Occupy Wall Street and Your Financial Plan

The Occupy Wall Street movement came out of nowhere. In just 4 weeks we have a movement that has gained some real traction. Here is where I agree with them.

• Whatever happened to the executives at Fannie Mae and Freddie Mac? The company executives made gazillions of dollars at the expense of shareholders.

• How about all of the mortgage companies that allowed people to borrow money, put down 5 or 10% with little documentation?

• How about all of the investment bankers who packaged mortgage loans into securities that they were going to sell and which they knew weren’t solid?

• How about the ratings agencies like S&P and Moody’s that rated these securities as high quality?

• What about the Wall St. executives who got paid tens of millions or even hundreds of millions at the expense of their employees or shareholders pockets?

• And how about our government that can’t work together to come up with a plan to create jobs and make America a leader again? I know many of you will email me saying that America isn’t going to be a leader anytime soon . . . I get it.

But I don’t think Occupy Wall Street should just protest anyone who is wealthy. Our country was built on capitalism and so many of the millionaires today are self made. They had an idea or product, believed in it, and took some action. What’s wrong with that? Should they pay more in taxes? Probably. But let’s not judge them because they achieved financial success.

I agree with business magnate, Mark Cuban, that Occupy Wall Street should talk with shareholders and align with them. They should go to shareholder meetings and voice their conce
s. And they should continue to go to Washington and protest.

I can understand the frustration of the Occupy Wall Street protesters. There is a huge gap between what CEOs get paid and what employees get paid. It’s too bad that educated Americans graduating from great American universities can’t get jobs and feel like they have no hope for their future.

As this movement grows, it will most likely affect your financial plan. Here is my list of how Occupy Wall Street could affect your financial plan:

1) Tax rates could go up. When I use financial planning software for my clients’ retirement projections, I am going to model/plan for higher tax rates.

2) The U.S. stock market could face more mid single digit returns. That could affect your financial plan for retirement. Boy, I hope I am wrong here.

• For the U.S. stock market to go considerably higher, the financial sector needs to be one of the sectors to lead the rally. Banks face a series of headwinds: more regulation, less fee income, and exposure to the European financial sector. In my opinion, bank stocks are going nowhere . . . quick.

• The growth will continue to come from countries like Brazil and China.

• U.S. stocks may have priced in higher tax rates for corporations. Corporations will have to pay more in taxes, which will affect how much they can reinvest back into their businesses

• Emerging markets (Brazil, Russia, India, and China) may be where investors turn for double digit stock returns. . .

3) Many people who can’t get jobs are taking matters into their own hands. They are starting businesses and beginning to take more ownership in their human capital – their ability to produce income based on their unique skill set. Consider modeling a financial planning scenario where you start your own business, and use that income to save for your retirement.