Welcome to Phoenix Master Financial.
After I learned lessons and gained experience through stock market crashes
and house market bubble burst, I realized the need and benefit of an investment strategy that balances growth and protection and
is efficient against inflation and taxation.
I believe a good portfolio shall include asset allocation in real properties, securities and insurance products
for it to outperform volatile market as diversity reduces risk and to keep pace with potential inflation and higher taxes
since governments currently run with huge (or unlimited) debts and print a lot money.
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Financial freedom is secured by whatever you keep but not by what you got. In current low interest rate environment, finding ways to get better
return and deferring taxes are more challenge and very important for wealth growth.
As an example, if you invested $10,000 with 4% annual return. Assuming inflation rate is 3% and federal income tax bracket is 28%,
your net becomes $9,988 which means your investment actually lose value after one year. Step by step calculation is shown in the table.
If federal income tax bracket lowers to 25% and other factors are the same, same calculation steps will show the investment value keeps at
$10,000 unchanged, or just made it even, after a year.
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| Impact of Taxes and Inflation: step by step calculation |
| Initial investment | $10,000 |
| Return after one year (with 4% return rate) | $400 |
| Less federal income taxes (28%) | -$112 ( = 400*0.28. Tax on gains only ) |
| Net return after-tax | $288 ( = 400-112 ) |
| Net investment after-tax | $10,288 |
| Inflation rate 3% (so, divide by 1.03 to adjust inflation) | Value-with-inflation = Value-without-inflation + Value-without-inflation * Inflation-rate |
| Total Net after inflation and taxes | $9,988 ( = 10,288/1.03 ) |
| Return rate after inflation and taxes | -0.12% ( = (9,988-10,000)/10,000) ) |
Planning ahead may not guarantee a success but will definitely increase the chance of success, especially in generating retirement
income. Many professionals, including a Fidelity article and a Charles Schwab webpage as shown below,
recommend annuity as an important component
in smart retirement income strategies.
凤凰城西区 White Tank Mountain Regional Park。AZ，2017
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SITE NOTICE: PhoenixMasterFinancial.com is re-directed to this site.
"dafa" is the spelling of Chinese word "大发", meaning grand prosperity.
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