Category Archives: Family Planning

Remembrance – Veteran’s Day

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Take the time today and remember in your own way.

Here are some of mine:
1. VIDEOS:

Pittance of Time –
English –
http://www.youtube.com/watch?v=2kX_3y3u5Uo
French – http://www.youtube.com/watch?v=XcjnqM6KQsQ&feature=mfu_in_order&list=UL

Remembering by current generation: –
http://www.youtube.com/watch?v=ACCpRPzu370&feature=related

End of World War I –
http://www.youtube.com/watch?v=x8s5QYwYtuY&feature=related

Battle of Vimy Ridge–
http://www.youtube.com/watch?v=PShuXicOzrk&feature=related

POEMS:
My two favorite poems for this day:
John McCrae’s poem, In Flanders Field is well known. The poem, however, was not written about the fighting which occurred in Flanders Field and before the biggest battles that occurred there. Lt. Col. John McCrae, M.D., a Canadian physician, wrote it while serving at a medical station in Ypres. On 8 December 1915, the poem was published anonymously in Punch magazine. Colonel McCrae died of pneumonia on 28 January 1918, nine months prior to large-scale fighting in the Flanders area. In 1919, his verses were collected and published under the title In Flanders Field and Other Poems.

IN FLANDERS FIELD
In Flanders fields, the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly,
Scarce heard amid the guns below.
We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
in Flanders fields.
Take up our quarrel with the foe:
To you from failing hands we throw
The torch; Be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
in Flanders fields.

It was due to the poem “In Flanders Field” that Miss Moina Michael originated the Flanders Memorial Poppy which has raised millions of dollars for veterans and their families. Miss Michael became known to millions of World War I veterans as the “Poppy Lady” and on 9 November 1918 she wrote the poem, We Shall Keep the Faith in answer to the In Flanders Field poem.

WE SHALL KEEP THE FAITH
Oh! You who sleep in “Flanders Fields,”
Sleep sweet – to rise anew!
We caught the Torch you threw
And, holding high we keep the Faith.
With all who died.
We cherish, too, the poppy red
That grows on fields where valor led:
It seems to signal to the skies
That blood of heroes never dies.
But lends a lustre to the red
Of the flower that blooms above the dead
In Flanders Fields.
And now the Torch and Poppy red
We wear in honor of our dead.
Fear not that ye have died for naught;
We’ve learned the lesson that ye taught
In Flanders Fields.

Images are powerful with the poem reading – particularly the words from those who served:

http://www.youtube.com/watch?v=2Rsy_5lelxo&feature=related

Additional Reading with slides – In Flander’s Field:

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

 

 

 

 

 

 

 

Fixed Annuities – apply them with care

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Fixed Annuities
– A limited but essential role in some retirement plans

Fixed annuities represent a contract between an individual and an insurance company. Annuities provide a contractual way for an individual to guarantee that he or she receives income for life or for a set period of time. Other liquid financial products like equities, can pay dividends that can be used as retirement income the income is not guaranteed. A fixed annuity will guarantee an individual a stream of income as long as he or she lives or for a set number of years.

Sometimes you can start with Deferred Fixed Annuities

Like all annuities, except those that are immediate, deferred fixed annuities have two phases. The first phase is the accumulation phase. During this phase, which can be as short as a few years or as long as several decades, the annuity owner makes regular deposits into the account. These deposits are known as premiums.

All premiums contributed to a deferred annuity grow tax-deferred which means that the growth income received at retirement will be taxed as ordinary income.

When an annuity owner, who is known as the “annuitant”, decides to have distributions start, the annuity is “annuitized”. This is a critical process that converts it to an immediate annuity and you begin receiving payouts. The distributions can be paid monthly, quarterly or annually, depending on the preferences of the annuitant. An annuitant should think about his or her distribution schedule very carefully, because once it starts, it cannot be changed. An insurance company will also typically let the annuitant choose the length of time over which the distributions are paid. Guaranteed payments can be taken for life or for a specific number of years. This selection will affect the amount of each payment.  Life annuities are the only ones that will give the promised guarantee life long income.  Consider that life long income may not support your current lifestyle particularly in high inflationary periods.

Under current federal tax law, an annuity owner cannot begin taking payouts on a tax-deferred annuity prior to age 59 ½ without incurring a 10% penalty. Any tax-deferred annuity must begin in the year in which the annuitant turns age 70 ½.

What are Immediate Fixed Annuities?

An immediate fixed annuity is funded with a single premium. The premium is typically after-tax money paid as one lump sum. You can also set this up from a mandatory distributions taken on a qualified account. The distributions made by the life insurance company begin immediately, typically within 12 months of the start of the contract.

Immediate Fixed Annuities Pros and Cons

The return % paid on fixed annuity is always fixed. It could change year over year, but once it’s set for the year it will not change regardless of stock market fluctuations. This can be of great help to those on a tight retirement budget unless the market rises and therefore inflation rises. The advantage will be that you’ll know exactly the amount of each payment that will be made. While the rate paid on a fixed annuity could vary from year to year, most insurance companies will guarantee a rate of between 3% and 5%. It’s important to note, however, this guaranteed amount might not be enough to offset any cost of living increase. Inflation is a real and significant threat to retirement savings.  It is best to do immediate annuities when interest rates are high.

You could purchase a COLA (cost of living adjustment) rider that adjusts with inflation to retain some of your future purchasing power. The COLA rider is a costly component of  a fixed annuity contract, but it will increase the amount of money that is paid out each year. The amount should be enough to counteract measured inflationary pressures.  If you can afford the COLA you might consider it or consider leaving a portion of your assets in an equity portfolio so that it growth with the economy and provides a real inflation hedge.

For some, another risk factor associated with a fixed annuity is the premature death of the contract owner. If an annuitant dies before he or she has been repaid the amount he or she paid in premiums, the insurance company will keep the balance. To offset this, most insurance companies now give a guarantee of some sort on the premium.  For example, if the annuitant has an annuity worth $300,000 and dies after having only received $50,000 back, the beneficiary will receive the remaining $250,000. Or, the annuitant can choose an option called “period certain”. If he or she chooses a period of 20 years but dies during year 10, the beneficiary will receive payouts for the remaining 10 years.

I only consider premature death an important risk factor if you have beneficiaries or a legacy you want funded.  Even so, there are other ways to cover this risk factor than to purchase this type of rider – particularly if you still qualify for life insurance.

Who Should Buy Fixed Annuities?

Retired investors who need to guarantee income for life or for a set amount of time are often advised to consider a fixed annuity. Retirees who rely on equity dividends for most of their income may also want to consider a fixed immediate annuity. Dividends can provide substantial income but are not guaranteed. They can be cancelled by the company at any time should it need to conserve cash.

A retired investor may also fear that he or she will outlive the money he or she has saved. An immediate fixed annuity will also provide financial security. The payouts will be guaranteed for as long as the annuitant is alive, regardless of the amount of the premium. Even when the amount of the payouts exceeds the premium, the insurance company is obligated to make the payouts. For those in good health with few liquid assets, a fixed annuity could make a difference in their standard of living BUT they are extremely costly and impossible to exit gracefully if your situation changes.

A fixed annuity investor should always make sure he or she has enough cash for emergencies. As outlined earlier, an annuity contract cannot be cancelled except under the extreme circumstances. Once the contract is signed, the only way an investor can receive his or her money is through the payouts.

Consumers are strongly encouraged to purchase annuities only after a thorough analysis by a NON annuity sales financial professional.  This is a major investment that once signed can’t be undone – read the fine print and understand the nuances and their impact on your entire retirement before you sign.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Social Security – Have a plan

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Maximize your inflation protected pension plan
– Couples must have a Social Security strategy

According to a recent survey (1) married couples nearing retirement do not maximize their social security benefits.  The vast majority of people are unaware of strategies that could increase their lifetime Social Security benefit by $40,000 or more. Only those with high net-worth or higher income appear aware that couples should have a social security implementation strategy.

Seventy-four percent of people with household income exceeding $200,000 expect to receive advice on Social Security benefit options from a financial planner, compared to only 48 percent of those with household incomes less than $50,000.

Most (77 percent) felt that the best advice to maximize their Social Security retirement benefits would be the Social Security Administration. Unfortunately, SSA personnel are not trained to provide more information than monthly benefit amounts at different election ages, and the SSA prohibits its representatives from dispensing advice.

If you are approaching your full retirement age or are planning on enrolling to receive social security make the investment to evaluate your social security implementation strategy with a qualified financial planner.

(1) survey source form socialsecuritytiming.com

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Government Policy To Watch

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Financial Policy in the news
Government policy that will impact our bottom line

1. Senate replaces Obama tax increases with millionaires’ tax

When President Barack Obama announced his jobs package in early September, he proposed paying for the measure with a series of tax increases on individuals making more than $200,000 and families making more than $250,000. Among them was a 28% cap on the tax exemption for municipal bond purchases and a hike in the tax on “carried interest” for private fund managers from the capital gains rate to the individual rate. In their version of the jobs plan, Senate Democrats replaced the Obama tax increases with a 5.6% surcharge on millionaires. The tax would apply to adjusted gross income less investment interest deduction above $1 million. Senate Democrats believe that the $1 million threshold more clearly delineates the difference between the middle class and the wealthy.

2. Obama’s jobs plan sliced, diced, stalled in Congress

In rallies around the country earlier this fall, Mr. Obama touted his jobs package and urged Congress to “pass this bill now.” By October, he was hoping that Congress would approve at least parts of it. It’s been slow going. The Senate blocked the entire $447 billion measure from getting to the floor. It was then diced up into smaller parts, and some blocked later on. The first portion of the package to get any traction was a provision to repeal a tax on government contractors that is set to go into effect in 2013. The bill’s prospects in the Senate are unclear.

3. Bills to promote crowd funding, raise SEC registration thresholds pass House Financial Services Committee

A bill that is similar to another piece of Mr. Obama’s jobs package was approved by the House Financial Services Committee on Oct. 26, would allow so-called crowd funding to finance startup companies by allowing the firms to pool small investments up to $5 million without having to register with the Securities and Exchange Commission. State regulators object, arguing that the bill would foster fraud.

4. What is the Buffett Rule? Capitol Hill steps into the definition vacuum

As he ramped up his re-election effort this fall, Mr. Obama proposed a so-called Buffett Rule. Named after Warren Buffett, the idea is that middle-class taxpayers should never fork over a higher percentage of their earnings to the federal government than the wealthy. The notion is based on Mr. Buffett’s suggestion that it is wrong for him to pay taxes at a lower rate than his secretary. A new bill, imposes an additional 5% tax on income from $350,000 to $500,000, 10% on $500,000 to $1 million, 15% from $1 million to $10 million and 20% on income exceeding $10 million. Another group has put forth a far different concept – taxpayers would be allowed to donate money to the Treasury Department to help pay down the national debt.  This last ‘concept’ has always been available BUT has yet to generate any income.

5. Republicans try to set rates on capital gains and dividends at 15% permanently and remove health care tax

House and Senate Republicans are attempting to bring some certainty to tax policy through a measure that would set capital gains and dividends rate permanently at 15%. If Congress does not extend the Bush tax cuts, the capital gains rate will rise to 20% and dividends will be taxed at individual rates beginning in 2013. In addition, the GOP is trying to get rid of a 3.8% Medicare tax that will be assessed on investment income starting in 2013 to help pay for the health care reform law.  Not sure how they plan to pay for it in a balanced budget BUT it may be a way to stop Obamacare by stopping its funding.

6. Legislation could allow retirement account borrowing to pay mortgages

Retirement savings advocates are wary of a bill that would allow penalty-free withdrawals from tax-exempt pension and retirement plans in order to pay mortgages.  It already allows it in 401K plans.  I would prefer that they borrow than withdraw BUT not for mortgage payments without a financial plan that helps them get ‘real’ to their current financial situation.

7. DOL on fiduciary-duty rule

The Labor Department is making clear to the financial industry that it is not abandoning a regulation that would significantly expand the definition of “fiduciary” for investment advisers to retirement plans. The agency withdrew a proposed rule in September which would increase regulatory and liability costs, and would drive brokers out of the individual retirement account market because it would subject them to fiduciary duty for the first time. But why would we want brokers who don’t follow fiduciary duty to be in the individual retirement market?

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Taxes prior to Debt Super Committee Vote

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2012-13 Tax Planning
– Prior to Debt Super Committee meeting deadline (Nov 23rd)

There are at least 60 income tax provisions scheduled to expire at the end of 2011 but even if they do the most significant income tax changes are expected in 2013.

The Bush tax cuts are set to expire and income tax rates rise in 2013. At that time, itemized deductions would once again be partially phased out, the estate tax exemption will drop precipitously and the estate tax rate will jump unless they are re-enacted.  At the same time we’ll begin the new healthcare surtax in 2013 that will result in 3.8% tax increase on
certain types of investment income and a tax of almost 1% on wages above a specified threshold.
Between now and 2013, we expect much talk about changes but the Congressional bipartisan ‘supercommittee’ is considering controversial revenue-raising measures, such as limiting itemized deductions for high income tax payers and other altered tax treatments. The vote & recommendations on November 23rd will play a large part in our confidence that our economy will begin to grow soon before the tax increases in 2013.

Our long term success still remain with business growth and ability to create and support well paying jobs.

What does this mean for investors? That we plan for what we know, not what might happen.  But we keep our eye on what changes are approved so that we can adjust and still reach your personal and professional goals.

This year and next year (are consistent with 2010) present us with tactical and strategic decisions that may require action before those rules expire.

Here are two lapsing provisions:
AMT Patch was extended from 2010 to 2011. If Congress
does not extend it, the AMT exemption for 2012 would
return to earlier, lower levels and will result in more tax owed.

The portion of the Federal Insurance Contributions Act (FICA) tax that goes to Social Security was reduced temporarily in
2011 from 6.2% to 4.2%. With no extension, the higher rate
returns in 2012.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Readings: Two is Enough

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Edi’s Book Readings
Two is Enough
by Laura S Scott

I was fortunate to share an evening with seven wonderful women who had read and wanted to discuss this book.  We shared a drink and our thoughts.

I want to share and recommend this book for you to read or scan as a general education for everyone to understand different groups in our society.  I think it is particularly a good read for anyone starting or considering having children.  Children are a wonderful addition to a family that welcomes and is prepared to provide for them.  All agreed that having children should be a very conscious thoughtful decision for every couple.

What persists with me even today is that 20% of couples may be childless – sounds like a fairly large group. Do the individuals share enough in common?  They do if we consider their financial and retirement planning needs.

In the US singles and couples without children are not usually addressed as a group and I thought this book did a good job at educating all of us on why couples choose or don’t choose to have children.  For me it was enlightening to see that we’re past the idea that having children is a requirement to have a life well lived.

If you get a chance to read it  – let me know your thoughts.

Edi

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Financial Planning if you don’t have children

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Financial Planning & Retirement Planning for Singles & Couples

Financial planning is often addressed by couples when they plan or have their first child.  In our society this is part of becoming responsible parents.  In turn this process brings parents closer together and forces them to review short and long term goals like cash flow & retirement planning.  In many cases, the process can help parents deal with their own emotions about money and bring about personal growth and a greater maturity that strengthens their relationship.

I’ve addressed financial and retirement planning for parents through presentations and workshops and would like to share some highlights for non-parent couples and singles.

Child-free couples and individuals should consider that often children serve as an important support for a parent’s retirement plan.  Their children and grandchildren often serve as a social and sometimes financial support network that is not available to those without children.  I propose that without children growing older requires more, not less, financial planning to ensure that a plan and a support network are created.

Think about your current network.  Do you have individual(s) that could be your advocate(s) and help you or make for you medical and financial decisions?  You’ll need to identify and empower advocate(s) that will care for you if you are hurt and unable to communicate your wishes.  Your advocate may need to answer questions regarding your quality of life and make critical financial decisions in your stead.  For example: Who will file your taxes or sign your insurance claims?  Who will pay your bills? Who will decide if it is time for you to sell your home and move to a more appropriate care facility?  Who will decide the level of care you want and can afford?

Couples can often depend on each other but sometimes you may want to choose a medical advocate whose beliefs are the same as yours – that may or may not be your current partner.

Planning the financial support network is particularly important for those without children.  Saving maximally for retirement is critical since you’ll likely need more financial income to retain your independence during retirement.  Singles need to plan earlier since they may have even more expenses.

Finally, once you are gone your loved ones will need clear direction on how you want your assets distributed. Don’t leave the courts to decide or your hard earned assets may go to a cause (or individual) you would not want supported.

A financial and retirement plan should help you understand yourself and your behavior around money – through understanding you can better work with your loved ones and make lasting joint retirement decisions.

Seek independent advice and explore the actions that you need to implement today to have your finances support your future wishes.  The time is now.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Durable Power of Attorney (DPOA)

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Durable Power of Attorney (DPOA)
(source: The State Bar of California information)

DPOA documents are meant to provide a trusted person to act in your stead.  There are two types of DPOAs that you need to include to care of your needs when you are unable or unwilling to do so.

The Health Care Directive should include the name of an agent or attorney-in-fact who you know will advocate for your health care needs.  This individual needs to be an advocate to ensure that your wishes (not theirs) will be respected and followed.

The DPOA for property (or finances) will handle day-to-day financial transactions that you normally handle; such as, paying bills or signing your taxes if you’re not able.  In addition, if you have a Revocable Trust it is the attorney-in-fact that will transfer non-trust assets to your trust if appropriate.

Know that your DPOAs are only valid while you’re alive.

If you don’t have a DPOA and you are unable to make decisions a court will appoint a professional conservator for you and pay them from your estate.  The court does supervise your conservator but it is often more expensive and cumbersome if your conservator does not know or follow your wishes.

Act now, you never know when you might need assistance to direct your financial or your health decisions.  You can get templates from the State of California or contact an Estate attorney or call us for an internal referral.

*** This blog is provided as information to encourage individuals to make available documents that are legally important in their lives ***

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Love & Money

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When I am asked what is the secret for a strong happy marriage. I always answer that for more than 20 years I have found that sharing values, respect and trust are often key ingredients. Over time a willingness to plan and share our lives has deepen our relationship.

Serious relationships should include open and honest discussions about credit, debt, income, retirement, savings along with a serious conversation about family & career plans. They should also include a healthy participation by both in family finances. Since there is NO BLISS IN NOT KNOWING I would encourage you to begin these conversations by reviewing each other’s credit reports. Begin healthy financial communications before you solidify your social contract with each other.

You can obtain each agency’s credit report
www.equifax.com
www.transunion.com, and
www.experian.com

Long before you say “I DO” ensure that you really do accept each others past, present and future behavior around money.

Communication is critical in any relationship and failure to discuss finances is at the core of many failed relationships. It is a huge red flag if you are both ready to join your lives and yet are not able to discuss and plan for your lives together.

If you need assistance consider a third party which may be covered by your benefit plan at work.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Remembrance Day and the Poppy

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In Flanders Fields

In Flanders fields the poppies blow
Between the crosses, row on row
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

— John McCrae (1872 – 1918)

The American Moira Michael from Georgia, was the first person to wear a poppy in remembrance. In reply to McCrae’s poem, she wrote a poem entitled ‘We shall keep the faith’ which includes the lines:

And now the Torch and Poppy Red
We wear in honor of our dead.

Many two-minute silences are followed by a lone bugler playing The Last Post, reminiscent of times of war when trumpets were as much a part of battle as bayonets. A poem called ‘For the Fallen’ is often read aloud on the occasion; the most famous stanza of which reads:

They shall grow not old, as we that are left grow old:
Age shall not weary them, nor the years condemn.
At the going down of the sun and in the morning
We will remember them.

Fourth stanza of ‘For the Fallen’ by Laurence Binyon (1869 – 1943)

 

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com