NO- if you like working so much you have no plans to ever stop

NO- if you never plan to go on vacation or do anything fun-like

NO- if you don’t like the sunlight and plan to arrive and leave work in the dark

Get the picture?

We meet with clients who have sacrificed for decades to diligently save for retirement via their Traditional IRA contributions, Roth, 401(k),  Tax sheltered Annuity or pension plan. Each year, you reduced your take-home pay by the amount of contribution to build that nest egg for that next stage in life. When I regularly meet with folks who reach that magic age (post 59 ½) and discuss taking out the money to supplement income, the usual response is to shrink back- heaven forbid we touch that savings vehicle. Guess what folks…what do you think you’ve been saving for all these years!

The choice to make your retirement deposit pre-tax or post tax (Traditional vs. Roth) is a calculation determined by a number of factors, and is best left to your tax expert. In either case, your mantra should be “save, save SAVE.”

Traditional IRA accounts may be opened anytime during the tax year between January 1 of the current year until the due date of the return- April 15^th. All of the earnings will accumulate tax deferred, meaning that you do not pay on any gains as long as the funds stay within the IRA vehicle until you withdraw them, after the age of 59 ½ and the year at which you attain the age of 70 1/2. At that time, you must withdraw some of the funds, called a Required Minimum Distribution based on tables issued by the Federal government. But, let’s talk more about the saving aspect…

Current contributions to a Traditional IRA are tax deductible, meaning your gross income will be reduced by the amount of your contribution. Current limits allow you to contribute the lesser of   $5000 or your earned income. For tax year 2010, if you are above the age of 50, you may contribute an additional $500 as a “catch up.” You may establish a Spousal IRA for a spouse with little or no earned income.

A 10% penalty applies if you withdraw your funds before the age of 59 ½. Some exceptions apply- see your tax advisor (vacations, a hot-rod, diamond ring and big screen do not qualify!) All earnings and deductible contributions are fully taxable in the year of withdrawal. The value of the IRA will be included in the owner’s gross estate, and will pass to the named beneficiary.

While you may be tied up in today’s struggle for survival, take a few minutes to see to the future- may you live and be well, sooner or later you will reach that age where you are longing to have more time for yourself and your family. Start now to prepare, and make that dream a reality.

But the fact is my comment about getting dark out has nothing to do with the above. It appears that there is a new term that has surfaced in the financial community that refers to the action of going dark! It looks like the credit for the terminology belongs to Todd Harrison who is the founder of a website known as www.minyanville.com The gist of the phrase implies that there are people in the financial industry that are just deciding to wrap up their businesses or for the time being stay as far away from the markets as possible. The evidence seems to manifest itself in the closing of several hedge funds with the most prominent one being that of Duquesne Capital Management, a 30 year business run by a well regarded hedge fund manager named Stanley Druckenmiller.

The reason offered…he’s just tired of managing other people’s money. For the thirty years of his business he had never lost money, but with the current market environment he is down 5% for the year. Apparently it is just getting too difficult! Typically people in the hedge fund industry seem to find a way of making money whether a market is going up or going down. Logic would suggest that if there was some opportunity presenting itself, such as shorting positions, even if we were to be falling back into a double dip recession, it would not be the time to close shop. Why go out on a negative note.

The scary part for all of the ordinary investors is that the implied suggestion of such a move could be that there is no good indication of the economy or the investment markets doing much of anything for some time to come. That could be a real possibility as there are no good economic indicators out there upon which to hang a hat. Today’s data (8/19/10) coming over the wires shows first time unemployment benefits rising to 500,000, the highest level since week ended November 14, 2009. Additionally, the Philadelphia Fed Board reported their August economic index at a negative -7.7 from a positive 5.1 in July. The combination of those facts took a further bit of steam out of the markets. The outlook certainly appears to be one of low interest rates for quite a while yet and that could just be the recipe for a market going no where for some time to come.

Along with what has been pretty anemic trading volume, maybe there are quite a few other investors out there who have chosen to go dark!

Evenings are much quieter than here, up North. The gathering place is usually my next door neighbor’s front or back porch, and you never know who’s going to wander in and “set” for awhile, talking about the weather, the neighborhood, family, health and that all encompassing subject: money. The neighborhood is varied in age, from mid 30’s to 70’s, and the subject of money runs from the cost of goods, college, retirement and everywhere in between. For those on the upper end of the age spectrum, planning for the continued care of one’s spouse and what will happen to their wealth upon their passing is a subject lightly touched upon but ever present.

Intergenerational planning is the act of designing a financial and estate plan to determine how and why your wealth will pass to the next generation(s) in a smooth and precise manner. If you are married or have a partner, chances are that your primary goal will be to protect and support your spouse or partner until their death- and this is where the intergenerational part of the plan comes in. What would you like your wealth to do or accomplish after you are gone and your partner is no longer in need of the principal or income?

In larger estates, the effects of skipping a generation can be very substantial. Each owner has an exemption which varies in today’s tax laws depending of the year of death. Two ways to remove up to this sum may be a gift to your child or a gift to your grandchild. The gift will effectively remove the lump sum from your estate for estate taxation purposes along with any further growth that may occur in your estate, further compounding your estate tax issues. With the estate tax tables starting at 37% and rising to over 55%, the reduction of your estate upon your death may be substantial. Another strategy may be gifting a lump sum to your grandchildren, and depending on your health, have them pay premium of a new life insurance policy on your life in the amount of the gift, thus leveraging the gift and growing the amount you leave to the next generation while not in your taxable estate.

Trusts may be utilized in various ways to reduce your estate while preserving the integrity of your wealth. If you choose to make an irrevocable transfer into a trust, it must be done more than 5 years from the date of gift to your death to be clear from inclusion in your estate. Terms of the trust may include support for you spouse or charities, or a complete removal of your wealth for a later planned benefit to your children, charity or other beneficiary. A structured gift to a trust may provide a means of income for generations to come as well as creating a legacy for the grantor. The terms of the trust are determined by you, the grantor, and may be as creative as you like as long as it is legal and within the confines of the present tax laws.

If you are of the feeling that your estate or wealth is too small to consider intergenerational estate planning, think again. Every dollar that you worked hard to accumulate is a dollar that you can plan and determine where and who will benefit from it when you are gone. Think about how you might benefit a charity, or how your children or grandchildren may find life just a bit easier with your help, and how they will thank you and remember you long after you are gone. Speak with your Certified Financial Planner™ or give us a call and we’ll fill you in on how your hard work can benefit generations to come.

The Boards of Trustees for Social Security and Medicare released their annual financial status reports on the two programs Thursday, August 5, and warned that while the outlook for Medicare has “improved substantially” because of program changes made in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010, the outlook for Social Security is “little changed” from last year, with the short term outlook “worsened by a deeper recession than was projected last year.”

Isn’t that nice…

In his comments at the August 5 press conference, Geithner said that despite the projection that Social Security can continue to pay full benefits for nearly 30 years, “the sooner action is taken the more options for reform will be available and the fairer reforms will be to our children and grandchildren. Now that we have taken meaningful steps to put Medicare on a sustainable path and moved quickly and aggressively to rescue our economy and put us a path to continued future growth, we must work to address the other intermediate- and long-term fiscal imbalances that the federal government faces as well.”

I feel so much better…

The question of Social Security surviving is the most debated issue in politics today (aside from the First Lady’s dress du jour). My questions is simple: how do you take money from Americans for decades, and then tell us that benefits have been exhausted, I won’t get paid when I retire even though I paid in for years and years, and I can’t get a refund of my contributions? If I ran my business this way, would I not go out of business too? Where is the fairness? Is this really the American way?

The aging of America Baby Boomers is the most pressing national issue of the century. Hallmark Cards sells about 85,000 100^th birthday card each year. Social Security was originally intended as a supplemental retirement income source for the minority, but has become the primary income source for the majority. In 1945, the contributors to Social Security outweighed the recipients by 16 to 1. In the 2005 census (2010 not yet available) the ratio changed to 3.25 to one- and we wonder why the system is going broke. According to the same census, 65% of retirees use social security for 50% of their income, and 33% use Social Security for 90% of their income. It would take $10.4 trillion, or $100,000 per family to achieve sustainable solvency.

The answer? We must all take responsibility and save for our own retirement. Utilize your 401(k) or Tax Sheltered Annuity. Make your Traditional or Roth contributions for as much as the law allows. Invest wisely, and find the best advisor you can to walk along with you on your journey to retirement. If you even question this philosophy, just look at the alternatives…

On a monthly basis, usually the first Friday, the Bureau of Labor Statistics releases the employment situation. There are a number of labor market statistics provided, based on two separate surveys conducted, from the report. The first is the Household Survey which results in the unemployment rate, clearly the most familiar statistic to the typical news reader. It is the number of unemployed persons divided by the total number of persons in the labor force and comes from a survey of 60,000 households. Other figures derived from this survey include the labor supply and discouraged workers who are no longer seeking employment. This latter category actually falls out of the unemployment rate calculation and tends to understate the true extent of the employment dilemma.

The second survey is known as the Establishment Survey and includes 400,000 work sites. Nonfarm payroll employment is the most well known indicator from this survey as business establishments report the number of workers currently on their payrolls. Some of the key indicators that are obtained are average workweek and average hourly earnings.

Once the data is released the analysts begin digging a whole lot deeper than the headline unemployment rate. As I previously alluded to the employment data gives the most comprehensive report on how many people are looking for jobs, how many have them, what they’re getting paid, and how many hours they are working. This provides key information to gauge the current state, as well as the future direction, of the economy. For the financial community this provides important information that helps to determine what sectors offer the best opportunity for investment.

Our economy is clearly in a major tug of war between slow, but steady, economic growth or the possibility of slipping back into some level of recession. Tomorrow’s job report will hopefully offer some clarity to the question of which we all seek an answer. A disturbing jobs report would not be received kindly by the markets that are hoping to maintain some recent momentum. I for one do not choose to guess the results. I will consider my investment decisions post report release. By the time you are reading this blog the data will have been released and analyzed from start to finish. Here’s hoping for the economies sake that it is good!

Like I titled the article here, it is just so frustrating! I continue to see this disconnect between the economy and the stock market. Sure it has been a pretty good earnings season so far for many of the reporting companies, but I seriously question whether corporate America is really tuned in to the real economic direction over the second half of the year Maybe I sound a bit cynical but I feel that there are just too many signs that the economy is not healthy. We have a weak labor market, housing activity is extremely soft, as are retail sales, and there are a number of indicators reflecting a deterioration in consumer confidence.

A troubling news story I saw today indicated that foreclosure filings climbed in three-quarters of U.S. metropolitan areas in the first half of the year. A spokesperson for Irvine, California based RealtyTrac indicated that we are dealing with underlying economic weakness as opposed to unsustainable home prices and bad loans. The company said that 154 of 206 U.S. metro areas with populations of more than 200,000 had increases in households with foreclosure filings. Cities in Nevada, Florida, California and Arizona account for the 20 highest foreclosure rates. It wasn’t that many years ago that these locations were hitting the headlines for the hot spots for real estate purchases.

First time unemployment claims fell by only 11,000 in the week of July 24 to 457,000. That clearly signals that the labor market appears to be very slow in improving and limited job gains may restrain consumer spending. Contrary to my earlier comment about the favorable earnings reports from many companies, there was a report today from consumer blue chip Colgate that disappointed investors and could be the indication of a consumer spending pullback.

I feel that the financial crisis hasn’t disappeared, it just seems to have changed shape. It doesn’t appear to be on Wall Street like at the beginning, but it surely rests on the lap of those on Main Street. Unless housing and unemployment problems start to subside the disconnect I spoke of will surely disappear and the markets and economy will finally be on the same page.

If you are in the minority of parents who are saving all their darling’s material memories, it may be time to settle up with them- and give them their things. After all, it’s theirs, isn’t it? Wouldn’t you like to have the space back that is being held by the 20 year old rocking chair and the hundreds of books, dolls, and the like? G’won, admit it- you want it out! I brought it to my daughter each time I visited- two boxes at a time- until I was void of her things. This gave her the ability to decide what she wanted, and what to give or throw away. It worked for both of us.

But what do you do when they come back to live at home? While we love our children, the fact is that we’ve settled into a lifestyle without children, and having them home again puts a crimp in our style. Yes, the little darlings just look at us as parents: little do they know we too have a life outside of them! But how do you handle the sudden change in your lifestyle, and what are the terms of them coming home? You did set terms, didn’t you?

Congress recently voted to allow parents to extend health insurance benefits to age 26 for children living at home. After that time, if they have not found gainful employment (ouch) they may apply for individually owned insurance. Check www.healthins.com for continuation of coverage for them. What else should you do? Don’t forget it’s your home, so setting guidelines and ground rules are applicable even though they are all grown up. It’s important for them to understand that they are impeding on your lifestyle, so the old “I’m 21 now and too old for curfews” doesn’t work. If they expect to live under your roof, you deserve the respect from them to go by your rules, or at least those that are agreed to by both parties. You’re not the Happiness Hotel: be keenly clear that this is temporary, and there are conditions.

Offer to pay for their health insurance and car payments or car insurance for a specified period of time: perhaps three months only. After that time, it is their responsibility to have a job and pay for it themselves. If they are not employed at that time, draft an agreement that they are responsible to pay you back when they do find their way. A little pressure is good motivator. You wouldn’t enter into an open agreement- why should they? Give them some incentive to go job hunting. Once they find a job, if they want to continue to live at home, define an amount for them to contribute to the household expenses and be sure to collect it. If they have a 401(k) option at work, require them to contribute 10% of their pay, or charge them rent which you will NOT give back to them. Don’t co-sign any loans for them- it could adversely affect your credit rating, or you may find yourself at the end of a lawsuit should they not keep up on their payments.

Teaching our children sound financial principals and integrity is part of being a good parent. Don’t fall into the black hole of enabling- there is no good to be had by it.

So what’s the test you ask? Well back on February 17, 2010 I posted a blog entitled “My Mea Culpa on Estate taxes.” In it I spoke to the fact that I never would have thought that Congress could have allowed us to move into the year 2010 without some form of estate tax on the record. However, they did, apparently because they were so tied up in other matters such as healthcare reform. I went on to say that their intent was going to be that whatever eventually got passed would be implemented retroactively to the first of the year. Even my most recent tax newsletters that I receive give every indication of that intention still being on the table. I also said that it could prove quite interesting for the estate of some highly wealthy individual, who passed away before an amended law was put in place, to challenge the constitutionality of imposing a retroactive tax to January 1. Enter the estate of George Steinbrenner!

It is impossible to imagine that the conscience of The Boss, even from the grave, will not be inspiring his estate team, should there be a Federal tax challenge, to fight any attempt at collection all the way to the Supreme Court. With all due respect to the man and his passing, it is nevertheless so ironic that he, of all people, could be the test case should it be necessary.

Certainly it behooves the fiduciary and beneficiaries to test the unplanned gap in the estate tax, the first since it was enacted in 1916. At the estimated estate value mentioned above and based on the last set of tax rules in effect for 2009, there could have been a possibility of tax due of approximately $500 million. Obviously this is not precise as much depends on how his estate had been structured over the years, but nevertheless it provides a good indication of the dollar magnitude that could be involved. All of this would not be saved, however, as beneficiaries would eventually have to pay capital gains taxes when assets, such as the Yankees, are sold based on original acquisition cost. But the net savings in total would indeed be substantial.

So George’s death may just be the catalyst in Washington to get movement on the estate tax issue and then let’s see how it all plays out. Meanwhile Mr. Steinbrenner…R.I.P.

With my newfound awareness of this tool in my financial planners toolbox, I made it my business to research the issue further to understand some of the implications of executing the strategy. Interesting also, was the fact that it surfaced in one of the workshops that I attended last week at an annual financial conference that I go to.

So my early due diligence validated the obvious question….does it really work? The answer is yes it can under the right circumstances and it is totally legal and allowable under Social Security Administration guidelines. Alright, what is the right situation to consider the strategy? Assume an individual began taking Social Security at age 62 which would be 75% of their primary insurance amount known as the PIA. At age 70, and with all indications being of good health, a reapplication to Social Security benefits might reap them a monthly check of 132% of PIA. So in order to get that amount all the dollars received since the age 62 start date must be repaid. It should be pointed out here that the payback is made without interest. So essentially the payback can be looked at as a free loan from the government.

But remember I raised the caveat in the preceding paragraph about being of good health. The reason being that with the lump sum repayment to make the strategy work it will require a recovery of those same dollars through the higher new monthly checks before getting into the bonus dollars as I would refer to it. So obviously for someone with any serious health condition it probably would not pay to play the odds of getting more money in total from the system.

Additionally, there are other issues that need to be considered to make a prudent decision on follow through. Don’t forget that for many individuals income taxes have been paid over the years on up to 85% of the social security received. The recovery of those taxes would be necessary to come out whole in the overall exercise of the plan. That in itself could require a bit of work.

So summing up, withdrawing and reapplying to social security is not a guaranteed solution for increased income for everyone. But it does warrant the proper review when individuals had elected to take early social security benefits.

This document comes into play when a person is unable to either perform legal duties due to physical limitations, or is mentally incapable or unwilling to make decisions for his or her benefit. Real estate transactions, banking needs, and a vast plethora of legal obligations may be utilized with this document. Essentially, you are giving another individual the power to sign for you, transact business, control your finances and make decisions for you.

The power in the document is general, as opposed to a ‘limited power f attorney” where the powers’ are limited to a certain transaction or are closely defined, allowing the individual to perform tasks specific to those noted on the document.

The powers can be immediate or “springing” meaning that they come into power in a certain time or circumstance: hence, they “spring into action” based on the specifics of the document. A durable power of attorney may save the arduous instance of a court appointed conservatorship, which may be cumbersome and outside the actual wishes of the disabled grantor. However, a court appointed conservatorship is supervised by the court.

Significant powers may be granted under a power of attorney, Essentially, you are giving another individual the right to sign for you and may have access to your money, deeds or other legal documents. Before entering into this or any legal agreement, be sure to consult a qualified attorney to see if the arrangement is applicable to you, your state regulations, and in your best interest.