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Don't miss this month's timely story ideas, direct dial phone numbers, and E-mail addresses of these accessible experts! • Corporate
Stock Options Guidelines Are Important to CEO's
(for Personal Financial Planning), Stockholders and Analysts • Family
Assets at Risk Because of Illness of Patriarch?
Look for an Estate Recovery Expert RETIREMENT, IRAS & 401(k) PLANS • Long
Term Care Insurance Will Help Single, Aging Baby Boomers Avoid
Institutional Care • Free Financial Resume Posting and Paid Job Listing Opportunities At www.IARFC.org Provide Services to Financial Community
Corporate Stock Options Guidelines Are Important to CEO's (for Personal Financial Planning), Stockholders and Analysts Analysts and stockholders of corporate equity want to know that the management of the corporation has a vested interest in the success of the company. The size of the CEO's personal portfolio of stock options is an indication of commitment. However, when a CEO's personal wealth is tied up in stock options, it is essential that corporate guidelines exist that allow the CEO - at some point - to liquidate stock options to meet his or her needs for portfolio diversification, second home purchase, or weddings of children. Thus, corporate guidelines on handling senior officer stock options become very important to three audiences: -- The CEO and senior officers need to know at what threshold of stock option ownership they may consider liquidating shares. A value of four times salary is common in the U.S. A CEO may be forced to resign when no guidelines exist allowing him or her access to accumulated wealth while still employed by the corporation. It becomes punitive to a CEO or senior executives trying to protect family wealth not to be able to exercise appropriate amounts of stock options. -- Analysts are comforted by stock options held by CEO as an indication of a commitment to continuing good management and strong stock price. CEOs may exercise stock options within established guidelines without raising alarm among analysts. -- Similarly, stockholders , both individual or institutional, pay attention when a CEO exercises options. When the Guidelines are public, the liquidation of stock options by the CEO can be seen as a normal corporate activity. Philip
J. Toffel, Jr., Esq., Weston Financial Group, 781-639-7938
Planning a Spring Wedding? The Best Gift Parents can Give a Bride and Groom is Financial Literacy. Couples seldom
focus their thoughts on their finances before a wedding. Young
people often see money very differently. Some want to save every
penny and some want to spend every penny. For this reason financial
difficulties are often cited as a cause for divorce. A visit with
a financial planner during the engagement period can give a couple
adequate time to do the following: • Understand each other's attitude toward money and begin to develop a plan for finding a middle road toward solvency. • Consolidate debt and get on a payment schedule. • Look at expected expenses in the first two to three years. (this is important if the couple have plans for one or both to attend college or graduate school.) The fewer loans necessary the better. • Develop a joint annual budget, match with anticipated earnings. • Diversify existing IRAs or 401(k)s so both bride and groom are not investing in the same or nearly identical portfolios. • Evaluate the cost of the wedding and honeymoon in context with cost of buying a first home. It may be that understanding the inability of a dollar to do two things at the same time would help the Bridal couple to participate in scaling down the wedding and honeymoon so they might, with their parents' help, build up a nest egg for their first home. Henry
I. Montgomery, CFP -- Planners Financial Services, Inc., 952-835-9000
Even Without a Raise This Year, Tax Law Changes Mean You'll See More Money in Your Paychecks. Tax rates are down to 10% for the first $6,000 of income for singles, the first $12,000 of Married, filing jointly, and $10,000 for head of household. All the other rates are down 1% -- the 28% tax bracket goes to a 27% bracket, on down. Here's what you can you do with the extra cash: • Pay
down debt If you got a big refund last year, (average was $1,700 for 93 million people ) change your W-4 so the extra dollars are going into your pocket each month. $1,700 divided by 12 months gives you an extra $142 a month to use for any of the prudent uses that improve your financial standing. Dee
Lee, CFP, Harvard (Mass.) Financial Educators 978-456-3778 Are Your Family Assets at Risk Because of Illness of Patriarch? Look for an Estate Recovery Expert. As parents age, one of the most daunting tasks confronting Baby boomers is knowing when and how to step into the void in administering parents' financial affairs. Our parents are a staunchly independent breed. Discussing money, particularly their money, ranks second only to sex as the prickliest topic of conversation between parent and child. Notwithstanding this reality, Boomers must be prepared to step into the void-and to step in long before the parent welcomes, or even acknowledges, the need. This need is most often triggered by an aging or ill parent who has retained the financial reins well beyond the point where he or she has the mental acuity, stamina or capacity to manage the total financial picture. Without appropriate intervention, parents risk jeopardizing their ability to meet current lifestyle needs and may fail to preserve wealth in a manner consistent with their stated legacy. This issue can be pronounced in instances where a patriarch has amassed a substantial and complex wealth picture, and has kept a tight rein historically on financial disclosure. Under such circumstances, children are often thrust into an estate recovery effort. This effort begins with the forensics of unraveling the parents' financial picture: tracking cash inflows and outflows; identifying the nature, location and management strategy for portfolio assets; determining the extent of liabilities that have a claim on those assets; understanding health care and other insurance coverage; and identifying financial, legal and health care advisory relationships. Next, comes the design and implementation of a cohesive financial strategy to provide for current lifestyle needs while ensuring appropriate planning for estate transfer. All in time to preserve the family assets... In the absence of such an effort, family assets can be rapidly diminished through inattention to portfolio management strategy, and resulting investment losses, by claims on assets arising from limited partnerships and private investment vehicles, and by a day-to-day lack of oversight and control of the family assets. Paula
Chauncey, CFA, Managing Partner of Redwood Group LLC, 617-818-5514
Estate Planning Should Focus on Your Life's Legacy, Not Exclusively On Taxes A popular misconception is that estate planning is all about saving taxes. It is not, or at least it shouldn't be. If we stop and think about those things that are truly important to us about life, estate taxes rarely come to the top of the list. If we allow ourselves to think about planning our estate as planning our legacy rather than death tax avoidance, we free ourselves to complete our life's journey according to our lifelong values. Many people believe that estate planning is a tax event. While taxes are certainly an important consideration, they should not be the driving force behind the last decisions we make on earth. If we stop and think about what is truly important in our lives (not just our financial lives), legacy planning can go in many directions driven by many different motivations. Financial advisors often pigeonhole our thinking through checklists, word processing documents and preconceived notions based on their value system focused almost exclusively toward financial ends. Obviously, this is part of the process but should not be the primary objective. We need to focus on our value system. Legacy planning should be driven by what we want to accomplish, as well as what our family prioritizes and holds dear. This will most often focus on personal goals, financial security, family, charity and religion. A fascinating observation is that when asked what is most important to you about life, most couples confess they have never discussed that question before. If you ask them what is important about money, you get very predictable answers. Check your personal inventory. What is important to you? Michael
T. Hengehold, CPA, MST, PFS, Hengehold Capital Mgmt. 877-598-5120 Long Term Care Insurance Will Help Single, Aging Baby Boomers Avoid Institutional Care Aging, single boomers must investigate the benefits of long term care insurance (LTC). Unless they have personal wealth or an LTC insurance policy that pays for in-home care, they may not be able to afford the in-home assistance they will need as they age. For example, the inability to get dressed, get out of bed, or bathe alone, could result in a need for assistance, or long term care. Studies show that most Boomer's plan on living in their own home or condo throughout retirement until they die. The alternative left to them without private funds or LTC insurance is a nursing home because there are no government programs that will pay for in-home services. Privately paying for necessary services to keep elders in their own homes can take a significant chunk out of a bank account. Considering that most women will have smaller pensions than men, such financial pressure will come as a harsh reality. Most of us can anticipate costs for long term care, but are most pension checks large enough to cover both living expenses and the added financial burden of in-home care when it is needed? Marilee Driscoll, President of the Long Term Care Learning Institute, Plymouth, Mass., speaks to national audiences (both consumer and financial services) on retirement planning and long term care. She also provides technical long term care training to financial advisors & accountants. She is the author of "Seminar Secrets: How to market to baby boomers & their parents," and speaks to financial professionals on marketing through seminars. She working on a consumer book about long term care planning. mdriscoll@marileedriscoll.com 508-830-9975 or toll free at 866-627-4533
For single tax payers, whose adjusted gross income (AGI) has fallen below $95,000 or married couples whose AGI has fallen below $150,000, converting existing IRAs to Roth IRAs may be an excellent strategy under certain circumstances. Your financial planner can help you calculate whether the expected rate of return going forward would make up for the cost of the conversion. All assets moved into a Roth (except any non-deductible contributions already made to the traditional IRA) will be taxed at the time of the switch. If your income is down, your tax bite will be lower. But, from the time of the conversion going forward, those assets compound tax free and contributions can be made throughout your lifetime. A Roth IRA does not require you to begin taking distributions at 70 1/2 as does a traditional IRA. For those investors with sufficient income so they don't need to take distributions from the Roth, they may leave it to compound tax free for their heirs. Watch your adjusted gross income when you convert to a Roth, because the assets you convert will be treated as income and can increase your AGI above the minimum needed to qualify for Schedule C deductions such as medical and miscellaneous deductions. Also, increased income for any given year may make you lose certain credits on your taxes, such as Child Tax Credits and may change your eligibility for student loans. Jane
King, Fairfield Financial Advisors, Wellesley, Mass. 781-431-1119
or 1-800-486-4845 is a small fee-only advisory and investment
management firm that provides sound, well-reasoned counsel
to individuals, families and business owners. She consults
on estate and retirement planning and has more than $75 million
in assets under management. She has been named to the Worth
Magazine list of the top financial advisors in the country
every year since it began. jking@fairfieldfinadvisors.com. What To Do If You Fear You Will Run Out of Retirement Money. Many people are concerned that they will run out of retirement money. The time to begin taking distributions from their nest egg is near and the market hasn't rebounded substantially. They worry that taking distributions will reduce their capital, which it will. Check with your financial advisors about your true financial status before you tell the boss you are leaving. If you have need to be concerned, here are some ways to delay using your nest egg: • Keep working. It may not be a happy thought, but its practical. Or retire, and get hired back as a contract worker with a more flexible schedule. Check the impact on your health benefits before becoming a contract worker. • Cut expenses of daily living. As unpalatable as that may be for those who envisioned golden years in retirement, if you are worried about money, keeping what you have is the very best strategy. • Check the age when you will begin to receive your Social Security. Not only is it taxable income depending on other sources of income, but for many Boomers, the full Social Security is not going to show up in the mailbox until you are 67 1/2. But, it may be strategic to start taking Social Security as soon as possible. However, for many Boomers, the earliest start date allowed by Federal law will be beyond age 62, depending on your birth year. • Do not panic and liquidate a portfolio that has dropped in value so you may invest in CDs. While a normal reaction to retirement is to become fiscally conservative, liquidating your retirement portfolio should be your last choice. Any conservative investment you put your retirement money into will not recoup your losses, and may take double or triple the time to recoup losses compared to sticking with your current equity investments. Nancy
Coutu is Principal, Money Managers Advisory, 630-990-7174
Free Financial Resume Posting and Paid Job Listing Opportunities At www.IARFC.org Provide Services to Financial Community The International Association for Registered Financial Consultants (IARFC) is offering a free, on-line resume posting service to the financial professional community. Now, financial advisors and planners seeking new positions and financial planning students seeking internships or entry level jobs have an opportunity to put their information online so that companies seeking personnel may find them quickly and efficiently. As a companion service , the IARFC is also offering a paid, on-line job posting service so that financial organizations can find the talent they seek in an efficient way. The job posting service charges a minimal fee to employers, $100 for each 90-day job posting. Individuals who learn of a position on the web site may instantly connect with the employer by e-mail link. Job postings will go live immediately and the employers will be billed. For more information on IARFC contact Robyn Howard, Executive Director, 800-532-9060 or e-mail at director@iarfc.org. The IARFC is the fastest growing organization of financial professionals in the country, with more than 2000 members. The IARFC has a continuing education requirement that is greater than all of the other designation-granting bodies of the financial advisory community. Each year an RFC must complete 40 hours of CE from among a topic list of 74 items that are critical to the delivery of personal financial advice.
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