money

How To Wreck Your Estate

One of the best things about celebrities is that they live their lives so publicly that, hopefully, the rest of us can learn from their mistakes.  When it comes to famous people who mismanaged their considerable estates, regrettable stories abound: 

Guitarist Jimi Hendrix left no will and no instructions.  It took 34 years of court battles to come to some resolution, and, according to biographers, relatives closest to Hendrix during his lifetime didn’t get a dime.  Attorneys got plenty. 

Actor Heath Ledger failed to update his will after the birth of his daughter, Matilda.  His legal will left all of his assets to his parents and sisters.  Confusion and recriminations abounded until the family (much to their credit) decided to gift the entire estate to then two-year-old Matilda. 

James Gandolfini, the actor who played Tony Soprano, left behind a much criticized will that reportedly did not protect large portions of his hefty estate from probate and exposed his heirs to millions of dollars in tax liability.                  

You Too Can Easily Wreck Your Estate...and, in doing so, you may also compound grief issues and soil your legacy among family members and friends whom you hold closest to your heart.  Let us spell out some of the most common examples of bad advice that can cost you and your family so much. 

#1 “Don’t worry!  You’re too young to worry about a will.  You don’t own enough yet to protect.”

Death, injury and illness are not reserved just for the elderly.  There are vital reasons now to address your estate.  Dying without a will may subject your assets to a potentially very expensive and time-consuming probate process.  Your neglect also adds significant stress to the hearts of your loved ones, perhaps in a time of nearly unendurable grief. Your plan should also include documentation to designate who cares for your children in your absence, who cares for you if you are incapacitated, and the quality and limits of your own medical care in the final season of your life. 

#2 “Let someone sign a signature card at your bank so that, if anything happens, at least they can pay your bills.” 

Not a good idea.  Allowing someone else to “fill out a signature card” on a financial account immediately makes him or her a full co-owner of that asset. Not only do countless stories exist about “loved ones” abusing such privilege, but, if either one of you becomes embroiled in a lawsuit, bankruptcy or divorce, you and your “co-owner” are very much at risk.   

#3 “Don’t worry.  All of your money will go to the person listed in your will.” 

Not so fast!  Even if you have a will designating your intended heir, he or she may not get the money you have stashed in specific accounts.  If you own an insurance, brokerage or investment account which cites a beneficiary, that other document will trump the value of your will.  If, for example, you write out a will leaving your whole estate to your cat BUT your former wife is still listed as the beneficiary on your 401(k), your ex-wife will get the cash in that 401(k) account.  

#4 “You don’t need a planner. You can do it yourself with some help from an attorney.”
  

Many people approach estate planning in a piece-meal process, only addressing those issues which impress them as important at the time.  They consult an attorney only if (A) legal documents are required and (B) they can’t find a DIY (Do-It-Yourself) solution on the Internet.  Not good.  Estate planning should never be a patchwork process.  

The lapses or well-intended messes you leave behind may very possibly impact the quality of your final days and compound the tragedy of your departure.  Your estate plan may involve the entirety of your financial profile and, done well, absolutely maximizes your personal wealth for the duration of your life.  Only after your security is settled, should you plan then to maximize the amount of wealth that you pass on as a legacy to those whom you love the most.

Attorneys are often a vital part of this process but are not equipped in many financial matters.  You need a team led by a financial professional.  Don’t compromise the quality of your later years.  Don’t short-change the people you love.  Let’s meet and talk about your good intentions.  

Sources:  (1)  “Six Costly Estate-Planning Minefields, and How to Avoid Them.” Consumer Reports.  consumerreports.org. 4/14/15.  (2)  Goldman, L. “10 Celebrities Who Made Terrible Mistakes Planning Their Estates.  Business Insider.  businessinsider.com.  12/7/10.  (3)  Fabio, Michelle. “The Battle over the Jimi Hendrix Estate.” legalzoom.com.  12/1/09.  (4)  Davis, C. and Ambrose M., “Heath Ledger’s Daughter to Inherit Entire Estate.”  People Magazine.  people.com.  9/29/08

Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through TWP Financial. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, ED&F Man Capital Markets and Wells Fargo Bank, N.A. 

 

 

 

Weekly Market Commentary Sept.14, 2015

The Dow Jones Industrial Average finished the week up 331 points, adding 2.1% to close at 16,433. The S&P 500 Index gained 40 points, up 2.1% to end the week at 1,961.  

The Nasdaq Composite advanced 3.0% to close at 4,822. The S&P MidCap 400 Index closed the week at 1,414, up 2.0%. The Russell 2000 ended the week up 1.9% at 1,158.  

The MSCI ETF "EFA", the proxy for developed international equity markets, rose 3.2% for the week. Emerging markets, as represented by the MSCI ETF "EEM", bounced back from last week's loss with a 4.1% gain.  Domestic high-yield corporate bonds gained 0.5% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index.  

Volume was light and volatility remained elevated as stocks fluctuated over the holiday-shortened week but failed to make significant headway in either direction.  The yield on the benchmark 10-year US Treasury note rose to 2.18%.  Oil prices declined to $45.16 for West Texas Intermediate (WTI) and $48.70 for Brent Crude.  Goldman Sachs issued revised oil price projections through 2016, with median projections indicating that WTI will still be at $45 a barrel 12 months out and a worst case estimate of $20 a barrel, noting that production has not declined fast enough to resolve the massive oversupply.    

For the second consecutive week, there was no new highyield debt issued in the primary market.  High-yield bond issuance has dropped off significantly since mid-August and now stands at $205.6 billion year-to-date, 3% lower than the same period in 2014.  Investors cautiously returned to highyield funds, which reported a net inflow of $186 million for the weekly period ended September 9th.  The Effective Yield on the Bank of America Merrill Lynch High Yield Master II index declined slightly for the week, to 7.22% as of September 10th, down from 7.3% a week prior.  The OptionAdjusted Spread (OAS) over the risk-free Treasury rate was 5.58%.        

The OAS of highly speculative CCC-rated bonds is currently 11.35%, 7.58% greater than that of BB-rated debt, considered the least risky of the high-yield rating tiers.    

This spread stood at 6.38% at the beginning of the year, so investors seem to be demanding a greater relative risk premium for the lower rated, riskier debt.  High-yield markets are clearly flashing warning signs despite a relatively low rate of defaults, which have thus far been contained to energy and mining companies.  The Moody's high-yield bond Covenant Quality Index (CQI), which tracks the quality of investor protection mechanisms embedded in high-yield bond transactions on a rolling 3-month basis, weakened to 4.53 in August, a new record low.  The CQI measures bond covenant quality on a five point scale, with 1.0 denoting the strongest level of investor protection and 5.0 being the weakest.  Of the bonds issued in August, 29% were considered "covenant-lite", a term used when the bond indenture lacks traditional investor protection clauses, therefore making the bond issuance more risky to the investor.    

In US economic news, inflation remains muted in advance of next week's Federal Open Market Committee (FOMC) meeting.  The August producer-price index (PPI) was unchanged after rising 0.2% in July.  The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed a spike in job openings from 5.323 million in June to 5.753 million in July.  The rate of workers quitting their jobs, an indicator of worker confidence, was unchanged for a fourth consecutive month at 1.9%.  The rise in job openings is indicative of tightening in the labor market, and will likely be cited by hawkish FOMC members in next week's meeting.  Consumer sentiment data, however, may give the Fed reason to pause.  The preliminary September flash index fell sharply from 91.9 to 85.7, the lowest level in nearly a year.  New York Fed President William Dudley singled out this report as an early indicator of the effect of Chinese stock market turbulence on US consumers.  Weekly jobless claims fell 6,000 to 275,000 for the week ended September 5th.  The less-volatile four-week moving average rose slightly to 275,750.  Continuing claims, reported on a one-week lag, rose 1,000 to 2.260 million.

Weekly Market Commentary

After beginning the week deep in the red, The Dow Jones Industrial Average finished up 183 points, gaining 1.1% to 16,643. The S&P 500 Index also finished in positive territory, advancing 18 points, or 0.9%, to finish at 1,989.  The Nasdaq Composite rose 2.6% to close at 4,828. The S&P MidCap 400 Index closed the week at 1,426 up 0.2%. The Russell 2000 added 0.5% to end the week at 1,163.  

The MSCI ETF "EFA", the proxy for developed international equity markets, was up 0.8% for the week. Emerging markets, as represented by the MSCI ETF "EEM", bounced back 3.2%.  

Domestic High Yield corporate bonds gained 0.3% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index.  

Stocks experienced severe price fluctuations, beginning with a Monday selloff that saw the Dow Jones Industrial Average plummet more than 1,000 points before ending the day down 588 points, or -3.6%.  The S&P 500 Index posted a one-day loss of -3.9% on Monday and the Nasdaq fell -3.8%.  Stocks bounced back sharply on Wednesday and Thursday, with the Dow posting 619 and 369 point gains, the largest two-day point increase in the history of the index.  Monday's panic selling drove the yield on the 10-year US Treasury note below 2% for the first time in nearly four months, down to an intraday low of 1.976%.  The 10-year note ended the week at 2.18%, up from the prior week.  Oil prices were extremely volatile, crashing to below $38 a barrel for West Texas Intermediate early in the week before surging 10% on Thursday, the largest one-day rally in six years.  West Texas Intermediate finished the week around $45.23 and Brent Crude was trading at $50.00 as of Friday.  

Investors withdrew $1.602 billion from high-yield bond funds during the week ended August 26th.  New high-yield issuance ground to a halt with just $1.3 billion issued across three transactions.  Spreads continued to widen and the average bid on high-yield bonds dropped to 96.78 according to S&P Capital IQ's LCD.  The Moody's Liquidity Stress Index (LSI) for US speculative-grade companies, a measure of high-yield corporate liquidity, reached a five-year high of 4.8% in mid- August as low oil prices took their toll on energy   
companies.  LSI rises when corporate liquidity weakens and falls when it improves.  Energy-related debt is clearly dragging down the high-yield market as a whole, and conditions for stressed oil producers could worsen in the coming months if oil prices remain depressed.  Credit lines issued by banks to oil drillers typically take into account the value of the borrowers' oil reserves.  With crude prices at their current depressed levels, many drillers will likely see their credit lines significantly reduced.          

In US economic news, second-quarter GDP was revised higher from 2.3% to 3.7%, exceeding analysts' estimates of a 3.2% revision.  Consumer demand was strong, largely driven by vehicle spending.  A strong increase in residential investment also contributed to the higher-than-expected revision.  New home sales rose in July, up 5.4% to an annual pace of 507,000.  Year-on-year sales are up 26%.  Weekly initial jobless claims fell 6,000 in the week ended August 22nd to 271,000.  The four-week moving average rose slightly to 272,500.  Continuing claims, reported on a one-week lag, rose 13,000 to 2.269 million.  New York Federal Reserve Bank President William Dudley, in a mid-week press conference, categorized a September rate hike as "less compelling" in the wake of global market volatility.  Both Dudley and Fed Chair Janet Yellen have indicated a preference for a rate hike some time in 2015, but current market conditions have made anything prior to December unlikely.    

In international markets, the roller-coaster ride in Chinese equities continued as the Shanghai Composite plunged -8.5% on Monday.  Chinese stocks continued to sell off until midweek, then reversed course in response to gains in the US equity markets and 140 billion yuan in fresh government stimulus.  Despite the late week surge, The Shanghai Composite still ended the week nearly -8% lower.

Weekly Market Commentary

The Dow Jones Industrial Average plummeted 1,018 points for the week, declining -5.82% to 16,460. The S&P 500 Index was also down sharply, dropping 121 points, or -5.8%, to finish at 1,971.  

The Nasdaq Composite fell -6.8% to close at 4,706. The S&P MidCap 400 Index closed the week at 1,423, off -5.2%. The Russell 2000 was down -4.6% to end the week at 1,157.  

The MSCI ETF "EFA", the proxy for developed international equity markets, was down -6.4% for the week. Emerging markets, as represented by the MSCI ETF "EEM", fell -7.8%.  

Domestic High Yield corporate bonds were off -0.8% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index.  

US stocks sold off dramatically in their worst week of 2015 as the S&P 500 turned negative for the year. Sinking commodity prices and poor manufacturing data out of China prompted investors to exit international and emerging market stocks in favor of safe-haven US Treasuries and gold.  Gold rose to a five-week high.  The yield on the benchmark 10-year US Treasury note fell to 2.05%.  Oil prices continued to slide, with West Texas Intermediate breaking below $40 a barrel for the first time since 2009, before closing the week around $40.23.  Brent Crude fell to below $45.50.  High-yield bond funds saw a net inflow of $111.3 million for the week ended August 19th, reversing course after three consecutive weeks of net outflows.  High-yield bond issuance was up marginally in the week ended August 14th, with $4.6 billion in new debt issued across 9 transactions.  The Effective Yield on the Bank of America Merrill Lynch US High-Yield Master II Index stood at 7.38% as of August 21st.  

In US economic news, market expectations of a September interest rate hike have been all but erased after the release of rather dovish Federal Open Market Committee (FOMC) meeting minutes from July.  The minutes showed most Fed policymakers believe the conditions for a rate hike have not been met.  While FOMC members noted some improvements in the labor market, they cited a lack of inflation and concern over China in their decision to pause on implementing an interest rate policy liftoff.  The July Consumer Price Index rose only 0.1% in July, failing to meet expectations of a 0.2% increase.  Existing home sales data was positive, up 2% in July to an annual rate of 5.59 million.  Year-on-year sales are up 10.3% and the median price is up 5.6% at $234,000.  The Philadelphia Fed Business Outlook Survey index reading for August was stronger than expected at 8.3, compared to July's measure of 5.7.  The positive Philly Fed data was contradicted by Friday's Flash PMI report however, which showed a reduction to 52.9 in August from July's reading of 53.8.  Weekly jobless claims for the week ended August 15th were up 4,000 from the prior week at 277,000.  The lessvolatile four-week moving average was up 5,500 to 271,500.  Continuing claims, reported on a one-week lag, fell 24,000 to 2.254 million.  

In international economic news, concern over a weakening Chinese economy sent global stocks into panic mode after the Caixin China Manufacturing Purchasing Managers' Index fell to a six-and-a-half year low.  The Shanghai Composite Index ended the week down -11.5% in response.  In European news, Greece cleared one of the final obstacles in securing a third bailout after the plan won approval from the German and Dutch parliaments.  With the bailout secured, Greek Prime Minister Alexis Tsipras announced he would be stepping down.  While a majority of Greeks still support Tsipras, his concessions to the Eurozone during the bailout negotiations caused a great deal of friction in the left-wing Syriza party and will likely lead to further political uncertainty for the struggling nation.  Elsewhere in the Eurozone, manufacturing data was generally positive for August according to Markit's Purchasing Managers' Index, which rose to 54.1 in August from 53.9. 

Weekly Market Commentary

The Dow Jones Industrial Average gained 104 points for the week, up 0.6% to 17,477. The S&P 500 Index was up 14 points, or 0.7%, to finish at 2,092.  The Nasdaq Composite added 0.1% to close at 5,048. The S&P MidCap 400 Index closed the week at 1,502, up 0.9%. The Russell 2000 advanced 0.5% to end the week at 1,213.  

The MSCI ETF "EFA", the proxy for developed international equity markets, was down -0.9% for the week. Emerging markets, as represented by the MSCI ETF "EEM", fell -2.1%.  Domestic High Yield corporate bonds were off -0.6% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index.  

US Stocks moved marginally higher for the week, while global stocks turned slightly negative after a series of surprise currency devaluations from China's central bank sparked concerns over a potential global currency war.  The yield on the benchmark 10-year US Treasury note slipped to a threemonth low of 2.08% before recovering to close out the week at 2.19%.  Oil prices were relatively flat for the week, with West Texas Intermediate at $42.56 a barrel and Brent Crude at $49.02.  High-yield bond funds posted their third straight week of net outflows as investors withdrew $1.2 billion in the week ended August 12th.  Investors are clearly going "riskoff" across asset classes, as investment-grade funds also saw large outflows of $1.8 billion and US equity funds experienced a $1.5 billion outflow.  Investors are parking their cash in safe-haven money market and US Treasury funds, which saw inflows of $6 billion and $601 million, respectively, during the same time period.    

High-yield bond issuers returned to the market in the week ended August 7th, issuing $4.135 billion over 8 transactions.  The Effective Yield on the Bank of America Merrill Lynch US High-Yield Master II index spiked to 7.69% as of August 13th.  The Option-Adjusted Spread (OAS) rose to 6.04%, the highest level since August of 2012.  OAS is a measure of the spread on high-yield debt over the risk-free rate, accounting for prepayment risk via embedded options.  While investors are receiving relatively greater yields in the high-yield market as of late, they are foregoing traditional investor protections in the process.     

The Moody's high-yield bond Covenant Quality Index (CQI), which tracks the quality of investor protection mechanisms embedded in high-yield bond transactions on a rolling 3month basis, weakened to 4.37 in July.  The CQI measures bond covenant quality on a five point scale, with 1.0 denoting the strongest level of investor protection and 5.0 being the weakest.  The single month measure in July was 4.6, the worst-ever reading.    

In US economic news, Producer Price Index data for July pointed to a 0.2% rise for the month, with the year-on-year change at -0.8%.  Energy prices, which fell -0.6% in July and are down -17.6% for the year, will likely continue to decline next month and keep the Fed hawks at bay.  Industrial production posted a solid gain of 0.6% in July, beating the consensus estimate of 0.4%.  Retail sales rose 0.6% in July, largely driven by a 1.4% increase in vehicle sales.  The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed a contraction in job openings from 5.357 million in May to 5.249 million in June.  Layoffs increased from 1.2% to 1.3%.  Weekly jobless claims remain low, at 274,000 for the week ended August 8th.  The less-volatile four-week moving average was down 1,750 to 266,250.  Continuing claims, reported on a one-week lag, rose 15,000 to 2.273 million.  

In international economic news, China's central bank initiated currency controls, devaluing the yuan in successive moves by 1.9%, 1.6%, and 1.1% over the course of three days.  Asian currencies sold off sharply in response, over fears that the weaker Chinese yuan will negatively impact the competitiveness of neighboring countries.  In European news, Eurozone GDP rose 0.3% in the second quarter, below the anticipated pace of 0.4%.  

Weekly Market Commentary

The Dow Jones Industrial Average dropped 316 points for the week, down -1.8% to 17,373. The S&P 500 Index was down 26 points, a loss of -1.3%, to finish at 2,078.  

The Nasdaq Composite fell -1.7% to close at 5,044. The S&P MidCap 400 Index closed the week at 1,488, down -1.0%. The Russell 2000 declined by -2.6% to end the week at 1,207.  

The MSCI ETF "EFA", the proxy for developed international equity markets, was down slightly at -0.3% for the week. Emerging markets, as represented by the MSCI ETF "EEM", were down -2.2%.  

Domestic High Yield corporate bonds were off -0.8% for the week, as measured by the Bank of America Merrill Lynch US High Yield Master II Index.  

US stocks slid while European stocks rose this week, and Asian shares were mixed. Global data were mildly disappointing overall, though a solid US monthly employment report was seen as increasing the likelihood that the US Federal Reserve will raise interest rates in September.  The yield on the 10-year US Treasury note rose to 2.22%, while the yield on Germany's 10-year bund closed at 0.66% on Friday.  The euro stood near $1.09.  Oil prices extended a sharp six-week slide, with US West Texas Intermediate and international Brent crude oil falling to around $44 and $49 per barrel, respectively. High-yield bond funds reported net weekly outflows of $1.201 billion for the week ended August 5th. High-yield bond issuers grew cautious in the week ended July 31st, issuing just $2.48 billion in new debt across 4 transactions.      

In US economic news, the US economy added 215,000 jobs in July, and the May and June tallies were revised up by 14,000 for an average of 235,000 per month, up from the first quarter's average of 195,000.  The unemployment rate remained at 5.3% and labor force participation at 62.6%, a 38-year low.  Full-time jobs rose to 81.7% of total employment, the highest share since November 2008.           

Hourly pay rose 0.2% over the month and 2.1% from a year earlier, while the average work week increased 6 minutes to 34.6 hours.  Initial jobless claims edged up 3,000 to 270,000 for the week ended August 1st, marking the 22nd consecutive week of initial claims below 300,000.  The four-week moving average fell 6,500 to 268,250.  Continuing claims declined 14,000 to 2.26 million for the week ended July 25th.  The US trade deficit widened 7.1% to $43.8 billion in June.  Exports were flat, while imports rose 1.2%, with the strong US dollar and weak overseas demand hurting exports and boosting imports.  This has weighed on US manufacturers and created an obstacle to faster US growth.  

In international economic news, Greece's manufacturing PMI plunged to an all-time low of 30.2 in July, but the overall Eurozone PMI rose to 52.4.  While activity slowed somewhat in Germany, Spain, and the Netherlands; Italy's PMI rose to a four-year high.  German factory orders rose 2% from May to June and 7.2% year over year, according to the country's Federal Statistical Office.  Strengthening demand from neighboring Eurozone countries more than offset the slight contraction in domestic orders.  By contrast, in a separate report released Friday, German industrial production contracted -1.4% month over month.  The Caixin China manufacturing PMI dropped from 49.4 in June to 47.8 in July, held back by slumping foreign and domestic demand and possibly impaired by China's sharp stock market slide in late June and July.   

Don’t Let the Cost of Inflation Threaten Your Retirement Dreams

In a long lost movie called “The Great Rupert,” a dancing squirrel finds one man’s horde of cash stashed away inside the wall of his duplex apartment and showers it, one bill at a time, through a hole in the ceiling upon Jimmy Durante, the occupant of the adjoining space. Durante, of course, is thrilled by his good fortune. His neighbor, on the other hand, loses his hard-earned nest egg, one wadded up bill at a time.

There’s No Good Fortune in Inflation!

Like a hidden rodent, inflation gnaws away at the substance of your retirement dreams until, bit by bit, the value of your own treasure -- your long-term security -- is depleted. Just think, a paltry annual inflation rate of 2% would have eroded the value of cash, stashed away in the year 2000 in some apartment wall or coffee can, by 34 cents on every dollar in today’s value. In effect, we’re being robbed...and yet we might as well be battling a squirrel for all the recourse we have. At whom can you point a finger and cry, “Thief! Thief!”?

You Have to Fight Back!

Within a much larger arsenal of weapons at our disposal as financial professionals, here are four basic rules to live by:

1. A Comprehensive Plan is Absolutely Essential.

Just as a wise man works with his CPA or his financial advisor to devise clear tax strategies, so you need to plan well to protect your retirement dreams against inflation. Very often, by carefully reviewing your financial choices with you, we can not only help you fight inflationary drag; we may also recharge your savings plan to build even more security and comfort.

2. Re-Check Your Investments.

Every single investment is either resistant or vulnerable to inflation. Are your investments secure? Just as you go to a doctor to check out the state of your physical health, you need to seek out a financial professional to secure your investments against the ravages of inflation. Let us help you in this regard.

3. Buy Your House.

Even as the housing market has taken a beating over the last decade, it still makes sense for retirees to own their own home. A fixed-rate mortgage will establish the amount of your monthly payment for decades.

4. Don’t Let Lifestyle Inflation Creep In.

“Lifestyle inflation” is marked by an increasing
cost of daily living, not so much because of the decreasing value of money as much as it is our appetite for better things, coupled with an ever growing range of options. Think! You used to just love your little cell-phone, but today you feel naked without a smart-phone. You place a high value on the camera, calendar service, GPS and a thousand other handy phone applications. Do you need all that? Now multiply that phenomenon by applying it to restaurants, kitchen equipment, home services, your car, etc., and you can see the result -- a constantly increasing cost of living without an increase in real value.

Please contact us for a free review of your financial portfolio and investments to make sure that you are protected against inflation and other financial threats.

Source: Ning, David. “Five Sensible Ways to Combat Inflation in Retirement” U.S. News & World Report / Yahoo! Finance. 11/28/12
Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through TWP Financial. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, ED&F Man Capital Markets and Wells Fargo Bank, N.A.

How To Avoid Being "Rocked" By Retirement

How to Avoid Being “Rocked” by Retirement

Most Americans have visions of what their retirement may look like -- time to pursue avid interests; perhaps continued education, fishing or endless days of golf; relocating to follow the grandchildren; or time to renew the dearest relationships of your life. Well, maybe. Many retirees face a serious time of adjustment, especially if they haven’t planned financially, psychologically, and relationally. When push comes to shove and “retirement” becomes a reality, you may be challenged by some aspects of that adjustment. Here are a few to consider:

1.The Emotional Adjustment May Rock You for a Time.

Walking away from an established role often involves serious head-games. For years and years when people have asked, “So can you tell me about yourself?” you began by saying, “I’m a teacher” or “Well, I’m an attorney” or “I’m in construction.” All of us, to some extent, define ourselves by what we do. When you retire, that fundamental perspective shifts. For a time, we may not really know who we are within retirement’s dramatically different landscape. The adjustment may require time, encouragement of loved ones, or even professional help. Owning a clear plan before you make that transition eliminates uncertainty and makes the whole process easier. We would love to help you put that into place.

2. Spending Down Assets Can Be Difficult.

Whoa! Here’s another twist! For long years, you’ve socked away dollars and managed resources to be able to afford retirement; then, suddenly, you’re spending, pulling those assets in an entirely different direction. Alicia Munnell, Director of the Center for Retirement Research for Boston College, says many retirees find spending their hard-earned resources may initially seem “repulsive” and that retirees may sometimes need to give themselves “permission to spend their money.” The expectations of children, grandchildren or loved ones, who may or may not be anticipating some kind of inheritance, may very well increase anxiety issues.

3. Building Wealth Is Only Half the Battle.

Accumulated wealth is no guarantee of long-term comfort. If you don’t believe that, you can look at the majority of retired NFL players or lottery winners! Even before you take that first step into retirement, you should have a clear plan in place to conserve your assets, to absolutely maximize the value of every available dollar. Chasing dreams recklessly -- meaning “without a plan, established priorities and/or clear direction” – may result in your eventually waking up penniless.

4. Medicare Doesn’t Pay It All.

Successful retirement planning often involves understanding that medical expenses may still be a major concern even with Medicare. Hearing aids and dental care can be two leading examples of expensive issues where Medicare won’t help.

5. Very Few Retirees Relocate.

There may be lots of talk about moving to follow grandkids or to sunbathe in warmer climes, but very few people do. According to the U.S. Census Bureau, only one out of every 100 retirees, age 65 and over, moved to a different state from 2009 to 2013. You don’t want to just stumble into retirement. The prerequisites of a healthy retirement -- especially the process of accumulating wealth to achieve a quality life-style – require time and careful planning. Give us a call to discuss your options. We would love to help.

Sources: (1) Brandon, Emily. “10 Surprising Facts about Retirement” U.S. News & World Report. yahoo.com. Feb. 17, 2015 (2) Cussen, Mark P. “Journey through 6 Stages of Retirement” Investopedia. investopedia.com. Feb. 17, 2015

Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through TWP Financial. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, ED&F Man Capital Markets and Wells Fargo Bank, N.A. 

Getting Old is Not for Sissies

How to Prepare for the Cost of An Aging Parent

Getting old is not for sissies.

And this is equally true: serving as the caregiver for your mom and dad may take all that courage and more.

Make no bones about it. You may very well need the wisdom of the sages, the flexibility of a circus gymnast, and an army of counselors and advisers to successfully navigate the obstacle course reserved for those committed to caring for aging parents. Especially if your parents don’t want to cooperate, you can anticipate reaching the outer limits of your emotional bandwidth trying to serve them.

No matter how young or old, how healthy or infirm your parents may be now, you should take note of these guiding principles. Time and attention invested now will pay off in spades if a season of real crisis appears. 

#1 Time Is Not On Your Side

The time to talk about “elder care issues” is NOW!  Putting off the big discussion about your parents’ wishes, asset management, their insurance, care-planning and estate issues can very well leave you trying to navigate a House of Horrors with your hands legally tied and your eyes blindfolded. 

Shared silence endangers the quality of their own last days and, perhaps, your own financial security as well. At the very minimum, these five legal documents need to be in place:

A. A medical directive or “living will”

B. A medical power of attorney and HIPAA release

C. A durable power of attorney for finances

D. A revocable living trust

E. A legal will

Understand that these documents must be completed while each parent is mentally capable of making his or her own decisions. If one slips into an advanced state of dementia or suffers a stroke or head injury, then the difficulty of your journey is compounded unnecessarily.  Ask us for a list of estate planning attorneys that can help you create these documents.
 
Secondly, a list of your parents' financial assets needs to be available, preferably including account numbers, recent statements and contact information for any responsible financial agents. Knowing where their most recent tax records are held may be helpful as well.

#2 Know that Every Move You Make Carries Legal and Financial Implications.

Consider this scenario.

Because of a serious debilitating condition, your parents face a decision involving long-term nursing care. Medi-Cal or Medicaid can offer what amounts to a financial life preserver. But Medi-Cal can deny payments for lots of reasons, can demand answers about your parents’ spending decisions, and can seize your parents’ home for repayment of long-term care expenses even if a will already exists to pass their home on to you!  Regulations vary from state to state, so doing your homework is critical.
 
#3 Understand Your Parents' Assets and Debts

Getting involved in your parents’ finances may seem intrusive to them, but it’s really important for both their sake and yours as well.

Debts may pass through to your parents’ estate and could affect you. Those obligations will vary according to their state of residence, the companies to which they owe money, and their insurance coverage.

It’s a clear fact that, as parents age, they become more prone to making costly mistakes AND stand a much greater chance of being targeted by those who would take advantage of them.

If your parents own their home or have debt obligations against it, make sure they are current on payments. Credit card statements can also give you a snapshot of their finances.

No one knows for certain what you or any other member of your family may face in coming years. Your true security comes with understanding and carefully managing the assets you gain during your productive years, assets sufficient to face life’s sudden jolts and challenges fearlessly.

We help people build that security. We work with you to grow real wealth which can provide for a rewarding lifestyle and stand sentry against scary financial seasons.  Let us help you manage the transitions of your parents’ lives and yours as well.

Please contact us for a free analysis of your current portfolio. (424) 288-4254. 

Sources: (1) Pulawski, Shirley. “Eight Essential Things to Know When Estate Planning for Aging Parents.”   My Bank Tracker.  mybanktracker.com. Nov. 20, 2014. (2)  Costal, Karen. “5 Legal Documents you Need for Your Loved Ones” caring.com/checklists.  Dec. 12, 2014. involving long-term nursing care. Medicare or Medicaid can offer what amounts to a financial life preserver. But Medicare can deny payments for lots of reasons, can demand answers

Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through TWP Financial. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, ED&F Man Capital Markets and Wells Fargo Bank, N.A.

How to Draw the Attention of the IRS

How to Draw the Attention of the IRS: 

For millions of Americans, the prospect of having the IRS audit your tax return is enough to cause your stomach to tense, blood pressure bump upward, and palms grow a little clammy. While none of us wants to or should pay Uncle Sam a dollar more than we owe, none of us ever wants to be among the roughly 1% of Americans this year summoned by the IRS to justify our tax calculations either.

So how do you minimize your exposure to the IRS? Understand this: the IRS usually doesn’t just choose names like a blindfolded executive drawing names out of a hat at some office party. There are red flags that tax-payers raise in filing taxes, red flags that cry, “Pick me! Pick me! Pick me!” And just as you perhaps inadvertently hoist those flags, you can also consciously lower your taxpayer’s profile and minimize your chances for an audit.

Consider the following principles:

1. Higher Income Draws Closer Scrutiny.
Reporting more than $200,000 in income will automatically hike your chances of being audited from 1.11% to 3.93%. No one advises you to earn less, and yet tax law allows for methods to reduce your reported income. Take full advantage of the “Income Adjustments” on page 1 of your Form 1040 to squelch the size of your adjusted gross income even before you reach for Schedule A deductions.

2. Failure to Report Income Is Like a Red Flare.
The IRS receives copies of all of the W-2’s and Form 1099’s that are delivered to you, so omitting reported income is simply foolish. Don’t do it.

3. Higher Deductions Draw Attention.
The IRS takes into account the median deductions for categories like medical expenses, charitable contributions and taxes. If you fall outside this range, it raises a red flag.

4. Be Careful When You Estimate!
The word “estimation” implies questions about the value of reported transactions. Whether you’ve donated property to a charitable organization or are calculating a business deduction for your office at home, you need to have the documentation to substantiate your deductions.

5. Home Offices Are a Red Flag All by Themselves!
Like any good business, the IRS is going to concentrate on those areas that, over history, have proven the most lucrative. High, high on that list are home office deductions which, very often, the IRS can chop down considerably. Understand this: a legitimate home office claim can include a portion of your rent or mortgage, real estate taxes, utilities, phone bills, insurance, even relevant landscaping -- IF AND ONLY IF you use claimed “office space” exclusively and regularly as your principal place of business. If you take the home office deduction, be prepared for scrutiny.

6. Watch Your Business Expenses!
Entertainment, travel and auto, meals and other business expense are as commonly abused in the private sector as they are in government offices. This is fertile ground for the IRS, and they know it -- especially among self-employed individuals.  The law prescribes that you hold receipts for any such expense of $75 or more and that you record the amount spent, place, names of people present, and the business purpose of any cited event.

7. Report Foreign Bank Accounts!
Want to get into deep trouble? Try to conceal from the IRS a foreign bank account or financial activity conducted overseas. It’s the nature of our world now that banks, here and abroad, are forced to report more and more detailed information, and, in recent years, the IRS has made it a high priority to research the overseas assets and activity of citizens parked here at home. Penalties in this area are among the most stringent.
Sources: 1. “IRS Audit Red Flags: The Dirty Dozen” Kiplinger.com. 11/14/12 2. KFMR Certified Public Accountants & Business  Consultants. “Average Itemized Deductions” Financial Fitness  Special Edition.    KFMR.com. 12/1/12. 3. Perez, William. “Tax Planning Basics: 3 Ways to Reduce Your Taxes” About.com.

Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through TWP Financial. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, ED&F Man Capital Markets and Wells Fargo Bank, N.A.