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Income Opportunity
What goes around, comes around. How often have we heard that phrase. Remember, just a few years ago when Alan Greenspan was lowering interest rates, it seemed like, daily? Well now we are in the same kind of environment. The Federal reserve is trying to avoid a recession and stave off inflation at the same time. Guess how they are doing it? Right, they are lowering interest rates. Here we go again, good news for borrowers, bad news for those who have to live off of the interest generated by their holdings.
Looking for Lost Income?
In case you haven't noticed it, interest rates have been dropping rapidly. This has brought joy of those who want to refinance their mortgages, and to those who owe money and are in a position to change interest rates on the debt they carry.
It's No Sin to Profit
We are obviously in a period of concern, fear and confusion in terms of our investments. One thing is true, people want their vices and will continue to engage in them, no matter what economic conditions exist.
Protect Your Income
One in five Americans will experience a long term disability during their working years. Disabilities that persist for more than 90 days, tend to last for years. Every 30 seconds, someone files for bankruptcy in the aftermath of a serious medical problem. Despite these scary statistics, over 85% of those employed have no loss of income or disability coverage.
Slow, But Not Bad
What's 2008 going to look like for investors, savers and borrowers? First, no one knows for sure, but based on the accumulated inputs provided by knowledgeable sources in finance and investing, here is the general picture.
A New Investment
The recent mortgage fiasco has brought attention to the "securitization" process. The involves taking individual financial instruments, in this case home mortgages, and putting them in pools for sale to investors. In the case of the mortgages we have read about, these pools were sold to investors all over the world, so no one really knew who actually held the mortgage on their home.
Oldie But Goodie
Defined benefit pension plans are disappearing rapidly. Social security is on shaky ground. 401K plans are expensive:limiting performance. All the building blocks of guaranteed retirement income are far less dependable than they once were thought to be.
Disappearing Tax Opportunity
Unless congress passes an extension, "qualified charitable distributions" will expire on December 31, 2007. These involve the ability of a taxpayer to make a direct transfer from an existing Individual Retirement Account to a charitable organization. The donor of the gift must be at least 70 1/2 years of age, and own a traditional IRA or Roth IRA - other retirement plans like 401K are not eligible. Other plans can be rolled into an IRA, and then the gift can be made.
Preferred Income
Baby boomers are looking for and need income. This is a simple fact. The 76 million "boomers" will be retiring in a time when social security will not come close to satisfying retirement income needs, and when there has been a drastic reduction in the availability of defined benefit pensions to supplement social security.
An Invaluable Asset
My firm was contacted by a recently widowed woman. She and her husband had always lived well and seemed to have no money problems. Immediately after her husband's death, she discovered that he had been borrowing huge amounts of money through credit cards, equity lines of credit and personal loans.
Don't Let This Tax Saver Escape
Congress has provided a tax benefit that exceeds Individual Retirement Accounts in tax saving and accumulation opportunities. Even so, the acceptance of Health Savings Accounts has been much slower than estimated.
Save Those Policies
We often hear from unhappy clients about the life insurance policy or the annuity they bought that have not performed. Cashing in these poor performers is not the best strategy. There are methods for turning these lemons into lemonade. Let's consider some.
Avoiding Mutual Destruction in a Divorce
Protecting wealth is as important as creating it. One of the greatest wealth destroyers is the process of divorce, and it’s destructiveness is often amplified by both parties total reliance on attorneys.
Help For Cheated Seniors
The New York Times featured an article last Sunday that was infuriating. It dealt with unscrupulous “financial advisors” who prey on unsuspecting elders. One effective tool that is used is a professional designation. More often than not, the designation is purchased and has no substance except to mislead.
When is 5% really 8%?
Tax deferred annuity rates have now climbed to slightly over 5% year, guaranteed for 5 or more years. This is an exciting opportunity for those seeking to accumulate money safely, at a conservative guaranteed rate of interest.
Estate Documents - Updates and Reviews
We continue to be surprised to discover that clients have not looked at their wills, trusts and other estate documents in years. This is often the case, even when there has been some transitional or life-changing event. Disregarding the review and update of estate plans has little to do with taxes. It really is critical to ensure that your estate plans accomplishes what you want and does it efficiently.
Investments Dos and Don'ts
Two major factors have limited the profits realized by most investors: failure to diversify, and falling into traps that we will call don'ts.
Tax Favored Income
In our last article we discussed the high level of interest among Baby Boomers in post-retirement income. We talked about the use of guaranteed income options available with a number of variable investment products. While these are valuable options, they do have two drawbacks; the income is not adjusted for inflation, and virtually all of the income is subject to income tax, reducing the net by as much as 41%.
Lemonade for a Life Insurance Lemon
A client came in recently with a problem. He had purchased a life insurance policy nearly twenty years ago, had paid premiums based on a level that was recommended by his insurance advisor, and thought that he would have coverage for life. The problem is, he had purchased a flexible premium universal life policy that had “underperformed”.
Keep It In The Family or Among Friends
In case you haven’t noticed, interest rates have been rising. The federal reserve raised rates in sixteen consecutive sessions. The impact has already been felt in the residential real estate market. Those seeking to purchase homes now face much higher mortgage rates, and anyone trying to start a business now is looking at costs as much as 50% higher than a short time age for start up funds.