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A Monthly Newsletter Source of Financial Sources • When an Income Annuity's Return Matters, Invest with Harvard's Endowment: Wharton Research Shows Income Annuities are Cost Efficient Sources of Lifetime Income • Taking IRA Withdrawals Too Early or Too Late Can Create Problems • Party Like It's 1949: • Let Your Advisor Talk You Out of Bailing When Market Volatility Strikes • Have You Gone Through a Financial Fire Drill? Serious risk is in investor behavior, not in the investments. • New Parents Must Face Long Term Financial Issues • Customized Marketing Materials About Health Care Costs Lead to Increased Product Sales 80% of Americans think, incorrectly, that Medicare will cover all their long-term health care expenses. • Pride Planners Conference Covers Financial Issues of LGBT Clients, Non-Traditional Families, and Unmarried Couples • PMFM/401kToolbox Reaches $1 Billion in Assets Under Management Firm has grown 35% for each of the past four years
When an Income Annuity's Return Matters, Invest with Harvard's Endowment Wharton Research Shows Income Annuities as Cost Efficient Sources of Lifetime Income A recent Wharton Financial Institution Center study showed that income annuities can assure retirees of an income stream for life at a cost of at least 40% less than a portfolio of traditional stocks, bonds and cash. The study referred to insurance company income annuities, but they are not the only income annuity game in town.
Consider the possibility of making a contribution to Harvard University's endowment, where a charitable remainder trust can be established that creates an income stream (income annuity) watched over by the investment managers who run Harvard's endowment. For the last ten years, they have produced an average annual return of 14%. Harvard's endowment will allow its contributors to recommend where, geographically, the assets that revert to Harvard at the time of death of the contributor. In other words, you can indicate that your assets should support scholarships for students from your region and ultimately have a dramatic impact on a young person's future. Pearson Financial Services, Dennis, MA, is the author of "The Two Million Dollar Gift: Dynasty Trusts. Why Leave Your Assets Any Other Way", written for his clients, his clients' families, and his own family. He offers a fully integrated wealth management process, incorporating investment, retirement, financial and estate planning specialists under one roof, serving clients as their family's office, designing and implementing strategies to protect and distribute their wealth and highly appreciated property. Seth Pearson, CFP, 800-385-7925, seth.pearson@verizon.net. Taking IRA Withdrawals Too Early or Too Late Can Create Problems Retirement plans, such as Traditional IRAs (Individual Retirement Accounts) are great vehicles for accumulating assets on a pre-tax basis, thus sheltering the income you contribute to the plan from current income tax. Additionally, the income and gains from your investments in the plan are deferred until you begin withdrawals. However, accessing the money can be a problem whether you take it too early or too late. It's like Goldilock's porridge - it has to be just right. Failing to Take IRA Withdrawals What if you forget to take the distribution? If you're the kind of individual who doesn't open their monthly bank statement, then you may miss the notice advising you that it's time to begin taking withdrawals from your IRA account. Unfortunately, that can be costly. The penalty tax can be 50% of the required distribution. For example, if you should have taken a distribution of $10,000, your tax penalty could be $5,000. Obviously it pays to make sure you don't fail to take your IRA withdrawals. The first concern is that they will run of money. If your idea of early retirement is age 55, for example, the average life expectancy, based on historical averages for a male, is another 30 years. Who knows what impact health care advances will have on your life expectancy? The bottom line is that people are living longer and will need their retirement assets to last longer. So, if you begin withdrawing your retirement assets too early, the only way you can avoid running out of money is to also die early -- a heck of a way to avoid running out of money! Let's assume, however, that you have accumulated adequate retirement funds and you can afford to retire early. You can begin taking early withdrawals (before age 70 1/2), but you want to be careful to avoid penalties. An attitude such as, "It's my money, why shouldn't I be able to take it when I want to?" doesn't carry any weight with the IRS. How to Take an Early Withdrawal Ultimately, whether you are taking early withdrawals or waiting until age 70 1/2, make sure you get professional help. The institution managing your IRA account should be qualified to accurately calculate your required distributions once you reach age 70 1/2. If you are taking early distributions, you will certainly be wise to get the help of an accountant or financial advisor. You worked hard to save the money. Don't waste the tax advantages on tax penalties. Barry Taylor, CFP, is a portfolio manager with Bingham, Osborn & Scarborough LLC (BOS), a San Francisco and Menlo Park, California-based registered investment advisor with approximately $1.5 billion in assets under management. BOS has provided investment management and comprehensive financial planning for individuals and endowments since 1985. All revenues are fee only. Barry provides financial planning, investment advice and portfolio design for private and institutional clients, including non-profit organizations. Party Like It's 1949: Most of the U.S. media reports on the economy frames higher prices of oil and growth in economies of China/India/Latin America in “problem” terms. Instead look at these two “problems” as global wealth multipliers, keeping the economy and markets humming much longer than most pundits are expecting. Oil is creating wealth for a small group of fortunate countries. The cash flow is so large and oil producers from Norway to the United Arab Emirates so flush with cash that they are creating “sovereign wealth funds” to manage cash. This is after they fill their official government reserve funds! Unlike official government reserves, which traditionally are invested largely in U.S. and European government bonds, these sovereign wealth funds look to enhance returns for their country by investing in stocks and real estate. Given the nature of the source of these dollars, the likelihood is that the bulk of the flows will be directed to purchases of large blue chip stocks and 'trophy' real estate. It should not be a surprise if these asset classes move higher in price - and sustain those gains for longer periods - than one might traditionally expect. Economists know that infrastructure growth is driven by and follows middle class consumer growth (new homes and apartments built to house new middle class families; roads built to accommodate the cars sold. This makes the Asian boom to include not just lattes and Levis, but heavy and complex growth elements as well. Never before in history, ever, have we seen such a huge and sudden expansion of global economic participation. The closest example - the post World War II recoveries of Japan, Great Britain, Germany, Italy and France - involved populations half the size of those we are speaking of now. Even so, it helped support a long boom of prosperity that lasted for some twenty years after 1950 and created the modern economic world. Equally important, the post war boom was not “the good old days; hot wars in Korea and Vietnam were just bubbling surface manifestations of what was then an accepted “long twilight struggle.” We were spending enormous resources, with no end in sight and no guarantee of victory, in the struggle against communism. The threat of nuclear devastation was real and never far from most folks' calculations. A large cap fund such as Markman Core Growth Fund (MTRPX) has found a number of prudent ways to potentially benefit from this historic global realignment, such as: • BHP Billiton -- feeding manufacturing the metals and minerals it needs. Robert Markman, Portfolio Manager has used this approach to guide the Markman Core Growth Fund (MTRPX) to five star status for the trailing three and five year periods ending 5/21/07. The fund is a dynamic and responsive large cap growth, no-load mutual fund with a portfolio strategy developed to adapt to the changing investment environments Let Your Advisor Talk You Out of Bailing When Market Volatility Strikes Many investors have been unnerved by the recent market volatility. They see the big daily market declines and decide that it is time to get out of the market. These investors are experiencing a normal reaction to losing money. As a rule, we hate losing money more than we like making money. The issue becomes one of talking investors out of making a bad, emotional decision The first element of the review should focus on the tax consequences of Once the tax consequences have been laid out for them, investors may have a different attitude toward selling. People hate to lose money temporarily but they also hate to pay taxes. If the investor has money in a qualified account or the potential tax bite is acceptable to them, the next step should be a review of their risk tolerance. If the volatility in the portfolio is too high for them, a reassessment and a rebalancing of the portfolio into a less risky mix might be in order. Investments that were appropriate in the past may not be as appropriate now particularly if the investor is approaching retirement or has experienced some other important event in their life. This discussion reframes the issue away from completely leaving the market Market turmoil can create a great deal of anxiety. It is the investment professional's job to recognize the anxiety and educate the investor and help them make intelligent decisions that serve the goals of the investor, their client. Donald L. McCoy, J.D., CMFC -- Planners Financial Services, Inc., 952-835-9000. Minneapolis, Minnesota. Registered investment adviser and subsidiary company Montgomery Investment Management, specialize in the management of no-load mutual fund portfolios for individuals and retirement plans designed to protect capital by reducing risk. pfs@usinternet.com. Have You Gone Through a Financial Fire Drill? Work with your advisor to determine how much volatility you can handle and what your portfolio will look like in the best and worst circumstances. Your advisor should be able to tell you, based on your customized portfolio, what will happen when temporary losses occur, and its impact on your overall plan. Your goal is not to sell into a losing market, so your plan should have five to seven years of income available in bonds. This eliminated the feat that propels people to sell into a losing market because they always have a cushion of cash - enough to allow a down market to recover. If you need to sell assets, you have not done proper planning. An advisor can and should motivate you to establish your plan. If you panic and sell in a losing market, you will own that loss. With a plan that anticipates up and down markets, your loss is your responsibility. Serious risk is in investor behavior, not in the investments themselves. Your advisor should be able to explain why a down market is a buying opportunity. So the next time the Dow spikes or slides, ask yourself these questions provided by the Financial Planning Association: What's my plan? If you've worked with a good financial planner, you should be able to articulate those goals all by yourself or refer to an investment policy statement you made together. What's my risk tolerance? At your first meeting with a planner, you should have discussed - and later filled out - a form asking you a number of questions about how you handle risk and what your expectations were about investment returns. Am I prepared to stay invested - no matter what? We all remember the "Tech Wreck" of 2000. At the worst of that downturn, investors bailed out of the stock market or drastically cut back, only to get back in after they were "convinced" that the market was rebounding. In reality, they missed out on stock market gains during the early stages of recovery, and that's costly in the long run. Am I diversified? The NASDAQ lost 39 percent of its value just in 2001, and another 21 percent in 2002. Meanwhile, real estate investment trusts, which performed poorly in 1998 and 1999 when stocks were booming, had banner years in 2000 and 2001, performed so-so in 2002, and had an excellent 2003. Bonds also returned well during the bear market. Your planner, based on your risk profile, should have you in diversified investments that fit your goals. Do I still feel the same way I used to about returns? Having a long-term investment plan doesn't mean make the plan and leave it to gather dust. You and your planner should decide when it's time for a review of your investment goals and your feelings about them. Ongoing conversation and communication with your advisor makes sense if nothing's going on, but life events like death, divorce, kids moving out and illness are good reasons to do a head-to-toe review of your financial plan. In other words, , the markets will move randomly in the short term but if indeed you have a written, sound financial plan it will already have accounted for these normal, temporary declines. Remember that the only people who are able to time the market's temporary declines are those who are self-proclaimed "gurus" and only wish to profit by selling you magazines, newsletters...or perhaps a bridge in Brooklyn. Plan properly, follow your plan, and then stay disciplined even when it doesn't "feel good." You'll then be one of the few who achieve true Financial Freedom. Tim Decker, President, ISI Financial Group, Lancaster, PA, is a fee-only financial advisor providing comprehensive financial advice and retirement planning. He can be reached at 800-342-5474. His radio show “Financial Freedom” can be heard every Saturday at 2:00 pm on WHP 580 AM providing financial guidance and answering questions from callers. New Parents Must Face Long Term Financial Issues You are a new parent and you have many questions. It is important to find answers to your questions sooner than later, consulting with a financial professional, so that your planning will result in the desired results as your child grows, matures, and you want to be able to help them in some way. Here are four questions and answers for new parents to think about. o Should you save for retirement or save for college? o How much should parents plan on spending for college? o If you're already on track for retirement savings, what's the best way to save for college? o What are additional issues for new parents think about? Dana J. Levit, CFP AE, Fee Only Financial Planning and Tax Services. can be reached at www.paragonfeeonly.com or (617) 938-3864, dana@paragonfeeonly.com. Dana is the president of Pride Planners Association. Customized Marketing Materials About Health Care Costs Advisors are always looking for new material and topics to discuss with their clients, and long term health care issues certainly must be addressed by advisors and their clients. HealthView takes a four-prong approach to solving health care financial issues for clients and advisors. 1. HealthView provides advisors and their clients with the actual projected health care costs they will face during their retirement based on life expectancy given their personal health issues and family history. Most Americans aren't thinking or planning for their retiree health care costs. Many do not realize they are responsible for health care premiums - they assume their employers will continue to pay their premiums during retirement. Eighty percent of Americans think, incorrectly, that Medicare will cover all their long-term care and health care expenses. It does not. Medicare only covers 51% of the average retiree's total health care needs. 2. HealthView offers individual and very specific investment strategies to effectively fund retirees' future long-term health care expenses. 3. HealthView provides access to information on health care facts it is crucially important for all advisors to know. 4. HealthView offers educational and marketing materials that can be customized to help educate clients on the importance of planning for health care costs during retirement. Advisors can customize prospecting letters, marketing slicks, and seminars that focus on planning for health care costs. Educated advisors are in an ideal position to help their clients understand the magnitude of their future health care expenses by hosting seminars, sharing valuable information, and recommending financial products to fund prospects health care expenses. Providing key health care cost information to clients and prospects promotes a willingness to investigate financial solutions necessary to acquire the future dollars they will need for their long term health care costs. Ron Mastrogiovanni is the president of WorldCare North America, a provider of medical advisory services including Web-delivered health assessmen programs that offer personalized health risk tools and analyses. The company also offers independent medical consultation services through some of the nation's leading research institutions, including Brigham and Women's Hospital, Dana-Farber Cancer Care, Duke University Health System, Massachusetts General Hospital, and UCLA School of Medicine. WCNA's platform of services is provided to consumers through financial institutions, affinity programs and employers. To reach Ron Mastrogiovanni, call Joanna Flynn, WorldCare North America – 617-250-5167. Pride Planners Conference Covers Financial Issues of LGBT Clients, Non-Traditional Families, and Unmarried Couples Financial advisors working with the gay, lesbian, bisexual. transgender (LGBT) and unmarried couple clients will have the opportunity to learn vital information and understand changing laws that impact the complex needs of this market segment at the Fourth Bi-Annual National Financial Planning Conference of Pride Planners Association (www.prideplanners.org), in Washington, D.C. from September 27 – 29, 2007, at the L’Enfant Plaza Hotel. The event features keynote addresses by: Additional topics will include: The Pride Planners Association (www.prideplanners.org), a national organization of financial, tax, insurance, investment and estate planning professionals, represents financial advisors and money managers who specialize in meeting the unique needs of the LGBT community, non-traditional families, and unmarried couples. Among the major financial sponsors of this year’s Conference are American Brokerage Services, Inc., Medical Capital Corporation, Pershing, Transamerica/Aegon, and Triple Net Properties. Additional significant sponsorship and support was received from Calvert Funds, John Hancock Annuities, MFS Mutual Funds, and Paladin Realty Advisors, LLC. The Conference also attracted a number of additional sponsors and contributors who will be present as vendors and will be exhibitors at the event. Collectively, the Conference will be providing exhibition tables and space to accommodate over twenty exhibitors, who will have an opportunity to meet and greet all of the Conference’s attendees and provide everyone in attendance with informational materials unique to their organizations. Further information about the Conference can be obtained from: PMFM/401kToolbox Reaches $1 Billion in Assets Under Management PMFM, Inc., the registered investment advisor to 401k Toolbox (www.401ktoolbox.com), has grown from $250 million to $1 billion in assets under management since 2003. In an industry that keeps track by numbers, a firm that has grown by approximately 35% each year for the past four years is remarkable. PMFM/401k Toolbox provides 401(k) advice and managed account services to more than 3,000 401(k) plans representing $3 billion in assets. In 1995, PMFM was one of the first firms in the country to offer a managed account option inside a 401(k) plan. In July of 2007, PMFM continued their pioneering ways as the first firm to bring a managed account Qualified Default Investment Alternative (QDIA) offering to the market in conjunction with Guardian Insurance and Annuity Company's Guardian Advantage™ product. The growth of the firm speaks to the desperate need of the average 401(k) plan participant to have someone manage their retirement savings, and the recognition of this fact by plan sponsors," says Tim Chapman, President and Co-founder of PMFM, Inc. 401k Toolbox® utilizes a tactical asset allocation strategy in Manage It For Me®, a participant fee-based service. The five risk-based portfolios change with market conditions and are designed to help protect client assets by utilizing their long-term investment philosophy of 'winning by not losing'. 401k Toolbox works to capture most of the good times while reducing market exposure during the bad times," says Chapman. PMFM offers separate account management services, proprietary mutual funds, and is the advisor to 401k Toolbox, one of the leading 401(k) managed account and investment advisory services in the nation. As of 7/31/07, PMFM manages $1 billion. The firm has increased its assets under management by nearly 35 percent each year since 2003. The management team at PMFM includes experienced investment advisors with offices in Watkinsville, Georgia. PMFM offers 401k Toolbox, it’s investment advice and managed account service, via vendor partnerships with 401k providers and direct to large plan sponsors. You can reach National Sales Manager Tim McCabe at 800-222-7636 or tim.mccabe@401ktoolbox.com. |