LJPR Financial Advisors
After growing up in Hazel Park, Michigan, Leon LaBrecque graduated magna cum laude from University of Detroit with degrees in accounting and law. He grew his wealth management firm, LJPR Financial Advisors, from the ground up with a foundation in financial education.
Leon started his career in 1977 in the accounting profession. Leon worked in public accounting as a pension specialist, then became the Chairman of the Department of Finance and Economics at Walsh College.
Leon took his educational background to the outside world, where he wrote and delivered programs in personal finance and pre-retirement to Ford, AT&T, BellSouth, CalPERS, the states of Washington, Montana, Idaho, and many other entities. Leon has also been an author, co-authoring a personal finance textbook, “Practicing Financial Planning for Professionals,” and producing programs on IRAs and retirement, some very specific to groups, such as police officers and fire fighters (which we call 'Guns & Hoses').
Leon is also a director of the Michigan Association of CPAs (MICPA), where he leads a special task force on new tax changes. He is tasked to help get the best perspectives on any new tax law changes for 2017 and 2018 and communicate those changes to MICPA's membership. Leon is also involved in the nonprofit arena, helping organizations raise funds and build awareness, as well as invest their money.
Leon and his wife Anne, like to travel and spend time in northern Michigan, where they enjoy hiking, biking, kayaking and playing with their golden retrievers.
BS, Accounting, University of Detroit
JD, Law, University of Detroit School of Law
Assets Under Management:
Without sounding flippant, in the Doomsday scenario you portray, what makes you think cash will be any good? Look at a bill in your wallet, and note the phrase ‘this note is legal tender’. It only works if everybody thinks it works. Money no good, you can roll cigarettes with it: refer to ‘Weimar Republic currency’ or ‘Zimbabwe currency’ on your search. I’ve had this question many times before, so some folks say ‘I’ll buy a gold ETF.’ And my response is, ‘When everything collapses, how will you get your gold?’ So let’s think it over: if the market completely collapses, financial assets will be at least temporarily worthless. That would leave you with a barter based system or chaos. In the barter-based system, metals like gold or silver may be worth something, although many barter economies have functioned on packs of cigarettes or stone disks. In chaos, the barter breaks down, and now you need a couple of Navy SEALS and a lot of ammunition. If it’s any consolation, we’ve had whole societies collapse and we’re still here, so I’d pose that having some hard assets makes sense. Krupp and the Sumitomo Copper company survived multiple wars, currency collapses and in Sumitomo’s case, a nuclear bomb. Both of those companies were established in the late 1500s, and Theisen Krupp is still here, and so is Mitsubishi (which was Sumitomo). Capitalism is resilient.
Leon LaBrecque, JD, CPA, CFP®, CFA
Managing Partner | LJPR Financial Advisors
“Rich” is a highly subjective quality. In my opinion, there is no absolute “rich”.
Willie Nelson had millions and went broke. Jordan Belfort (the ‘Wolf of Wall Street’) was making apparently $250 million a year and went broke and to jail. MC Hammer also apparently went broke despite $33 Million of income. So to define rich in absolute terms is not useful. How about we define it in terms of the amount of income you need to be happy? So if you need $50,000 a year to be happy, then $50,000, divided by some rate of return would give us a number. Suppose you thought 5% was a reasonable return, then $1,000,000 would be a good nest egg. But, we have inflation. So I think you need 25 times (that would be 4%), or better, 33 times (that’s 3%) your annual income requirement to be ‘rich’. Need $50,000 a year? $1,650,000 is the start of rich for that person.
This presents a problem of ‘how much income makes you rich?’ According to that bastion of wisdom, income of about $200,000 for a single person or $250,000 for a married couple makes you rich. So using my math, a single person with $5 - $6.6 million is rich, and a couple with $6.25 - $8.25 million is rich. That goes to my old definition of rich as over $10 million. That being said, I’ll ask you about your health, your family, and your spirit. Money can’t give you those. So measure material wealth in dollars and real wealth in sense.
The employer match is free money. Maximize it. There is nowhere you can get a 50% return on your money.
The short answer is yes, you can and yes, you should consider it. Index funds are a great low cost way to achieve returns. We use a lot of index funds in our portfolios for that reason. There a multitude of studies that show that very few actively managed funds outperform index funds in the long run. That being said, all index funds are not created equal. Look at the cost: I’ve seen fees run from 0.05% to 1.56% on an S&P 500 fund, so shop around. Second, be sure to diversify. You want either a total stock market index, or a combination of big (S&P 500), small, international, and maybe emerging markets, as well as bonds. In other words, just because you own 500 big stocks, you’re not diversified. You want big, small, domestic, international, stocks, and bonds. But all in all, saving money on fees is a good idea.
I'd suggest my answer is 'heck no!' Your 401(k) is a way to make tax-deferrals. You didn’t' say how much you were earning, but let’s assume you're in a modest bracket like 15% (let’s assume you make somewhere around $60,000). When you contribute pre-tax, you immediately save the tax dollars, so every dollar in your 401(k) saves an immediate 15% in federal taxes, plus state income taxes in most cases. You said you’d have no other income in retirement except Social Security. If that’s the case, you may actually be in a zero to ten percent tax bracket in retirement, (since your Social Security would likely be tax-free). You get 15% now, and pay zero later.
Maxing the 401(k) is a great idea. Again, you didn’t say how much you made, but you might consider still maxing the 401(k) and doing a contributory Roth (if you are married, do a Roth for both spouses).
Bottom line, keep saving in the 401(k), save taxes now, and pay less later. Keep up the good work.