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Home Repair Book Store > Home Repair books beginning with L
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The Last Chance Millionaire: It's Not Too Late to Become Wealthy |
Author: Douglas R. Andrew
Published: 2007-06-12 |
List price: $24.99
Our price: $16.49
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As of: January 05th, 2009 09:02:50 PM
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Customer comments on this selection.
 Average
Last Chance Millionaire was an interesting read for me. I am not part of the boomers, but I have certainly started obsessing over my retirement. A subject that has become more and more important as this economy tanks.
Author Andrew takes a very detailed look at how we can accumulate wealth($$) even if we are starting late or from a position less than ideal. Andrew details and explains at length the influence certain factors have over our savings. These are: Compound Interest, Tax-favored accumulation and positive-safe leverage.
Andrew also tackles the more "standard" suggestions that we find commonly in most "how to save" books - such as paying down your mortgage, debt, etc.
While some of the ideas in this book were novel and interesting, I did not feel as though this book was written for the average investor/saver. I often felt as though what I was reading was somewhat over my head and this book, at times, felt more like it was written for the business world or at least for the people who work in high finance.
Still, I did manage to get some interesting suggestions and I did feel inspired to re-arrange some of my current investments.
 Great book, good information
This book will change the approach of many peaople that are close or in the retirement. Valuable information with especific direction.
Interesting, but the world changed
I can't help but wonder if Andrew would have written the same book a year later. I'm adding this review because the two highest reviews when I checked today are seven months old, and the real estate world has changed a lot in those seven months. As noted in the other reviews, the gist of the advice is to get as much equity out of your house as possible and invest that money in universal life insurance instead of a paid-down mortgage.
Today, you'd have a hard time getting an interest-only loan, let alone a negative amortization loan, at an interest rate that's competitive with other investment options. In many parts of the country, real estate is not appreciating and may not recover its 2007 valuations for years. I don't do "money math" myself; I pay a financial advisor to help me. So do your own number crunching.
Mostly? For the best ROI, get the book from the library. The logic of NOT paying off a mortgage is informative, and I'll discuss my own retirement plans with my advisor a little differently as a result. I may not pay off my HELOC ahead of schedule; I might do something else with the funds I'd earmarked for principle-only payments. But the alternatives and actual mechanisms of what to do instead of paying down a mortgage are probably already out-of-date.
Finally, the content of the book could probably be reduced significantly if all the times the author says, "I'll tell you how to do this in a later chapter" were cut out. Another plus for libraries, IMO.
 A big disappointment
Many, if not most, older Americans are ill prepared for retirement. They have less than $50,000 saved and most have far less. So there is a real need for a book that will help this large group learn to catch up. Unfortunately, this book does not live up to that promise.
The bottom line: Buy insurance. I don't think so. While I'm not a financial genius, I do know that you don't use insurance as an investment. Not the way the book describes.
There are many ways to accumulate money and one must look for ways to pay as little tax as possible. So to that extent, I agree with the author. But the book is a lot of fluff and very little substance.
If you follow the author's advice, you could get into some trouble. And, having sold insurance myself, I can tell you that there is no insurance product designed to provide a tax free income or any income short of an annuity and disability income. And an annunity is of limited value and only to some people.
In addition, one could argue the value of a home and mortgage payments as tax deductions. There are other authors (for example Ramsey) who will advise you to pay off that mortgage and be free of it; that it's not that much of a tax deduction.
I'm not taking sides on that issue. But I'm merely saying that you can get both sides and each makes good arguments.
I don't see how not taking out an IRA at any age could not be a good thing. As long as we must pay income tax, why not put all we can in an IRA or SEP-IRA or whatever and pay less taxes? Of course it's tax deferred and not tax free. But one would assume that when one actually takes out the money, one will be in a lesser tax bracket. And yes, there are rules and regulations that can be harsh. But there's no way to beat the system. It's too bad we have to plan our lives around taxes to begin with!
I got nothing from this book that would help me. Perhaps you will. But I wouldn't count on it.
 Follow this advice at your own peril!
This book is primarily a sales pitch aimed at getting you to borrow against your home to buy indexed universal life insurance. The author advises you to not only not contribute to a 401(k) or IRA but encourages you to withdraw the funds to buy insurance. His illustrations regarding the tax consequences of distributions from your tax deferred retirement accounts are simplistic. He also omits entirely the tax savings you have when contributing to a 401(k). If you contributed $20500 (the limit for 2007 for someone age 50 or over to a 401(k) and were paying a marginal tax combined state and federal tax rate of 33%. (A rate the author uses in many of his illustrations) you would save $6765 in taxes immediately. The tax savings can also be invested in either a taxable account or possibly a Roth IRA or even a nondeductible traditional IRA. You would then have $26,765 (not including the employer match) working for you instead of just the $20500 that you would have paid in premiums for the universal policy. The author does not mention this possibility at all. He compares a pretax 401(k) contribution to an after-tax insurance premium. He states that the 401(k) distributions are taxable when received (a true statement)and therefore you have not improved your retirement situation. However, you will have been able to save more than 30% more each year than you would have put into the insurance policy and since a significant portion of the total retirement balance will have already been taxed you can pay taxes from that side of the savings.
The author is several places compares the returns of a mutual fund to the universal life policy by assuming a 10%-11% return to both investment vehicles, conveniently ignoring that you must pay substantial insurance expense and mortality charges from the returns. If both a index mutual fund earns 10% and index universal policy earns 10% before expenses, you must compare the two vehicles after charges and expenses are deducted. In that case the mutual fund may have a 9.5% return while the insurance policy would have a 7-8% return. Although the policy credits are not subject to income taxes, the net after-tax difference is not as large as first appears. However, this is only comparing the after-tax rate of return on the policy. You must also compare the balances which will earn those returns. You will pay substantial commissions (loads) to buy an index universal policy (generally 5%-12% of the premium). After commissions you will have considerably less money working for you. You could pay as much as $24,000 in commissions on a $200,000 premium. This means that your policy will have a much lower balance than your investment for several years. See the author's illustration of values on pages 292-293. While looking at that table also note that the illustration has an initial premium payment of $62700 while he compares it to a 401(k)/IRA contribution of approximately $35,000 for a married couple (and ignores the tax savings which can also be invested). He also assumes that the 401(k)/IRA are subject to 3% sales charges and a 1% expense ratio. You can buy no-load index mutual funds all day long with no sales charge and expense ratios of less than 0.25%. In this illustration he assumes contributions to the alternative investments all cease after 10 years at age 60 and that the couple will retire at age 70 and begin taking distributions. Having shown a comparison of smaller contributions to a 401(k) with larger contributions to the retirement account, he then "proves" that the insurance policy will last longer than the 401(k)! I can present an analysis to my clients which shows that the same after-tax investment in a combination of a 401(k) and taxable account will be far superior to the insurance policy.
The advice to continue refinancing your mortgage ignores the costs of refinancing. You will incur transaction costs in refinancing. Although some mortgage brokers will advertise no closing costs you must compare the effective annual percentage rate of the loans offered. The mortgage brokerage business can be just as deceptive as the insurance brokerage business. The author also ignores the itemized deduction phase-out and alternative minimum tax consequences of his strategy to refinance and use the proceeds to buy life insurance.
I could go on for hours about problems with this author's strategies and the misleading arguments he makes. The long-term rate of appreciation on residential real estate is aproximately 6% or 3% above inflation, which coincidentally, is approximately the market rate on conventional mortgages. The current housing credit crunch is a product of strategies such as those presented in this book.
If you wish to assure an insurance agent and a mortgage broker of a good retirement, follow the strategy. Otherwise consult a good fee-only financial planner for sound planning advice. You can buy a lot of advice for the commissions you will incur following this author's sales pitch.
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