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GAO Suggests Retirees Delay Social Security & Look Toward Other Solutions

In a time in which many question the very certainty of Social Security altogether, the Government Accountability Office (GAO) recently suggested that individuals postpone drawing benefits, waiting until at least their full retirement age, or 66 for those born from 1943 to 1954, before tapping into the system.   This comes as unwelcomed advice to many, following the Social Security trustees’ report in May of this year which indicated the system would not be able to pay recipients in full, beginning in 2036.2

CLICK HERE for the full report from the U.S. Government Accountability Office.

According to the recent GAO study, “The risk that retirees will outlive their assets is a growing challenge.” Lengthened life expectancies with ever-increasing health care costs paired with significant drops in both financial markets and home values have deepened American retirees’ concerns about how to manage their savings in retirement, the report said.  Many facing this dilemma seek the highest possible benefit payment from Social Security, and it’s no mystery that monthly payouts are significantly higher if benefits are postponed as long as possible. The problem for many? Bridging the income gap from the time one retires until one is eligible for his or her maximum Social Security benefit.

According to the GAO study, a husband and wife, both age 65, have about a 47% chance that at least one will live to age 90.  Nearly half of those nearing retirement are expected to run out of money and be unable to pay for basic expenses and uninsured healthcare costs.1 Among the solutions proposed by the study was the traditional annuity – the only financial vehicle widely used – on a guaranteed basis* – to help protect retirees from the risk of outliving their savings. 

While annuities, like any other financial product, are not the right solution for everyone, they have been critically important retirement-income components in the overall financial strategies for many of our clients.  While many Americans have watched their invested retirement accounts suffer significant losses throughout the past 3-4 years, our clients who leverage the principal guarantees* and lifetime distribution option of annuities as a component of their financial strategy have enjoyed the reassurance of knowing every penny is protected,* and their income is assured* – no matter how long they live.

We believe that life goes on well after retirement.  Would you like your income to do the same?  If you’d like to schedule a complimentary retirement income analysis or discuss your unique financial goals, simply contact us today.  We specialize in helping valued clients to and through retirement, and we’d love to do the same for you.
 

1 Retirement Income: Ensuring Income throughout Retirement Requires Difficult Choices. Report to the Chairman, Special Committee on Aging., U.S. Senate. June 2011.

2 “Delay Social Security, add annuity to outlive savings, GAO says.” Margaret Collins. Bloomberg News. July 4, 2011.

*Insurance products such as annuities are guaranteed subject to the financial strength and claims-paying ability of the underwriting  insurer.

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Protecting Yourself from the Thief of the New Millennium

Protecting Yourself from the Thief of the New Millennium

It’s happened to far too many individuals.  You’re enjoying dinner when the phone rings with a collection agency on the other end, demanding payment for overdue charges on an account you never knew you had.  Maybe a statement shows up in the mail with purchases you never made on a credit card you haven’t used in over a year.  Whatever the situation, the reality is that we’re all potential victims of identity theft, and it’s critically important to take steps to protect your personal information.

Generally speaking, identity theft occurs when someone uses your personally identifying information, like your name, Social Security number, or credit card number, without your permission, to commit fraud or other crimes. The Federal Trade Commission estimates that as many as 9 million Americans have their identities stolen each year.1  While some victims of identity theft are able to quickly resolve their issues, others are forced to spend thousands in legal fees and countless hours in an effort to repair their good name and credit record.  Job opportunities, loans for housing, automobiles or education – all may be unavailable simply because unprotected information was stolen and abused.

So what can be done to help protect yourself?  First, CLICK HERE to watch a short video from the Federal Trade Commission on how you can deter, detect and defend against ID theft.  Then, take a look at these practical steps you can take to avoid becoming a victim of identity theft.

TRUST YOUR INSTINCTS…UNLESS YOU’RE THE TRUSTING TYPE.
There are a million schemes running everyday to catch the unsuspecting consumer.  From free trips to the Bahamas to new laptop computers to mandatory “information updates” to your credit accounts, ID thieves employ every trick imaginable.  If you’re contacted by phone or email requesting information, do not divulge or confirm any information.  Remember, even in today’s “digital age,” there is still nothing that has to be done over the internet or by phone that can’t be done in person or by mail. Be cautious of anyone telling you otherwise. Even if you are the one who initiated contact with a company online, never release personal information without knowing whether or not the company is reputable.

GUARD YOUR SOCIAL SECURITY NUMBER AT ALL COSTS.
Only provide your Social Security number when required by law. Never have it printed on your checks (as was custom for quite some time), and review your annual Social Security statement for major discrepancies.

SHRED, SHRED, SHRED.
Every document containing any personal information whatsoever should be shredded before being discarded.  This includes everything from credit card and bank account statements to new credit card offers, insurance policy statements, voided checks and any personal correspondence containing information you wouldn’t want shared.  Home office shredders can be purchased at any office supply store for roughly $35 – a wise investment to help you protect yourself from thieves.

MIND YOUR MAIL.
As simple as this seems, it’s one of the most important steps you can take. Identity thieves have been known to steal personal information straight from your mailbox, so make sure your daily mail is promptly removed, and whenever possible, deposit any outgoing mail at the post office as opposed to leaving it in your mailbox unattended. Whenever you’ll be away from home for more than a day, ask a trusted neighbor or relative to retrieve your mail or ask the post office to hold it until you return.

DON’T USE THE OBVIOUS.
Whenever you are creating personal identification numbers (PINs) or passwords for various accounts, resist the urge to use easily remembered numbers such as your birth date, the last four digits of your Social Security number, your street number or any other information which could easily be uncovered by thieves. Instead, use create more abstract PINs, and if you must write them down (rather than committing them to memory), be sure those “cheat sheets” are well hidden in a lock box or other secured location.

CARRY A BARE MINIMUM.
Despite the urge to keep everything “handy,” do not carry your Social Security card, all credit cards and your passport in your purse or wallet unless absolutely necessary. 99% of the time, you should only need your driver’s license, an insurance card and your primary credit card on your person at any given time. As a precautionary measure, make copies of all credit cards, and record all account numbers, keeping this information in a secure location such as a lock box, along with the telephone numbers for the fraud departments for each institution so you can quickly notify them if an issue arises.

INSTALL A LITTLE PROTECTION.

A firewall is a protective device which can be installed on your computer to help prevent identity thieves from obtaining personal identifying information and financial data from your hard drive. Virtually any computer retailer can assist with the installation and maintenance of your firewall, and they can also assist in “wiping” your computer clean before disposing of an old one. This is very important as you don’t want to rely solely on your own deleting abilities to remove any sensitive information from your device.

CHECK YOUR CREDIT REPORT.
On an annual basis, it’s wise to review your credit report to check for errors and fraudulent use of your accounts. You can now get a free copy each year of your credit report by visiting www.annualcreditreport.com or calling (877) 322-8228.

Have you or someone you know already been a victim of identity theft?  CLICK HERE for a free copy of “Take Charge: Fighting Back Against Identity Theft.”  This 52-page guide from the Federal Trade Commission gives you the immediate steps you should take to file a report as well as the follow-up steps you can take to help resolve any resulting issues. 

While there may be no absolutely “fool-proof” way to avoid ID theft, there are concrete ways to greatly reduce your risk.  Take action now, and if you’d like more information on this topic, simply contact our office today!

1 http://www.ftc.gov/bcp/edu/microsites/idtheft/consumers/about-identity-theft.html#Howdothievesstealanidentity. 2011.

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Now, More than Ever Before, Responsibility is Yours

The spring tornado season of 2011 will easily go down in history as one of the deadliest on record, with both storm counts and death tolls more than doubling the previous year’s figures. In Tuscaloosa, AL, over 335 lives were claimed in the second deadliest day of twisters in U.S. history.1 In Joplin, MO, an EF5 ripped a path three quarters of a mile wide and 6 miles long – killing over 130 and marking the deadliest single tornado since 1950.   On May 24th, deadly twisters claimed 18 additional lives in Oklahoma, Kansas and Arkansas. Other states are reeling as well. There were 34 deaths in Mississippi, 34 in Tennessee, 15 in Georgia, five in Virginia, two in Louisiana and one in Kentucky.2 The devastation this spring has been unbelievable, and our deepest sympathies and condolences go out to all those impacted by these many disasters. 

In analyzing the contributing factors to this year’s deadly season, many meteorologists note an incredibly unstable environment.  “This is just remarkable from a meteorological point of view,” says City College of New York’s Professor of Earth and Atmospheric Science Stan Gedzelman. “The instability of the storms that hit Tuscaloosa is just about as large as I have ever seen,” he says.

CLICK HERE to read the entire article.

Unfortunately, weather patterns aren’t the only source of instability facing our country. Treasury Secretary Timothy Geithner recently informed Congress that the U.S. government had officially reached its $14.3 trillion debt ceiling.  (CLICK HERE to view the full text.) What is the debt ceiling? It’s the maximum amount of money the government can borrow to finance existing obligations such as Social Security and Medicare benefits, military salaries and interest on existing national debt.  Geithner said he will immediately halt investments in two major government pensions to allow borrowing to continue, but repeated a warning that if lawmakers don’t increase the borrowing limit by August 2nd, the government is at risk of an unprecedented default on its debt.

With private sector pensions virtually obsolete, even major government pension investing freezing and the future existence of Social Security as a real source of retirement income hanging in the balance, the burden of creating a sound retirement strategy is falling squarely on the shoulders of the individual.  Much like the storms of the Midwest and the South, there have been warnings regarding recent financial storms, several of which have gone unheeded. 

You may have seen our previous post in which we relayed the findings of a recent study showing that 44% of Boomers aren’t sure they’ll have enough to retire – 25% reporting they don’t think they’ll see a day when they can. In this same national study, 11% reported feeling “deeply confident” that they could retire comfortably.3  Much as meteorologists have no ability to control the weather they analyze, there is very little we can do to control the factors swirling on the national economic radar. 

However, in the midst of one of the worst financial storms in recent times, there is safe shelter to be found.  While many in this country saw losses to their investments and retirement accounts in excess of 30-40% over the past three years4, several of our clients enjoyed the knowledge that their hard-earned assets were safeguarded from all loss, potentially even earning interest while others around them saw dramatic drops.  As millions now head into retirement wondering what the forecast may bring, we have scores of valued clients knowing exactly what to expect – at peace with even their worst case scenario – because of the guaranteed* retirement income (through the use of annuities) and overall strategies we’ve helped them put in place.

If you’d like to prepare for the instability ahead and help ensure you’re not in the path of the storm, simply contact us today! 

To help those affected by recent tornado devastation, please consider supporting American Red Cross Disaster Relief or other local relief agencies. Ours has always been a nation willing to roll up its sleeves and help in times of need, and to get started, simply CLICK HERE.

Sources:
1
http://www.huffingtonpost.com/2011/04/30/2011-tornado-outbreak-deaths_n_855646.html,  April 30, 2011.
2
http://www.cbsnews.com/stories/2011/05/23/eveningnews/main20065478.shtml#ixzz1ObMXFhLX, May 23, 2011.
3
Associated Press – LifeGoesStrong.com Poll, http://work.lifegoesstrong.com/retirement-poll, April 5, 2011.
4 USA Today. “401(k) losses: Older investor’s retirement funds hit hard. October 31, 2008.


* Guarantees subject to the financial strength and claims paying ability of the issuing insurer.

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Staggering Numbers Approach Retirement Feeling Unprepared

The past two to three years have marked a major shift in the way Americans approaching retirement view this “third act” of life.  Once regarded as “Golden Years” in which many of life’s dreams could finally come to fruition, retirement now signifies a time of anxiety, unrest and uncertainty for many.

Significant losses to 401(K)s and IRAs, a prolonged recession and continued volatility on the market have millions of Boomers wondering if the retirement they’ve always envisioned is really still within reach. In fact, a broadcast from ABC News recently revealed some staggering new statistics regarding retirement:

  • 44% of Baby Boomers surveyed aren’t sure they’ll have enough to retire
  • 60% of Boomers have lost significant value in their investments, homes and retirement plans in the last three years
  • 42% are delaying retirement
  • 25% feel they will not see the day they can retire
  • 64% of people see Social Security as the key part of their retirement safety net
  • Only 11% of people feel deeply confident that they can retire comfortably

Source: Associated Press – LifeGoesStrong.com Poll, http://work.lifegoesstrong.com/retirement-poll, April 5, 2011.

CLICK HERE to watch the actual broadcast (originally broadcast on April 5, 2011).

Where do you find yourself among those surveyed above?  Are you still right on track for each of your retirement goals, or will you have to delay them or settle for less than anticipated?  Are you really even sure?

Fortunately, despite a volatile economy and a number of factors which indicate that real recovery will be slow in the making, those looking for guarantees are not without hope.  In fact, one of the most frequently requested services we offer is the “insuring” of our clients’ retirement income through the use of guaranteed* financial products such as annuities.

What is an annuity?  It is an insurance product which can distribute income as part of an overall retirement strategy. Annuities have become a very popular choice for individuals who want to receive a steady, predictable, guaranteed income stream throughout retirement. Here’s a general description of how an annuity works: you deposit a sum of money into the product, and it then makes payments to you on a future date or series of dates. The income you receive from an annuity can be paid out to you monthly, quarterly, annually or, in some cases, even in a lump sum payment. You have several payment options including (but not limited to) receiving payments for a set number of years for the rest of your life.  This latter option has made these products incredibly popular, as life expectancies continually increase, the prevalence of employer-sponsored pensions decrease and the future of Social Security becomes increasingly uncertain.

(CLICK HERE for a look at commentary from President Obama himself on the value of annuities, published in the New York times in January of 2010.)

Translation? With a true financial professional at your side helping you navigate the road to and through retirement, the future doesn’t have to be uncertain.  The dreams you’ve envisioned don’t inherently have to wait, be “down-sized” or abandoned altogether.  If you’d like to see where you currently stand and ensure you’re making the best possible moves for your financial future, just give us a call today!

* Guarantees subject to the financial strength and claims paying ability of the issuing insurer.

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Does Your Life Insurance Policy Still Pass the Test?

When it comes to life insurance, there’s a common saying: “The best kind of policy is the one that’s in place when you need it.” While there’s no question that some form of coverage is always better than none, there’s still a very important difference between having coverage and having the right coverage.

A simple policy review can help determine whether you have the right coverage in place or give you the chance to make any necessary adjustments.  Why is this so critical?  Because your needs are constantly evolving. Such is life, right?  Those pants from a few years ago may now be fitting a little snug.  That motorcycle which seemed like a great idea at 21 isn’t quite as practical at 30. Situations change, and those who take a “set it and forget it” approach to life insurance coverage may very well find that their intentions aren’t carried out as effectively or efficiently as they’d hoped them to be.

Will I have to buy more coverage?
A policy review isn’t an automatic precursor to purchasing additional coverage. There are actually several different possible outcomes. Depending on your present needs, you may find that:

• Your coverage effectively meets your goals
• Your coverage ineffectively meets your goals
• Your coverage exceeds your current needs
• Your coverage does not meet your current objectives

(Unsure of your current life insurance needs?  CLICK HERE for a “Life Insurance Reality Check” from www.lifehappens.org to help calculate coverage!)

What are common reasons for a policy review?
• It’s been 2 years or longer since a financial professional reviewed your coverage with you
• You want to make sure your immediately family is still adequately protected
• Your health has changed – either for the better or worse
• You have paid off major expenses which you were previously insuring with your life policy (Ex. Mortgage, children’s college education, etc.)
• You’re curious as to whether or not you can find more affordable coverage
• You’d like to explore a term vs. permanent life insurance comparison
• You’d like to learn more about possibly converting your  existing term life insurance policy into a permanent one

What’s covered in a typical policy review?
A thorough policy review will examine any relevant changes in your life, your current life expectancy, any applicable economic factors or conditions and recent changes or developments in new life insurance solutions. We offer complimentary policy reviews to help ensure the coverage you initially put in place continues to meet your needs into the future.  We’ll look at questions such as:

• Would your current death benefit cover today’s estimated estate settlement costs?
• Could your current goals be met more economically with different coverage?
• Is you’re current ownership structure of your policy as tax-efficient as possible?
• Are your beneficiary designations still current?
• Are there new product options or riders that may better suit your needs?
• If applicable, is the cash value in your policy capable of sustaining your coverage?

Some individuals may feel their life insurance is something they could easily monitor themselves.  However, mistakes here can be very costly. We encourage you to take advantage of a free policy review in which we can quickly uncover the factors that need to be analyzed, facilitate any necessary changes, offer our expertise and keep you abreast of any new products or solutions available. To schedule this complimentary review, simply contact us today!

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How much are you paying in investment fees?

When it comes to assets that involve risk, you will usually have to pay fees. The fees also become more difficult to find within a prospectus. Unfortunately, investing in securities often carries both disclosed and undisclosed fees and commissions. However, by understanding what you are paying now, you will have a better idea of the type of value you are receiving for those fees. Let’s dive into some of the more common risk-type investments so that I can show you what you are really paying to own each investment.

Mutual Funds:

Mutual funds may be the most common risk-type investment.  However, they might also be the most expensive. The most common cost in a mutual fund is the expense ratio, the standard measure of how costly a fund is to own. In fact, according to Morningstar, the average expense ratio is estimated at 1.31%. These costs are paid to the portfolio manager each and every year, whether you make money or lose money.

However, it is the undisclosed costs that can make a mutual fund 2-3 times more expensive than the advertised expense ratio. Mutual funds also have brokerage commissions, bid-ask spreads, opportunity costs, and market-impact costs. Brokerage commissions are paid to the firm that sells you the securities. Bid-ask spreads estimate the gap between the lowest price someone is willing to pay for said security and the highest price. Market-impact costs are often as much as 1.5 times the brokerage commissions. As if mutual funds were not difficult enough to understand, they come with what is called a prospectus. A prospectus is usually a long-winded document that explains in great detail the investment objectives, level of risk, costs and fees, past fund performance, fund management objectives, etc. They are written by attorneys and filled with difficult-to-understand legal jargon and largely go overlooked by the common investor.

Make sure you understand whether or not your mutual funds are back-end loaded or front-end loaded. Many mutual funds will have a load attached to the purchase (front-end) or the sale (back-end) of said fund. This load is paid to the broker dealer, which means that you immediately start in a deficit. You can find no-load funds that are usually much better options than funds that have sales loads.

Commissionable mutual funds are also separated by what is called share class. There are four main types of commissionable mutual fund classes: A, B, and C-shares as well as No-Load Funds and ETFs.

  • Class A Shares – Class A shares carry lower 12b-1 fees and usually require a larger initial investment. Many A shares also have front-end loads attached to them that subtract a fee from your initial investment. The commissions usually get smaller as the investment gets larger. (For example, if you invest $100,000 into a Class A share mutual fund that has a 5% front-end load, only $95,000 will be invested. You pay $5,000 in fees up front.)
  • Class B Shares – B shares are classified by the back-end load that they come with. Therefore, they do not have front-end loads, meaning your entire initial investment earns interest. Their yearly expense ratio is higher than Class A shares.
  • Class C Shares – C shares are classified as a level-loaded fund and are usually close in similarity. They have the highest expense ratios of all three classes, carry back-end loads, and carry no opportunity to convert to a different share class.
  • No-Load Funds – These funds are sold without a commission or sales charge. The main reason they do not have a charge is because shares are distributed directly by the investment company, rather than a secondary party.

 

Mutual funds can also have an annual account fee or custodial fee. Last, depending on whom you are working with and the size of the overall fund, a management fee may also come into play. This is the cost your broker is charging you in addition to everything else listed to “manage” your mutual fund portfolio.

Variable Annuities:

Variable Annuities are risk-based assets because the value of the annuity goes up and down in accordance with the sub-accounts in which it is invested. VAs are one of the most expensive places you can invest your money, and brokers and bankers love to sell these fee-loaded accounts. Variable Annuities are made up of sub-accounts holding various mutual funds, stock and bond funds within them. They also carry insurance-related costs, including mortality and risk charges as well as administrative and fund expenses. In fact, variable annuities’ fees can total as much as 3.00% per year or more. Most of the time, owners of variable annuities are unaware of the total cost because common fees are located in the prospectus. They are normally purchased through a broker who does not have “fiduciary” responsibility to the client. Most insurance agents and brokers are not required to disclose fees because they are not a “fiduciary.”  

What can you do?

 

Often times investors are told by their broker or advisor that they need to own riskier investments because they need to hedge for inflation, or they will not have enough money to make it through retirement. Unfortunately, when people are close to retirement or already retired, they should be moving away from excessive risk and into a complete financial plan that develops protection for their assets while providing lifetime income that they cannot outlive.

To fully understand how much you are paying for your current portfolio, allow us to price your relationship with Morningstar and Fidelity. Without knowing exactly how much you are paying your advisor in fees, how can you know the value he or she is providing?

Contact Slagle Financial toll-free at (888) 294-9248 or visit our website at www.SlagleFinancial.com.

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Skyrocketing Oil Prices: Will rising oil prices and the crisis in Japan affect the United States’ recovery?

Recently, the economy has been showning signs of strength. With consumer spending on the rise and the stock market’s continued growth, many experts and economists believe that the recovery will continue. However, with the recent tragedies in Japan and unrest in Libya, our economy – and more importantly the recovery – sits in a delicate balance. Many are worried that the nuclear destruction in Japan will have a lasting effect on the United States economy and its recovery. However, most economists believe that the bigger problem comes from rising oil prices.
More importantly, an extended period of high oil prices could have a largely negative impact on our economy. As long as political unrest continues in the Mideast, we can expect oil prices to stay high and the stagnation U.S. growth to continue.

According to William Alden of the Huffington Post, for each $10.00 increase in price per barrel of oil, the price at the gas pumps in the rises about $0.25. With the possibility of some of the highest oil prices our nation has ever seen, consumer spending could be on the way back down again in the near future.

The future outcome of potentially higher energy prices remains to be seen at this point. On March 18, the price of a barrel of oil cleared $116. Gus Faucher, the director for macroeconomics at Moody’s said, “a spike in energy prices to $125 or $150 a barrel is the primary threat to the recovery at this point.” Oil prices of this level have not been seen since 2008.

Sandra Pianalto, the president of the Federal Reserve Bank of Cleveland said in a recent Wall Street Journal article that the housing market will continue to deter economic growth. She described unemployment as a “lingering problem” in our nation. A large spike in energy prices could create skyrocketing inflation. Couple inflation with the possibility of decreased consumer spending and lagging housing market, and our economy could be heading for another downturn.

In a recent study released by Fannie Mae’s Economics and Mortgage Market Analysis Group, projected economic growth for the year has been lowered. The unpredictability of the oil price hike as well as the duration any price spike may last is enlisting new doubts and fears on economic growth.

In the days and months to come, the situation overseas will have a large effect on what happens with the U.S. recovery. Here we are, more than 2 years after the beginning of one of our nation’s deepest recessions to date, and we are still struggling. However, we now have new wounds to accompany with the injuries we are still nursing from the housing and real estate collapse of 2008-2009.

For retirees, it is important to remember to focus on the right thing when planning your lifestyle in retirement. You may be thinking about how inflation, market volatility, and slow economic growth may affect your retirement accounts.

However, you should be focusing on protecting your assets. More importantly, protect the amount of money that you need to last throughout your retirement. Retirees should develop an income plan with safe and reliable income. Once you develop an investment plan that guarantees your income, then you can take some risk on the extra money you have available.

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Preparing for the Unexpected: Estate Planning Tips

Consider the following six tips to setting up a comprehensive estate plan to help protect your estate, assets, children, and legacy and to ensure what is left to your loved ones is what you originally intended.

1) If you are single and over the age of 18, consider a…

Will (last will and testament): This is a written document which leaves your estate to named persons or entities, including portions or percentages of the estate, specific gifts, trusts for management and future distribution of all or a portion of the estate. A will typically names an executor to manage the estate as well as states the authority and obligations of the executor in the management and distribution of the estate and sometimes gives funeral and/or burial instructions. Assets in a will can include real estate, cars, bank accounts, stocks and bonds.

If you are in a relationship but unmarried, you should consider…

Adjustments to your will: If you are in a relationship but unmarried, be sure to 1) set up a will, if you haven’t already, if you want your life partner (unmarried) to inherit your possessions OR 2) update your will to include your unmarried life partner, otherwise it will go to your closest relatives as directed by state law.

Trust: A trust is a legal entity that can hold title to property for the benefit of one of more persons or entities. Contrary to popular belief, trusts are not just for the affluent. Setting up a trust is an excellent way to control what happens to your estate, regardless of its size, to prevent the frustrating and expensive probate process.

2) If you are married, consider…

Living Trust: One of the most valuable benefits of a living trust is that it allows for ease in transition of your estate and outlines how you would like your affairs handled if you become incapacitated. You and your spouse are typically the primary beneficiaries of the trust with beneficiaries, such as children, named after your deaths. A living trust allows you to retain control of your assets as long as you are able to manage your own affairs. In a trust you are able to address all of your significant property in one document and the desired transfer/distribution of your property upon your passing. When set up properly, a living trust can protect your estate from probate, the process a will may undergo to prove its validity, and potentially save thousands of dollars in attorney fees to settle the estate, as well as time.

3) If you have children, consider…

Guardianship: In order to prevent confusion as to who will take care of your child or children after your passing, it is important to establish guardianship of your children in the event of you and your spouse’s passing, which can be done in a will. Have a qualified advisor help you think this decision through, since it can have a huge impact on the lives of your children.

4) If you are retired or getting ready to retire, consider…

Financial contracts (beneficiary designations): More than likely you’ve accumulated assets such as annuities, life insurance, and IRAs that are considered financial contracts. These types of assets are not considered to be part of a probate estate and are generally not accounted for in a will. With that said, you need to designate beneficiaries with your custodian and check to make sure that the designation is accepted and will produce your desired result.

If for some reason your IRA custodian is unable to identify your beneficiary, or if the amount of the account value you would like passed on to your beneficiaries isn’t what was anticipated (i.e. account value dropped and the specific monetary amounts you’d required to be left are no longer feasible), this ambiguity can result in legal fees, time and ultimately not leaving what you intended to your heirs. Instead consider leaving a percentage to beneficiaries. No matter what the state of the economy or your account balance, a percentage is always a definable amount.

Estate planning for your retirement accounts (reduce tax liabilities): Most people forget to do estate planning for traditional IRAs, 401(k)s and other types of retirement accounts. These dollars have typically never been taxed and there are changes to law that now afford you the opportunity to control how and when they are taxed. Tools like the multi-generational IRA and the Roth IRA can drastically reduce the income tax impact your beneficiaries will face when they inherit these accounts.

Long-term care insurance: With Americans living longer, the risk of outliving one’s life savings due to the high costs of medical and long-term care is a tough reality for many. One way to combat this situation is to explore the option of long-term care insurance. This type of insurance is designed to give coverage for necessary medical or personal care services provided, such as a nursing home or in-home care.

5) If you or a loved one is in a nursing home and you still have assets, consider…

Nursing home or assisted living plan: There may be government benefits available to help pay for the high cost of care while retaining some of your life savings. This can be especially important if there is still a healthy spouse living at home or if there is an interest in passing on some of your life savings to your heirs. A qualified advisor can explain options such as Medicaid or the Veteran’s Aid and Attendance Benefits Program and help you determine if you are eligible for such programs.

6) Regardless of your stage of life and where you are in the estate planning process, consider…

Durable power of attorney for health care (living will): These are legally qualified advance directives, giving instructions as to what actions should be taken for your healthcare in the event you are no longer able to make decisions due to illness or incapacitation. Typically, if you do not have a durable power of attorney for health care it can cause problems in the decision making process, if needed, and the decision making will be left to your parents, children or next closest living relative, rather than honoring your wishes.

Tips for Estate Planning Success

Once you have an understanding of what you need to meet your estate planning needs, you need to complete your estate plan ensuring it’s legally binding. Consider the following tips for estate planning success:

1) Pick an estate planning team.

You will need a qualified team of experts to provide you with the counsel and tools you need to implement a comprehensive estate plan. Be sure to meet with a few individuals to ensure you feel comfortable with and confident in the persons you select.

Be sure your team takes a comprehensive approach to your estate plan and that all areas are working together and in your best interest.

Seek the advice of more than one expert. Ideally, you should receive counsel from an estate planning attorney, tax accountant, financial planner, and insurance agent. An attorney should be put in charge of drafting a will, creating a trust, or drafting a Power of Attorney. A tax accountant can help you figure out what your estate’s tax bill will be and can explore the advantages of tax-deferred investment strategies with you. A financial planner can recommend investments that are best suited to your estate plan and can tell you how your retirement income will be distributed in retirement, as well as an inheritance after your passing. Lastly, an insurance agent can help you with matters involving life insurance, disability coverage, and more.

Don’t attempt to set up your own plan. While there is a lot of information available in books and on the Internet, I do not advise setting up your estate plan on your own. The estate planning process is a tricky thing to attempt without the help of one or more professionals. By using information you pull from the Internet or read in a book, you run the risk of missing important changes to laws governing estate planning. An attorney is responsible for keeping track of any relevant changes and how they will impact your estate plan. Also, know that a small mistake, like a wrong word, in one of your documents can potentially change the way that the court interprets what you meant.

2) Explain your arrangements to those close to you and tell them where they can locate all-important documents, should they become necessary.

One complication that many families face when they have lost a loved one and are trying to take care of final arrangements is locating the appropriate documents. Discuss your estate plan with your loved ones. Be clear about your intentions and be sure to let several trusted family members know where your documents are stored.

Don’t keep your estate documents in a safe-deposit box if it’s just in your name. This delays the process as it takes a court order to open one after the owner dies. Key information should be stored in a fireproof box in their homes or in an airtight bag in the freezer to protect them from fire or flood.

Telling your family about the arrangements you have made will help to dispel any potential conflicts after you are gone. Inheritance can be a loaded issue, and to help promote family harmony after your passing, it is best to let the individuals affected know your plans. Of course, use your discretion and only reveal to them what you wish. I always recommend that my clients be open and honest with loved ones about their wishes. Explaining your plan openly gives you the opportunity to clear up any misunderstandings and to answer any questions your family may have. I usually find that by eliminating surprises you also help to eliminate fights.

3) Evaluate your plan on an annual basis and when you have a life-changing event.

Once you have completed all these steps and all documents are up-to-date, be sure to keep them current. It is very important that you evaluate your estate plan with your team on an annual basis AND when a life-changing event happens. Re-evaluate your estate plan documents to make sure they are up-to-date and that you have the best plan for the unexpected. Also, be sure your estate plan is tailored to fit your current situation and goals.

Estate planning is not a one-time job. There are a number of life changes that call for a review of your plan. Some of these changes, such as marriage, divorce, birth or death are all life events that warrant a reevaluation of your estate plan. Work with a professional to be sure your plan is current and always reflects your final wishes.

FREQUENTLY ASKED QUESTIONS

- What is probate, how can this process impact your estate and how can you protect your estate from it?

- What types of “life” events should cause you to re-evaluate your estate and retirement plan?

- What is the difference between a will and living will?

- What is the difference between a trust and a living trust?

- How can you pass some of your assets onto a charity efficiently and what is the process for doing so?

- What are some things to consider when selecting guardians for your children?

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Chad’s Interview with the Edwardsville Intelligencer; article titled "Double-Dip Recession on the Horizon?"

St. Louis County foreclosures nearly double and Missouri’s unemployment reaches 9.1 percent, St. Louis advisor addresses what you can do now to prepare your finances for a potential second-wave of economic hardship

The fear of a “double-dip” recession is back. The Federal Reserve recently issued a cautious outlook, noting that the economic recovery had “slowed in recent months. “ This, paired with high unemployment, growing federal debt, the possibility of increased taxes, reduced consumer spending, the ongoing foreclosure crisis, and more, has led some analysts to question whether the recovery will hold. With St. Louis County foreclosure numbers nearly doubling since 2009 and the state of Missouri’s unemployment rate nearing the national average of 9.5 percent, the fear of a “double dip” recession is a serious concern here at home.

“Despite the slowing economy, the odds are still in favor that the recovery will continue,” said Chad Slagle, chief financial advisor and president of Slagle Financial, LLC, an independent financial and retirement advisory firm based in St. Louis. “But err on the side of caution! What we need to make sure of now is that we have learned from our experiences in the last recession, that our previous vulnerabilities have been addressed, and that our financial affairs are protected and positioned to withstand another dip.” Slagle has identified the five most prevalent financial hardships experienced as a result of the last recession, and offered insights and advice on what you can do today to reduce the potentially negative repercussions a second recession may bring.

• Make your mortgage manageable. The mortgage meltdown and falling home prices had a lot to do with the first tumble into recession. However, today, we are experiencing record low interest rates, yielding the opportunity for many to refinance their homes to receive more manageable monthly payments. If you have been struggling with paying your mortgage due to unemployment, the Obama administration approved a bill on August 11 to provide $3 billion to unemployed homeowners facing foreclosure. $2 billion will go to the 17 states that have unemployment rates higher than the national average of 9.5 percent, and the other $1 billion will go to a new program, being run by the Department of Housing and Urban Development, to provide homeowners with emergency, zero interest loans, up to $50,000 for two years.

• Invest based on your risk tolerance. Due to the first recession, many people lost money in investments that they needed to access in the near future. If you are relying on money for retirement or to put your children through college within the next few years, then it should really be invested conservatively. Take into account your age and timeline to retirement, as this plays a part in your ability to “ride out” the stock market. Countless people have had to postpone retirement or even come out of retirement to go back to work because of the 2008 recession. While ideally you don’t want to expose your finances to any unnecessary risks, risk can also provide upside potential. At the minimum, be sure that a portion of your investable assets are liquid and/or invested conservatively. You should have at least six months of living expenses readily accessible in the event of an emergency, and for your longer-term investments, a general rule of thumb, is the ‘Rule of 100.’ Simply stated take your age and subtract it from 100. The result is the percentage that you could have exposed to higher risk investments, and the remainder should be placed in more conservative accounts. While it’s not exact science, at least it’s a place to start.

• Explore “non-correlated” investment options. Never place all of your eggs in one basket. Many who experienced substantial loss during the last recession did not have proper diversification of their financial accounts. There are numerous financial instruments and investment vehicles that are considered “non-correlated”, which means they are not tied to the performance of the stock market. Take an interest in interest-bearing accounts, such as CDs, savings bonds, savings accounts, and money market accounts. However, it is important to note that although you get to “keep” your money when investing in interest-bearing accounts, today’s low interest rates work two ways. You can borrow at low interest rates, but the return on interest bearing accounts will also be low. While you can keep what you have, interest accounts will not help you to significantly build your wealth. Additionally, look at other options such as commodities, insurance products, like fixed annuities, or even non-traditional or alternative investments. Diversification is key to not allowing any significant shift in the economy to put a halt to your future financial or retirement dreams. But if you’re getting creative with your investment strategy, be sure to seek assistance from a qualified advisor.

• Plan for your retirement. With the recession came changes to how we save for retirement. Many employers discontinued contributing to 401(k) s, pensions became harder to fund, and investments linked to troubled companies disappeared. Government funded Social Security has experienced its share of difficulties because of the recession as the lack of payroll taxes due to high unemployment has temporarily caused the program to run at a deficit. It is becoming more apparent that you have to be responsible for your own retirement savings, and as such, should place your savings in a safe and secure financial instrument. As of this year, Roth IRAs are available to anyone, no matter their income. If you convert your traditional retirement plan before the end of year, you can do so at this year’s tax rates. In the future, you may be paying a higher income tax rate on the conversion amount, which could potentially be much more expensive. As far as pensions are concerned, don’t be so sure that you’re safe, especially when it comes to public pensions. Even before the recession, pensions were troubled, and now major companies (including GM and Chrysler) are unsure of what the future holds.

• Be tax conscious. Don’t add insult to injury and put your money into an account that will nearly triple in tax liabilities next year if you cannot afford the bite. Tax rates for dividends and short-term capital gains will be taxed at a tax-payer’s ordinary income tax rate next year, up from the 15 percent we’ve seen in recent years, which could make the tax due as high as 39.6 percent. Long-term capital gains will increase to 20 percent from 15 percent, and more changes are expected to the tax code towards the end of this year. You may want to consider paying taxes on tax-deferred investments now, such as converting your retirement plan to a Roth or cashing in long-term investments to lock in today’s rates. For the future, seek tax advantageous options that allow for you to pay taxes only when the investment is realized or money is withdrawn, rather than annually. Examples of tax advantageous investments include municipal bonds, fixed annuities and treasury bills.

Slagle concluded, “If you include early projections for the last quarter, we’ve seen positive economic growth over the last four quarters, which would mean that we are technically out of a recession. Some economists believe that due to the lack of a quick recovery and combined lingering problems, such as unemployment and foreclosures, we could see another recession by as early as next year. Of course, other economists argue that a recovery is still underway, and although slow, it is steady. The bottom line is—we need to take action to ensure that we are prepared for a possible “double-dip” recession and that our finances are protected from market and any economic volatility.”

For more information on how to protect your finances from a double-dip recession and to set up an interview with Chad Slagle, please contact Alex Timeus at (702) 685-7437 or alex@cayane.com.

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How To Keep Your Retirement Savings Plans Working, Even If You Are Not

It’s unavoidable! You turn to the news and there is another round of announcements about the rising unemployment rate, company layoffs or massive corporate cutbacks.

People spend decades contributing to their 401(k) with the anticipation of not having to touch it until they are ready to retire. It’s times like this when that plan goes awry because they were forced to retire, laid off, or find themselves needing to withdraw from their retirement account early, that they must have a solid understanding of how that decision could seriously impact their financial future.

We are all feeling the effects of this ailing economy, unemployed or not. Now it the time to have a plan and make decisions regarding your 401(k) or IRA to ensure it’s working for you. Here are some essential tips for understanding your retirement account and the options available to you…

1) Understand Loans & 401(k) s

If you are employed and considering taking a loan from your 401(K) to get through the “hard times”, understand that you will have to pay it back with interest (typically prime plus one). Although you pay the interest to yourself, as the monies borrowed are not growing for retirement while out of the account, this money is earmarked for retirement. Don’t shortcut the retirement years for quick cash today. If no longer with an employer and you have taken a loan from your account, you will need to pay it back within 60 days of termination to avoid paying income taxes and early withdrawal fees. If you can’t repay the loan, then it is considered defaulted, and you will be taxed on the outstanding balance, as well as assessed an early withdrawal penalty if you are not at least age 59 1/2. A loan is not transferable and cannot be rolled over to another plan.

2) Understand Your Current Account Value

On average, 401(k) account balances declined 18% in 2008, with reports as high as double, or more, in total account value loss for Americans. Since these contributions were done pre-income tax, rolling over a 401(k) now, at a reduced account value, does not provide you any tax credit. If you were hoping to write it off, think again – since no taxes were paid on the amount contributed to the account in the first place, there is no tax break for “realizing” the loss through account reallocation or rollover.

3) Review Your Options

When leaving a company, don’t make any hasty decisions concerning your financial future. Evaluate all of your options and determine which makes the most sense for you. Rolling over your 401(k) to an IRA may not be the best option if you intend to find additional work. Rather you may want to consider rolling over your 401(k) to the new company sponsored plan and take advantage of any benefits your new employer offers, such as fund matching. Employer sponsored plans offer more flexibility for early withdrawal, loans, lower minimum balance requirements and higher before tax contributions.

If rolling over to an IRA is the best decision, understand which type makes the most sense for you. Traditional IRAs allow for tax deductible contributions. Withdrawals can begin by age 59 ½ without penalty, however before 59 ½ there is a 10% early withdrawal penalty on the amount taken prematurely. Withdrawals from IRAs are mandatory by 70 ½, even if the money is not yet needed for retirement. Taxes are paid on the withdrawal amounts. There are a number of investment options within an IRA, allowing one to invest according to their risk tolerance and time horizon.

Roth IRAs are gaining in popularity, as there is no mandatory distribution age, all earnings and principal are 100% tax free and funds within a Roth IRA can be invested in a variety of ways, again, ensuring one invests according to their risk tolerance and time horizon. Although contributions to a Roth IRA are not tax deductible, some experts believe paying taxes on the amount invested today may prove to be profitable decision, as tax rates are likely to increase in the future. Although there are income restrictions for Roth conversions, available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually, starting next year in 2010 these restrictions are lifted. If considering rolling to a Roth IRA, now may be a good time — account values are likely down and the income tax rates are still relatively low.