Income Replacement and Financial Security

The most fundamental purpose of life insurance is to replace your income. In the event of your death, the death benefit can provide your dependents with the financial security they need to maintain their standard of living. It can cover daily living expenses, childcare costs, and other ongoing expenses, ensuring your family can continue with their lives without financial hardship. This is particularly important for families with a single income earner or those who rely on your income to meet their financial obligations.

Debt Repayment and Future Goals

A life insurance policy can also be a powerful tool for debt repayment. The death benefit can be used to pay off debts, including your mortgage, credit card balances, and student loans. This can provide a clean slate for your family and prevent them from being burdened with your outstanding debts. Furthermore, life insurance can be used to fund future financial goals, such as a child’s college education, providing a legacy for your children, or leaving a charitable contribution.

Permanent Policies and Wealth Building

For those who opt for a permanent life insurance policy, the cash value component can be a valuable wealth-building tool. As the cash value grows, it can be used for a variety of purposes:

• **Borrowing Against the Policy:** You can borrow against the cash value of your policy to cover unexpected expenses or fund investments. The policy will continue to provide coverage as long as you repay the loan and interest.
• **Saving and Investing:** In some permanent policies, you can access the cash value to supplement your retirement income or fund other investments. This can add a layer of financial security to your retirement planning.

Estate Planning and Tax Benefits

Life insurance is a cornerstone of estate planning. The death benefit is often paid out tax-free to your beneficiaries, helping to cover estate taxes or equalize an estate among heirs. This can provide a smooth transfer of wealth to the next generation and ensure your legacy is distributed according to your wishes. Additionally, life insurance can be used to protect a business, funding a buyout in the event of a partner’s death and ensuring continuity.

Regularly Review Your Policy

Finally, your financial plan is not a static document, and neither should your life insurance policy be. Regularly reviewing your policy and adjusting your coverage as your life circumstances change is crucial for maintaining an effective financial plan. A periodic review can ensure your beneficiaries are correct, your coverage amount is still adequate, and your policy aligns with your evolving financial goals. By viewing life insurance as a dynamic part of your broader financial strategy, you can maximize its value and ensure a secure future for yourself and your loved ones.

Consider Your Financial Needs, Not Just Your Income

A simple rule of thumb suggests having coverage of about 10 times your annual income. However, a more comprehensive approach involves a deeper look into your financial needs. Consider these key factors:

• **Income Replacement:** The primary purpose of life insurance is to replace your income. Factor in how many years your dependents will need support and what their living expenses will be.
• **Debt Repayment:** Include all outstanding debts, such as your mortgage, credit card balances, and student loans. The death benefit can help clear these debts, providing a fresh start for your family.
• **Future Financial Goals:** Think about your family’s long-term goals, such as funding a child’s college education or providing a financial legacy.
• **Final Expenses:** Include an estimate for final expenses, such as funeral costs and medical bills, which can be a significant burden for your family.

Use a Life Insurance Calculator

Using a life insurance calculator is an effective way to get a more accurate estimate of your needs. These calculators consider all the factors mentioned above, including your age, marital status, and the number and ages of your dependents. They can provide a more tailored number that reflects your specific financial situation. It’s a great tool for starting the conversation with your financial advisor.

Review Your Coverage Regularly

Your life circumstances will change over time, so it’s important to review your coverage regularly to ensure it still meets your needs. Major life events, such as getting married, having a child, buying a home, or a change in your income, can all necessitate a change in your life insurance coverage. A periodic review, perhaps every 5 to 10 years, can ensure your policy remains up-to-date and adequately protects your family.

Balancing Cost and Coverage

The amount of coverage you choose will directly impact your premiums. Term life insurance is typically more cost-effective than whole life insurance, and opting for a shorter term can also lower your premiums. Some people choose to have multiple policies, such as a smaller, lifelong permanent policy combined with a larger term policy during their high-responsibility years. This can be a cost-effective way to get comprehensive coverage.

Final Considerations for 2025

When determining your life insurance needs, remember that the goal is to provide financial peace of mind for your loved ones. By carefully considering your financial obligations, future goals, and family’s needs, you can choose the right amount of coverage without overpaying. The right policy is one that provides adequate protection and fits comfortably within your budget, ensuring a secure future for those who matter most.

The Foundation of Financial Services: Banking

At the heart of the financial services sector are banking institutions. These institutions provide a range of core services that are fundamental to both personal and business finance. Services include checking and savings accounts for managing day-to-day transactions and securing funds, as well as various types of loans like personal loans, auto loans, and mortgages for financing major purchases. Digital banking has revolutionized this sector, making it easier than ever to manage accounts, transfer funds, and pay bills from anywhere. Mobile apps, online banking portals, and ATMs have transformed how we interact with our money, offering unparalleled convenience and accessibility. Beyond individual accounts, banks also offer services tailored for businesses, including merchant services, commercial loans, and cash management solutions.

Investing and Wealth Management: Growing Your Money

For those looking to grow their wealth over time, the investment and wealth management sector provides essential guidance and platforms. Investment services range from brokerage accounts for self-directed trading of stocks, bonds, and ETFs to comprehensive wealth management for high-net-worth individuals. Financial advisors play a crucial role here, offering personalized advice on investment strategies, retirement planning, and estate planning. They help clients understand risk tolerance, set financial goals, and build diversified portfolios. Robo-advisors are a growing trend, offering automated, algorithm-driven investment management at a lower cost, making professional financial guidance more accessible to a wider audience. Understanding the difference between these options is key to choosing the right approach for your investment goals.

Insurance: Protecting What Matters Most

Insurance is a critical component of financial services, providing protection against unforeseen risks and financial losses. Types of insurance include life insurance, health insurance, auto insurance, homeowners insurance, and business insurance. These products help individuals and businesses mitigate financial risk, offering a safety net against various perils like illness, accidents, property damage, or even legal liabilities. Choosing the right insurance coverage involves assessing your personal and business risks and finding policies that offer adequate protection at a reasonable cost. Insurance brokers and agents play a vital role in helping clients navigate the complex world of policies and premiums.

Lending Beyond Banks: Credit and Alternative Finance

While banks are major lenders, the financial services sector includes a broader range of credit and financing options. Credit unions offer similar services to banks but are member-owned and often provide more personalized service and potentially lower fees. Online lenders and FinTech companies are also transforming the lending landscape, offering faster application processes and innovative loan products. Peer-to-peer lending platforms connect borrowers directly with investors. Additionally, payment processing services, like those offered by Stripe or PayPal, are essential for businesses and individuals making online transactions, enabling secure and efficient digital commerce.

The Importance of Financial Literacy

Navigating the diverse world of financial services effectively requires a foundation of financial literacy. Understanding basic concepts like budgeting, saving, debt management, and investing empowers individuals to make informed decisions and take control of their financial future. Many financial institutions and non-profit organizations offer resources and educational programs to improve financial literacy. Taking the time to learn these essential skills can lead to greater financial security and the ability to leverage financial services to achieve your life goals. By actively engaging with the resources available and building your financial knowledge, you can make the most of the opportunities provided by the financial services sector.

1. Banking and Lending Services

Banking forms the bedrock of the financial services industry. These institutions serve as intermediaries between depositors and borrowers.

• Retail Banking: Focuses on individual consumers, offering checking accounts, savings accounts, credit cards, mortgages, personal loans, and auto loans. Modern retail banking is heavily digital, with mobile apps, online banking, and ATMs providing convenient access to funds and services.
• Commercial Banking: Caters to businesses, providing services like business checking accounts, lines of credit, commercial loans, equipment financing, and cash management solutions.
• Investment Banking: Primarily serves corporations and governments, assisting with capital raising (e.g., IPOs, bond issuance), mergers and acquisitions (M&A), and financial advisory services.
• Credit Unions: Similar to banks but are non-profit, member-owned organizations, often providing more personalized service and potentially lower fees on loans and accounts.

2. Investment and Wealth Management Services

This category focuses on helping individuals and institutions grow their capital.

• Brokerage Services: Provide platforms for buying and selling financial instruments like stocks, bonds, mutual funds, ETFs, and cryptocurrencies. Discount brokerages offer self-directed trading, while full-service brokerages offer research and advice.
• Asset Management: Manages investment portfolios for individuals and institutions, making decisions on their behalf based on specified goals and risk tolerance. This includes mutual funds, hedge funds, and private equity firms.
• Financial Advisory and Planning: Financial advisors offer personalized guidance on investment strategies, retirement planning, education savings, estate planning, and debt management. Robo-advisors are automated platforms providing algorithm-driven portfolio management.

3. Insurance Services

Insurance provides financial protection against various risks, mitigating potential losses.

• Life Insurance: Provides financial security to beneficiaries upon the death of the insured.
• Health Insurance: Covers medical expenses.
• Property and Casualty Insurance: Includes homeowners insurance, renters insurance, and auto insurance, protecting against damage or loss of property and liability.
• Business Insurance: Covers a range of risks for businesses, including property damage, liability, and business interruption.

4. Payment Services and Fintech

This sector facilitates transactions and is increasingly driven by technology.

• Payment Processors: Companies like PayPal, Stripe, and Square enable secure and efficient online and in-person payments, essential for e-commerce and modern commerce.
• Mobile Payment Solutions: Apple Pay, Google Pay, and other digital wallets streamline transactions using smartphones.
• Cryptocurrency and Blockchain: This emerging area offers decentralized financial services, including digital currencies, lending platforms, and asset exchanges, leveraging blockchain technology for security and transparency. Crypto-first platforms are growing in prominence in 2025, reflecting a demand for alternative financial systems.

5. Mortgage and Real Estate Finance

Specializes in financing property purchases.

• Mortgage Lenders: Provide loans for individuals to purchase homes. This includes conventional, FHA, VA, and other loan types.
• Home Equity Loans and HELOCs: Allow homeowners to borrow against the equity built in their property for various purposes like home improvements or debt consolidation.

Understanding these key types of financial services can empower you to make informed decisions about managing your money, protecting your assets, and planning for your future financial well-being.

Term Life Insurance: The Simple and Affordable Option

Term life insurance is the most straightforward and often the most affordable type of life insurance. It provides coverage for a specific period, or “term,” typically 10, 20, or 30 years. If you pass away during the term, your beneficiaries receive a death benefit payout. If the term expires and you are still living, the policy ends, and there is no payout.

• **Who is it for?** Term life is ideal for individuals who need coverage for a set period, such as the years they are raising a family or paying off a mortgage. It’s a cost-effective way to ensure financial protection during your highest-earning, highest-responsibility years.
• **Key Benefits:** Affordability, simplicity, and a clear, defined coverage period make it an excellent choice for many.
• **Common Uses:** Income replacement, covering mortgage debt, and funding a child’s education.

Permanent Life Insurance: Lifelong Coverage and Cash Value

Permanent life insurance offers lifelong coverage and includes a cash value component that grows over time. There are several types of permanent policies:

• **Whole Life Insurance:** Premiums and death benefits remain level for the life of the policy. The cash value grows at a guaranteed fixed rate, and the policy may be eligible for annual dividends. Whole life is simple and predictable but can be more expensive.
• **Universal Life (UL) Insurance:** Offers more flexibility than whole life. Within a certain range, you can vary your premiums, and the cash value grows at an adjustable, market-interest rate. However, you may need to increase your premiums to keep the policy in force if the cash value declines.
• **Variable Life (VL) Insurance:** Gives you more control by allowing you to invest the cash value in various subaccounts, similar to mutual funds. The cash value growth is tied to the market performance of these investments, and while there is potential for higher returns, you also assume the risk of potential losses.
• **Indexed Universal Life (IUL) Insurance:** Ties the cash value growth to a market index, like the S&P 500, with minimum and maximum caps to limit your investment risk. This offers a balance between potential growth and downside protection.

Which Policy is Right for You?

Choosing between term and permanent insurance depends on your financial situation and goals.

• **If you need coverage for a specific time and want the most affordable option,** term life is likely the best choice.
• **If you want lifelong coverage and the added benefit of cash value,** permanent life insurance is the way to go. Your decision between whole, universal, or variable will depend on your comfort with market risk and desire for premium flexibility.
• **Some people combine policies,** holding both term and permanent, to get comprehensive coverage while managing costs.

Step 1: Assess Your Coverage Needs

Before you even begin, you need to determine how much coverage you actually need. Consider factors like your annual income, the number and ages of your dependents, any outstanding debts (like a mortgage or student loans), and your long-term financial goals (like a child’s college fund). A good rule of thumb is to have coverage of about 10 times your annual income, but using an online calculator can provide a more accurate estimate.

Step 2: Choose the Right Policy Type

As discussed in the previous article, you’ll need to decide between term and permanent life insurance. Your choice will depend on your budget, how long you need coverage, and whether you want the additional feature of cash value. If you’re unsure, consulting a financial professional can help you weigh your options.

Step 3: Gather Necessary Information

The application requires detailed information, so it’s a good idea to gather it beforehand. You’ll need:

• **Personal Information:** Name, date of birth, address, and Social Security number.
• **Financial Information:** Income, occupation, and net worth.
• **Health History:** Detailed medical history, medications, surgeries, and family health history.
• **Lifestyle Details:** Information about smoking status, hobbies (especially high-risk ones like skydiving), and travel habits.

Step 4: Underwriting and the Medical Exam

This is the stage where the insurance company evaluates your risk. For many policies, you will undergo a medical exam with a healthcare professional, which is scheduled at your convenience. The exam typically includes basic measurements like height and weight, blood pressure, and a blood and urine sample. If you are applying for a “simplified issue” or “guaranteed acceptance” policy, a medical exam may not be required, but premiums can be higher. The underwriting process uses all the information gathered to determine your risk classification and final premium.

Step 5: Policy Approval and Issuance

After the underwriting process is complete, the insurance company will either approve or decline your application. If approved, you will receive a final policy offer detailing the premium, coverage amount, and any specific terms. It’s important to review this offer carefully to ensure it matches what you applied for.

Step 6: Reviewing and Accepting Your Policy

Once you accept the policy offer, you will make your first premium payment, and the policy will become active. It’s a good practice to keep your policy information, including the policy number and a copy of the contract, in a safe place. You should also ensure your beneficiaries are aware of the policy and know how to file a claim.

Step 7: Keep Your Policy Up to Date

Your life circumstances will change over time, so it’s a good idea to review your policy regularly to ensure it still meets your needs. A regular review can help ensure your beneficiaries are correct, your coverage amount is still adequate, and you’re getting the best possible value for your premiums.

Age: The Most Significant Factor

Age is arguably the most significant factor influencing your life insurance premiums. The younger you are, the lower your premiums will typically be, as you are considered a lower risk. As you get older, the risk of health-related issues increases, and so do your premiums. Applying for life insurance at a younger age can help you lock in a lower rate for the duration of a term policy.

Health: Medical History and Lifestyle

Your overall health and medical history play a crucial role in determining your premiums. This is assessed during the underwriting process and may include a medical exam. Factors that can influence your health classification and premium include:

• **Pre-existing Conditions:** Certain health conditions can increase your premium. Managing controllable health conditions, like high blood pressure or diabetes, can help keep your costs down.
• **Smoking/Vaping Status:** Smokers and vapers typically pay significantly higher premiums, often more than double, due to the health risks associated with nicotine use.
• **Family Health History:** A history of certain illnesses in your family can also influence your rates.
• **Weight and BMI:** Being overweight can also increase your premiums.

Lifestyle and Occupation: Beyond Your Medical Records

Insurance companies also consider your lifestyle and occupation when assessing your risk. Hobbies that are considered high-risk, such as skydiving, car racing, or scuba diving, can lead to increased premiums. Similarly, working in a profession with high occupational hazards can also impact your rates. It’s important to be honest and transparent during the application process to ensure your policy remains valid.

Coverage Amount and Policy Type

The amount of coverage you select will directly impact your premiums; higher coverage amounts lead to higher costs. The type of policy you choose also plays a significant role. Permanent life insurance is typically more expensive than term life insurance due to its lifelong coverage and cash value component. As the duration of a term policy increases, so does the cost.

Tips for Managing Your Premiums

While you can’t control your age, you can take steps to manage your premiums:

• **Shop Around:** Compare quotes from different providers to find the best rates.
• **Improve Your Health:** Addressing controllable health issues can help you secure a better rate.
• **Quit Smoking:** Quitting nicotine use can lead to lower premiums over time.
• **Choose the Right Policy:** Ensure your policy type and coverage amount align with your needs and budget.

By understanding the factors that influence your premiums, you can make more strategic decisions about your life insurance and ensure you get the best possible value for your coverage.

A Legacy of Excellence

Fidelity’s journey began as a small mutual fund company and has since grown into a financial powerhouse. Today, the company manages trillions of dollars in assets, making it one of the largest asset management firms in the world. Fidelity’s commitment to innovation and customer-centric solutions has solidified its reputation as a leader in the financial services industry.

Core Services Offered by Fidelity

Fidelity provides a wide array of services and products, including:

1. Investment Products

Fidelity offers a variety of investment options, such as:

Mutual Funds: Actively managed and index funds tailored to different risk appetites and goals.

Exchange-Traded Funds (ETFs): Low-cost, diversified investment options.

Stocks and Bonds: Access to a broad selection of securities for building personalized portfolios.

Options Trading: For experienced investors seeking strategic growth opportunities.

2. Retirement Planning

Fidelity specializes in helping clients prepare for a secure retirement through:

Individual Retirement Accounts (IRAs): Traditional, Roth, and rollover IRAs.

401(k) Plans: Management and support for both individuals and businesses.

Retirement Income Planning: Strategies for generating income during retirement.

3. Wealth Management and Financial Advisory

Fidelity’s wealth management services cater to high-net-worth individuals and families, offering:

Personalized financial planning and investment strategies.

Dedicated financial advisors for ongoing support.

Tax-efficient investing and estate planning solutions.

4. Trading Platforms

Fidelity provides state-of-the-art trading tools and platforms that suit both beginners and experienced investors. These include:

Fidelity.com: An intuitive web-based platform with extensive research tools.

Mobile App: On-the-go access to portfolios, research, and market updates.

Active Trader Pro: Advanced desktop software for active traders.

5. Educational Resources

Fidelity is committed to investor education, offering:

Tutorials and webinars for beginners.

Advanced tools and insights for seasoned investors.

Real-time market analysis and reports.

Unique Features of Fidelity

Fidelity sets itself apart through several distinctive offerings:

Zero Expense Ratio Funds: Pioneering mutual funds with no expense ratios, attracting cost-conscious investors.

No Minimum Investment: Many accounts require no minimum deposit, ensuring accessibility.

24/7 Customer Support: Reliable and responsive service through various channels.

Cutting-Edge Technology: Robust platforms for seamless trading and portfolio management.

Commitment to Innovation

Fidelity continuously innovates to meet evolving market demands. Its robo-advisor service, Fidelity Go, provides automated, low-cost portfolio management for tech-savvy investors. Additionally, Fidelity’s integration of artificial intelligence and data analytics enhances user experience and decision-making.

Why Choose Fidelity?

Fidelity’s strong emphasis on customer satisfaction, coupled with its extensive range of investment options, makes it a preferred choice for millions. Whether you are a novice investor, a seasoned trader, or a high-net-worth individual, Fidelity has tailored solutions to help achieve your financial aspirations.

Conclusion

With its rich legacy, innovative approach, and unwavering commitment to client success, Fidelity Investment Company remains a trusted partner in financial planning and investment management. By prioritizing transparency, education, and technology, Fidelity continues to empower individuals and organizations to reach their financial goals.

The Basics of an Investment Portfolio

An investment portfolio comprises various asset classes such as stocks, bonds, mutual funds, real estate, and cash equivalents. Each asset type offers unique benefits and risks:

Stocks: High potential for growth but come with significant volatility.

Bonds: Provide steady income and lower risk compared to stocks.

Real Estate: Offers long-term growth and acts as a hedge against inflation.

Cash Equivalents: Ensure liquidity and serve as a safety net during market downturns.

Diversification—spreading investments across multiple asset classes—is a key strategy to mitigate risk and enhance returns.

Setting Investment Goals

Before constructing a portfolio, investors must identify their financial objectives. These may include:

Retirement Savings: Long-term growth with moderate to low risk.

Education Funds: Steady growth with specific time horizons.

Wealth Accumulation: High growth potential, suitable for risk-tolerant investors.

Emergency Funds: Focus on liquidity and minimal risk.

Clear goals help in selecting suitable assets and determining the appropriate asset allocation.

Risk Management and Asset Allocation

Risk tolerance varies from one investor to another based on age, financial stability, and personal preferences. Young investors often have higher risk tolerance, allowing for a greater allocation to equities. In contrast, retirees might prefer safer investments like bonds and cash equivalents.

Asset allocation is the process of distributing investments among various asset classes to align with one’s risk tolerance and financial goals. For instance:

Aggressive Portfolio: 70-90% stocks, 10-30% bonds/cash.

Moderate Portfolio: 50-60% stocks, 30-40% bonds, 10% cash.

Conservative Portfolio: 20-30% stocks, 50-60% bonds, 10-20% cash.

Regularly reviewing and rebalancing the portfolio ensures it stays aligned with the investor’s goals and market conditions.

The Role of Professional Guidance

While some individuals prefer a hands-on approach, many benefit from professional financial advisors. Advisors help in:

Assessing risk tolerance.

Identifying investment opportunities.

Creating and maintaining a diversified portfolio.

Providing insights into market trends and economic forecasts.

Additionally, robo-advisors—automated platforms—offer cost-effective portfolio management for beginners and tech-savvy investors.

Monitoring and Adjusting Portfolios

Markets are dynamic, and personal circumstances change over time. Regular portfolio reviews ensure investments remain aligned with goals. Key actions include:

Rebalancing: Adjusting asset allocation to maintain the desired risk level.

Tax Optimization: Leveraging tax-advantaged accounts and minimizing taxable events.

Performance Analysis: Measuring returns against benchmarks and goals.

Conclusion

Building an investment portfolio is a strategic process that requires careful planning, regular monitoring, and adjustments. By understanding financial goals, risk tolerance, and market dynamics, investors can create portfolios that provide both growth and security. Whether through self-management or professional guidance, a well-constructed portfolio serves as a cornerstone for achieving financial success.

With falling property values, the stock market on a roller coaster ride and the economy worsening many people will wonder if it is time to start investing in real estate again. The answer to this question is a very simple and very obvious one: not any time soon.

Pending home sales fell by nearly 30 percent in June according to the National Association of Realtors. Many people will see this as an opportunity to pick up but bargain properties as investments but it is not.

Real Estate is Overvalued
The reason why people should avoid real estate investment at this time is that real estate is still way over valued in most of the United States. In many areas homes that are worth less than $100,000 are still being sold for $200,000-$300,000 and condominiums that are worth less than $100,000 are still being sold for a half million dollars.

If you don’t believe me take a look around your area, drive or walk around and look at the houses for sale. Chances are you’ll see broken down old dumps with smashed windows and shingles falling off the roof for sale. Do a quick Google search on those properties and you’ll discover that they’re probably selling for $100,000 or more.

The market for commercial property is even worse, I know of one depressed Colorado town with high unemployment where questionable retail space is renting for $900 a square foot. This space is being leased in a building in a very cold area where natural gas the cheapest fuel for central heating in the US is not available. This means heating costs will be double or triple those in an area where natural gas was available. Not surprisingly that retail space has been sitting empty for years.

Sooner or later the market will catch up with all that over priced real estate and property values will fall to realistic levels. My guess is that real estate prices in most areas of the United States will still have to fall by 25 to 50 percent to reach a realistic level of value. This means that persons who invest in property now could loose 25 to 50 percent of their investment.

Properties are Over-Mortgaged
The main reason properties are overvalued is that many of them are over-mortgaged. Over the past few years it was so easy to get a mortgage that many people put two, three, or even mortgages on their properties.

Many pieces of property are mortgaged for more than they are worth, they are “underwater” in real estate parlance. Media reports indicate that as many as 25 percent of American homes could be “underwater.”

One terrible situation out there is that many property owners who want to sell can’t because they know they couldn’t make enough from the sale to pay off their mortgage. Naturally, nobody will want to take over the mortgages on those properties because they would loose money. This means that a lot of real estate can’t be practically or legally sold at this time.

If this wasn’t bad enough, a lot of those underwater properties are encumbered by all sorts of liens, especially tax liens. This means that anybody who takes over such properties will be faced with a big legal bill.

There Will Be a Glut of Foreclosed Properties on the Market
Anybody who has followed the news over the past couple of years knows that are hundreds of thousands of homes in foreclosure. This means that people haven’t been able to pay their mortgages and have been evicted. To this figure we can probably thousands more homes where the owner has simply walked away and the mortgage holder hasn’t bothered to take the property back yet.

Many of these foreclosed properties are sitting empty and off the market right now. Quite a few realtors won’t touch foreclosures because of all the problems with them so they’re hard to sell.

Sooner or later all of those foreclosed properties are going to come on the market and drive real estate prices down further. In cities like Detroit and Cleveland where a large percentage of the homes are in foreclosure full sized homes in some neighborhoods are selling for less than $20,000. We’re going to see similar situations across the country in the next few years. When this occurs, the value of real estate in many cities such as Denver, Las Vegas and Los Angeles will fall to levels rivaling those of Cleveland and Detroit.

Property Taxes are Too High
To make matters worse we’ll soon see a situation where property taxes will exceed the value of the property in quite a few areas.

This will occur because in many areas of the country property taxes are based on “property value.” Unfortunately this property value has little or nothing to do with market value. The values used to determine property taxes are based on a figure determined by a government official usually the County Assessor in most areas this individual is elected and needs no training or expertise. In many areas it is based on what “comparable properties” sold for in the recent past. Not surprisingly the local government sets the property values as high as possible so it can collect as many taxes as possible.

In other areas the property taxes are based on what the property last sold for. This means if you bought your house for $500,000 in 2005 but its now worth $100,000 you would still be taxed as if the property was worth $500,000.

The property tax situation will make the foreclosure mess worse because many owners won’t be able to afford to pay their property taxes. Many owners will simply walk off and leave the property to be seized by the local government and sold at a tax auction for pennies on the dollar. Many of the foreclosed properties will also end up at the tax auction because nobody is paying the taxes on them which will greatly increase the real estate glut.

When to Invest in Real Estate Again
Naturally people will ask: when should I start investing in real estate again? The best answer to this question is when the real estate market hits bottom which should be in about two years.

At that time we’ll see a real estate investors’ paradise with great properties selling for $50,000-$100,000 or less. Many people will be able to pick up tremendous bargains at foreclosure and tax auctions.

Until then your best strategy is to avoid real estate investment and keep your money in money markets, stocks, foreign currencies, CDs or precious metals. If you have a lot of cash I would recommend that you put it in precious metals like gold because a collapse of the dollar could be just around the corner. If the Euro collapses because of the European debt crisis it will bring down the dollar. Some foreign currencies such as the Canadian and Australian dollars and the Swiss Franc will be good investments too.

It would also be a good idea to sell off any property other than your home that you own right now. That way you will be able to avoid taking a huge loss on it in the future. For seniors who have no mortgages on their home, I would recommend taking out a reverse mortgage and investing the cash from it in stocks or precious metals. This way they can still live in their home and cash in.

Real estate is simply not going to be a good investment in the United States for the next five to ten years. Smart people should start seeking alternatives to real estate investing now.