| Investing
Side effects of interest rate
cuts
9-19-07
Interest rate cuts by Bernanke may spur inflation, cause both the U.S. dollar
and the bond market to collapse and push the U.S. economy into
recession. The cause of the recent housing, sub-prime and credit
problems are due to artificially low interest rates, which results in too much
money in the market.
Oil price may decline from
lower demand growth
9-15-07
The demand growth rates of oil has been declining since 2004, including a
recent significant slowdown in U.S. oil-demand growth. The rate of
decline is similar to what happened in the 70's-80's cycle, the oil price
skyrocketed and then fell sharply. If the trend repeats again, then the
price may lose more than 50% of the current price and, if so, it is better to
reduce the oil related stocks.
Interest rates to fall in
2007
10-23-06
It appears the Fed is done with raising the interest rates as the inflation
worry is subsiding and the Fed's past continuous interest rate hikes have a
positive effective on tightening the money supplies. It is known that
the inflation is only caused by the over-flowing of money supplies. With
inflation leveling off and the domestic economy moving towards to a lower
level of growth rate (about 2% real rate), the Fed at some point in 2007 will
be forced to cut the interest rates to re-stimulate the U.S. economy.
Start your new business with
your 401(k) money
1-5-05
Normally, if you take an early distribution (before age 59 1/2) for your new
business, you have to pay income taxes (federal and state) and a 10% penalty
of early distribution, However, if you use the pension transfer trust,
there are no income taxes or penalties. The following
table shows the difference between a regular early distribution and setting up a pension transfer
trust when you take out money for your new business:
|
Regular early
distribution |
|
Setting up a pension
transfer trust |
| Amount in retirement fund: |
$100,000 |
|
$100,000 |
| Ordinary income taxes (at 30%) |
$30,000 |
0 |
| Early distribution penalty (10%) |
$10,000 |
0 |
| State income taxes |
$5,000 |
0 |
| Total taxes & penalties |
$45,000 |
0 |
| Cost of setting up transfer trust |
|
$6,500 |
| NET CASH available: |
$55,000 |
vs. |
$93,500 |
You can clearly see the benefit of setting up a pension transfer trust by
saving to invest more money in to your new business. With the pension
transfer trust, you can convert existing retirement funds to hold the stock of
your new business. Under the tax deferred 501(a) trust, your new company
can sell its own stock to the pension transfer trust. Contact us for
additional information.
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