Financial Repression is a form of wealth confiscation and redistribution that is in some ways as effective as taxation – but the government never directly calls it that. It never appears in the budget (directly), and while it is dependent on a comprehensive network of laws and regulations – none of those go through the legislature with a stated intention of creating Financial Repression. So while the economic net effects are similar to a huge and comprehensive set of investor taxes being used to pay down the national debt, the “taxes” are never a campaign issue because voters and investors don’t understand what is happening – they only feel the results. [In this article I lay out for you what is slowly developing and expected to escalate dramatically in the next few years.]

So says Daniel Amerman (www.danielamerman.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The report’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Amerman goes on to say, in part:

“Financial Repression” is the academic term for how governments can pay down enormous debts by forcing interest rates below the rate of inflation, and then systematically confiscate the purchasing power of their citizens’ savings over time, while keeping people from being able to escape or defend themselves. It is a hidden form of investor wealth confiscation and redistribution – as effective in its own way as taxation – with a very long track record of “success”. [For another article on the subject read “Financial Repression” May Soon Become Our Worst Nightmare! Here’s Why]

 The form of wealth confiscation is inflation rather than cash payments, and while the enormous benefits which flow to the government are entirely real, the overwhelming majority of those whose wealth is being confiscated will never fully understand what is happening, as there are no checks being written, and it never appears on a tax return. This makes Financial Repression a hugely successful strategy from a governmental perspective. 

The policies of Financial Repression were used by advanced economies between 1945 and 1980 to successfully slash over 70% of the amount of government debt relative to economic output. This strategy is posted on the IMF website and is drawing international attention among government policymakers and economists for very good reason – it’s what actually worked for the governments the last time around, and how they dodged default or hyperinflation.

However, while parallels exist, the current crisis is very different from the post-World War II government debt crisis. By the end of 1945, the war was over, and the challenge was how to pay down past debts that had been racked up but were no longer being incurred. Conversely, the main problem this time around still lies in the future, with the United States, Europe and others having made long-term entitlement promises that dwarf the current deficits.

For Financial Repression to have a chance in the current environment, the governments of the world must employ not just the strategies of the past, but even more powerful strategies to deal with a fast oncoming future crisis that is far larger than the post World War II crisis.

From the perspective of a government that is in financial crisis mode, with no end in sight, there is a powerful mathematical advantage to deploying a double-edged strategy which devastates the financial security of millions of retirement investors by slashing both the value of their savings (the first edge) and the value of their pensions and/or Social Security payments (the second edge).

The effects of the implementation of this strategy can already be seen all around us,[as follows]:

The solution to investing in the face of financial repression..is quite distinct from the all-or-none currency meltdown strategies that implode absent a meltdown, and the more conventional investment strategies. Ideally, an investor should deploy a strategy that can handle any or all…scenarios: one that survives and even thrives during and after a currency meltdown, and one which also not only survives but even prospers in Financial Repression (or combinations of meltdown and repression) while still doing fine if those scenarios end up not being as severe as many now anticipate.

Historic Financial Repression & Its Powerful Return

The most important thing that we need to understand about Financial Repression is that it works. The graph below shows that historically, as a result of war debts, the developed nations of the West owed about as much in total public debt outstanding compared to their economies in 1945 as they do right now. By 1980, more than 70% of that debt was gone, as a percentage of the size of the national economies.

The graph was derived from the data in an influential paper by Carmen Reinhart and M. Belen Sbrancia, which has been circulated by the International Monetary Fund to decision-makers on a global basis. What the paper shows is how it’s done: how the developed nations of the world took seemingly impossible debt burdens and brought them down to a manageable level. Here is a link to my analysis of this traditional first edge of Financial Repression, Financial Repression: A Sheep Shearing Manual, in which I discuss the way traditional investment strategies are devastated by the governments’ deliberate tilting of the investment playing field. Should you wish to also read the much longer original paper by Reinhart and Sbrancia, this is the Original Paper on the IMF website.

What was done – even if it was never described that way in the newspaper headlines or in the investor education books and columns – was as follows: 

• the governments used paper currencies that were prone to inflation, instead of the precious metals-backed currencies that were the norm before the 1930s.
• they also deployed a network of rules and regulations to create a playing field in which savers and financial institutions were pretty much forced to invest their money at interest rates that were below the rate of inflation.
• Each year as inflation destroyed part of the value of money, the real (inflation-adjusted) value of the governmental debt burden fell along with the value of money.
• Each year, inflation also destroyed part of the value of the nation’s savings with much of those savings being either directly invested in government debt, or indirectly, through accounts at financial institutions that were forced to heavily invest in government debt.
• Savers were effectively given no choice but to watch the purchasing power of their savings fall each year as government debts were paid down by inflation…

Even though the academic term Financial Repression fell into obscurity for about three decades, it is not just an artifact of the historic past. Indeed it has returned stronger than ever. To see the evidence: consider what you pay for food, energy, healthcare, education and many of the other essentials of life. As we all know, the cost for these resources has been rising at an annual rate that is much higher than the puny-to-nonexistent interest rates that we have been earning in our collective money market funds and savings accounts.

Now in a theoretical free-market, investors would force interest rates up to adjust for current inflation as well as for future inflationary expectations. This competing academic theory that governments can’t use inflation to pay down debts has wide acceptance among many commentators. However, it flies in the face of what actually happens in the real world, as shown not just with the experience of the last ten years, but also from 1945 to 1980. The point of Financial Repression from a governmental perspective is that there is no free market with regard to interest rates; instead the government uses its vast powers to effectively force a negative return on savers. Much more information on the recent and current experience can be found in my article “Cheating Investors As Official Government Policy“.

The Oncoming Global Crisis & Governments’ Need For Wider & More Aggressive Repression Policies

As mentioned in the overview, while the ratios of overall government debt levels to the size of the economies are roughly comparable between the years 1946 and 2011, there is a major difference which makes things far worse this time around. In 1946, the war was over, the massive deficits had stopped, and it was a matter of paying down debts already in place.

This time, the worst of the crisis still lies ahead of us instead of being behind us. What grips the developed world in the early 2010s is a sovereign debt crisis, the essence of which comes down to the governments having promised to pay far more to certain sectors of their societies than they have the tax revenues or even the economic resources to actually pay for and, as shown by numerous studies which go back for decades, the worst is still ahead of us.

The amount by which future government expenditures are likely to exceed future government tax revenues in the United States (under the current structure) is estimated to be somewhere in the range between $62 trillion and $200 trillion (with some estimates being in present value form and others not). Now officially, the US government merely has the staggering sum of $14 trillion in debt outstanding. But, that is using a government definition of debt, which is Treasury obligations only, rather than all of what the government has promised to pay in the future. If a corporation were to use that kind of selective accounting people would go to jail for fraud.

If we take the approach that the newspaper USA Today did, which was to treat the government like a corporation and report on the total by which its total future obligations rose in a year, then during 2010 (as illustrated in the graph below), the share of the one-year increase in total unfunded national obligations per solvent and able to pay (above poverty-line) US household came to $54,600.

The source of the above graph is my article, “Per Household Annual Deficit Exceeds US Income Per Household“. Also covered in that article is that according to the US Census Bureau, the median household income is only about $50,200 per year so the situation is far worse than “merely” having a national debt burden that is greater than the size of the national economy. We are in the incredible place where the annual growth in total unfunded government obligations per above-poverty-line household exceeds the current annual income of the median household.

This sounds fantastical and difficult to believe, but the math is basic: take the results of a study of US government obligations by a major mainstream newspaper, divide the annual increase in obligations by the number of above-poverty line US households, compare to the median annual US household income, and you have the preceding graph.

Obviously, the Financial Repression techniques of the past aren’t by themselves going to be enough to deal with the problem this time around. The future deficits are increasing at too great of a rate so if Financial Repression is to be successful again it is going to need to be modified in such a way that the size of those future payments is as much a target as earnings by savers. As we will cover below, that is the second edge of modern Financial Repression: it is devastating for retirees, it will be getting worse year by year for current and future retirees, and it has been underway for some time now.

The Solution For Governments: Inflation Index Manipulation & Theft By Statistics

Simply put, the solution for governments is to not pay what has been promised to entitlement beneficiaries (especially retirees) and public sector workers who rely on inflation-indexed payments. Instead, governments use their direct control of how inflation rates are calculated and reported to deliberately understate the rate of inflation, which then steadily reduces retiree and inflation-indexed workers standards of living on an annual basis over the coming years and decades. From the perspective of governments – which is a very different perspective from fairness and justice for individual citizens – this leads to a highly desirable outcome.

What is causing the “sovereign debt crisis” which is threatening the economic viability of the US and the EU simultaneously is that impossible promises have been made from the perspective of overall society. There has been a fundamental demographic shift, with a post-war boom in population followed by smaller families. For decades, politicians have made generous promises to a rapidly aging population without considering the cost of meeting those promises in the future, or how a relatively smaller group of adult children in their prime working years could support a very large group of elderly parents in the style which the politicians promised. It’s not even so much a matter of money and tax rates as that the promises made exceed the likely economic resources available to pay for them under any reasonable growth scenario. [As such the promises made in the past will not be fulfilled in the future... and, therefore,] these impossible promises will be broken in one form or another.

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We know there will be higher and higher Social Security costs in the US (and its equivalent in other nations), higher and higher public and private pension costs, and most dangerous of all, higher and higher health care costs for an aging population – even as relatively fewer workers are available per retiree to pay for the burden so we know there will be a steady mathematical decline in the ability to pay that will get a little bit worse every year. When $62 trillion or $200 trillion in future total deficits in the US are discussed – it is the demographics of an aging population that is the source.

One way of dealing with [the promises that were made] is to explicitly and openly change the rules and reduce the entitlements, and the first stages of this approach are already in process. However, for politicians, this is a very dangerous path indeed when taken too far. People have been falsely told for decades when they paid payroll taxes that these taxes were a public savings plan for retirement. Of course, this has been a lie the entire time, the money was never saved but was always spent the same year it was taken in, and the Social Security “trust fund” has always only been IOUs which the government has written to itself but many people don’t understand that. [As such, they naturally they get inflamed when what was promised to them, and what they thought they had paid for, is taken away from them. They feel cheated and they look for people – namely politicians – to blame. When this problem is compounded by particularly unscrupulous politicians seeking short-term advantage by denying that the problem exists at all - then open entitlement cuts are difficult, and no one is proposing a plan powerful enough to actually solve the problem.

The other path available is to use steady annual math to fight steady annual math. As covered in my article "Inflation Index Manipulation & Theft By Statistics", which was originally published in 2007, the mathematics involved are to publicly claim an inflation rate that is lower than the actual inflation rate. Then each consecutive year continue to deliberately understate the rate of inflation. This methodology is employed because most benefits are promised in inflation-adjusted terms, which is both the problem and the loophole. The problem is that as long as the government honestly makes fully inflation-adjusted payments to beneficiaries, then the burden of future government promises is impossible. The loophole is that the government controls what the inflation rate is defined as being.

When we look all around us [we see that] the costs of maintaining our standards of living are rising at a rate that is substantially higher than the earnings we receive on our savings; and there is also a higher rate of true inflation than the annual increases we get in Social Security payments or in cost-of-living adjustments to salaries. What we are seeing is a steady mathematical process of growing theft.

The illustration in the chart and graph above, from the article “Inflation Index Manipulation & Theft By Statistics”, uses assumptions of 10% for the real inflation rate, and 3% for the official rate of inflation. This means that the government cheats retirees out of 7% of their incomes each year. There is a 7% reduction in year one, and another 7% in year two, and another 7% in year three, until by the 20th year, the government is able to wipe out 73% of its future debt burden without ever explicitly taking a benefit away or breaking a promise. Crucially, this mean the otherwise impossible promises are now well within the capacity of future tax rates and the future economy to pay albeit at a terrible cost in falling standards of living for retirees and those whose salaries are tied to inflation indexes.

For the economically impossible to become possible, without explicitly reneging on retirement promises on a massive scale, the inflation rate must be deliberately understated. More specifically, the steady mathematical progression of breaking promises via reducing inflation-indexed payments is used to cancel out the steady mathematical progression of increasingly impossible promises as

• the ratio of current workers to retirees falls with each year,
• the makeup of the population of retirees is transformed by age, with an ever increasing percentage of Boomer retirees reaching 80 and beyond, along with
• the associated explosive surge in average annual medical expenses.

This is the necessary mathematics…and it is the reason why it’s likely to get only worse – indeed much worse – in the years to come. More on the math and the thoroughly interrelated political considerations can be found in this article.

The Double-Edged Risk For Retirees

Both of the two closely interrelated aspects of modern Financial Repression are likely to have a devastating impact on the future standard of living for tens of millions of retirees. These current and future retirees are investing to supplement Social Security and/or a pension, and this means the two edges of Financial Repression will be slashing them both coming and going. Unfortunately, the overwhelming majority of the population doesn’t see the blade or the deliberate nature of the attack, making it very difficult to build effective defenses.

For future retirees, in each year up to retirement and each year afterwards, there will be a steady squeeze which reduces the standard of living that can be paid for by Social Security and pensions. Their expenses are likely to be increasing at rates that are well above the increases in benefit payments which are tied to inflation-indexing as determined by the government…

Let’s return to our illustration of a 10% real rate of inflation, versus a 3% official rate of inflation that is used to calculate annual increases in Social Security payments. We’ll assume that we are talking about a 60 year old named Brian who had for many years been hoping to retire at age 65, but because his financial planning investment strategy didn’t work out as hoped, Brian is now shooting for 70 – if he is lucky. The current purchasing power of Social Security, in combination with Brian drawing down from what he hopes will be his retirement savings in 10 years, would be tight but doable, in terms of his future retirement standard of living. However, when he goes to the chart, and sees that, with the illustration assumptions, in 10 years the purchasing power of Social Security may only be 48% of what it is now, Brian realizes that it simply won’t work, and that he and his wife wouldn’t be able to retire at all with an above-poverty-line standard of living.

(The above chart was created in 2007, thus ten years out is 2017. While the chart could have been easily updated to the current year, it was left in its 2007 form to reinforce a very important point: this isn’t a new, surprising, or short-term development, but instead, governments resorting to inflation-index manipulation has been predictable for a long time, for the same fundamental reasons that such manipulations are likely to persist far into the future.)

Brian realizes that with his current plan, he can’t retire at 70. He also doesn’t know what his health will be in his 70s, and he isn’t entirely confident that he will still have a job in 5 years, let alone in 10 or 15 years. For these reasons, Brian and his wife decide to tighten their belts right now, and drop their standard of living, to try to save as much as they possibly can before their incomes fall in retirement. Perhaps between additional savings and earnings on those savings, they will be able to retire in ten years, or at least have the option if life makes the decision for them.

Which brings us back to the first edge of Financial Repression, the time-honored method governments can use to reduce the real value of massive debts. Having been badly burned with their more aggressive stock investments, Brian wants to stick to “safe” and liquid investments this time around, particularly since they don’t know for sure when they will need to start cashing them out. [As such,] they choose short-term, high quality investments where interest rates are being manipulated by the Federal Reserve to stay at levels well below the rate of inflation, as part of a deliberate government policy of Financial Repression.

For simplicity’s sake, we will assume that the relationship between short-term high quality investments and real inflation is the same as that between the official rate of inflation and real inflation which would mean that over ten years, with a 3% annual return, and the value of money declining at 10% per year,

• the purchasing power of a dollar that Brian saves today will be worth 48 cents in ten years (pre-tax)…[and, as such,] he and his wife try to prepare by saving as much as they can, in an uphill struggle against the future – but it gets worse.
• 15 years from now, when Brian turns 75, Social Security payments only have 37% of the purchasing power that they do today – and the dollars saved to make up the difference in purchasing power also only have 37% of the purchasing power.
• 20 years from now, when Brian reaches age 80, Social Security payments only have 27% of the purchasing power that they do today – and the dollars saved to make up the difference in purchasing power also only have 27% of the purchasing power.
• Brian’s wife has a bigger problem than Brian does because, on average, women are younger than their husbands, and will live for longer, meaning Angela could easily have ten or more years of inflation and financial repression exposure after Brian has passed and 30 years from now, Angela’s solo Social Security payments may only buy 14% of what those payments would buy today – while the dollars saved 30 years before might have only 14% of the purchasing power they have today – pre-tax, even after having been invested at market rates for 30 years.

What makes this bleak scenario all too likely is the other side, and the financial interests of the sword-wielder. Because of 30 years of systematic inflation-index manipulation, the government is saving 86 cents on the dollar when it comes to retirement beneficiary payments. That fantastic, incredible, unpayable $14 trillion in national debt from 2011 is worth only about $2 trillion in inflation-adjusted terms by 2041. Thus, the impossible numbers of unfunded obligations, the $62 trillion and more – turn out to be possible after all.

From a very cold, impersonal, mathematical perspective – the steady power of exponential mathematics was simultaneously applied from two different directions to quite effectively deal with the seemingly impossible 1-2 combination of current debts and promised future payments that are rapidly increasing. From the self-serving perspective of politicians seeking to stay in power there is a compelling political logic to choosing a slow and highly technical deceit that most voters will never fully understand, as opposed to repeatedly voting to reduce retirement payments in the open (these political considerations are covered in more detail in the “Inflation Index Manipulation” article linked above). From the perspective of the tens of millions of current and future retirees, [however,]… there is all too likely to be an intensely personal tragedy, repeated in city after city across the U.S., as well as in other nations. Honest hard-working people who played by the rules their entire lives, who made a lifetime of contributions, who did everything they were supposed to do in order to enjoy a pleasant and prosperous retirement – find themselves facing impoverishment in their later years, caught in a multi-sided financial trap with seemingly few ways out.

This is unfair, it is an outrage, and it is just plain wrong. One solution may be to scream and shout and spread the word, and if enough people do it [perhaps] that could help. The situation – and the math – being what they are, however, the most practical and effective solution may be to leave the conventional retirement investing box altogether, move to a different level of understanding, and learn to flip the government’s mathematics of retirement destruction into a personal arbitrage opportunity for building safety and wealth.

The Triple Risk For The Military, Teachers & Other Public Sector Employees

The greatest danger of all is reserved for those who currently still serve the public in their careers: military personnel, police, firefighters, teachers and the many other public sector workers. (While they fall in a different category, the millions of private sector employees whose incomes are also explicitly tied to official inflation indexes are also at risk.)

As the public workers face the severe challenges in making retirement investments in an intertwined world of financial crisis and Financial Repression, what may appear to be their greatest benefit relative to many in the private sector, may instead turn out to be the lead weight that drags them down. The advantage – and also the problem – is that they have a job and source of income that is (generally speaking) more secure than the uncertain prospects faced by many in the private sector. However, in these days of financial strain, unless they get a promotion, their pay is going to be limited to increasing with the rate of inflation. Much like Social Security beneficiaries, the only raises they will receive are those associated with the official index for inflation. Indeed, because they are paid by the government, public sector worker salaries come out of the same pool of money as entitlement beneficiaries, and will effectively sink or swim along with the entitlement beneficiaries.

Let’s consider the total challenge that is faced by a soldier, firefighter or teacher who is trying to prepare for retirement in 10 or 15 years…In an environment of Financial Repression, they face

• steady impoverishment from the first edge, that comes in the form of a declining purchasing power for future retirement benefits. Like Brian and his wife in the previous illustration, they face the danger that their public pension may have only 48% of its current purchasing power in 10 years, or only 27% in 20 years,
• steady reduction in the purchasing power of their savings from the second edge. They face the danger that a dollar they invest today to offset their benefits falling by half in 10 years, will itself only have half the purchasing power that it does on the day they first invested.
• steady financial squeeze on their savings because their income is explicitly tied to inflation indexes so, as public employees attempt to save ever more money, their household expenses (all else being equal) are likely to be rising as a percentage of their income each year, which translates to less money being available to save each year. This then places them in the situation where 1) their ability to save diminishes every year along with the purchasing power of their salaries; 2) the purchasing power of their savings declines each year; and 3) the purchasing power of their public pensions declines each year.

The above may sound like a horrible example of Murphy’s Law in action, but there is no coincidence here…The governments of the Western developed world are broke, and have no way out, unless they make some radical changes…Governments have massive current debts, along with impossible spending burdens ahead. The largest components of those spending burdens are salaries for public sector workers and transfer payments for entitlements – each of which are inflation-indexed. The “magic bullet” of manipulating the inflation indexes to steal from savers, public workers and retirees is what makes the math work.

Because they have three separate exposures – salaries, savings returns and retirement benefits – public workers face the likelihood of having three distinct “shots” taken at their current and future standards of living – this year, next year and every year thereafter.

The Choice Between Impoverishment & Finding New Solutions

While there is a significant chance of a financial and economic meltdown when it comes to the governments of the West, particularly if the euro and European economy were to collapse – there is no certainty of a meltdown. This meltdown may look inevitable to some people when we consider current laws and the way the banks and economies are currently structured, however, for personal financial survival, it is also essential to keep in mind that the rules are what the government says they are. Think of governments as being enormous, dangerous beasts who have been backed into a corner and are fighting for their lives. Bloodied, wounded beasts with full control over not only what the language of the law reads – but perhaps even more important – which laws are enforced and how they are enforced with how inflation-indexing works being only one example.

As we are already seeing in Europe [and] the U.S., the general governmental reaction to the increasing failure of government policies is not to say “we screwed things up, we’re all resigning in shame and here is your power back and a return to sound money”. Rather the government’s reaction to its own failure is to try to ratchet up its own power in the name of emergency, and to increase its control over its own citizens in the process.

The use of Financial Repression to emerge from enormous debt levels is not theory – it is proven history. It is what worked the last time the governments had this level of debt outstanding. The situation is worse this time around, but the double-edged sword of Financial Repression is already being aggressively wielded today by the US government against its own citizens. This can be plainly seen when we compare the real cost of living and how that changes on an annual basis in comparison to either returns on savings or the official indexes that are used to pay salaries and entitlement benefits. In my opinion, there is no question that the net result is that we are not being adequately compensated for saving our money, and that standards of living are falling for people who are completely dependent on payments that move exactly with official government inflation indexes…

There is an alternative, however, and that is to seek out strategies that are thoroughly nonconventional from a meltdown perspective, as well as in comparison to normal financial planning. Perhaps the best approach is to say: “I don’t know what the future will be, so I want a strategy that protects what I have if it’s meltdown, with a strong upside potential and I want a strategy that protects what I have if it is financial repression, with a strong upside there too. What I want is a strategy that works for me both ways.”

A continuation of Financial Repression into the future will likely severely damage many conventional long term investment strategies. There are the direct effects of the first edge, which means fixed income investors steadily lose the value of their portfolios to inflation.

It is the second edge of Financial Repression, however, that is the deadliest for traditional investment strategies…Baby boomers have been buying stocks which are absolutely dependent on growth in consumer spending in order to fund their retirements, with an intention to sell at the very time the Baby Boom is reducing spending in retirement, not taking into account that age-driven reduction in Boomer spending will slash much of the value of stocks that depend on growth in consumer spending. This then creates a loop as reduced investment values lead to reduced retirement spending ability, which further reduces investment values, and so forth. If retirees and public sector workers – along with inflation-indexed private sector workers – have falling real incomes because of inflation-index manipulation, then this has a devastating effect on consumer spending growth, which…then means that a stock market priced for never ending growth is radically overvalued, and subject to a punishing and long-term decline.

The repression may or may not be successful at preventing a total financial meltdown. Crucially, however, meltdown investors must understand that if currency collapse is dodged, even if there is a sustained but high real rate of inflation that is deliberately deployed as part of a strategy of Financial Repression, part of the very design of the playing field and tax structure will likely be to squeeze out and crush the assets of those pursuing simplistic and traditional meltdown strategies. The government actively makes the rules, and history shows that in times of emergency, motivated governments change rules very quickly on a wholesale basis. Unfortunately, however, too many people mistakenly believe that a desperate government that is scrambling to prevent financial collapse will merely passively maintain the current rules.

As close to financial security as can be found in these perilous and volatile times can best be achieved through pursuing unconventional strategies designed to handle both repression and meltdown.

* http://danielamerman.com/articles/2011/DoubleRb.html

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So says Arthur Adams (http://www.ampminsure.org/) in edited excerpts from his original article.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The authors’ views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Who in the world is currently reading this article along with you? Click here

Adams goes on to say:

Unfortunately, very few are concerned about their retirement years and are unaware of the ways they can be harassed if they have debts during this time. Pre-retirement planning, including having all the necessary insurance policies in place, is a necessity if you want to stay on top of your finances. Here are some retirement planning tips:

1. Start saving early: Whatever step you take to repay your debt obligations while you’re young, you should make sure that you start saving early for your retirement. You should save at least 10% of what you make in a month so that you can build the emergency fund that you can fall back on during tough economic times. The rise in the number of bankrupt seniors in the US is solely due to the number of people who are not saving when they should.
2. Know your retirement needs: Your needs keep on changing with time and when you retire it will change a lot as you’ll not tend to go out as often as you used to earlier. You should determine what you may need in order to formulate a plan that can help you meet all your retirement needs. Take charge of your financial future so that you don’t take wrong steps in the long run.
3. Contribute money to your workplace 401(k): If your employer offers you a 401(k) account… [then take full advantage of the opportunity and]contribute [to the maximum allowed] and irrespective of the matched contributions by your employer. Also, don’t withdraw money from this account as and when you need as this may become chargeable before your retirement age.
4. Get adequately insured: As you’re ageing it is more likely that you wll be prone to disease and accidents. The only way you can stop burning the hole in your wallet is by getting yourself basic insurance policies [such as] health insurance and auto insurance. Get enough coverage so that in the event of a mishap you don’t shell out… [more money than you can comfortably pay].
5. Allocate money to an IRA: An IRA or an Individual Retirement Account is yet another retirement plan that can help you lead a debt free retired life. It is best if you can put up to $5500 a year into the IRA account and if you’re 50 and older you can contribute even more. IRAs offer you tax benefits but make sure you don’t withdraw money from this account whenever you want as this will nullify all benefits and you may even be subject to taxes.
6. Determine basic investment principles: How you save your dollars is equally important as how much you can save them. As you’ll be living on a fixed income, you should always consider the basic investment principles following which you can make money by earning profits. Choose the best asset that can ensure maximum returns and minimum loss. You [should use] an investment advisor…[to] get expert advice and [make full] use it while taking the plunge into the investment market.

Conclusion

If you don’t want debts to mar your golden years, you should follow the steps mentioned above. While you’re working, get help from a debt professional so that you can reduce/eliminate all your financial worries while you’re earning your bucks. Don’t delay this entire debt payoff method till you reach your retirement age and also check the insurance coverage to make sure that you’re adequately covered.

Editor’s Note 

Sign-up for Automatic Receipt of Articles in your Inbox or via FACEBOOK | and/or TWITTER so as not to miss any of the best financial articles on the internet edited for clarity and brevity to ensure you a fast an easy read.

Related Articles:

1. 10 Index ETFs for Building an Ideal Retirement Oriented Portfolio

2. Is $1,000,000 Enough to Provide for a Successful 30-year Retirement?

5. AARP Survey: Golden Years Appear Grim to Aspiring Retirees

 

An AARP survey of over 5,000 American workers aged 50 or older has confirmed…that the Great Recession has radically changed the financial situation for many aspiring retirees and that the outlook for their golden years now looks grim. It seems that counting on their home equity to finance a life of leisure didn’t exactly work out as planned. [Let's review the survey's findings.] Words: 400

 

6. 5 Places to Retire and Rent for Less Than $500 Per Month

 

 

 

Housing is likely to be one of your biggest retirement expenses. One way to approach your search for the ideal overseas retirement haven is to focus on retire-overseas choices where housing is cheap. [Below I present five such places for your consideration.] Words: 1040

 

7. Life Insurance: a Pot of Gold or Ready Cash?

 

A life insurance policy is intended to provide your family with a sizable amount of money should you meet an untimely death and, as such, can be said to be a something of a an ultimate bonanza – a pot of gold, if you will. Most people, however, think the only way to get money from a life insurance policy is to die but there is another way should your circumstances change and that is called a life settlement. In this article I provide you with some insider insights on how to go about negotiating the maximize payout on such a settlement. Words: 851

8. 75% of Americans are in Deep _ _ _t!

Rising education and medical costs, on-going credit card interest payments, well used personal lines of credit and large mortgage debt and home equity loans – most a penchant for living beyond their means – is keeping 75% of American households in some degree of debt. Take a look and then pass it on to your friends, neighbors and co-workers.

9. 2 Ways to Reduce Your Debts Using the “Snowball” Method

 

 

What is the best way to reduce debt? The most-efficient means is probably the snowball method. There are two main variations of the snowball method, but you must consider your personality to determine which of the two is right for you. [Let me explain.] Words: 1251

 

10. 10 Money Ideas That WILL Change Your Life

 

 

 

Frugality often gets a bad rap. Many people misunderstand frugality and assume that it’s nothing more than being “cheap” when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited. [Here are 10 ways to do just that.] Words: 1132

 Constructing a portfolio for the retirement years requires one to focus on portfolio risk or uncertainty while not neglecting return. If the portfolio asset allocation plan is too conservative, the return will not meet lifestyle expectations. Inflation is again on the rise and this needs to be taken into consideration when putting together a retirement oriented portfolio. Below is a combination of index ETFs that project respectable returns while holding down portfolio volatility. Words: 455

Withdrawing from a $1,000,000 nest egg upon retirement using the familiar 4% rule to generate a successful 30-year inflation-adjusted (3% per annum) retirement proved to be totally inadequate as per the retirement withdrawal strategy that I put forth in a previous article (1). In fact, it crashed and burned in year 25 of the 30-year plan! In fact, as I show in this article, it will only succeed if your portfolio outperforms the S&P 500 by 5% every year for 30 straight years – and what is the likelihood of that? Words: 1533

The Growth Retiree’s advisor recommended an asset allocation and a withdrawal strategy to meet their goals. The advisor adjusted their asset allocations according to his understanding of Modern Portfolio Theory…believing that the best path to follow was a total return strategy.

Mr. and Mrs. Growth Retiree seemingly had already done the hard part by accumulating the $1,000,000. In a total return strategy, a withdrawal plan is mandatory. That is because the portfolio is not constructed to generate all the income needed. Rather, it is designed to have parts of the nest egg be sold off each year to obtain the cash needed for living expenses. The most common guideline is the 4% rule as described above, with 3% withdrawal increments each year to cover inflation.

Assumptions

In this article I am going… to revisit the situation and run other trials using different assumptions.

Other assumptions remain the same:

Discussion:

I lied. Running the return sequence forward and backward is not just for fun. It is, in fact, a main point of this article. I want to demonstrate the surprising impact that the sequence of returns has on the entire 30-year strategy…

Here’s the return series. The table below shows:

• Actual year.
• Year number in the Growths’ retirement. The 10-year series will be repeated to total 30 years. The series will be run both forward (Trial 1) and backward (Trial 2).
• The actual total returns including dividends of the S&P 500 (according to MoneyChimp) in 2000-2009, rounded to the nearest whole percent.
• Model A: Volatility cut down to 2/3 of what it actually was.
• Model B: Five percent added to each year’s returns.

This will give us four shots at a successful 30-year retirement for the Growths: 1A, 2A, 1B, and 2B. Do you think any of them will work? Here are the trials:

• 1A: Years run forward; volatility dampened to 2/3 of actual.
• 2A: Years run backward, volatility same as 1A
• 1B:Years run forward; returns 5% better than S&P 500.
• 2B: Years run backward; returns same as in 1B.

Run 1A: Sequence Run Forward and Volatility Dampened to 2/3 of S&P 500’s Volatility

First Decade:

Second Decade:

Third Decade:

There is no third decade. The Growth Retirees ran out of money in Year 18 of their planned 30-year retirement.

Run 2A: Sequence Run Backward and Volatility Dampened to 2/3 of S&P 500’s Volatility

First Decade:

Second Decade:

Third Decade:

Once again, there is no third decade. The Growth Retirees ran out of money in Year 20 of their planned 30-year retirement. The resequencing of returns did get them an extra two years.

Run 2A: Sequence Run Forward and Returns 5% Better than S&P 500 Every Year

First Decade:

Second Decade:

Third Decade:

Once again, this withdrawal scheme fails, this time in Year 25.

Run 2B: Sequence Run Backward and Annual Returns 5% Better than S&P 500

First Decade:

Second Decade:

Third Decade:

Finally, a Total Return plan that squeaks through, barely. If taxes were counted, this would have failed too. It will fail in Year 31.

More Discussion:

As with the previous article, I had no preconceived notions of how any trial would end up. I simply wanted to illustrate the importance of return sequencing on total returns. I was aware that using 2000-2009 as a starting decade would provide a severe stress test on the 4% strategy. That’s what a stress test should do.

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[While] sequencing by itself [does not] make a difference in compounded returns…sequencing [is] important when you are making withdrawals because the withdrawals go relentlessly up (the result of the 3% annual increment), and sometimes an increased withdrawal coincides with a particularly bad annual return year. The combination can be lethal. In each run, the backwards sequence did better than the forward sequence. That’s because the smallest withdrawals coincide with the best returns in each decade when you run the sequence backward.

Here are some other takeaways:

• If you have the misfortune to retire in a flat market, it is really hard to make the 4% rule work for 30 years. The likelihood that your portfolio will outperform the S&P 500 by 5% every year for 30 straight years is practically nil. Yet that’s what it took here to get a single successful trial.
• In the lost decade of 2000-2009, the arithmetic average of each year’s returns was actually positive – but the compound average was negative. As some people say, down years have more impact than up years. The most common example of this is that returns of -50% and +100% do not yield +25% as their arithmetic average would suggest. They actually leave you at 0%, right where you started.
• Getting off to a bad start in a withdrawal plan can cause psychological problems. In Run 1A, the portfolio was down more than 1/3 after the first three years. I imagine that can cause sleepless nights when you know that the portfolio is supposed to last for 30 years.
• When portfolios are failing, their plunge to zero is sickeningly fast and steep in the last few years.

Conclusion

For me personally, this is my takeaway:

• don’t rely on a total return strategy and portfolio withdrawals to fund retirement.
• don’t employ automatic inflation escalators in your withdrawals every year.

How this method has gained dominance in the retirement industry is a mystery to me. The risks of failure, and fear of failure, are just so great.

Links to Related Articles by Van Knapp as Posted at Seeking Alpha:

1. Retirement’s 4% Rule: Surprising Answers You Need to Know about the Inflation Factor
2. *Retirement’s 4% Rule: The Importance of Return Sequence
3. Retirement’s 4% Rule: Why Mr. & Mrs. Income Don’t Need It (Part 1)
4. Retirement’s 4% Rule: Why Mr. & Mrs. Income Don’t Need It (Part 2)

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Some physical gold, silver, platinum and palladium bullion assets, in addition to traditional paper assets, can be part of your Individual Retirement Account (IRA) or Roth account and they can be bought and sold with no tax consequence until you move money out of the account. [This short articles reveals just what bullion assets can, and cannot, be included.] Words: 573

So says an article at www.free-bullion-investment-guide.com which Lorimer Wilson, editor of  www.munKNEE.com  (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.  The article goes on to say:

Until 1997 the law governing acceptable precious metals bullion investments for IRAs only mentioned American Gold Eagles and American Silver Eagles. [The law] changed in 1997 allowing the investor…[to include a greater] variety of physical bullion in their investment retirement account to include:

• American gold, silver, and platinum Eagle bullion coins 
• Canadian gold, silver and platinum Maple Leaf bullion coins 
• Australian silver Kookaburra and the Australian gold Nugget bullion coins 
• Austrian Philharmonic silver and gold bullion coins 
• Gold, silver, platinum and palladium bars and rounds manufactured by a NYMEX or COMEX approved refiner/assayer and meeting fineness requirements. 
• Purity requirement for gold bullion must be at least .995 fine (99.5% pure) and the Silver requirement must have at least .999 fine silver.

Who in the world is currently reading this article along with you? Click here to find out. 

The following bullion coins are NOT allowed to be placed in an IRA. 

• South African gold Krugerrands 
• Old United States Gold numismatic or collectable coins 
• United States 90% or 40% silver coins (1970 and before) also known as “Junk Coins” 

A few other facts about putting physical bullion into an IRA account are: 

• You cannot put bullion you already own into an IRA account; IRS regulations concerning IRAs prohibit it. 
• You cannot hold the physical bullion yourself; IRS regulations require that the metals be held by an approved depository or “custodian” to fund your account such as, among many, the Sterling Trust Company, (www.sterling-trust.com), American Estate & Trust, LC (www.iracentral.com) ,GoldStar Trust Company (www.churchtrust.com), etc. 

If you are interested in including physical bullion into a IRA account, consult [an accountant or] financial advisor about specific ways to introduce physical bullion into a Roth or Traditional IRA account.

*http://www.free-bullion-investment-guide.com/iras.html

Related Articles:

1. Number of Canadian and American Silver Bullion Coins Exploding   http://www.munknee.com/2011/07/number-of-canadian-and-american-silver-bullion-coins-exploding/
2. What’s the Best Buy in Silver These Days?  http://www.munknee.com/2011/06/whats-the-best-buy-in-silver-these-days/
3. What’s the Difference Between 1 Gold Karat, 1 Diamond Carat and 1 Troy Ounce?  http://www.munknee.com/2011/03/whats-the-difference-between-1-gold-karat-1-diamond-carat-and-1-troy-ounce/
4. The Pros and Cons of Buying Gold Bars, Ingots and Coins  http://www.munknee.com/2011/03/the-pros-and-cons-of-buying-gold-bars-ingots-and-coins/
5. What You Need To Know Before Jumping Into Gold And Silver  http://www.munknee.com/2011/03/what-you-need-to-know-before-jumping-into-gold-and-silver/
6. Be Careful! Owning Gold Bullion is a Revocable Privilege in the U.S. – Not a Basic Right!  http://www.munknee.com/2010/10/be-careful-owning-gold-bullion-is-a-revocable-privilege-in-the-u-s-not-a-basic-right/
7. Beware The Dangers of Buying Gold Coins  http://www.munknee.com/2010/06/the-dangers-of-buying-gold/
8. Beware: Official U.S. Government Price for Gold is Only $42.22/oz.   http://www.munknee.com/2010/05/beware-official-u-s-government-price-for-gold-is-only-42-22oz/
9. 8 Reasons to Own Gold  http://www.munknee.com/2010/02/8-reasons-to-own-gold/
10. Americans: Here’s How to Protect Your Retirement Assets From Coming Gov’t “Confiscation”     http://www.munknee.com/2011/03/americans-heres-how-to-protect-your-retirement-assets-from-coming-govt-confiscation-2/

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Coins

I’ve read many articles about living and retiring in Mexico. A good number of them tell of the good and focus on a specific market. These are mostly written by local business people aiming to attract you to a certain project to purchase.

As an artist who is neither a real estate salesperson or travel agent pushing an agenda, I feel it’s time to have a real discussion and look at the very best places to retire with real Pro’s and Con’s so the reader can really make an informed decions on where to go that serves their needs, interests and ambitions.

First to put this comprehensive report together, I have consulted with highly experienced ex-pats who have lived and/or live in the places that I rate here. For me, through my travels, I have met these amazing people who really know and walk the talk and it’s been an eye opening experience.

So, without further wait, here’s The Top 10 Places to Live and Retire in Mexico and the reasons why…

1. Lake Chapala, Jalisco
2. Ensenada, Baja California
3. San Miguel de Allende, Guanajato
4. Guadalajara, Jalisco
5. Merida, Yucatan
6. Riviera Maya, Quintana Roo
7. Mazatlan, Sinaloa
8. Puerto Vallarta, Nayarit
9. La Paz, Baja California
10. San Cristobal de las Casas Chiapas

[For those interested in 5 places to retire and rent for less than $500 per month other than in Mexico please read this article.] 

1. Lake Chapala, Jalisco (Winner)

http://www.youtube.com/watch?v=dodSP4eHTTE&feature=youtu.be

According to Kristina Morgan of Focus on Mexico, she says “Of all the places in Mexico I have been, none can quite compare with Lake Chapala. There’s something about this place that just seems…magical. And as corny as it sounds, that’s the word I hear people use to describe Lake Chapala time and again. Lake Chapala gets into your heart and becomes home. It’s like stepping back 50-70 years here regarding the simpler lifestyle, culture and values. When I’m here I feel like I can be me, like I can breathe a little more freely and be the person I want to be and this is a sentiment expressed by most everyone who has ever been here or lives here”.

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Kristina has lived in the Chapala area for 5 years before returning to Colorado, where she lived for another four years. She says “There wasn’t anything really wrong with our lives in Colorado but we also knew there was much more to life than we were able to experience in our daily suburban grind. I wanted to live my life on purpose, not by default. So we made a list of pros and cons and quantified each and returning to Lake Chapala won by a landslide. In our case, this was a giant leap of faith. We were not retired, had limited savings and three small children to think about”.

Many people said Kristina and her family were crazy. But yet, those same people now say they wish they could do what they did. Kristina tells them that they can and that it just takes a detailed dream with action behind it.

Lake Chapala used to be just a retirement community but in the last 10 years that’s changed and a lot of younger families and entrepreneurs are moving there for the obvious business opportunities and lower cost of living.

The Lake Chapala community is comprised of a string of villages, mostly on the north shore, with Ajijic being the crown jewel of the area in terms of artisans, charm and amenities. Horses clopping down the road, vendors selling fresh fruit, women weaving, live music everywhere from classical to salsa and teenagers helping their grandmothers are common sights. There’s a happy hum of activity there.

For us, the most compelling reasons (besides raising our children here) are listed below.

Pros

The Climate
The weather, of course, is a huge draw. National Geographic touts Lake Chapala as the 2nd best climate in the world. The Lake is surrounded by the Sierra Madre Mountains and is a mile high, like Denver, Colorado so we have very little humidity. The distance inland is still close to the ocean but far enough away to not have to worry about storms and hurricanes off the coast. We have all the same flora as Hawaii as well as the same vegetation in arid states like Colorado—pines and palms—growing equally well, side by side!

The most-developed expat/English infrastructure in Mexico
You may feel like you’ve stepped back in time, but there’s still a lot to do here, from golfing, to boating, to organized group activities including a community theater in English, two American Legion posts, the Lake Chapala Society, churches in English in every denomination, concerts and events (the Bolshoi Ballet even came to Ajijic!), live entertainment, world class restaurants that will impress even the most seasoned palate and much more!

So many people have a love affair with Ajijic and the Lake Chapala area that it is the largest expat community anywhere outside the U.S. and Canada. I figure 20,000 expats can’t be wrong. But as Latin World says, “Despite being home to one of the heaviest concentrations of North Americans in Mexico, Lake Chapala doesn’t feel quite as Americanized as other retirement enclaves in Mexico.” I believe that is due to the fact that this isn’t a resort area catering to tourists, but rather a place to adopt a new way of life and be a part of a community.

There are also many real opportunities to get involved and make a difference through any of the numerous charities here if you want to volunteer your time. The rewards are greater than any paycheck.

Affordable, top-notch medical care is available
Though it may sound surprising, the University of Guadalajara boasts an excellent medical school. In fact, many U.S. doctors are educated there! There are excellent facilities, doctors, specialists and medical staff in Mexico and a major benefit is that they are readily available (no long waiting periods). Many of the doctors even speak English and often have taken some training in the United States or abroad. The doctors here have such a gift for listening carefully to you and not making you feel as if they don’t have time to spend with you. They even make house calls! There are two clinics here and there are world-class hospitals in near-by Guadalajara that resemble 5 star hotels but at a fraction of the cost.

Proximity/Accessibility: Guadalajara, airport, coast
One of the reasons we chose Lake Chapala is its easy access to other places of interest in Mexico. Ideally located about 40 minutes from Guadalajara (Mexico’s 2nd largest city), 25 minutes from Guadalajara’s international airport, and as close as 3 hours to the pacific coast and an easy 11 hour drive to back to the U.S. so it is easy to trade the frigid winters and the wilting heat of summers north of the border for paradise. We wanted to know that they can get back home quickly if we need to so being so close to the airport makes being home in a few hours possible. It is interesting to note that travel is part of the culture in this area, for Mexicans and retirees alike and the low surcharge at the airport in Guadalajara makes flying more affordable.

Low cost of living
I didn’t move to Mexico to spend a lot of money! It has been said that Lake Chapala is the place to be if you want a bargain and all the amenities you’re used to from back home.

Home prices are still low here. I know people who have looked into different retirement destinations all over Mexico and say they have found the best deals here. We also have an MLS, which almost nowhere else in Mexico has so it is easier find the right home for you. On the coast, you must purchase property through a bank trust but because we are inland you are allowed to own property outright through a direct deed.

We pay our maid about $35 USD a week for 15 hours of work. I never could have had a maid for 15 hours a week while we lived in Colorado. The average cost for a single person to live very well is $1800 a month but I know many people doing it on significantly less than that. We can have a steak dinner for $12.00, with wine and there are fresh organic foods and a weekly farmers market available as well. Labor is very inexpensive here, too so if you are interested in custom work or art, etc it’s easily within reach.

All of this adds up to a lifestyle there is no way I could afford to duplicate in the U.S. and that it would be hard to give up.

This is a real community
To me, this is the most compelling reason to come here. People come to Lake Chapala for the weather and lower cost of living and end up staying because of the people. Lake Chapala still has a small-town feel to it. It seems like everyone knows everyone and the people, both Mexican and expats, are very friendly and look out for each other. This area also has the largest singles population owing to the sense of safety and community here. It is said that people are nicer here than they were back home. The Mexicans are still very warm and welcoming, largely due to the fact that most of the transplants are very cognizant that we are guests in their country and we try to be as gracious and considerate as our Mexican friends are. There is still an old-world, genteel flavor here. Mexicans embrace family, customs and tradition and tend to dote on their children and cherish their elderly. The people who come here are frequently in awe of the close ties in our community and how quickly they are welcomed and accepted. I haven’t seen anything like this anywhere else in the world, not even in other places in Mexico.

A safe and secure environment
Despite a rather negative media representation which focuses on drug related violence, Mexico is actually a top choice when it comes to safety. The conflicts which make the headlines are mostly limited to the U.S. border area; the majority of the country is virtually unaffected, and news of these unfortunate events is as distant to these areas as it is to the U.S., and in some cases, even more so.
“In Lake Chapala violent crime is almost unheard of,” points out Shawn Gaffney. “In Lake Chapala, the citizens walk the streets at any time of day or night safely and confidently.”
Statistics back this feeling of comfort; in most parts of Mexico, violent crime is significantly lower than in large U.S. cities.

Stunning beauty
Lake Chapala has breathtaking sunsets over the lake, and majestic mountain views. Flowers are prolific and seem saturated in bold color. There are charming cobbled streets with stone walls and fuchsia bougainvillea draped like petticoats over the tops. The best way to give you a picture is that people say it looks like Hawaii. The vivid color here is whimsical and artistic, with many murals all over the area, including some that are painted on houses and businesses. There are at least 3 waterfalls in the area and thermal springs that will transport you with their relaxing and curative properties. Sundrenched terra cotta tiles, mesmerizing vistas and tropical foliage make it feel like you’re on permanent vacation—but without the heat, humidity, tourists, hurricanes or expense.

Solid investment
When you’re considering a place to retire, no one wants to flush their money into an area where they would have a hard time getting it back out if they ever needed to. This area is at a steady growth rate with promise of more future growth, especially with the Pan AM games being held in Guadalajara in 2011 and some of the water sports competitions being held at Lake Chapala. You’ll get a lot of bang for your buck now while knowing your money will grow here.

Slower pace of life:
We can learn so much from the people here about what is truly important in life. For those who are seeking to simplify their lives, Lake Chapala should be on your short-list. This isn’t a “time is money” culture. Mexicans work to live while many of us have lived to work. In general, the people here have their priorities straight. It’s all about how you treat people and recognizing that each day is a gift to be lived fully and graciously.

Cons

Altitude
At a mile high, some people who have COPD or other severe respiratory illnesses may find this is a little too high in altitude for them. However, some people report feeling far better here and being able to sleep better than they ever could. The elevation is also a major reason we have such a temperate climate and why the area isn’t prone to natural disasters.

Language
If you move to Mexico you’re going to have to learn at least a little of the Spanish language to get by. Some people find this daunting and intimidating. The good news is that compared to anywhere else in Mexico, English is spoken to one degree or another by most people.

Small villages
If you’re looking for a big city feel then Lake Chapala isn’t for you. Think quaint fishing villages with an old world feel and modern amenities and you’ll have the idea. However, village life has its benefits in safety and community and if you need a break from the tranquility and want to head to the big city then Guadalajara is just up the road.

Noise levels
This can be said about any area in Mexico but I still think it needs to be said. Village life is noisy with live music, church bells tolling at all hours, roosters who crow all day and night, fireworks, parades and processions, parties and cars driving by announcing everything from their wares to who has a fresh catch of fish down at the pier. On Mother’s Day, some lucky moms are woken before dawn with mariachi bands serenading them outside their window. If this would drive you crazy, then be sure to look for homes on the outskirts of the villages or in a planned development, or gated community. Thankfully, there are a lot of places to choose from to escape the noise.

Not a Business Mecca
For those young and agressive, they will be disappointed because the Lake Chapala area is NOT a mecca for business. Business gets done but for the most part, retiree’s are slower more set in their ways and thus are not seeking big opportunities so trying to sell them something using a carrot for the future can be frustrating and will land you in the “con man” category real quick.

It is not the ocean
Lake Chapala is Mexico’s largest lake at 77 miles long and 13 miles across but if your heart is set on a daily routine of drinking a margarita on the beach with endless waves stretching out to the horizon then this isn’t for you. While this is the largest lake in Mexico and the conquistadores thought this was the ocean when they first arrived here, it is still a lake. But the lake is beautiful and ideal for sailing, swimming and recreation and the ocean is just three hours away.

In short, Lake Chapala is a one in a million place with everything it offers. Of course, one size doesn’t fit all but if you’re looking for a paradise with a low cost of living, an established English infrastructure and activities, modern amenities, near-perfect climate and a friendly and safe community, come visit Lake Chapala and see if this might be for you. To help you in making a decision, Focus On Mexico offers 8-Day Educational Programs to Ajijic and Lake Chapala, Mexico (2nd Best Climate in the World). Join them on a Focus program and learn why thousands of Americans and Canadians chose to retire in Lake Chapala.

Their programs offer the perfect balance; a wonderful vacation and an insightful, educational experience. Our expert speakers cover all topics: Health Care, Real Estate, Legal System, Immigration, Bringing Pets, Cost of Living, US Taxes for Americans, Non-Residency for Canadians, Living on the Lakeside, Investing in Mexico, Mexican Economy and much more… You’ll get everything you need to help you decide if Lake Chapala, Mexico is the place for you, plus have a lot of fun doing it. Retiring in Mexico couldn’t be better.

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2. Ensenada, Baja California

According to John Vogel of BajaWine.info, the major travel and info site covering the Valle de Guadalupre wine country in the greater Ensenada area, he says “In Ensenada, you have everything that a major city could have but it’s still a small family town” The weather is very temperate between 60 to 80 F mostly all year round. It’s never too hot or too cold in Enenada as it’s on the Pacific Coast in a bay so it’s somewhate shielded by direct ocean winds. For Expats, it’s an easy transition because Ensenada is really half Southern California half Mexico. Most speak English as the border is just 1 hour away. So travel back and forth is relatively easy. It’s a major benefit for those that want to live an Mexico lifestyle but still get the San Diego Chargers game every NFL Sunday for a little tailgating.

Pros

• Close to US Border
• Easy going beach weather
• Inexpensive
• Very little rain fall
• Family friendly city
• All kinds of events held almost every weekend



Cons

• Airport is in Tijuana about 1 hour away and San Diego International Airport is about 1 hour and 30 minutes away by car albeit, there is a border crossing that could take from 1 to 3 hours depending on time of day.
• Anti-septic Mexican culture meaning that the culture in Baja is more close to the USA culture as it’s a mixed culture. If you’re looking for authentic rustic old Mexico, Ensenada is NOT the place to be. This is San Diego South and the peoples of Baja are a hybrid of Mexico and USA.
• You must have a car to get around.

3. San Miguel de Allende, Guanajuato

According to Rebecca Fass of Singles of San Miguel de Allende, a local socialite and bon-vivant, San Miguel de Allende is “the most wonderful place on the planet”. This place is probably the most well-to-do city in all of Mexico. With world class arts, music, and amazing restaurants with the highest end peoples from all over the world, SMDA is the most equistite classy place to live in Mexico. So if your looking to hob-nob with the rich, famous, artsy types, and peoples who really hold their own at the highest levels, SMDA is the place to be.

Klaudia Oliver, Relocation Specialist in San Miguel says “I can´t speak for that many places in Mexico but I can certainly suggest that San Miguel is THE top destination. Why? Because there is an overriding sense of well being which permeates the inhabitants of this beautiful colonial town. There is a swirl of social events and it’s like a college campus for baby boomers with cultural and social activities constantly”.

Pros

• Amazing Cultural Beauty
• Old Mexico Meets the Well Healed Traveler
• Small Town full of super interesting Internationally reknown people that you will get to know quickly
• English spoken everywhere
• 3 hours away from Mexico City and all it’s available big city offerings
• Friendly small town atmosphere
• Beautiful architecture and history.
• Excellent nightlife



Cons

• Not close to major city or airport
• High Desert elevation means it’s cold in winter and hot in summer
• Extreme temperatures mean that in one day can go from high 80′s at high noon and then into the 40′s at night.
• Very expensive to live.
• Feels like living on a desert island since there is nothing within an hour away.
• Nearest airport is in the City of Leon; about an hour and a half away.

4. Guadalajara, Jalisco

The weather is amazing; Perfect really! Guadalajara is the 2nd largest city in Mexico. So if you are used to living in the city, then you will enjoy Guadalajara as it is the very best big city in Mexico. Guadalajara is NOT as inexpensive as it used to be but you can still find bargins if you look hard. Great shopping, malls, activities, and excellent perfect weather make Guadalajara the best city to live in Mexico.

5. Merida, Yucatan

An old colonial city in the heart of the Yucatan jungle. It is very hot and humid mostly all year round and so you must love warm to hot weather to enjoy Merida. Amenities are excellent. According to resident Expatriate, Randy Miller, he says “I live in a very nice 2 bedroom house, living room, kitchen, dining room, 1 bath front and back yards and fully gated, I pay 3000.00 pesos a month, which translates to about 270 dollars. The water bill is 5 dollars a month and electric is about 50 bucks a month. Progresso, our closest beach, is a fabulous place to swim. It’s only a short 20 minute drive from the house. There are so many things to do here; art, markets, museums, theater and so much more”.

Merida is about a 4 hour bus ride from the major resorts of Cancun and Playa del Carmen. It’s a Mexican business working city where prices are low and life is excellent.

For more information, visit Travel Merida

6. Riviera Maya, Quintana Roo

Welcome to the Jungle! The Riviera Maya includes Cancun in the North, Playa del Carmen in the center and Tulum in the South and all points inbetween.

According to Bil Mabra , an Expat who is a resident and businessman living and working in the Riviera Maya running of Mexico Real Estate, he says ” Even though the cost of living in the Riviera Maya is a bit higher than other areas of Mexico it is still way more affordable than any state in the United States or Canada. When you figure that when you retire you will need to adjust your life to be able to live on about 30% to 40% of what you were making each month when you were working full-time. Think about it, can you live comfortably on $1500usd per month where you are now? In Mexico you certainly can. Can you afford a housekeeper 2 times per week where you live now? In the Riviera Maya you can. Realistically if you own your home then your expenses will consist of utilities, upkeep, taxes, food and entertainment. A retired couple with an income of $1500 usd per month can live very comfortably in Mexico even in the Riviera Maya which is slightly higher than the rest of Mexico”.

Even with the real estate market in the U.S. Taking a huge dive, the properties in Riviera Maya are still cheaper. Consider buying something that is not right on the beach but possibly walking distance or a 5-10 car ride to the Caribbean ocean. Right now you can find 2 bedroom and 3 bedroom condos and homes from under $50,000usd to $200,000usd depending on your budget and your needs.

What can you buy currently near the beach in San Diego, CA or Miami/Ft. Lauderdale, FL for under $200,000usd? Chances is are if you do find something in that price range in those areas it will require major repairs or it might just be an empty building lot. A caveat to this is property taxes each year. How much are property taxes in the U.S.? Most homes and condos in the Riviera Maya the property taxes are less than 1% per year of the property value. Lastly, upkeep on your Mexican home will not cost you as much because the cost of labor is a fraction of what it is in other countries.

If you are retiring then a question everyone has is about health care.

In the Riviera maya there are 3 Top hospitals—2 of them are run by a group from Spain called Hospiten. The other is the American Hospital in Cancun. Hospiten is recognized for being a top notch medical facility the world over and is on par or above most health care facilities you find in the U.S. And Canada. Most of the Doctors and nurses that work at Hospiten are bi-lingual so even if your Spanish is not that great you can still communicate very effectively. There have been many old rumors and wives tales that have been dispelled over that last several years when it comes to healthcare in Mexico. Now it is an every day occurance for people to migrate from the U.S. To have all types of medical procedures—everything from cosmetic surgery to heart bypasses and everything in between are now common place in Mexico. Compare the cost of healthcare and medications in Mexico to the cost in other countries and you will find the cost is usually more than 50% less.

The Riviera Maya climate is tropical but the actual daily temperature does not vary that much from the winter time to the summer time. Yes, summertime there is more humidity and it gets hot but typically there are only 3 months of the year where it is very hot from July to September. A lot of people take their vacations during this time if they want a little break from the heat. The other 9 months of the year it is very comfortable.

Highs in the winter time are usually around 84 degrees fahrenheit with lows in the high 60s to low 70s. Highs in the summertime are typically around 93 to 95 degrees with more humidity in the hottest months. If you come from a colder climate it takes a few months to get acclimated but once you do it sure is nice wearing your shorts and flip flops in January and February.

Living in the Riviera Maya also allows many people to get in and out of the country very easy. There is an international airport currently in Cancun servicing many major cities daily in the U.S. And Canada. Another airport is now being built near Tulum, Mexico. Getting to and from the Riviera Maya of Mexico has never been easier. Depending on where you nee to go usually within a few hours you can be most places in the U.S. Or Canada.

As far as amenities go, how about going shopping at Wal-mart, Costco or Sam’s Club and then going to have lunch at Applebee’s? Yes, now in this area of Mexico there are mostly all the creature comforts which all of us have grown accustomed to such as high speed and wireless Internet, satellite TV and GSM mobile phones.

20 years ago, this was a small fishing community. From Playa del Carmen to Tulum. Now, because of the influx of European and Mexico City money, this area has exploded. This is good for many reason, people choosing to now move and live here, have all the necessary amities that one could need. The beaches are some of the best in the world. Miles and miles of white sand and beautiful Caribbean warm waters.

Because this area is the largest resort area in Mexico, many people who live and work are from elsewhere. So the area does NOT have long standing family ties like some of the older more established areas of Mexico. Thus, from a family friendly standpoint, this is NOT the highest rate place. But really, its’ the most beautiful as there is nothing like the beaches of the Riviera Maya. Nothing Compares! If you love the ocean and beaches, this is for you all the way!

7. Mazatlan, Sinaloa

Mazatlan is a local Mexican resort city. It is older, inexpensive, and has a wonderful older downtown with excellent cultural rustic Mexican life. Excellent seasfood in this very unique resort town.

8. Puerto Vallarta, Nayarit

Life in the pacific tropics is excellent in Puerto Vallarta. Lovely fun downtown, great restaurants. Prices are relatively high for Mexico and so its’ not for the budget retiree.

9. La Paz, Baja California Sur

Inexpensive city life on the Sea of Cortes. Near Cabo San Lucas, La Paz is a family friendly small city. It’s very hot so its’ not for those that love colder climates.

10. San Cristobal de las Casas, Chiapas

Randy Bowser, a well traveled botonist who’s live in Mexico for over 10 years says ” I lived in San Cristobal de las Casa for 1 year and have to say really liked it a lot. The truest of Mexican culture exists in San Cristobal. It’s 5000ft above see level. It does have a chilly feel to the climate year round but the beauty of the area is well worth the trade off. It’s not really a viable place to live for the younger generation but for those retiring from life and wanting a slow, relaxed, peaceful existence, then this would be the place for you. It’s a magicial place.

About the Author: Johnny Punish is a musical artist who has lived in Mexico for the past 11 years. Please visit his official web site at www.JohnnyPunish.com

Canadians are the second happiest group in the world, after Australia, according to the results of a new study in which citizens of 34 countries were able to rate their own country on the things that made them feel they were experiencing a happy life. Where do the United Kingdom and the United States rank themselves? Read on! Words: 517

So says Lorimer Wilson (www.FinancialArticleSummariesToday.com) and editor of www.munKNEE.com. Please note that this paragraph must be included in any article reposting with a link* to the article source to avoid copyright infringement. Wilson goes on to say:

The Organisation for Economic Co-operation and Development’s (OECD) “Better Life Initiative” used an interactive tool to generate what they referred to as a “Your Better Life Index“  in which the volunteer participants measured their feelings of well-being and progress in 11 areas: housing, incomes, employment, social relationships, education, the environment, the administration of institutions, health, general satisfaction, security and the balance between work and family. (For detailed results area by area for all 34 countries go here.)

In the overall happiness scale which weighed all 11 topics mentioned above, the top 13 rankings were as follows:

1. Australia
2. Canada
3. Sweden
4. NewZealand
5. Norway
6. Demark
7. Unites States
8. Switzerland
9. Finland
10. Netherlands
11. Luxembourg
12. Iceland
13. United Kingdom (Britain)

 The list of all 34 is as graphed below:

Regarding the participants views as to their quality of life the Scandinavian countries top the list:

1. Netherlands: 91%
2. Denmark: 90%
3. Finland: 86%
4. Norway: 84%
5. Sweden: 83%

followed by these 5 countries to complete the top 10:

• Canada: 78%
• Switzerland and New Zealand: 77%
• Belgium: 76%
• Australia: 75%

The United States came 14th at 70% and the United Kingdom was 15th at 68%.

15 countries ranked below the overall average of 59% including these major countries of note:

• Germany: 56% (tied for 20th)
• Italy: 54% (22nd)
• France: 51% (23rd)
• Spain: 49% (24th)

Those citizens the most unhappy with their quality of life were:

• Hungary: 23%
• Estonia: 24%
• Slovakia: 27%
• Turkey: 28%

As to the participants’ perceptions as to their countries’ quality of education the top 10 rankings were as follows:

1. Korea
2. Finland
3. Canada
4. New Zealand
5. Japan
6. Australia
7. Netherland
8. Belgium
9. Norway
10. Switzerland

And where did the U.S and the U.K. rank?

The U.S. ranked 12th tied with Poland and Iceland. The U.K. ranked 20th.

The study begs the following questions:

1. Can happiness really be measured?
2. If so, why would we want to measure it?
3. What are the benefits of  having happy citizens?

In a presentation to the OECD, in 2010,  Ruut Veenhoven of the University of Rotterdam in the Netherlands wrote  that the data showed that happiness is a realistic goal for public policy in that greater happiness is possible through policy initiatives which can be evaluated as to their effectiveness accordingly. As such, Veenhoven noted that promoting happiness and well-being is a legitimate and important goal of government.

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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Life