Planned Assets Planning Blog

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!

Many 401(k) plans offer opportunity for personal loans from your plan, in other words yourself. Although plan administrators require some paperwork and fees (normally $75 to $100) there is no requirement to qualify for the loan and therefore much simpler than going to the bank.  But should you take a loan from your 401(k).  General answer, No.

If you absolutely need the money and have no other option, borrowing from your 401k is better than taking an early withdrawal, which normally generates a 5 to 10% penalty plus income tax if you or under 59^1/2 or just standard income tax if over.  But depending on why you need the money you may qualify to take a penalty free early withdrawal which is allowed by most plans if using the money to buy a home, avoid foreclosure or pay medical bills .

Loan programs vary from plan to plan, but most allow the government max of 50% of fund assets to a maximum of $50,000 with a maximum five year payback period.  If borrowing to purchase a home, terms may be to 15 years and a larger amount of assets available.

There are a lot of problems borrowing from your 401k.  To start with most plans require payback to start with the next pay period and many do not give you a choice from what investments the money is taken.  They simply take an equal portion out of each investment even if it involves selling some of your stock at a loss.  Additionally, some 401(k)s do not allow you to continue funding your 401(k) until the loan is paid off.,

The most danger in taking a loan in this economy is what happens if you are laid off or lose your job.  If this happens, in most cases, you have only 60 days to pay the loan back in full or face the IRS and problems of an early withdrawal.  Although Senate Bill 1020 was proposed in 2011 to help with this problem, it has not gotten further than committee.

Bottom line; taking a loan from your 401(k), if you have no other option, may be beneficial, but know and prepare for the risks beforehand.

 Before you make a jump to access your 401(k) plan you may want to discuss it and determine if you have other options.  If you are ready for this conversation call us (888 270 9870) or email me ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it. ).

What is a “Wealth Transfer”?  The definition used here for “Wealth Transfers” is and unknowingly or unnecessary transfer of wealth (income) out of the family.  A wealth transfer can be the way we pay our taxes, mortgage, even our credit card bills or any other expenditure we may have.  The point; is there a more efficient means of handling this outflow and was it necessary in the first place?  The average American may have as much as 20% of income lost to Wealth Transfer without his or her knowledge.

Even the most astute money handlers have wealth transfers they do not recognize.  The largest cause of wealth transfers is Inattention.  Something like our phone bill may have wealth transfers called “cramming” where two or three dollars are lost each month.  Perhaps two or three dollars a month is not worth worrying about but it is thirty-six ($36) dollars per year and may be a great deal more.  Regardless of claims to the contrary most of us have little idea how much discretionary income we have each month or where it goes, it just goes.  The other principal cause of Wealth Transfers is Conventional Wisdom.  Conventional Wisdom is something we take for truth because everyone else does.  Madoff and Enron are only two examples of Conventional Wisdom going awry.  However, the most costly to Americans when added together is handling of our mortgages.

Stopping wealth transfers is THE most effective way to increase Wealth Accumulation and Life Style.  Termination of wealth transfers is usually more effective building wealth than increasing rates of return on investments and comes with no risk in doing so.   The loss of a dollar to a wealth transfer is not just the loss of the dollar but the future Opportunity cost that dollar had.  That is the money that dollar could have returned if it had not been loss.

Consolidating and paying off debt as soon as possible is and has been sound advice for increasing the distance your pay check will go.  But is termination of all debt good or even possible for most Americans?  If you can live without debt, your pay check can go further and your savings may grow faster but perhaps not always.

There is both good and bad debt.  Good debt is debt taken for capital goods and debt wherein you can write off the interest in other words the debt is Tax-Efficient.  Bad debt then is debt that is not tax efficient, debt spent on consumables, everyday expenses, etc; debt that cannot be paid in full at the end of the month.  There is good debt and better debt but how you arrive at better debt is how the debt is structured and how it is used.  One example is buying a home.  Assuming you have used good sense and are not buying more house than you can afford, changing this good debt to better debt is based on how your mortgage is set up.  This factor is always important but now during this window of very low mortgage rates how you set the mortgage up will affect you for a very long time, most likely for life.  The good news is this can be fixed

Common wisdom has always been to pay of you home as soon as possible if possible pay cash or take a 15 year mortgage.  If you can’t afford to pay cash or take a 15 year mortgage get a 30 year and then make extra principal payment, but pay it off as quickly as possible.

Common wisdom is questionable at best and just plain wrong for most.  In fact Paying off Your Mortgage is a Mistake and perhaps the worst thing financially you could do!

Money paid in interest does not have to be money thrown away and do you care how rich a financial institution gets as long as you are making more than you are paying.  Using other people money can be very profitable when used right, something financial institutions discovered long ago.

For a white paper why Paying off your Mortgage is a Mistake, please email me (Hubert McMinn) at This e-mail address is being protected from spambots. You need JavaScript enabled to view it. list as subject: Wealth Transfer: Mortgage.

Do you know what an Index Fund is or does?  Index funds are available as standalone investment funds, with Equity Index Annuities where you cannot lose principal and Variable Life and Annuity policies.  Article by Jason Zweig; ‘The Intelligent Investor” Wall Street Journal 11/27/2010), titled “Are Index Funds on Track to Become Even Harder to Beat?” is well worth reading.

Mr. Sweig states “index funds continue to make investing cheaper and easier than ever. For investors in these low-cost, autopilot portfolios that dispense with stock pickers and passively replicate the holdings of a broad basket of stocks or bonds, the best is yet to come.” 

The article points out “Over the past decade, Vanguard Total Stock Market Index fund has gained an annual average of just 1.79%....  ...according to Morningstar, this autopilot fund outperformed two-thirds of all other stock funds, including those run by managers trying to beat the market.  Another point, “the Dow Jones U.S. Total Stock Market Index is up 10.3% thus far this year.” (December 2010) Has Index funds had their problems, they have but mostly or completely due to regulation, changes are taking place starting January which may resolve this.  Hundreds of Index funds are available through many sources and set to be available in 401(k) plans as investment options or 401(k) Equity Index Annuities in 2011.

Reviewing your phone bill may not sound like a way to stop wealth transfer (money transferred unknowingly and unnecessarily out of income) but $2 or $3 dollars or more each month can add up to an interesting amount each year.

Most of us really never review our phone bill and doing so may seem like a lot of bother, but doing so may stop some insidious fees.  Unauthorized or deceptive charges on a phone bill are known as “cramming”, they show up quite often, they continue to show up until you stop them and phone companies care less.  These charges are initiated by third parties and may be for almost anything.  According to the Senate Commerce Committee last year, phone companies collect more than $2 billion worth of third party charges each year, most or not authorized and the problem is growing.

Cramming charges are normally relatively small perhaps no more than $2 or $3 a month and most often listed as service fee or voicemail.   Most of these charges are not for legitimate services but customers are enrolled from available information such as your phone number.  And yes, your phone company collects a fee for allowing these extra charges.

Cell phone customers have become a favorite for this problem with charges usually appearing as a fee for downloads or text services.

Scrutinizing your bill for odd little charges with names you have never heard of or don’t understand could save you several percentage point on you bill each month.  If you see or think a charge is unauthorized call your phone company and ask for the reason for the charge.  If it doesn’t make sense ask for it to be removed just like you would for a false charge on your credit card.

Want to file a complaint, call the Federal Communications Commission at 888 225 5322 or go to www.fcc.gov/complaints.

Guaranteed Income is the amount of monthly income you must have and derived from your retirement assets amd most importantly your retirement budget which you established as you develop your retirement plan.  This amount will change over time but you must have a starting point.  Initially creating a flow of guaranteed income to meet minimum income requirements frees you to develop a better mor complex retirement allocation plan: arranging assets to achieve desired balance for desired income future liquidity needs, making allowances for inflation, special events and even bequests.  The key is to develop pots of money or assets for different uses starting with minimum financial requirements; know the amount, know where it will come from and know it will be there regardless of the economy, market or interest rates.

Most Americans fail to recognize their limited Money Management skills and inability to focus what little free time is actually allotted to planning their financial future.  Because of lack of time, information or ineffective planning, money trickles out of income continuously, unnecessarily and unknowingly reducing savings and life style.

While increasing rates of return on saved assets is always helpful the associated increase of risk is not.  Today, many people are investing more aggressively in hopes higher returns will recover lost earnings or close a savings gap.  To close a savings gap or increase wealth accumulation, most financial professionals recommend maximizing the tax-efficiency of your portfolio, reviewing your asset allocation, and of course, “saving more and spending less.”  Always good advice, but you have taken these courses of action to the best of yours and your advisors capability and find it is not enough.  Now, apparently your only option is to spend less and reduce your standard of living or ramp up investment risk in hopes higher returns will close the savings gap.

Instead of searching for the perfect investment formula; we find the greatest potential for wealth accumulation is not higher return on your investment, but finding those places where inefficiency and resultant opportunity cost drain away income for savings and life style.  We call this drain “Wealth Transfers”; defined as unnecessary and unknowingly transfers of income out of the family.  It is not unusual to find wealth transfers of 15, 20% or more of earned income within a family.  We think stopping wealth transfers and redirecting part to saving and part to life style is more effective, safer and satisfying than taking additional investment risk.

We are Planned Assets and we would like to have a conversation with you about a subject you or your financial advisor may not be familiar with, Wealth Transfers.  Everyday wealth transfers erode saving and reduce life style by stealing income from Americans.  Saving 10, 15, even 20% of income due to wealth transfers is more effective and safer than increasing rates of return. 

If spending a small amount of time having this type conversation makes sense to please register at [link], call (888 270 870) or email ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it. ) Hubert W. McMinn.  There is no cost for the conversation just a small investment of your time and the return could be significant.