’t save for your retirement at 10 percent while you’re paying 20 percent interest on credit cards,” he added. “I can’t help you with that. It will be a struggle but you need to do it.”

As for inflation, over the long haul it averages out at 5 percent, which means that a $70,000 nest egg might have been enough to retire in comfort in 1971 but, to achieve the same level of comfort in 2011, a person would need $400,000.

“In 40 years, you will need $2 million,” he said. “You can’t avoid inflation but you can plan for it.”

Clark-Dreibus also recommended life insurance.

“Uncle Sam can’t touch your life insurance,” he said. “You can borrow from it and your kids can inherit it. The money does become part of your estate and subject to estate taxes but you can plan for that too. Just buy another insurance policy that will cover the taxes.”

He then talked about “the rule of 72,” which is used to determine how long it will take money to double at a specific interest rate.

“Just divide the interest rate into 72,” he said. “The result is how many years it will take your money to double at that interest rate. Compound interest makes it double faster.”

Clark-Dreibus also recommended that everyone get a lawyer or good insurance agent who will review financial documents periodically.

“This can help you avoid such costly mistakes as forgetting to change your beneficiary when you get married,” he said.

He said the lawyer should be accessible but not too accessible. “If you live in Colorado Springs then get a lawyer in Denver,” he said. “That way you won’t bother each other too often.”

Source: http://www.ourcoloradonews.com/trilakes/news/financial-planning-not-just-for-the-rich/article_0b6a4ac4-a02d-5f47-9e72-dc8cfb1bf805.html