Planned Assets Planning Blog

If you were struck with a Critical Illness, Heart Attack, Cancer or Stroke and couldn’t work for six months or more, how would you meet the cost of living, pay your bill and medical cost?

Did you know?

1.3 Million Americans will be diagnosed with Cancer each year?

1 out of 2 men and 1 out of every 3 women in America will be diagnosed with Cancer sometime in their lifetime?

77% of All Cancer diagnosis will be over the age of 55?

865,000 Americans will suffer a major Heart Attack each year?

700,000 Americans will suffer a Stroke each year?

It’s not pleasant to think about what could happen to your family if you were to become seriously ill or otherwise disabled for an extended period of time.  The reluctance to confront that risk may be one of the reasons why 69% of private sector employees have no long-term disability insurance.  If you consider small business and self employed, the percentages are even higher.

If you are 55 and hit with a critical illness and can’t work, what will it do to your retirement plans?  We all are actual cognizance of the risk but still we ignore the possibilities, why is this? 

For most small business and all medium to large business long and short term disability protection is normally available at very low cost, generally at very low cost to the business or employee.  For the business not to provide it and the employee not to accept it is irresponsible, but for the very small business or the self employed it just may not be available often because of cost.  While group short and long term disability is relative affordable with very low cost this may not be the case with individual disability coverage, but there are alternatives.

If you have not explored protecting your family and yourself from a situation that most probably will ruin all of your future plans, now should be the time.

Is now the time to have a conversation concerning your plans to protect yourself, your family and your retirement from disability?  We know how to help you cover this very important problem at less cost than you may think.  Time is not on your side concerning your risk of a disabling episode; regardless of what plans you have for retirement and it will get here before you know it, a disabling episode could ruin them.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

If you ask ten different people about the rules, penalties, and tax consequences of an IRA distribution, you’re likely to get 11 different answers.  The fact is a wrong move could cost you dearly.

1^st IRAs are not the same as employer sponsored plans such as 401(k) plans, so they don’t play by the same rules.  

2^nd There are two types of IRAs; Traditional and Roth and both have different rules.

3^rd With the exception of Roth IRAs and 401(k)s distributions generally require payment of income tax.

4^th Distribution rules are governed by your age as to when distributions can be safely taken and how they may be taken.  Understanding these rules can mean the difference between tax savings and a potential tax liability as high as 50%.

With a traditional IRA contributions may be or have been tax deductible, but distributions, at the time they are taken, may be taxable as income.  Your age is the determining factor as to the cost of getting your money.  If you begin taking distribution prior to age 59.5, but if you don’t take enough at 70.5 (Required Minimum Distribution (RMD)) you pay a penalty.  Generally, money taken from an IRA prior to age 59.5 elicits a 10% penalty as well as standard income tax. (If only a portion of your contributions were deductible at the time they were made, that portion plus interest is only taxable.)  Miss taking the proper RMD and it could cost you up to 50% of what you did not take in penalty tax.

As with most things the government does there are a number of exceptions to the rules:

1.     By your beneficiaries at your death.

2.     If you become disabled.

3.     If the money is used to pay qualifying medical expenses [when they exceed 7.5% of your adjusted gross income]

4.     If you are unemployed, to pay the costs of health insurance.

5.     If the money is withdrawn to pay for “higher education” cost for yourself, your spouse, children or grandchildren.

6.     If you use the money [up to $10,000] for the first time purchase of a home for yourself.

7.     If you made an excess contribution, you can take out that amount on or before the due date, including extensions, of your federal income tax return (If you leave it in, you will be subject to a 6% excise tax.).  However, if you withdraw the net income attributable to the excess contribution, it will be included in income and subjected to the 10% penalty.

8.     At any age, under what is known as the Substantially Equal Payments Exception, if payments (at least annually) are spread out over your projected life expectancy.

This is a brief review dealing with traditional IRAs only, many factors can affect you IRA distributions and this is only information not tax advice.  I recommend you consult with your financial of tax professional for more specific information.  

Are you in control of your medical care?  Those of us looking at 60 in the rear view mirror find we spend a lot more time with the doctor and have a have a lot more doctors than in our younger years but are we in control?  Why do seniors or for that matter anyone put up with doctors that are continuously late for appointments?  Why do seniors allow doctors to prescribe medication or treatment without discussing it with them and reviewing the impact of a new prescription on current prescriptions or for that matter explaining why the senior should remain on the old prescription? 

Too often seniors are treated as a group and not as an individual; we allow the doctor to make us feel it is an honor for the doctor, taking time from his busy, to see us and in reply to a question tells us we just have to expect the problem because of our age.  We are being stereotyped by age and while none of us wants to be stereotyped by age, we let the doctor get away with it.

Dr. Mark Lachs, physician and gerontologist author of the book; Treat Me Not My Age, in an interview with Maureen Mackey (AARP Bulletin, 2011) laid out why this is unacceptable treatment and why you should not accept it.

“None of us wants to be stereotyped by age, yet all too often in the world of medicine, we are defined and labeled by our years of the planet—and treated according to preconceived notions about age.  Because of this, we can potentially miss out on the unique and individualized care we need for maximum health and well-being.

Lachs asserts that none of us ages in exactly the same way.  This is especially critical, he says, “Because when we’re looking at a tremendous increase in longevity among the population, we’re also looking at more chronic illness among older people.” We need to know what is at stake.

Ageism can start early and subtly – in our 40s, 50s, 60s, Lachs says. …”You might go to the doctor for pain, and without a complete evaluation or an exam, the doctor may say, ‘You should expect that. You’re getting older.’ And that’s just crazy.”

…Patients should feel that their doctor is leaving no stone unturned, that complaints are being fairly adjudicated, and that someone is really thinking about their issues.  No ailment should ever be written off as an old age ailment.  Treating patients based on their age means you can miss very significant, treatable situations.”

Q. What can patients do about it?

A. “Among other things, outline your goals for any doctor’s visit before you arrive.  Then, try saying ‘Doctor, today I’d like to cover three things --…”

This interview is well worth full consideration and can be found at www.aarp.org. [click on entertainment, books, author speaks, and then read at Lachs]  For even more read his book “Treat Me Not My Age”.

A predominate cause of financial deprivation to a family is the premature death of the primary income earner.  How many of us have friends or known of others whose life has changed for the worse due to death of spouse or parent and avoidable financial situation if adequate life insurance had been maintained.

Death protection has always, for most, been the primary consideration for obtaining and maintaining life insurance but that is only half the story.  Life insurance has also always been a financial engine and tremendous resource for those who own it.

In the 1980’s term became the life insurance of choice because you get so much death benefit for so little premium.  A policy providing $1,000,000 in benefit obtained for $50 a month or even less depending on age, health and product is not unusual.  But term life insurance, at best, is a one dimensional product.

Life insurance that builds internal cash value can be a financial engine for life and retirement.  Because of protected inside build up of cash value, business and the wealthy have used this product in very large chunks’ to cover estate tax, fund pension and retirement plans, insure businesses survive, provide deferred compensation benefits and the list goes on.  One very interesting and effective use, even for the non-wealthy, was championed by R. Nelson Nash with “The Infinite Banking Concept”, and his book “Becoming your own Banker”.  A concept when properly followed will create a fortune over a lifetime. 

A significant use and value of “cash value insurance” (CVI) is creating retirement income.  Other than death benefit term insurance has no value.  After a period of level premium, term life premium increase and is eventually dropped.  On the other hand CVI may be kept until death regardless of how long we live and when properly designed can provide exceptional benefit in addition to tax free death benefit.

Today’s soon to be retired workers are focused on the all important question; will they outlive their money during retirement?  People are living longer; inflation is not going to go away so it takes more savings to make it through the long haul.  With recent and ongoing problems in the economy, not likely to change soon, retirement plans such as 401(k) savings plans and investment portfolios have taken a hit from which many may never fully recover.  Yet when considering retirement income it is not really possible for most of us to consider the full amount of retirement assets as available for our particular retirement.  A certain amount of these assets, as much as half, must be reserved for our spouse and even with this amount many spouses will live in poverty.   This is a problem only one financial product can solve, CVI.  If I have enough life insurance I can access more of my retirement assets and if I die first assets are replenished for my spouse.  If I out live my spouse I can take the cash value basis tax free through tax deferred loans forgiven on death and perhaps pass a benefit on to my heirs, benefits which may be income and estate tax free.

Civil Employers, Unions, Government Jobs, Military, Teacher Employment provided pension plans require retirees take a spousal option when retiring or the spouse signs a release allowing a higher life annuity  payout, in which case at death of the employee the spouse will receive no further income.  The spousal benefit is a life annuity and if the spouse predeceases the employee there is no benefit to the retired employee for its termination.   Depending on age and health, a life policy may be less costly and a better spousal benefit than the life annuity being offered.  If the retired employee is predeceased by the spouse the retired employee not only does not need to continue premium payment and at his or her discretion receives the cash reserve or value as a benefit..

Is Cash Value Life Insurance expensive?  It depends on the product and how it is designed.  Is CVI more expensive than Term again that depends on how the product is designed.  During the first years CVI is more expensive than Term, in later years it is much less expensive.  Using proper design, CVI provides tax free death benefit and can provide tax free retirement income.  If you look at CVI correctly, it not how much do I need but how much can I afford or obtain.  Before you write Cash Value Off as being an overpriced insurance product unable to provide a viable living benefit for you, an outstanding death benefit and a number of benefits in between you might want to get the full story.  Cash Value Life Insurance is a valuable financial product with flexibility, guaranteed return and ability to do what no other product cable of doing. 

Is now the time to have a conversation concerning your plans for retirement income and how you can develop retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

News that isn’t news: Individual retiring or planning to retire (I hate the term Baby Boomer) are more nervous about and unprepared for their retirement today than any time in history.  In the 90’s the financial press told us to diversify and move our assets out of stocks into mutual funds as a way of protecting our assets just to get slammed in 2000-2001and again in 2007-2008, being diversified or using mutual funds made little difference.  Since December 31^st the market has been good to us with the Dow increasing almost 1,000 pts and the S&P just under 200, but for how long.  Due to market volatility, excessive mutual fund fees and difficulty of actively managed fund to beat the market advisers are turning to the next new thing, managed exchange–traded funds (ETF) portfolios.  

A few advisors build their own portfolios of ETF’s most outsource the work to registered investment advisers.  Although ETF’s carry lower cost than the mutual funds they replace, these portfolios changes are adding new layers of fees and commissions, more often than not with higher aggregate fees than the funds they replace.  The print outs and projections look good, but these higher fees have impact generally not to your benefit.  This is not to say ETF are not a good idea, but will you earn enough to offset the penalty of change, is there a guarantee?  The real problem for the retiree is the track record of ETF’s, there is none.  According to Morningstar “almost a third of the strategies tracked are less than three years old.  If you are looking for long term benefit can you trust a three year old?  And Because ETF’s is an asset-allocation strategy, what do you compare it too. 

Whether it is stocks, mutual funds or ETF’s listening to and following the advice of the financial press or your friend next door may not get you where you want to go.  They look good today will they guarantee that tomorrow you will not loses principal, interest earned or have to change again?  Safe money products have changed, with many, over time, providing better total return and security.  Safe money products can out pace most market investments and are the only product able to project a minimum life income, protect your Social Security from being tax and provide an income you cannot outlive.

The main excuse used by advisors or brokers to not recommend safe products is what they call high cost and the fact that any money going into a safe money investment is money they cannot churn to build fees and commissions.  When talking about high cost or commissions they only comparing cost of the first two or three years.  Safe money products are not built for the short term and when their cost and benefits are compared over a 10-15 year period or life to market investments safe money products cannot be beat.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!       

As business owners we often get behind in being able to plan and fund our own retirement.  The first several years there may be little or no income but as business develops income gets better but the age creep is there, retirement is now you what can you do? If you are self-employed or the sole employee (your spouse can be included) of your S or C corporation two of the best options may be a solo 401(k) or a Roth 401(k)

Both have been around a few years but have become more common now as accountants with entrepreneurial clients have awakened to the need.  These plans are designed for independent contractors and the owners of small businesses to hold and develop retirement savings.  Such plans are becoming the most desirable retirement investment option as the annual contribution limits are set high and grow tax deferred or tax free with the Roth.

The 2012 Solo 401k contribution limit is $50,000 or $55,500 if age 50 or older.  Contribution actually consist of two parts; salary deferral and profit sharing contributions.  Total contribution combines these two for the maximum contribution limit.  But calculation of how much can actually be contributed is dependent on whether your business is taxed as a corporation or as a sole proprietor.

Contributions for 2012 sole proprietor, partnership or an LLC taxed as a sole proprietorship:

1.      100% of net adjusted business profits income up to the maximum or $17,000 or $22,500 if age 50 or older.

2.      Profit sharing contribution up to 20% of net adjusted business profits.

Contributions for a S or C corporation or an LLC taxed as a corporation:

1.      100% of W-2 earnings up to the maximum of $17,000 or $22,500 if age 50 or older.

2.      Profit sharing contribution up to 25% of W-2 earnings.

And yes, a Solo 401(k) allows you to put away more than a SEP IRA. If you can reliably contribute at least $15,000 a year, solo 401(k) plans often make more sense than SEP IRAs.

Isn’t it time to have a conversation concerning your retirement plans?  Retirement planning to actually meet your goals and objectives is not do it yourself project, even more so for a business owner.  If you would like to have a conversation concerning your options call (888 270 9870) or email ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it. ).  Remember, time is not on your side, so do it today.

Simple 401(k) plans and Safe Harbor 401 (k) plans vary from the traditional 401(k) in that each has a funding requirement.  The basic attraction for Simple 401 (k) and Safe Harbor plans, they do not require non-discrimination and top-heavy testing to ensure that the plan operates in compliance with regulatory requirements.  Because such testing must be done by professionals who specialize in this area the testing can be financially burdensome.  The removal of this requirement can be very appealing to the small business owner who desires the features of a 401(k) plan, but can’t afford the administrative cost.  Contributions allowed for a Simple 401(k) are lower than a traditional 401(k), in 2012 the maximum deferral limits for a simple was $11,500.  

Employer contributions to an employee’s SIMPLE 401(k) account have been limited to 3% of the employee’s compensation and employers could not consider compensation in excess of $245,000 for 2011 (Indexed)for plan purposes. 

If your business has reached the position where it may be ready to help your employee plan for retirement, now may be the time for a conversation on your best options and why helping your employees plan for retirement may also be good business.  Call (888 270 9870) or email (hmcminn@plannedassets.com) if it’s time for this conversation, we can help. 

A Section 401(k) plan (also known as a “cash or deferred arrangement”) is a qualified profit sharing or stock bonus plan under which plan participants have an option to put money in the plan or receive the same amount as taxable income.  For 2012 pre-tax contribution limit for 401(k) plans is $17,000 with an index for inflation set at $500 increments. However, the employer is free to matches employees salary reductions, either dollar for dollar or under another formula.  For example, the plan might provide for the employer to contribute an amount equal to 50% of the amount the employee elected as a salary reduction.

In 2012 maximum 401(k) contribution for over age 50 [catch-up provision] is $5,500 and is indexed for inflation at $500 increments.  Combining pre-tax limits and the catch-up provision an individual over 50 could contribute up to $22,500 for the year.  This plus any employer contribution can form a significant part of an employee’s retirement income.

If your business has reached the position where it may be ready to help your employee plan for retirement, now may be the time for a conversation on your best options and why helping your employees plan for retirement may also be good business.  Call (888 270 9870) or email ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it. ) if it's time for this conversation, we can help. 

A simplified employee pension (SEP) is an employer-sponsored plan under which plan contributions are made to the participating employee’s IRA. SEP plans can provide a significant source of income at retirement when employers set aside money in retirement accounts for themselves and their employees.  A SEP does not have the start-up and operating cost of a conventional retirement plan and allows for contributions up to 25% of each employee’s pay.  These tax-deferred contributions levels are generally significantly higher than maximum contribution limits for traditional IRAs.  SEPs provides for employer contributions only.

SEPs are easy to adopt and generally simple to administer, while providing employees with tax-deferred retirement savings benefits of a qualified plan.  For 2012 contributions to an employee’s SEP-IRA cannot exceed the lesser of:

1.      25% of the employee’s compensation or

2.      $50,000

Why would a business owner want to establish and fund a retirement account for his or her employee’s?  In today’s economy retaining or attracting great employee’s is predicated not only on salary an employee may earn but benefits available.  At this point and time attracting employees may not be as difficult as at previous times but retaining your best employee’s is.  An employee may remain even if compensation is not as competitive as perhaps your competitor due to the level of benefits available.  The two most important benefits employees look for:

1.      Health Insurance

2.      Retirement Plans

When is a SEP a good idea?

1.      When the employer is looking for an alternative to a qualified plan that is easier and less expensive to install and administer.

a.      For very small employers, a SEP is one of the simplest types of tax-deferred employee retirement plans available.

2.      When an employer wants to install a tax-deferred plan and it is too late to adopt a qualified plan for the year in question.

3.      When an employer wants to provide a qualified plan with flexibility in the timing of contributions.

a.      The employer is free, at its discretion, to make or not make contributions to the plan in any given year.

4.      When partners and proprietors of an unincorporated employer would like to set up a retirement plan for themselves.

What about tax implications?

1.      An employer may deduct contributions to a SEP, up to 25% of the total payroll of all employees covered under the plan, but contributions must be made under a written formula that meets requirements of the Internal Revenue Code.

For additional information or to have a conversation how your business could benefit and how simple and cost effective setting up a SEP can be, calls us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

With the April tax filing deadline just around the corner, now is the ideal time for small-business owners to reassess their need for introducing a retirement plan for their business or to reassess their retirement plans and determine if they meet their needs.

Most small business owners with less than 100 employees down to just one employee, themselves, do not understand the advantages of establishing a retirement plan.  For the self employed it is absolutely necessary to develop a plan and fund it, as you have to provide nearly all the funds for your retirement.  The small business owner with employees who want to retain or attract great employees may find offering a retirement plan is a cost effective option.

Why don’t small business owners provide retirement plans?  The top reason found by Fidelity Investments in a recent survey or 100 small business owners who do not have a retirement savings plan is expense.  Expense not necessarily the cost of funding the plan but cost and complexity of managing a plan.

Fortunately, small business plans need not be complex or expensive to set up or maintain.  The real problem is a knowledge gap.

Retirement plans can be tremendous valuable for the business, the employees and the owner of any size small business.  It might be worth while spending a small amount of time talking with us about a retirement plan and what it can do for your business

The unified gift and estate tax credit is the lifetime federal credit available to each taxpayer to reduce the tax on taxable transfers that he or she makes during life and at death.

Prior to 2011 the gif tax credit schedule and estate tax credit schedule were not unified from 2004 through 2010.  That is, the maximum gift before taxes were imposed was $1,000,000 which was only a part of the estate tax exclusion during that period.  In 2011 the two were united and you could gift the full amount of the estate tax exclusion but only for 2011 and 2012. 

The unified gift and estate tax exclusion for 2012 is $5.12 million (adjusted for inflation) or $10.24 million for couples.  Taxable assets gifted or passed above these thresholds will be taxed at 35% if you die this year.  By having a unified gift and estate tax exclusion you do not have to wait until death to use the exemption.  This year an individual could gift $5.12 million and a couple $10.24 million without incurring the 35% gift tax, but you still must file the correct forms to notify IRS.

This gifting is often confused with the annual gift-tax exclusion which in 2012 is $13,000 for an individual and $26,000 for couples.  To add to the confusion, the annual gift-tax exclusion is per gift and is not a total. That is, I can give as many gifts of $13,000 to as many individual as I desire or my wife and I could give as many gifts of $26,000 as we desire, as long as they are to separate individuals.

Admittedly not many of us have $5.12 million or $10.26 million estates and with land values at current reduced levels you might think only large farms and ranches may reach this number, but even a farm or ranch of 40 to 50 acres could reach the $5.12 million level fairly easy as well as many medium to large family businesses. Next year, the estate and gift tax exemption is set to return to $1 million ($2 million for couples) and the tax for taxable property over that amount increased to 55%.  Will it, most likely not, but the one thing we can count on is the unified gift and tax exclusion will not remain at $5.12 million and most likely will not remain unified.

Numbers often mentioned is an estate tax exclusion of $3.5 million and gift tax exclusion of $1 million.  This means that for purposes of transferring property 2012 is a window about to be shut.  Assuming you don’t plan to die this year, we are talking about gifting of property.

The problem for small business is most families have no idea how much the family business is worth or how much it may be worth in the future.  Then there is the problem of control and an inability to turn loose of control.  But there are ways to transfer ownership without giving up control or losing income.  The other question is does the next generation of family members want to be involve in the business or even have the ability to take control and survive?  Extending ownership of a family business is a very difficult question and one without an answer sometimes until the very last moment, but the prudent business owner will not let this opportunity pass without significant investigation. 

Family farms and ranches are usually somewhat more stable in selecting future ownership and why 2012 is an important benchmark.  If future ownership can be qualified 2012 is the last year ownership may be transferred tax effectively.  Again it is not always necessary to give up full control or income making the transfer, but any family with farm or ranch of 40 acres or more should consider now how much it might cost to pass ownership at death in the future.

Unlike standard businesses, most of the money available to the farm & ranch businesses is tied up in land, equipment, the next crop or all three.  Estate tax is due within 9 months, and although there are delaying alternatives all are expensive.  If you have not obtained enough life insurance and do not have enough cash on hand how will you meet the tax and do you really want to give up the cash?  Starting the transition now may allow the farm to remain within the family rather than most or some of it remaining in the family.

Whether a nonagricultural family business, farm or ranch the window will shut December 31^st, not considering your alternatives only available for the rest of 2012 is not a viable option for any family business.

Is now the time to have a conversation concerning your estate plans and how you may tax effectively maintain the family business, farm or ranch within the family.  Time is not on your side, 2012 will be over before you realize, and we are not likely to see these tax rates again in our life time. A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Are you sure who will inherit your IRA?  You may think it's who you named primary beneficiary or beneficiaries for your IRA when you opened the account and completed the IRA Beneficiary Form.  By the way when was the last time you checked this form are the beneficiaries listed still your choice for inheriting your IRA?

Consider: You have two sons Jack and Bob and each have a son.  Jack’s son is Charles and Bob’s son is Ron.  On the IRA Beneficiary form you list Jack and Bob as primary and Charles and Ron as secondary.  If Jack dies before you do, who inherits Jack’s portion when you do.  If you think it is Charles are you sure, this may not be the case.

If your beneficiary designation form had no place to specify how the primary and secondary beneficiaries are related or how you wanted the IRA handled in this situation, the full IRA could go to Bob.  If you weren’t able or did not explain your intentions or desires those beneficiary forms may not be adequate to fulfill your desires.

What should you do: Providing your IRA custodian with complete instructions by letter or even better by using your own form can correct the situation.  The form you design is a Retirement Asset Will because you are providing (hopefully complete) instructions as to what you wish to happen.  It would be even better if you have your attorney draw up this form when he is reviewing or preparing your will.

Is now the time to have a conversation concerning your plans for retirement and estate?  Time is not on your side concerning retirement or estate planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!      

All of us have a tendency to put off planning issues we know we should take care of like Wills, Trusts even developing a coordinated Financial Plan.  Planning for the future of special needs child seems to just add to the mix as something I should get around to doing.  As important as a financial plan or will is, a plan for the future of a child that will have difficulty or cannot take care of his/herself might be considered even more important.  The question is do you want to make sure your child is taken care of the way you would do it or do you want to leave it up to the government.  An interesting by product of planning for your special needs child is you will complete your own planning.

The following steps are initial steps you should take for special needs planning, but they are not too different than steps you should take for your own planning.  These steps create a process for making critical decisions that can stand the test of time when you are not there to look out for the child.

So let’s get started!

Step one: Choose your team

It’s important to choose a team of dedicated professionals who will become knowledgeable about the specific concerns and issues of your family.  {Get ready; this is going to become personal if it is done right.} Your team should include family members, a specialized attorney, perhaps a social worker and a financial advisor with knowledge of planning for special needs individuals. (Not all attorneys, social workers and financial advisors have this knowledge.)   It is critical to choose professionals with special needs planning expertise – people who understand fiduciary requirements, government benefits and tax laws. So start investigating but at this point you are not ready to bring them on board, so don’t.

Step two: Calculate your financial needs

Unless you have work out your own financial plan it is very doubtful you will build a successful plan.  Is it about the money, it’s always about the money.  You are going to have to consider both the here and now and the then and there.  Your financial strategy will have to include short term and long term objectives.  Have a good idea about these issues before you meet with your team.  After all this should be your plan not theirs, they are only advisors.   To do the best for your child you first must take care of yourself and the rest of the family.  If you short change the family, the plan will ultimately fail.

Step three: Create your strategy

As you draft your plan, think about the lifestyle you want for your family member and the rest of the family.  {Yes, have a working draft prepared before you start meeting with your team.  I think I said this is going to be your plan, they are just advisors.}

Step four: The team

Now it’s time to institute step one.  You’ve done your homework, you know what you want.  Now the team is going to devise a legal (yes legal) plan incorporating the ideas you have in your draft or show you why an idea is not a good idea or how you can do better.  Your team will cost money, in some case your financial advisor may not charge a fee but is compensated by financial products you may need.

Step five: The hard work

Once you have put the plan together, you have to create an estate plan to make it happen.  The point is special needs planning is a subset of estate and financial planning.  Is it important?  How important is the child to you? Make sure your family has the proper documents and financial products in place and then  review at least once a year with your team members.  If you don’t review, you have most likely wasted your time and money.

Estate Planning: The window may be closing

Last year (2011) estate and gift tax exemptions (individual) were unified at the highest level ever, $5 million, adjusted for inflation this year.  If you used any of a past estate exemption or past $1 million gift exemption this year you can subtract these amounts from $5 million and move the residual out of your estate.

This relief in estate and gift tax may dissipate unless extended by Congress.  Otherwise it will reset to $1 million ($2 million for couples) and estate tax return to 55%.  Most likely Congress will reset the law to something other than $1 million, but today’s higher rates may be a window closing starting next year given Congress’ search for new revenue.  Even if 2013 close out these record highs many estate lawyer believe lawmakers will grandfather the large gifts and gift-transferring trust established in these golden years.

Laws and opportunity may be lost in 2013 for transferring assets to your heirs cost effectively.  Parent that intend to transfer property to their children could take advantage of a qualified personal residence trust (QPRT), freezing the value now and transferring an appreciating asset to their ownership in 10 or 15 years, perhaps saving thousands of dollars in estate tax.

Family partnerships have been and are a valid method of transferring a small family business or investment portfolio to you children while you still maintain control.  In 2013 this window could slam shut if Mr. Obama has his way and ends valuation discounts on partnerships funded with marketable securities.

The point is, if you have not developed a written estate plan or have not kept your plan up todate time may be running out for significant effective update or changes.  Regardless of who is elected in November I think we can count on significant change is the ability to create and do effective estate planning as we can today.  Even if your estate is not at the $2 or $5 million level if you have assets you wish to transfer or pass on to your heirs, now may be the last chance you have at current values and laws we have today.

If you are concerned with your estate plan or haven’t really created one, today is the best time to have a conversation on what you would like to do with your residual estate.  Take advantage of this window we have today, once these laws change there may not be an opportunity lie we have today for a long time to come.  If you are ready to have a conversation call (888 270 9870) or email ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it. ) we can help.

Since college cost continues to increase, faster than the economy or inflation, paying for college has become and is challenging.  As a result, college educations for you student can wind up costing 20-30% more than you plan.

Once you student enters high school you have only three years to make financial arrangements to reduce your expected family contribution (EFC) for the first year of college for your student.  During your students senior year second semester you and he/she will complete a FAFAS form and send it in to the government.  The earlier this form is completed (any time after January 1^st) the better.  This form provides financial information which defines your EFC. (The minimum you are to pay out of pocket for your students first year.) If you hope to receive any help from the school of your students choice this form must be completed and sent.  Funding from schools and the government is based on a first come bases, even though your student is deserving there may not be funds available if you send the form too late.

The FAFSA is quite explicit and incorrect or false data can have tragic consequence.  However, there are many things you can do to improve your opportunity to receive a lower EFC award and improve your chance of obtaining increase funding from the school of choice.  You may have heard myths about financial aid: that you can’t get it if you own a home, have savings in the bank, make more than a certain amount of money, or even not working.  But none of this is necessarily true. Parents and students who understand how and are prepared to apply for financial aid get more. It’s that simple.  I’m talking about understanding the system and rules and having your financial house prepared for the examination it is about to receive.  Little things, like your student having savings in his/her name can increase your EFC.  Lying, cheating or trying to beat the system by fraud is not a good idea and can cost you more than you hope to save, but taking certain practical steps may save you a good deal.

However, the most important consideration is how you will to meet your EFC and any part of the other costs your choice of schools cannot or will not provide.  The idea here is to meet the cost of educating your student or students without going broke, dipping into your retirement fund or reducing your life style.

Many people find working with a financial advisor knowledgeable about preparing for college funding is an effective solution.  Educating your student may cost more than you planned. In trying to meet this cost on your own, you may over look significant areas of savings or finding less expensive money.

Today, the most critical year for college planning is usually the student’s junior year. During this year, parents can do serious planning that help to plan expenses, eliminate unpleasant surprises, and maximize planning and preparation for financial aid and federal tax credits. Of course starting in the freshman year or before would be even better.

Is now the time to have a conversation concerning your plans for financing higher education for your student and how you can develop a financial program that will not eat into or destroy your retirement income plan?  Time is not on your side concerning planning for your student or retirement planning; regardless of how far in advance both may be the need will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

As I have written before, student loan debt (debt contracted to attend higher education) has surged above credit card and auto-loan debt to over $1 trillion, in 2011.  The average student loan debt recently topped $25,000, up 25% in 10 years and 8 in10 of these loans are government-issued or guaranteed.  It will come as no surprise that nearly 3 in 10 student loans are past due 30 days or more.  The current student debt problem is not unlike the housing problem we have been and are going through, with the same probability of damaging the economy.

While it is hard to be sympathetic for students that have racked up loans of $90 to $100,000 or more the untold story is effect on parents who co-signed for these loans.  It may be news, but student loans are protected from bankruptcy and very difficult, not often forgiven.  By co-signing, parents put themselves in the position of having only two options when their wayward child can’t or won’t pay the debt; pay it for them or see your credit destroyed.  Often by the time it reaches the parent they are now responsible for the loan, fees, interest and penalties have increased the cost beyond all reason.  Not paying it is not an option for most, for some a loss of credit worthiness can mean loss of employment or being hounded by collectors and the government for the rest of your life.

Most people do not realize in order to encourage the financial market to make loans to individual who by no means could qualify otherwise the government made sure they would be able to collect their money.  So parent who cosigned are reaching into funds saved for retirement or having funds garnished from their Social Security to pay the loans off.

Students that did not have co-signers with unpaid loans are shackled to the loan even into their 80’s with the government, as with Medicaid, collecting from their estate even after death.  Today Americans age 60 and older owe about $36 billion for student loans, and more than 10% of the debt is delinquent.  Debt collectors routinely pursue borrowers older than 80 for loans that are decades old, and Social Security benefits have been and are garnished.

It’s difficult to tell your child no when he or she ask you to cosign a loan to attend college.  Everyone thinks a child obtaining a college education will or should make enough after they graduate to pay the loans off easily, but now we know the truth.  Statistically only about 25% will work in the field they studied for and graduated in.  Another problem is many of the courses of study and classes having no relevance are hawked by almost every college and university in the land. We may believe colleges and universities are mostly concerned in providing higher education but they are big business focused on netting  more money to grow larger and hire more professors who very often are more concerned about gaining political influence through our children than education.

Part of the answer to the problem is parents must take a more pro-active stance with their child.  As much as we would like some of our children to go on with their education at college, many would be much better off in a trade school or working for a while after high school and maturing.  Because a child at 18 is an adult, grades and course selection is private the college/university by law cannot provide you information, but your child is still answerable to you because it is your money. 

For the many that will have higher requirements of family contribution from results due to the FAFSA form or the inability or unwillingness of the school selected to fully fund cost above the family contribution working with a financial advisor may bring about a solution.  Working with a financial advisor knowledgeable about college funding and financing, may be able to help you meet the ever rising cost of higher education for your student.

Warning, you do not need to work with or hire an individual to help you find grants and scholarships. You or your student are quite capable of researching this subject as well as anyone marketing themselves as able to find little known money for your student.

Is now the time to have a conversation concerning your plans for financing higher education for your student and how you can develop a financial program that will not eat into or destroy your retirement income plan?  Time is not on your side concerning planning for your student or retirement planning; regardless of how far in advance both may be the need will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

As recently reported by the National Association of Consumer Bankruptcy Attorneys, “Student loan debt may pose the next mortgage-style economic crisis.”

It may be hard to believe but student loan debt is now higher than total U.S. credit card debt and there is no where to get help.  This is the one debt with little opportunity for relief even if you file for bankruptcy; the debt can’t be forgiven in a bankruptcy.  When Congress put together the student loan program they made sure lenders would not be under undue risk by making loans to a group as risky as students.  Therefore private lenders and the government have broad collection powers, much greater than for other loans such as mortgages or even credit cards.

Students and workers seeking retraining are borrowing at an extraordinary rate with loans last year exceeding the $100 billion mark (this is not a mistake), with total loans exceeding an unbelievable $1 trillion for the first time this year. (Federal Reserve Bank of New York, U.S. Department of Education and others)

With few or no hardship options available students and parents who co-signed for these loans face continuing financial problem that will not go away.  Again according to the National Association of Consumer Bankruptcy Attorneys, parents who co-signed face loss of retirement assets, homes and other assets.  Parents have an average of $34,000 in student loans and that figure increases to about $50,000 over a standard 10-year loan repayment period.  But this is only the average and generally it’s per student.  When you consider cost at public universities like Texas, A&M even Houston can run to more than $100,000 for a four and often five year degree, cost become more than just a concern.  Then factoring in post graduate cost and cost of most law schools, MBA programs or prestigious schools like MIT the cost over load will affect all but the most affluent.

Although much of the problem is today’s high cost of ‘required’ education for our children we, the parents, also bear some responsibility.  We know we want our child to get the education needed to compete in today’s economy, but we do not start planning until the last moment if we plan at all.  If this is you, contact us, there is hope even at the last moment, but we prefer planning 4 or 5 years before the problem starts.

I’m sure no one reading these blogs knows (I didn’t) or cares that food cooks in oil slower than water, even when both liquids are exactly the same temperature.  According to Cook’s Illustrated (March-April 2012)-Kitchen Notes, “This is true….  But how can this be? Isn’t temperature what determines speed of cooking?”  Actually, “equally critical is the liquid’s thermal capacity, or how much energy is needed to change its temperature by 1 degree centigrade.  Oil has roughly half the thermal capacity of water, which means it requires half the amount of energy to reach the same temperature as an equal volume of water.  This, in turn, means it has less energy to transfer to food and will cook it more slowly.

Don’t believe it?  Heat equal amount of water and oil to 135 degrees and then stick your finger in.  They will come out of the water faster than the oil.

Sounds like a science project!

According to studies by the government, AARP, Americans for Long Term Care Security and many others, 50% or more of Americans over the age of 60 will require some form of Long Term Care during their life.  While the predominance of long term care recipients may face less than 3 to 5 years of care even this limited amount of care can break or ruin retirement plans for the average couple, even the moderate wealthy.   As cost for Long Term Care Insurance (LTCI) continues to increase only the very wealthy can afford to self-insure their care expenses, but these are the very people insuring against the possibility of this need. 

Over the past several years we have seen LTCI increase in cost, recently companies have ask for permission to increase rates on issued policies by as much as 90% and now we are seeing companies leave the market.

Since the advent of LTCI most Americans have been adverse in obtaining it, thinking they will never need it.  In truth LTCI appears to be a bad bet:

Traditional LTCI policies have been intended for long term care needs and nothing else.  Basically a use it or lose it policy.  Even with the advent of more flexible policies providing not only nursing home care but home health and community care the use it or lose it principle still cause’s limited acceptance of these policies. 

Insurance companies, understanding the reluctance of the public to obtain LTCI because of the principal of use it or lose it added a return of principal rider to these policies. Thus, if the policy is never used a portion or all of the premium is returned, but this rider is usually too expensive and has not increased sales of the product.  Now with LTCI in apparent disarray what are the options for this necessary product? 

One such option is Life Insurance. Over the past several years people are relearning that life insurance has a place in retirement.  Life insurance may provide tax efficient income, family protection and estate cost funding.  Life insurance allows a couple to spend more of their retirement assets because the life insurance policy will replace them. Life Insurance has always been an excellent, flexible, misunderstood and maligned product.  Life insurance long term care (LTC) riders add to the flexibility of the product and eliminate the “use it or lose it” principle of LTCI.

Those people who need life insurance or desire a product providing guaranteed income, other than an annuity, and desire some form of LTCI can obtain a LTC rider to meet this need.

The life insurance LTC rider makes a portion of the death benefit available for long term care needs.  If you have a $1,000,000 policy it’s possible to have up to $500,000 available for care needs and if never used the only cost has been the rider, because the full $1,000,000 is then paid on death.

There are two types of LTC riders that can be added to cash value life insurance policies: Acceleration riders and extension riders.  The acceleration rider allows the insured to take an advance from the death benefit if long term care becomes necessary; but then the death benefit is reduced by the amount used.  The extension rider increases the insured’s LTC coverage without detracting from the death benefit.  This form is rarely used because of cost.

For all of us the need for long term care planning is a requirement of good retirement planning.  If your plan does not acknowledge this possibility and provide for it, your plan and retirement is at risk.

Is now the time to have a conversation concerning your plans for retirement and how you can develop a retirement you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

1.     The most common mistake future and retired retirees make is going it alone or even worse not preparing a written retirement plan. 

a.     Because it is always about the money, anyone planning for or currently retired must plan a budget.  This budget will change from month to month, year to year, but you must know how much guaranteed income* will be or is available each year by month as far out into the future as possible.   

b.     Break down known living expense by month and subtracting it from your guaranteed income.  If this is a negative and you’re not retired yet you may have time to readjust your retirement plans.  If retired you now know the problem and may be able to make adjustments.

*Guaranteed Income is money you can actually count on each month.  This is money not at risk such as Social Security, Annuities, Insurance, Cash, even CD’s.

c.      Retirement planning is not a do it yourself task.  Finding then working with a financial a professional you like and trust is a major step in the right direction and often at no expense. There is a lot more to retirement planning than the money and how do you know if you have covered all of the basis if you don’t know what you don’t know?

2.     Retiring With Too Much Debt:  If possible you should dispose of all your debt prior to retirement.  Mortgage debt may be considered good debt, in fact paying it off may be the worst thing you can do to your financial plan, especially if you can write a portion off but this is an item most individuals must discuss with their financial professional.

3.     Lack of Insurance: Even though you have Medicare, there are still future healthcare costs not covered by Medicare, such as long term care.  Life insurance is still the least expensive way to pay final expenses, taxes and probate cost.  With life insurance you can create a tax effective income fund and insure your family is taken care of after your death.  Life insurance will allow you to spend more of your available assets and many policies will also provide help with as a form of Long Term Care Insurance.

4.     Ignoring Inflation: Inflation is a fact of life in our time.  Inflation will always erode savings, but with proper planning can be mitigated.  This type of planning is best done with the help of financial professionals using safe investment products.

5.     Relying Too Heavily on One Income Source:  Having all your eggs in one basket is never good advice and having diversified streams of income is good advice.  Even safe sources of income can fail; retirees can avoid losing all their income if one source loses value.

6.      Not Protecting Savings: Reaffirm item 5 above.  Although the stock market or other risk investment may be doing very well, as you look toward retirement you must use prudence with saved money.  Moving at least moving minimum necessary money into safe investments is effective planning.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement plan you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Selecting a Care Facility: Assisted Living Homes

What is assisted living?  Assisted living is for adults who may need help with everyday task or feel it is time to live in an environment where help is available if needed, but over the past few years many of these facilities leaving the old definition of assisted living facility behind.  I some regards assisted living facilities are changing into villages or are a part of a retirement community of seniors living together for many reasons, but with resources to provide care at every level.  Many individual moves to assisted living because they are tired of living alone or they no longer want the day to day task of taking care of a house.  In many cases both the husband and wife move into an assisted living facility well in advance of need.  In this case the couple may even buy a condo within the facility and then pay for services as needed.  Within these same facilities, facilities may be available for visitors of a resident for a limited period.  But the traditional sense of assisted living is a facility catering to the individual that may need help with dressing, bathing, eating, or using the bathroom, but they don't need full-time nursing care.    

Assisted living facilities have a wide range of costs depending on service provided, but again in the traditional sense the basic assisted living facility cost less than nursing home care, but is still fairly expensive.  Individual assets, life insurance,

long-term care insurance even mutual funds will be used to cover costs. Medicare does not cover the costs of assisted living in some cases part are all of the cost may be covered by Medicaid. 

Some assisted living facilities and communities have become specialized for specific problems such as Alzheimer’s, there is one in Tomball.

As assisted living facilities and communities have evolved from their initial reputation more for profit facilities become available, quality improves and ROI for investors has become positive and interesting.  Assisted living facilities unfortunately are not available for everyone.  Using data based on 71 of the larger facilities in Texas, provided by AssistedLivingFacilities.org, the average cost of assisted living in Texas is $3,100 per month.  Actually costs range from a low of $1,000 to a high of $7,600 per month.  Increase of cost for assisted living facilities slowed in 2009 reported as less than 3.0%.

What’s available in our area: The Houston area has several assisted living and senior care options with varying degrees of service and amenities.   Houston, Texas is the largest city in Texas with 2,034,749 residents. Of this population, there are 176,325 residents who are over the age of 65. This number represents 8.7% of the population of Houston, which is slightly lower than the national average of 12.5%. However, the number of seniors in Houston will most certainly grow in the coming years, so will the need for assisted living and long-term-care options. (AssistedLivingFacilities.org)

Selecting a Care Facility: Nursing, Assisted Living or Home Health Care

One of the most difficult tasks we, as children, face is making the decision to move a mother or father, even ourselves, into a care facility, nursing, assisted living or using home health care.  As it becomes more difficult to manage the care of a parent or loved one the question becomes what do I do and where or what is best.

What do I do is a personal question base on personal observation, consultation with their doctors and perhaps a professional working in Elder Care.  Of course the question that jumps out is what is affordable? National median cost of skilled nursing care has risen to $222 per day or $81 to $87,000 per year and assisted living is at $3,300 a month.  Although Texas is somewhat lower it is still growing faster than inflation.  Even Adult Day Care is becoming unaffordable with cost like $61 per day and the national daily median hourly rate for licensed home-health aid services is up to $19 an hour.

Your first step is obtaining as much information as possible and a good place to start is the National Association of Home Care (NAHC).  NAHC is the nation’s largest care trade association.  NAHC has an extensive website of information for consumers to refer to in their search for help. {www.nahc.org}Additionally, doing a web search, state and location specific, can generate a lot of good information.

As is always the case, when looking for good reliable help nothing can replace doing your homework, visiting locations, talking to staff and family members of service users or residents. Again, using an Elder Care specialist to work with and for you will save you from a bad experience, time, and money.

Whether planning for a parent, loved one or yourself this is a project you may find over whelming aside the emotional trauma and should not be tackled alone.  After starting your research and getting some idea of the breath of the problem developing a team is the best approach.  If you have a financial consultant he/she should already be involved.  If you don’t have one, get one.  Then you need an Elder Care professional and an attorney, preferable one work with Elder Care.

“Understanding risks you face in retirement has never been more important.”

Planning for a successful retirement requires a written retirement plan based on several foundational retirement planning foundational principals and is not a do it yourself project.  A good financial plan will cover many subjects but the one we are always concerned with most is financial.  While focusing on the financial aspects of retirement planning will not assure us of a successful retirement, not focusing on them will guarantee failure.

Following are several basic financial requirements to prepare to develop the financial part of your retirement plan:

1.     Determine how much money you must have in retirement to cover basic expenses.

a.     Develop a budget based on current “required” expenses.

b.     Develop a budget base on expected future needed expenses

c.      Outline and prioritize expenses for future plans.

2.     Identify income sources and assets available to help fund your retirement.

a.     First understand options you have with drawing Social Security benefits before you do.

b.     Identify your risk tolerance.

c.      Review the risk your assets are at and if this risk makes sense to you for the long term.

d.     Assemble all of your financial information in one place, including 3 years of tax returns.

e.      Financial information will include other assets such as property or possible inheritances

3.     Create an outline as you first see it for turning assets into cash flow during retirement.

Creating an effective financial plan is not a do it yourself project, but by the same token you must remember that your impute is the key part of any financial plan for you.   It is your job to have a good idea of what your retirement will look like, what it will cost and what functions you want your team to take.  Remember your financial team is there to advise, recommend, and provide technical expertise, it I your job to accept or reject this advice.

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on?  Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

Monday’s Wall Street Journal included The Journal Report: Big Issues. Within this section was a discussion concerning Variable Annuities vs. equity investments such as bonds, stocks and mutual funds. As a financial consultant of 30 years and former Registered Rep, working with clients trying to build effective retirement incomes, I find these discussions disingenuous.

During the past 12 years we have seen the equities market plunge twice and although the DJIA and S&P are back up the recovery is shaky at best and really has no bearing on the smaller individual investor. The Dow is an index of 30 selected companies that are (stock) price weighted; a better index is the S&P 500 or the Russell 2000 Index. However, most small investors, whether investing individually or through mutual funds, recoup major losses within an effective time period effectively improving their retirement income position. As one of my clients said quoting Will Rogers, “if I had had it in a tin can, at least I would still have my money”. But what does this have to do with Variable Annuities (VA)?

In my opinion, a VA is another way for brokers to be continually paid for managing your money with the appearance of Safety. During the last equities melt down VAs took a heck of a hit, sells dropped to an astounding low and Registered Reps, brokers (to sell a VA you must be registered to sell securities) and insurance companies were losing money. Why did this happen?  If you don’t know you should find out VAs have not really changed.  Insurance companies then reinvented VAs adding what investors perceive as making VAs a safe investment. Unfortunately the proof is in extensive small print which small investor don’t read or understand if they do and Registered Reps or brokers don’t clearly explain. Regardless of the smoke and mirrors during the sales process VAs are not much different when it comes to being a safe investment than equities and often more expensive.

The really unfortunate problem is because a VA is an annuity Fixed and Equity Indexed Annuities (EIA) are painted with the same brush. Fixed and Equity Indexed Annuities are truly safe investments. Over a 20 year period an Equity Indexed Annuity will beat actual income returns from stocks bonds, mutual funds or VAs. With Fixed or EIAs you truly cannot lose money. Fixed annuities earn interest similar to CDs only better. EIAs earn interest based on indexes such as the S&P 500 but are not invested in the market. Each year interest earned is reset and becomes part of principal and principal is guaranteed. In years were we have a down market interest may, other than a guaranteed minimum, not be paid but nothing is lost and this is why over a period of years EIAs will beat the market or VAs.

Many VAs now provide guaranteed income based “only” on amount invested but require the annuity to be annuitize. {Annuitized, means the insurance company pays you a life income, but only for life, when you die the insurance company keeps any residual money in the annuity.} On the other hand Fixed or EIAs provide a rider that has an increasing income value higher than the accumulated value of the annuity and pays out any residual money within the annuity when you die.  Many VAs include or have available a death benefit or coverage, Fixed or EIAs also have availability of a death benefit, but with higher coverage.

Is VAs a safe investment? In my opinion, a VA is no safer than an equity, bond or mutual fund investment and over time can cost more. For real safety, return of and return on your money VAs, equities, bonds or mutual funds will not out perform fixed annuities or EIAs. For guaranteed retirement income why would you put your money at risk with a VA?

Is now the time to have a conversation concerning your plans for retirement income and how you can develop a retirement income you can count on? Time is not on your side concerning retirement planning; regardless of when you plan for retirement it will get here before you know it. A conversation with us today could save tomorrow. Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

Last Wednesday evening I was having dinner as usual at church with a group of older men when the conversation turned to savings, certificates of deposit and U.S. Savings bonds.  As conversation progressed several of my friends started bragging about the number and amount of U.S. Savings bonds they had amassed over their working years.  Here we are not talking about just a few dollars, but amounts from $50,000 to $200,000 perhaps more. When I ask what they were going to do with the bonds, the general answer was hold them and pass them on to the children.  When I ask why, the general answer was tax.

This conversation presented a question as to how much did the government owe to people like my friends and how much did my friends make in interest each year on these bonds.  With just a little research I had some unbelievable information.

1.     Seniors are holding around $19 billion in expired U.S. government bonds.

2.     These bonds once expired cease to earn interest.  In other words if you hold a bond that has expired (reached it maximum value) you are loaning money to the government for free.

Why would people hold bonds that have ceased to bear interest?  People, like my friends, think that they still earn interest.  These bonds were purchased years ago and the government never sends annual reports or statements.  And, when the bonds mature and/or expire, the government notifies no one—not even heirs.   

I work with my client identifying transferred wealth, wealth being transferred out of family assets unknowingly and unnecessarily.  Generally, it is more profitable in stopping these transfers than earning higher returns on accumulated assets and with a lot less risk. 

When you stop and consider the situation how much money is being lost and how much more will be lost when tax rates increase.  This is a perfect example of a wealth transfer and one I could never make up.  The unfortunate fact is when a dollar is lost or paid that did not have to be paid, it is not just the dollar you lose but all the dollars that dollar could have made.

Is now the time to have a conversation concerning possible wealth transfers in your family assets and how you can stop the loss and redirect it to your accumulated assets or standard of living?  Time is not on your side concerning wealth transfers; money once lost is gone forever.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

With mortgage rate at one of the lowest rates in history, now is a good time to consider refinancing if you mortgage is over 5% interest, but which mortgage is best 15 year or 30 year.

Most people think the quicker you pay your home off the less you have to pay so those that can afford a 15 year mortgage so choose.  Those who can’t afford a 15 mortgage send in extra premiums to get the principal down and pay off the mortgage as soon as possible.  The common belief is paying your mortgage off as soon as possible will save you money.  We were all raised to believe this; it’s possibly in our DNA.  But will you really save more money paying off your mortgage?   If you are disciplined, the answer is NO!

The answer is based on a number of factors but the two most important are arbitrage and opportunity cost.  The first factor that must be understood is that there is math and there is money and using straight math the answer favors a shorter term mortgage while the math of money does not.  Consider if I have a mortgage of $250,000 at 4% for 15 years my premium is $1,849.22 per month $9,018 per year more than a 30 year note.  Over the 15 year period I have paid $82,859 in interest with a 30 year mortgage at the 15^th year I still owe $151,954, using safe investments, if I invest my money not spent on the 15 year mortgage over this period I could have earned $203,825 at 6%.  With this amount it is my choice to pay off the house or maintain control of the money for other opportunities and a higher return at the end of 30 years.

If I complete a 15 year mortgage and then invest the after tax house payment at 6% for 15 years I will have $410,632, but continuing to use the 30 year mortgage concept I will have $665,123.  More importantly I will have maintained control of my money for other opportunities of higher return.  What impact would an extra $254,491 have on your retirement income?

Is now the time to have a conversation concerning your plans for wealth management, how you can stop wealth transfers and develop a retirement income you can count on?  When you lose a dollar you did not have to lose, you not only lose the dollar but the future return that dollar could have earned. Time is not on your side concerning wealth transfers.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

I have helped individuals and businesses obtain health insurance for over 25 years and am well aware of cost increase for this necessary insurance.  However, I remember 5 cent cokes and candy bars and as a kid I remember my dad buying a two story, 4 bedroom all brick house for $15,000.  All this to say the more money printed the more dollars required to meet costs.  $3.39 today will buy what $1.00 would buy in 84 considering inflation and all of us make a heck of a lot more in dollars per month than we made in 84.

Inflation is one reason Health Insurance is high in dollar cost another is the technological improvements keeping many alive and healthy. As Americans we complain about the high cost of health care, we will not accept limitation in accessing or availability of health care and realize Socialized Health Care is not the answer.  Our friends to the north and their health care system are often used as an example of good affordable coverage.  If it is so good then why do so many come south for health care, are we ready to accept the limitation, unsustainable cost and loss of technological advances?

On average, my clients pay $200 less for necessary health coverage.  This is complete major medical PPO coverage.  Why, it is all about design, actual projected used, related annual cost of optional benefits, understanding how to use the policy and what health insurance should be used for: 

1.     What optional benefits are actually used or needed and are they cost effective?

2.     Do I really understand how health insurance works and how to obtain maximum benefit and value for dollars spent?

3.     Is my agent more worried about commission than providing effective and affordable coverage?

The biggest problem I see with health insurance and the health insurance industry is the:

1.     Government

2.     Agents

3.     Insurance Companies

4.     Insured Clients

5.     Doctor’s

6.     Legal System

The government in a play for power wants to inflict a one payor system which is proven throughout the world as unaffordable, ineffective and life threading.  In 2009, according to the World Health Organization, the United Kingdom (England & Whales) had significant number of confirmed deaths due to sick people waiting for treatment by their National Health Care system and waiting times for certain necessary treatments can range from month to years.

Agents are compensated to sell the highest cost product and quickly.  Agents are not rewarded, initially, to spend time and make the effort to teach clients how to obtain and use health insurance more effectively.

Insurance companies no longer provide effective training for agents selling their product, encourage agents to sell the highest priced product and most have ceased providing effective low cost polices. 

Insured Clients do not take the effort to understand how insurance really works, how they can make their policy work better and do not hold the medical provider accountable to live up to their contract with the insurance company.  Refuse to take care of themselves and make poor decisions concerning life style.

Doctor’s, many but not all, concentrate on numbers not spending enough time with patients to help them make efficient decisions.  Require more test than necessary.  Do not police their ranks effectively, getting rid of poor and dangerous doctors causing liability insurance to reach ridiculous cost. 

The legal system is broke when it comes to health care.  Because of this, doctors’ practice defensive health treatment increasing requirements for unnessarly test and cost.  Patients with poor life style with the help of the legal system penalize doctors’ when results is not as desired even when it is due to life style. 

By making just a few changes health insurance could become more affordable.  My recommendations to start;

1.     All policies issued by a company should carry the same commission. 

2.     Policy commission should be based on policies not including doctors’ office copay benefits and increase of cost because deductible is above $2,500.

3.     Agents should not be allowed to sell health insurance without being trained under the supervision of the issuing company.

4.     Agents must have a better knowledge of how insurance works and how to teach clients to use negotiated rates.

5.     Clients must hold their agent more accountable to help them more effectively use their health insurance.

6.     Clients must hold their medical providers more accountable to meet the tenets of their contract with the insurance company.

Is now the time to have a conversation concerning your health insurance?  Time is not on your side if you are paying too much for coverage.  A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

It’s no joke the economy is still weak, layoffs and job loss are still prevalent, if you are employed perhaps you have been downgraded or have lower income, credit card interest charges and fees are up, no one is willing to provide a reasonable line of credit on the remaining equity in your home or your all tapped out.  But you need money and borrowing from your 401(k) looks like a good idea.  After all it’s your money and you are just borrowing from yourself.

However, your 401(k) is not that Life Insurance policy or Annuity you never took out so it doesn’t have the same advantages you get from borrowing from one of them.  Actually borrowing from your 401(k) can be more expensive than any bank or payday loan and can rate right up there with your local loan shark.  The only difference is you won’t get your legs broke when you can’t pay it back, but you will have to deal with your friends at the Internal Revenue Department. 

Borrowing from your 401(k) is not a good idea and should only be done with a great deal of fore thought and as a last recourse.  Your 40(k) is really not a bank and may very well cost you more than the money or loan is worth.  By the way I learned the hard way during the economic disaster of 2000.

Following are words of wisdom from the Financial Industry Regulatory Authority and issued as an investor alert as to considerations you need to be aware of before making the jump for a Loan or Hardship Withdrawal from your retirement savings, 401(k).

LOANS:

1.     The money you withdraw will not grow if it isn’t invested!

2.     Repayments are made with after-tax dollars that will be taxed again when you eventually withdraw them from your account!

3.      The fees you pay to arrange the loan may be higher than on a conventional loan!

4.     The interest is never deductible even if you use the money to buy or renovate your home!

5.     If you leave your job you generally must repay the entire balance within 90 days of your departure, otherwise the remaining loan balance may be considered a withdrawal.  Income taxes would be due on the full amount, and if you’re younger than 59.5, you may owe a 10% early withdrawal penalty, too!

HARDSHIP WITHDRAWALS:      

1.     Your employer’s plan must permit hardship withdrawals—not all do!

2.     The amount you withdraw cannot be repaid, and your future savings will be subject to a waiting period as well as 401(k) contribution limits!

3.     You’ll owe income taxes on the amount withdrawn, and your employer will likely deduct 20% up front!

4.     You could be subject to a 10% tax penalty if you withdraw before you are 59.5 years old!

5.     Your employer might require that you first exhaust all other available sources of funds, such as borrowing from your 401(k) or taking a commercial loan!

Is now the time to have a conversation concerning wealth accumulation and preservation?  Most individual are unaware of the money lost unnecessarily and unknowingly every month from family wealth.  Stopping the bleeding may be more effective and efficient than a 401(k) loan.  Time is not on your side concerning wealth transfers, money lost today is gone forever and the lost opportunity costs continue to accumulate. A conversation with us today could save tomorrow.  Please call us at 888 270 9870 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it. , today!

The housing market may still have problems, the economy may still be shaky and unemployment or underemployment may still be unacceptable but interest rates appear to have bottomed out and started back up.  If you have a mortgage with interest cost above 4 or 5% and you want to catch current super low interest rates now is a very good time to refinance.  Rates available are based on location and credit score, in Texas average rates without points is tracking above 4% with 15 year rates about .5% lower than 30 year rates.  According to the Wall Street Journal March 24^th Frank Nothaft, chief economist at Freddie Mac states; “If you’re considering refinancing there’s really no point in waiting.” 

While rates are currently still below where they were last year they are starting to rise and may keep rising throughout 2012 and 2013.  Of course if the economy does crash as many economists believe may happen rates would drop again.  Again according to the WSJ, “Freddie Mac, Fannie Mae and the Mortgage Bankers Association all are projecting that rates will keep ticking higher the year and beyond.  Freddie Mac and the Mortgage Bankers Association predict the average rate on a 30-year fixed–rate mortgage will reach 5% next year.”

If you mortgage is under water, your home appraises for lower value than your mortgage, there is still hope.  Freddie and Fannie have a program that allows individuals in this situation to refi.  As a matter of fact my house, newly built, now apprises for $100,000 lower than my mortgage after only a year and I still refied for 3.75% from 6.5%.  If you would like the name and phone number of my broker, email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it. .