Master Your Debt gives you strategies to slash your monthly payments, boost your credit score, and to really attain financial success.

Definitely give his website a visit and do yourself a favor and order the book.  If anything it’s informative and has great advice.

Jordan Goodman will be a guest on the Financial Lifestyle Show on Sunday September 26th and if we’re lucky, we might convince him to be our guest again the following Sunday to discuss debt and hopefully healthcare since that’s scheduled to hit on the 23rd of this month.

1. Revocable Living Trust
2. Pour Over Will – The Last Will & Testament. By design, it acts as a safety net to “catch” any assets not owned by the Living Trust
3. General Durable Power of Attorney – An instrument authorizing another to act as one’s agent or attorney for financial decisions.  Thie instruoment becomes or remains effective in the event of disability.
4. General Durable Power of Attorney for Healthcare – An instrument authorizing another to act as one’s agent or attorney for healthcare matters.
5. Living Will – An instrument that states your wishes to withold medical treatment in the event your medical condition is terminal with no hope of recovery.

To quickly recap this past Sunday’s show where we finished off the list of essential documents.

- If you do go with a revocable living trust, it’s best to get the funding done at the time of signing instead of later on.

- Atty Russ Cook pointed out that Time Shares are an extremely difficult asset because they’re usually located out of the state of TN, if you have a Will, you have to probate that asset in that state and it may not be worth a lot of money and the more bills build up, the more frustrating it is and money could be lost.  If you own time shares, it is strongly recommended that you have a revocable living trust and that the time shares are titled in the trust.

Gen. Durable Power of Attorney:

You don’t want to get an estate plan done without having this document included. There is a situation wher you may need someone to sign off on assets you own while you’re living but you’re unable to do so for instance if you’re in the hospital and can’t sign checks or pay bills. Or if you become incompetent and need someone to manage your affairs.

It must be “durable.”

Gen. Power of Attorney for Healthcare:

Another necessary document where you appoints your spouse or children (whoever you want) to make healthcare decisions for you. Especially important when it comes to end of life decisions and it prevents someone having to go to court to be appointed conservator to make healthcare decisons. Case in point, Terri Shiavo.

This all goes hand in hand with the Living Will.

The General Power of Attorney for Healthcare is a Directive to the hospital, stating that if your condition is terminal with no hope for recovery, you would authorize the hospital to withhold certain medical procedures. The hospital discusses those situations with the Power of Attorney. Make sure you have both documents as part of your estate plan. If you don’t you’re missing a key element.

Make sure you leave enough instruction and as much help to the people who are going to be put in that position.

Advanced Planning Documents:

After your five essentials are set, and there’s a foundation there’s more you can add on like

• Family Limited Partnerships
• Irrevocable Life Insurance Trusts
  • Created in your life to hold a life insurance policy.  This is the owner of the policy and when you pass away, the beneficiary is the trust and is not in your estate and can be used for spouse and kids.
• Charitable Remainder Trusts
  • Trust you create where you retain an income interest in the trust and upon your death the remainder interest goes to charity. If you have an asset you want to sell that has low cost basis and you know you’ll be hit with a lot of capital gains tax, create and transfer the asset to the trust has the trust sell the asset the trust doesn’t pay any income tax if set up properly and it maintains an income stream to you not based on the net value of the asset (net of taxes) but the total value of the asset because the total asset is remaining in the trust. The ILIT is holding the insurance policy that is going to replace the funds that are going to the charity at your death. That’s how you coordinate the two.
• Veterans Affairs Planning
• Medicaid Planning.

There are so many kinds of trusts you can set up. Definitely give the show a listen to find out exactly what they are and please do give me a call at 800-892-4102 for your complimentary first consultation where I can walk you through your estate planning needs.  Remember, estate planning is not a DIY undertaking, I do stress that you find a qualified, Board Certified Estate Planning Attorney, such as Russ Cook in Brentwood, TN.  Look for a comprehensive financial advisor such as myself who works with a strong team to watch out for your estate and for your taxes.

1. Revocable Living Trust
2. Pour Over Will
3. General Durable Power of Attorney
4. General Durable Power of Attorney for Healthcare
5. Living Will

A lot of us begin with a Will, thinking that it’s enough.  While that is not completely wrong, it’s just better and more solid planning to have all five in place.

The Revocable Living Trust

This is a simple yet all-inclusive and comprehensive way to transfer your assets.  Having a Trust over a Will helps avoid Probate after death and usually prevents “living probate” with a durable power of attorney.

A trust will allow for quick disbursement of assets to your heirs or their trusts and with the help of an accredited estate planning attorney, is a competently written and executed document that is harder to contest than a regular will.

This document prevents unintentional disinheriting and delivers options for professional asset management.  The trust can be changed at anytime prior to death.

This past Sunday we discussed the Five Essential Documents on the Financial Lifestyle Show with estate attorney Russ Cook of Russ Cook & Associates in Brentwood, TN. Listen to the podcast here and let us know what you think!

(Article: Social Security to start cashing Uncle Sam’s IOUs)

The average reported S&P 500 index annuity return beat the real S&P 500 return in 63% of actual five-year periods.  Index annuity detractors often retort those bad periods were exceptions, because when you take into account the good ones, and add on reinvested dividends, you more than make up for the bad times because “everyone knows” mutual funds perform much better than index annuities.  However, if you had invested $10,000 at the beginning of every five year period – a total of $80,000 in each since 1997 – the index annuities would have grown to $104,991 and the S&P 500 index with reinvested dividends would have been worth approximately $103,574¹

What if the investment markets of the last decade are not an aberration, but represent the new normal investing environment? If these times are the new normal then index annuities are the clear winners.

However, rather than accept the reality that index annuities have proven their work the detractors fall back on their other argument, which is index annuities may have performed well since they were introduced in 1995 but these aren’t normal times.  Their refrain is if these were normal times the mutual funds would have won big.

The detractors typically use two “normal” periods to support their position.  The first big period usually starts in the mid 1920s and ends at the millennium.  It results in those 12% return numbers cited by folks like Ibbotson.  The second period used is the more recent 20 or 25 years that include returns for the ‘80s and ‘90s; the average annual stock market return for those two decades was 17.6%².  The detractors then apply today’s index annuity participation rates to these periods and say, “see, in normal times mutual funds heartily beat index annuities.”  However, I submit those periods (to say nothing of the participation rates assumed) are also not representative of normalcy.

If you could have invested $10,000 in the U.S. stock market on New Year’s day 1980 your account balance on 1 January 2000 would have been $253,766!  However, if you had done this from 1970 to 1990 your balance would have been $87,586, and starting in 1960 and ending in 1980 your $10,000 would have grown to $36,905.

Some people use Ibbotson’s 12% return as representative of a normal stock market, but even using their 80 year timeframe as “normal” 96.8% of the 20 year returns will be less than the 1980-2000 period.  And if you use the first 80 years of the century instead of the last 80 years as normal, the likelihood of not getting a 1980-2000 style return is 99.99%.

What is normal?

Professor Siegel of Wharton looked at periods beginning after World War II and found the average annual stock market return for the next six decades, including reinvested dividends, was 6.83%³.  If you could find a annual reset index annuity that averaged a 50% participation rate for the same period your annualized return would have been 7.13% without reinvested dividends.

In my modeling of the Great Depression, if you could have purchased an index annuity each month beginning in August 1929 with only a 30% participation rate your average annual index annuity return would have been 6.4%.  All of this during a decade where the stock market ended 65% lower than where it began and blue chip stock market investors lost a lot of money.

The ten years following 1972 resemble the decade after 1999 in stock market movement.  In this earlier era the S&P 500 finished 3.8% higher than where it began, but an index annuity annual reset approach would credit interest based on a total period gain of 124%.

Frankly, I don’t know if the next 10 or 20 years will be like the last, but it appears extremely unlikely that the 1980-2000 period returns that occurred only once in the last 200 years should be used as “normal” times⁴.

I couldn’t agree more.  You can read the rest of the article by Clicking here for the PDF. (thanks Jack!).

For more articles by Jack Marrion, visit the IndexAnnuity.org.

The article was researched and written by Index Compendium Editor, Jack Marrion. Copyright 2010. Reproduction is not permitted without written permission of editor..  The Index Compendium does not provide investment, tax or legal advice. Information believed accurate but is not warranted.

1. The index annuity returns are actual policy returns for 5-years periods generally beginning and ending at or around 30 September.  The $103,574 index return assumes reinvested dividends of 1.72.%, which was the S&P 500 dividend average yeld from 1997 through 2009.

2. Bogle, John, 2003.  The Policy Portfolio in an Era of Subdued Returns. Bogle Financial Center.

3. Siegel, Jeremy (1992) The Equity Premium: Stock and Bond Returns since 1802.  Financial Anaylists Journal; 48, 1; pg 28

4. Schwert, G. William 1990. Indexes of U.S. Stock Prices from 1802 to 1987. The Journal of Business. 63,3; 399

7 Deadly Sins of Retirement Financial Planning

…and Virtues That Cultivate a Gainful Financial Game Plan

Retirement-based financial planning takes far more than faith…it takes action. And, investing one’s valuable retirement dollars “on a wing and a prayer “ can wreak havoc on even of most well-intentioned plan. Knowing what pitfalls to avoid can make all the difference in securing a heavenly lifestyle for your golden years.

With this in mind, the following are 7 Deadly Sins to avoid at all costs when planning for your financial future, along with enlightening common sense tips to help would-be wealth seekers get on their way to the financial promise land:

1. Pride. Ditch the “I can do it on my own” mentality. Rather, seek out a retirement-specific financial planning expert who can help ensure your hard-earned savings have the greatest potential for growth. Although professional fees will be incurred, the old adage of “pennywise and pound foolish” could not hold more true.

2. Envy. Comparing how much you have built up for retirement to others can either cause you to get discouraged and give up on your efforts, or get overly complacent and slack on your planning. It’s far more important to develop – and stick to – a sound game plan structured to attain your distinct retirement lifestyle goals.

3. Anger. Harboring anger at the government for the impending insolvency of Social Security, or the mounting threat to corporate pensions and retirement benefits will not secure your retirement and is, therefore, wasted energy. Instead, take charge, assess where you are in terms of your current assets and liabilities and how they are tracking toward retirement. Resolve yourself to do everything required to generate retirement asset ROI to better ensure your senior lifestyle goal.

4. Greed. While gambling is fun in Vegas – even with a few losses along the way – the same does not hold true with your retirement savings. Taking unnecessary risks, chasing a ‘hot’ stock tip or mutual fund, or buying ‘junk’ bonds or any number of other speculative ventures is a certain way to lose what you have worked so hard for – and need to sustain you through your golden years. With retirement planning, it’s imperative to reduce risks to the fullest extent possible, ideally with principle guarantees, using proven investment strategies in order to attain your financial goals.

5. Sloth. Going the lazy route and resigning yourself to being dependent on others during your senior years need not be your fate. The truth is, no matter what your age or how much, or how little, you have in the way of assets, it is NEVER too late to start saving and planning for retirement – but it does take a bit of motivation. While late planning may take a higher level of drive and creative strategy, you will certainly be in better financial shape, feel better about yourself, and enjoy retirement a lot more than if you did nothing at all.

6. Gluttony. Spending every penny you make and then digging an even deeper grave through acquiring excessive debt is a recipe for disaster. Recent problems with leading U.S. corporate pension programs have underscored the extent to which one cannot depend on so-called safety nets. It’s imperative to set up a plan that first serves to eradicate debt and get sound retirement planning fundamentals in place. Once the plan is in place, be sure to infuse it with additional funds on a regular basis – at least once a month is advisable.

7. Lust. We live in a culture where instant gratification is not only revered but, all too often, is expected. Over indulgence can rob you of valuable resources needed to secure your future, so don’t have a short-term outlook on life. What will work is strategizing a financial game plan with a qualified professional, implementing that plan, and staying the course no matter what temptations may present along the way.

Ensuring a comfortable retirement in today’s volatile investment climate is daunting, but it is also achievable with the knowledge of what to do and, as important, not to do. Even when using a financial advisor, it’s imperative for seniors and others saving for retirement to avoid complacency and be actively involved in their financial planning to ensure their unique and personal needs are being catered to.

At the end of the day, a cookie cutter financial plan is the deadliest of all sins, as no two individuals will have identical needs, goals, and resources. If nothing else, heeding my retirement planning ‘7 deadly sins’ warnings will help individuals preserve hard-earned assets and maximize the retirement income stream they want and need.

President Obama conceded this morning that the Nobel Peace Prize awarded to him was premature. 

“I would be remiss if I did not acknowledge the considerable controversy that your generous decision has generated. In part, this is because I am at the beginning, and not the end, of my labors on the world stage,” Mr. Obama said. “Compared to some of the giants of history who have received this prize — Schweitzer and King, Marshall and Mandela — my accomplishments are slight.”

I respect the president for saying so and I do congratulate him in spite of how I feel others who have given their lives.  However I did not commission this caricature to be political – this is not an indictment on the President, but more so on the Nobel Prize committee and the person who nominated him.  I want to instead pose this question to you from a financial planning standpoint:

How does the above cartoon serve as a metaphor for active management in mutual funds? Think about it, let me know your thoughts on this question.  As for my thoughts, well, stay tuned there’s more to come.

Picture credit: Thank you to H.C.T. for capturing my imagination so well.

This is going to be a good show to watch because everyone is affected by Social Security benefits.  One question I am often asked is, “How soon can I retire?” followed by “How do make sure I have enough income to support my lifestyle after I retire?”

We’re going to discuss these concerns, as well as talk about the Provisional Income Formula a little bit.

If you have any more questions, add them to the comments and I’ll use them on the show.

So tune in this Friday at 8am on Channel 250 on Comcast.

The Retirement Report has seen great response with the change to a new panel format.  My partners in crime, Dr. Friday and Attorney Russ Cook, and I have really meshed as a trio and our viewers have taken to them quite well.  I firmly believe in a team approach when it comes to planning your estate and retirement, and I am glad our team has served you well.

Dr. Friday and I have taken our camaraderie to the airwaves of Newsradio 1510AM WLAC on Sundays on the Financial Lifestyle Show.  A radio show is something I have wanted to do and to say that I am excited this goal has come to fruition is an understatement.  Every Sunday I get to share my expertise with so many people from all over.  Each caller has great questions that everyone can benefit from.  If you haven’t already been listening, I hope you can tune in.

If you can’t listen, I invite you to check out the podcasts we have available.  They’re perfect for the long drive to and from your Thanksgiving family road-trips.

This week,  I will be doing my own annual trip with my family to the fair city of Atlanta, GA.  I hope you enjoy your holiday traditions, and relish the time spent with loved ones.  I leave you with this:  As you take in what surrounds you – your children, partner, family, home and your life – thank yourself for the ability to attain it all.  You worked really hard for it so perhaps now it’s time to consider new options to maintain what is yours, and to make sure that everything you worked for is going to work hard for you.

Happy Thanksgiving.

Investing your money in accounts that can grow is always an advantage and I am not going to pick a Traditional IRA over a Roth IRA to say which is “better.” It varies from situation to situation.  Let’s look at a couple of examples.

Example 1:  Your income puts you in a higher tax bracket.  Should the money be placed in a Traditional IRA or directly into a Roth IRA?

Say you make $100,000 a year.  As current tax rates stand, you could be taxed 28%.  If you’re certain your lifestyle doesn’t require any more than maybe $40,000 a year, it would be to your advantage to contribute, tax free, to a Traditional IRA to where you could fall into a lower tax bracket.  Money put into a Roth IRA is taxed according to the amount put in each year.  But once the money is in the Roth, it sits and grows tax free.  Which brings me to conversion from a Traditional account to a Roth.

Example 2:  You are retired and you have X amount already in a Traditional account.  Would it be to my advantage to convert that to a Roth IRA?

While the money that you put into the account went in tax free, anything you take out is taxed according to the yearly amount regardless of whether that amount is to be spent or reinvested into a Roth.   Depending on the size of the Traditional  account, you could land in a higher tax bracket.

Now if you foresee that money being spent down in the next 10 or 15 years and this is your source of income to suit your lifestyle needs, then leave it, take it out yearly and pay the tax as you do so.  There is a caveat to this (as with everything we do when it comes to taxes) which is that taxes are going to go up (and they will go up substantially) so the risk you take is that you may end up paying a lot more for the final five years of that 15 year distribution if you leave it and don’t convert.

On the other hand, if the money is to be left alone for the 10 – 15 year period, or if you won’t ever need it or if you are leaving it to your children, then a Roth Conversion would make much better sense.   For example if you have a large estate to be left to your heirs, it is advantageous to convert.  If you’re in the top income brackets and with the knowledge that in 2011, the tax rates on those brackets are going to go up, that’s another good reason to do a Roth Conversion while the rates are still lower.

This is just basic advice, and doesn’t serve everybody – we are all unique with our goals so your best bet is to speak to a financial planner who will be able to go over your numbers and calculate the best rate of return for you.