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A Monthly Newsletter Source of Financial Sources • Hidden 401(k) Plan Fees Can Result in Nearly a 28% Robbery of Total Savings. • The Best Option for Leaving Assets to Your Family is Inside a Dynasty Trust; • The Smartest Guys in the Room: How to Take a Seat on the Billionaire's Bandwagon • Delivery of Investment Advice in a One-On-One Meeting With a Financial Consultant Makes • Financial Education and Counseling: What Will Smart Employers Offer for Retirement Planning Advice • Affordable Concierge Medicine Available Through Some Employee Benefit Plans • A Family's Inability to Discuss Money Only Increases Over Time. Start now to incorporate children • Why You Should Introduce Money Smart Kids to the Concept of Taxes • Clear Your Clutter, Make a Donation, Get a Tax Credit – Everyone Wins • Help Your Married Children Start the Year with Financial Awareness Hidden 401(k) Plan Fees Can Result in Nearly a 28% Robbery of Total Savings. The solution -- demand an unambiguous summary sheet of all fees and charges. The Dept. of Labor says a plan sponsor of a company’s 401(k) plan must, “Ensure that fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided.” http://www.dol.gov/ebsa/publications/401k_employee.html The ability of plan sponsors to make a judgment about fees is impossible without transparent fee disclosure, something unavailable at this time from the insurance company plan documents. In fact, the internal fees are quite undecipherable by the ordinary mortals who buy and implement 401(k) plans. There are several techniques for hiding fees:
The solution is simple -- lobby state and federal legislators serving on committees concerned with pensions to create a mandatory, unambiguous summary sheet of all fees and charges. These fees and charges should be shown to both the employer, when shopping for a plan, and to the participants, with every statement they receive from the record keeper. Regulations should have been implemented years ago. Approximately half the work force, 43 million Americans, now rely on 401(k)’s as their main retirement plan. Consumers and plan sponsors must demand of their Congressmen and State legislators the development of an unambiguous summary sheet of all fees and charges. Retirement security for many Americans depends on it. For information on low-cost 401(k) plans with all fees fully disclosed, contact Ken Weber, principal, Weber Asset Management, Inc., Lake Success, N.Y. The firm provides customized asset management plans for individuals and for 401(k) plans. He can be reached at 800-438-3863 or at ken@weberasset.com The Best Option for Leaving Assets to Your Family is Inside a Dynasty Trust Rather than receiving assets outright with all of the tax issues inherent in such an ill thought out plan, the dynasty trust is designed to allow the heirs to withdraw assets while maintaining the maximum asset protection and tax benefits available. At a minimum, make certain you and your financial advisor can help your children understand how the dynasty trust provides them with the following: • Unequalled protection of the assets from liability
But the best planning and establishment of a dynasty trust presumes that you are able to inform your heirs about its benefits and to educate them sufficiently so that they do not end the trust, which is their right when they become its beneficiaries. As long as the assets remain in trust, you have the relationship with a competent financial advisor, an independent trustee is on the job, and a trustworthy custodian is protecting the assets. Pearson Financial Services, Dennis, MA, is the author of "The 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. The Smartest Guys in the Room: How to Take a Seat on the Billionaire's Bandwagon It's mighty hard to keep a portfolio growing over the long term, so when a billionaire investment genius lets you piggyback along with him, its smart to go along. And when three billionaire investment geniuses make that offer, well, just ask where to sign! In fact, three of the best investors of our time run public companies into which they strut their investment acumen -- public companies in which they've plowed most of their own personal net worth. When you buy stock in these companies, you are, for all intents and purposes, investing exactly as they do. While oceans of ink have been spent writing about Warren Buffet and Berkshire Hathaway, far fewer investors are aware of Eddie Lampert of Sears Holdings or Steven Roth of Vornado Realty. Think you can beat Buffet? If not, why not relax and for about $10,000 buy three 'B' shares of Berkshire Hathaway (BRK/B)? How about Eddie Lampert. Lampert is acknowledged as one of the most brilliant hedge fund managers of our time and has an awesome track record investing in little loved companies and then building them up into major investments. His most recent coup was taking Kmart out of bankruptcy and merging it with Sears. The resulting Sears Holdings (SHLD) has many observers thinking that Lampert is on track to replicate what Buffet did with Berkshire Hathaway. Steven Roth is legendary in New York real estate for his visionary development deals executed via his REIT, Vornado Realty (VNO). Invest with him and be a part of history making deals in the Big Apple. When it comes to New York real estate, Trump is a fictional character; Roth is the real deal. What makes these stocks so special is that they are essentially operating companies through which these three legendary billionaires execute their best ideas. You're not just buying the stock of a company in a specific industry. Your participating in the activity and vision of billionaire investors who have forgotten more about making money than most talking heads on TV have ever known. It's a unique opportunity, not to be passed up for your core portfolio. Robert Markman, Portfolio Manager, Markman Core Growth Fund (MTRPX) -- a dynamic and responsive large cap growth, no-load mutual fund with a portfolio strategy developed to adapt to the changing investment environments. www.markman.com 952-920-4848. Delivery of Investment Advice in a One-On-One Meeting With Financial Consultant Makes All the Difference to Your 401(k) Plan Success Delivery, it turns out, is the key to successful 401(k) advice programs. Most advice programs on the market are quite similar and offer access to a wide range of tools online that you seldom use. What employees want and what they repeatedly say in surveys and to their management, is someone to tell them what to do. The advice programs that deliver in-person, one-on-one counseling are able to specifically direct employees in the steps they need to take to make their 401(k) plan and retirement savings work for them. The advice offered by the one-on-one consultants can be one or several of five ways you can improve your retirement planning:
Knowing and processing all of these ways to improve retirement planning are enhanced with one-on-one counseling that is now available to participants. The employers who are serving their employees’ needs are those who understand that any advice that does not specifically tell you whether you are on track for retirement is not the best advice available. The major metrics most often looked at by 401(k) plan sponsors are participation rates (data that tells nothing about future financial preparedness of the employee), and investment choices that are often far too conservative to support a retirement. However, advice for 401(k) plan participants is now accepted as important to the success of a 401(k) plan. Making one-on-one meetings -- retirement counseling meetings -- available to all employees helps to ensure the plan sponsor that their employees are on track for retirement. Sign up for your session now. 401k Toolbox, a service of PMFM, Inc., Athens, GA., is the acknowledged leader in one-on-one advice programs. PMFM, Inc. manages $800 million as of September 30, 2006. The firm has increased its assets under management by nearly 40% in each of the last three years. The firm has worked with thousands of clients and now offers their services to plan sponsors through 401k Toolbox. Tim McCabe is national marketing director. Tim McCabe -- 800-222-7636. Tim.McCabe@pmfm.com Financial Education and Counseling: What Will Smart Employers Offer for Retirement Planning Advice. Typical fortune 1000 companies have provided financial counseling for their top executives as part of a benefits package. Or, they would offer an allowance the executive could use to pay the fee for working with a financial advisor and executive financial seminars, but rarely anything for their non-executive employees. Now, with the trend away from defined benefit to defined contribution putting the responsibility for investing squarely on the shoulders of the 401(k) participant, smart employers are deciding to use a small fraction of what they spend on their retirement programs to fund the costs of investment advice providers for all employees as part of the company's benefits program. Some forecasters are seeing a labor squeeze coming for employees with experience and the employee benefits package has always been thought of as a recruitment and retention tool. If a company is investing 10% of an employee's compensation into their retirement program, 1/10th of 1 percent of that amount could pay for an excellent education and counseling program -- money well spent and ultimately highly rated by employees. The programs offered can be diverse, including:
Recent passage of the Pension Protection Act of 2006 encourages the provision of financial advice to all employees as long as the company has done a diligent (and provable) job of evaluating vendors. The need for advice is painfully apparent as study after study shows that most American workers are not adequately saving for retirement. Now, it is hoped that the advice programs will provide the answers needed for employees to get on an investment path that will lead to a secure retirement. John Burns, CFP™ 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. BOS has eight principals plus eighteen team members working on behalf of their clients, including seven credentialed portfolio managers with direct client contact and eleven operations, administration, finance, compliance, and systems staff with responsibilities related to client accounts. Kevin.Dorwin@bosinvest.com. 415-781-8535. Affordable Concierge Medicine Available Through Some Employee Benefit Plans Newspapers report day-after-day that emergency rooms at major medical centers must divert ambulances because they cannot treat all comers. Reporters point out that the doctors with the best reputations are no longer available for second opinions because their patient loads are so high. Other stories predict an increase in higher price concierge medicine for those who can afford an "access" fee to make sure they can see the best doctors. A new medical consultation service functions as an affordable concierge service because it comes wrapped in an employee benefit package. The employee may receive his primary care in his local doctor's office, but if his company makes a medical consultation service available as an employee benefit or in a product such as a Health Savings Account, the employee then has access to a concierge-level of service by the best physicians in the country. The employee's records will be gathered by the consultation company and presented to the "best in class" doctors at teaching hospitals who have agreed to provide the consultation services with a four-day turn around after the records have been collected. This top physician will not see the patient, but his diagnostic skills are brought to bear on the employee's existing medical records and medical tests. The service becomes a concierge level of service from physicians who accept cases to review when they would not accept the patient themselves into their practice. Medical consultation services, such as those offered by WorldCare North America, can be offered as employee benefits or included in Health Saving Accounts (HSAs) and other financial services products. This affordable concierge service offers the patient confidence that the most highly regarded physicians in the country are looking at their patient file, confirming or changing diagnoses, and offering treatment suggestions or changing treatments. To reach Ron Mastrogiovanni, call Joanna Flynn, WorldCare North America, Cambridge, Mass., 617-250-5167 or e-mail jflynn@worldcarena.com A Family's Inability to Discuss Money Only Increases Over Time Parents do a wonderful job of earning money and willingly sacrifice their time and energy to help in the education and development of their children. Countless hours are spent with homework, violin lessons and hockey practice, but parents are usually AWOL when it comes to passing on healthy money habits. Children are often given allowance and then given no guidance on how to handle the money. This absence explains why allowance is so quickly spent on snacks, trading cards and i-Pod downloads. Children are bombarded daily with thousands of images demanding that they spend, spend, spend. No one is telling the children to save, save, save or even, shockingly, give, give, give. A family's inability to discuss money matters only increases as time goes on. Children are too often left on their own to figure out how money fits into their value system. Predictably, many children from wealthy homes adopt a cavalier approach to money leading to wasteful and frivolous pursuits. A child is most likely to see money being spent rather than being saved or given. Such a one-sided education can lead to seeing money as something to be used for instant gratification. Parents must openly discuss money with their children and how the family as a whole values money and how money fits into the family's plans and goals. Impressing upon children that money is a tool to handled with care and not simply an end unto itself can start the children off on the right foot toward being financially responsible. One way to start this lesson is for the parents to help the child track their cash flow. A simple chart can show how much the child receives on a monthly basis from allowance, work and gifts. The child, with parental guidance, can decide what percentage per month they want to spend, save and give to others and then track where the money actually goes. \It is the holiday season and parents are busy figuring out what presents to buy for the children. One of the best gifts a parent could give, one that would keep giving over the child's life, is a lesson in financial responsibility. 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. Why You Should Introduce Money Smart Kids to the Concept of Taxes There are differing approaches to introducing kids to taxes, but children need to know the three basic types -- income tax, sales tax and property tax, which is also sometimes called an excise tax. Anyone who is self-employed and did not plan properly during that first profitable year for the coming tax hit has a fearsome awe of the need to take taxes into account. Some parents believe that children should be aware that money will go to taxes as soon as they receive their first allowance, and after their children are paid, they must return part of their allowance for taxes, room, board and utilities. The children in such a family will know that taxes have the same weight in financial decisions as basic living expenses. Not a bad lesson. The other method of learning is through a first paycheck. Clearly, the question "Who is FICA and why is he getting so much of my money?" is a great teaching moment if you take advantage of the opportunity. The reality of taxes comes home to teens when they realize that two hours of work at $8.00 an hour does not put $16.00 in their pocket. As parents, we also owe it to our kids to show them, in a positive way, what taxes do for us. You political views will skew whether you stress the advantage of social programs, military, or a balance of both, but the government does provide services that are difficult for individuals to provide without some type of public infrastructure. There are also local and regional services provided because of some type of tax. Roads, police and fire protection, museums, parks, cultural services, and food banks are often funded, in part or in whole from other sources outside the Federal government. Sales tax is easy to forget until you get to the checkout counter. If your state has a sales tax, it is a great teaching moment to help a child understand, by calculating in advance how much the tax will be so if she or he cannot pay the tax they are not buying the item on their own. Even property tax need to be addressed and using a car is a good example. Not only does the car need gas, insurance and maintenance, but annually, the owner pays a tax for it. This tax varies greatly between vehicles, but your child should include it in research before buying a car. Taxes are reality and do impact the value of our income. Make certain to introduce your children to taxes at each stage in their development as money smart kids. Linda Leitz, CFP, Pinnacle Financial Concepts, Inc., Colorado Springs, Colorado, is author of The Ultimate Parenting Map to Money Smart Kids,” as a book or as a CD. She specializes in helping families and individuals meet their long- term financial goals. She also helps those in the midst of divorce resolve financial issues through her company Divorce Solutions, Inc. She can be reached at 719-260-9800 or Linda@brightleitz.com. Clear Your Clutter, Make a Donation, Get a Tax Credit – Everyone Wins When you know someone else will benefit from your clutter, it is much easier to let go of stuff that you no longer love or use, or that does not fit your current lifestyle. Even better, some items can result in a tax credit. There are organizations in every city that will take automobiles, bicycles, books/magazines, building materials, clothing, furniture/household, furniture/office & supplies, medical and dental, school and art supplies. Start with the Salvation Army in your area. For details on how to record and value non-cash charitable contributions for your taxes go to www.salvationarmy.com. Click on “Your Help, Donate, Receipts” and you will find information on:
Nationally, the Citizen Action Team (CAT), volunteer humanitarian relief organization has created an award-winning database that links people who need humanitarian relief supplies to those who have services or supplies to share. Database includes instructions for beginner users, whether relief or service organizations, donors, volunteers, or individual and families. Contact: Terra Friedrichs 978-266-2778 www.reliefdatabase.org. Acton, MA Donations Made Simple
Make Clutter-Clearing and Donating Part of Your Routine and Enjoy the Tax Credit
Make donating a family affair. Bring your kids - teach them about giving, receiving, sharing wealth, community, and why giving feels good. And tuck your tax receipt into your tax records. Laura Moore, ClutterClarity, Cambridge, Mass., provides on-site clutter clearing and educational workshops to help people clear their homes of clutter for greater comfort and control. Her workshops “It’s your mess but not all your fault” are currently being presented in the Boston area. laura@clutterclarity.com 508-349-1661. Help Your Married Children Start the Year with Financial Awareness Parents know that a successful marriage requires many ingredients. Keeping financial stress to a minimum is one of them. Help your newlywed children get off to a strong financial start in their marriage with these ten tips: 1. Establish an Emergency Fund 2. Reduce Credit Card Debt 3. Put Savings on Automatic 4. Protect Income with Insurance 5. Diversify Investments Diversifying in this case means allocating money to different types of investments such as US and foreign stocks, small company and value stocks as well as bonds. Newlyweds with $100,000 or more may be better off building their own portfolio using a variety of index funds from Vanguard or I-shares. Investors with smaller amounts may prefer an “asset allocation” fund that owns many different investments in one mutual fund. These are offered by Vanguard, Fidelity, T Rowe Price, Charles Schwab and many other financial institutions. 6. Encourage Moderate Spending 7. Stress Communication 8. Develop an Estate Plan 9. Purchase a Home 10. Spoil the Grandkids Kevin Dorwin, CFP®, MBA 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. BOS has eight principals plus eighteen team members working on behalf of their clients, including seven credentialed portfolio managers with direct client contact and eleven operations, administration, finance, compliance, and systems staff with responsibilities related to client accounts. Kevin.Dorwin@bosinvest.com. 415-781-8535. |