Demystified Blog Archive #45 – This is what can happen when you turn o

Like a lot of major cities in the United States, Philadelphia is in pretty rough financial condition.

One of the city’s biggest problems is its woefully underfunded public pension, which has a multi-billion dollar funding gap.
In 2001, Philadelphia’s pension fund was still in decent shape with a funding level of 77%, meaning that it had sufficient assets to meet 77% of its long-term obligations.

By 2017 the funding level had dropped to less than 50%.
Part of this is just blatant mismanagement, while most of the market soared in 2016, for example, Philadelphia’s pension fund lost about $150 million on its investments, roughly 3.17% of its capital.

It’s interesting that, along the way, the city has actually tried to fix the problem. Between 2001 and 2017, the amount of money that the city contributed to the pension fund actually increased by 230%.

Yet despite increasing contributions to the fund, the fund’s solvency level keeps shrinking.

Mayor Jim Kenny summed up the grim situation in his budget address last year:

“The City’s annual pension contribution has grown by over 230 percent since fiscal year 2001. . . These increasing pension costs have caused us to cut important public services while the pension fund’s health has grown weaker. In fact, our pension fund has actually dropped from 77 percent funded to less than 50 percent funded during the same time our contributions were so rapidly increasing.”

This is what can happen when you turn over your finances
Most people are taught to turn their finances over to a financial advisor. And, they are usually taught that taxes are too difficult so they need to hand them over to a tax advisor.

The problem with this is that many people think this is the end-all solution and once it is handed over, they can forget about it.
The idea of handing over your taxes and finances to someone else can be tempting.

But the reality is, the likelihood of getting the results you want is very slim when you hand over your taxes or your finances.
Even the best advisors cannot provide the best results if their clients are not involved in the process.

One key piece of knowledge the wealthy have is that they understand how their daily decisions and actions impact their wealth and taxes.

While they have a team who handles their wealth and taxes, they understand that they have a key role and they know when they need to get their team involved.

Here are a few examples of when your team needs to be involved:

You Don’t Have to Be the expert

I'm not suggesting that you have to do all the work or become an expert. There are experts that you should have on your team, who can do the work for you. You must have the knowledge to know when to get your advisors involved and the knowledge to understand how your actions impact your taxes and your finances.

Of course, there is always additional information you should consider when setting up a taxation strategy plan. And, you should always be working with a team of professionals to help mitigate the risk of any investment.

To your investment freedom