How the Rich Get Richer

The rich are getting richer while the poor are getting poorer. The top one percent of Americans saw their income increase by a staggering 275 percent between 1979 and 2007, while the bottom 20 percent saw their incomes grow only 18 percent.

Know how their doing this? By taking advantage of the system. They use little known loopholes and incentives to drive their wealth through the roof. It’s always been the goal of Mark Patricks and The League of Power to reveal these advantages to the 99 percent. Today is no different. I want to tell you about one of those loopholes right now.

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The Lazy Secret

I’m always looking for the easiest ways to do stuff. Some people call that being “lazy”.

If that’s true, then here’s a true “lazy” way to success…

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The best part is you could take advantage of this loophole too! You can increase your net worth just like the top one percent of Americans are doing. What I’m about to describe to you is completely legal and available to many U.S. citizens who have a mortgage.

Interest rates have been falling for the past couple of years. My friends Jason and Jessica are about to purchase their first home in South Florida, they are getting an incredible interest rate of only 3.75 percent! Banks are offering the absolute cheapest rates at which to buy homes right now. If you have refinanced or bought a home in the last several years you likely have a rate somewhere between four and six percent.

Borrowing money at incredibly low rates have allowed mortgage holders to pull equity out of their homes and invest it in tax deferred accounts, like 401(k)’s and traditional IRA’s. Why is this a great way to increase your wealth? Because you get a tax advantage on both sides of the deal! These savvy investors get to deduct the mortgage interest on their tax returns, receive a tax deduction from their contribution, as well as watching their money grow tax-free for years, even decades!  All of these three components work to decrease the net effective interest rate on already cheap money.

While the markets have been crazy in past years, there are money ways for you to safely earn gains well above these low rates. There will be money to be made in the markets in 2012 and beyond! Remember the average annual return for the stock market sits at 10 percent. When you’re borrowing money at only four or five percent with the tax advantages lowering it further, that leaves a lot of money to be made!

There are some disadvantages to this money-making loophole. Number one you have to have equity in your house to take advantage of this. If you’ve bought a home in the past few years, you likely don’t have much or any equity or negativity equity, leaving you out in the cold.

If the housing market goes down any further, your home will be worth less than what you owe on it. That could make it hard to sell if you come into a financial crisis. While this is a possibility, I don’t see it happening. The housing market has already essentially bottomed out. Experts are arguing back and forth right now on whether or not we hit the bottom in 2011 or we’ll hit it sometime in 2012. So I don’t expect any of our homes to lose value over the next several years, in fact it’s much more likely that we’ll start to see some modest gains here shortly!

Another scenario is that if you lose your job, you’ll not only have lost your income but you’ll also have a higher mortgage debt load. If you don’t find another job or replace that income your risk for foreclosure goes up. The way to ensure you don’t lose your house is to make sure you have enough cash in your emergency fund to pay your mortgage for several months, even up to a year, until you find another job.

In my opinion the risk is low. There are ways around every possible disadvantage this wealth producing loophole creates. You just have to prepare ahead of time.

The biggest upside to this is that the money you take out of your home will be working for you, to make you richer. You don’t want to pull equity out of your house to go on vacation, buy a new car or anything that won’t increase in value.  This is exactly the kind of technique the rich use to increase their wealth; they make their money work for them, instead of working to make money.

Another advantage is that you don’t have to jump on this opportunity today to make money. Interest rates are expected to stay low at least throughout 2012, possibly even beyond that. At any point in the next year you can decide to take advantage of this loophole the top one percent of Americans are using to increase their wealth.

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Some Fascinating Loopholes

“Loopholes” have always fascinated me.

I could never understand why there’s so much info out there that so little people know about.  Especially when it comes to finances.

Just recently I reviewed a report that might change the lens through which you view retirement… Click here to read on.

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Keeping Money in Your Pocket,

Nancy Patterson


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