You don’t sound like my grandson.

Last week I received a call from a client asking that I flag his accounts. He thinks someone is trying to scam him and get his funds.
He received a phone call from someone with a foreign accent stating that his grandson was in an accident while on vacation. He asked where his grandson was and could he talk to him. A weak sounding boy got on the phone and said “Hi grandpa, I need your help, I was in an accident and need money to pay the ambulance and for hospital bills.” My client asked “Which grandson is this?’ He expected to hear a name, instead the boy said “Your oldest grandson.” I actually thought that was a clever answer. My client quickly hung up and started making calls to all of his financial institutions to protect his accounts.
With school ending and summer vacations starting, I am sure we will hear of this type of scam more often. Please keep your guard up and do not give out any information to anyone you do not know.


This was a hard decision to make.

Since September my Mother-in-law has only spent about three weeks in her home. The rest of the time she has been bouncing between hospitals and rehab facilities. She finally told my husband over the weekend that she realizes she needs to be in a nursing home. She has worked her whole life, but never earned very much, therefore, has not been able to save much. She was able to take advantage of a reverse mortgage to fund her life over many years. Now that long term care is facing her, what can she do? We have to get her qualified for Medicaid, not the best choice, but sadly, the only choice.
While health care is a hot topic right now preparing for long term care is not. Premiums for long term can be very expensive. Fortunately, the insurance industry is coming out with more options. If you have cash value life insurance by using a 1035 exchange, you may be able to convert your policy to a long term care policy. If you have tax deferred annuities, the 1035 exchange will work also for purchasing long term care.
Look at your family history for what your potential health outlook may be in retirement. The time to plan is while you still have time on your side.


Taking your RMD can help your taxes and your community.

Q: I’d like to move a portion of my RMD this month directly to my church. It is my understanding that the direct move to a qualified charity can reduce the modified income used by the Social Security Administration in determining Medicare taxes. Is this correct?
A: Yes, this is correct. All we have to do is get the Tax ID number for your Church, then, we can send your RMD directly to them. What a wonderful way to avoid taxes!


A taxing question – we should all be so lucky.

Q. I will be receiving a large (6 figures) gift from someone; do I have to pay the gift tax?

A: The person who makes the gift files the gift tax return, if necessary, and pays any tax. If someone gives you more than the annual gift tax exclusion amount $14,000, the giver must file a gift tax return. You will have to pay any capital gains tax that the funds earn once you have invested the gift.


What are you willing to give up?

I know many people that cannot function at all without their premium coffee first thing in the morning. There are many other little things that we buy regularly that we can make ourselves at a much lower expense but don’t. So I ask; what are you willing to give up so you can have a more secure future? Let’s take the coffee as an example.
If you buy a premium coffee each day you are probably spending close to $4 per drink. If we just look a 5 day work week, that’s $20.
If you were to save and invest that $20/week and earned 4% on that savings, at the end of 15 years you would have $19,752.86. That’s a lot of coffee!

I challenge you to do two things:
First, just for two weeks pay cash for everything and get a receipt for every thing you buy. You will be surprised at how much money you spend per week without a thought about it.
Second, pick one item you are willing to give up for the sake of your future. It will hurt for about six weeks, and then you will not even miss that item as you watch your nest egg grow.


What is your ceiling and floor?

We have all heard about the 4% rule, that is, when you begin your retirement you withdraw 4% of your account value annually to maintain your lifestyle and adjust the withdrawal amount up annually to match inflation. There have been many arguments as to why this rule is obsolete. Another way to prepare for paying yourself from your retirement nest egg is to establish your ceiling and floor.
Here is how this concept works:
You begin with an initial level of spending and then, depending on how much your nest egg’s value increases or decreases, adjust withdrawals up or down within bounds you set, say, reducing the current year’s withdrawal by no more than 2.5% from the previous year’s withdrawal and increasing it by no more than 5%.

I like this method of withdrawal better than the 4% rule because it forces you to review your portfolio annually and readjust your withdrawals.


Is it just 35 years or the best 35 years?

Q: I have heard conflicting information on what the Social Security Administration looks at to calculate my benefit. Is it 35 years of working or is it my 35 highest earning years that is used for the calculation?
A: Your Social Security benefit will be based on your best 35 years of earnings. If you do not have 35 years of earnings, the Social Security Administration will use zero earnings for those gaps.


Common IRA Snafus you don’t want to make.

IRA’s have been around for a long time and are widely used for retirement savings. Here are three common snafus that a lot of people make:
1. Having too many accounts. I had a client that established a completely new IRA each year he made him contribution. When we met and he asked me to take over management of his massive number of IRA accounts, they had numbered 20. I transferred all of the small IRA’s into IRA’s have been around for a long time and are widely used for retirement savings. Here are three once manageable account.
2. Using the wrong investment mix. Recently, I have been meeting a number of 20 somethings that want to start investing; they are a bit gun-shy and are very concerned about preserving principal. They are at the age where a portfolio that is weighted more towards equities vs. income is prefect. The greatest asset they have is time. Generally, with a long time horizon to invest, equities prevail.
3. Waiting too late to start your IRA. I am not referencing age; I am referencing the calendar year. If you make your deposits to your IRA in the beginning of the year, you take advantage of the great assets I just mentioned – time. Make your contributions in January vs. April, over the years the extra 3 months of tax-deferred compounding will make a difference to your retirement.