General Book Review of Stop Sitting on Your Assets (SSOYA)
SSOYA is a very clever book written by an author that has a nice ability to write a book that the general public will understand on what can be complex subjects.
While the book is easy to read, there are fundamental problems with the conclusions drawn, math used to reach those conclusions, and the fact that the book is devoid of a needed discussion on the Internal Revenue Code (IRC).
The essence of SSOYA is to help a reader understand why Equity Harvesting can be such a powerful retirement/wealth building tool (which it can be).
The problems with SSOYA are plenty. Some of them in brief form are listed below:
1) The most fundamental flaw with SSOYA is its "fuzzy" or flawed math.
The math is based on repositioning money borrowed from your home into what is called a "S.A.F.E.T.Y. Fund™" where the money magically: a) grows tax free, mutual expense free and money management free; b) grows at market rates (S&P 500 index returns); and c) can be removed tax free in retirement. It sounds great, except there is NO SUCH INVESTMENT.
The following may sound incredible: Since there is no real world math in the book to show readers how much wealth they can build with the concept of Equity Harvesting, the conclusions in the book as they pertain to building wealth through the "S.A.F.E.T.Y. Fund™" are not worth the paper they are written on.
2) SSOYA ignores the realities of the Internal Revenue Code (IRC). Readers will unfortunately take from SSOYA that the interest on the loan when borrowing money from a personal residence to fund the "S.A.F.E.T.Y. Fund™" is deductible. That is NOT TRUE the vast majority of the time. Obviously, when you can borrow money, write off the loan interest and reposition the borrowed funds into a tax-free wealth building tool, the decision to move forward is much easier. Whether an oversight made out of the ignorance of the author or an intentional deception of the reader; this flaw a significant. To read more about this significant oversight and a specific example with violates the tax code, please click here.
3) "IRA Rescue" using home equity management to generate more retirement income is nearly impossible. When you read Chapter 10 of SSOYA, you’ll get the impression that tax deferred savings tools such as IRAs and qualified plans are useless or even evil wealth building tools. Further, you’ll be counseled in the book to rid yourself of these “tax hostile" tools in favor of the "S.A.F.E.T.Y. Fund™." From a pure mathematical point of view, using real world assumptions, it is impossible to support this theory. When you cash in your IRA or qualified retirement assets in favor of the "S.A.F.E.T.Y. Fund™" you’ll have to pay income taxes on that money and if you are under the age of 59 ½ you’ll have to pay a 10% penalty. To read the specifics as to why IRA rescue does not work for retirement income, please click here.
4) In Chapter 1 and several other places in SSOYA it is stated that Equity in your home earns you a "ZERO rate of return". Sales people use this phrase commonly to motivate clients to move forward with Equity Harvesting instead to grow their wealth. This statement is patently FALSE. It is also FALSE to say that an appreciating home does not have compound growth.To read why statements from SSOYA are FALSE, please click here.