Important October Dates Are Quickly Approaching

 Fall is in the air. The hot days of summer are behind us. It’s getting darker earlier and kids have headed back-to-school. Saturdays are filled with non-stop college football and Sundays the NFL. With all those distractions, it’s easy to miss some important dates that are quickly approaching, but we want to make sure you don’t. So, don’t forget:

October 1, 2012: 

  • Deadline to establish SIMPLE IRA Plan for the 2012 Plan Year
  • Deadline to set up a new Safe-Harbor 401(k) plan for 2012 plan year
  • If you attain age 50 or over on or before December 31, 2012 October is a good time to consider making pre-tax catch-up contributions to your 401(k) - up to $5500 for 2012. 

October 15, 2012:

  • Self-employed business owners have until October 15 to establish a SEP IRA for 2012 
  • Last day to re-characterize your Roth IRA conversion if there is a loss
  • Medicare open enrollment begins, ending Friday December 7th
  • Final day to file your tax return if you have an extension

For help with any of these, please contact your Center planner for additional information. Then you can get back to enjoying fall for all its worth! 

Center Sponsors 2012 Vine & Dine to Benefit Gleaners Food Bank

 The Center proudly supported the local community and Gleaner’s Community Food Bank of Southeastern Michigan through the celebration of food, wine and art! The 9th Annual Vine & Dine, hosted by the Birmingham Bloomfield Chamber of Commerce, included an outstanding selection of wines, a strolling buffet featuring fine restaurants and caterers.  

This year's event was held Wednesday September 5th at the Birmingham Bloomfield Art Center. More than 300 business representatives and residents in Beverly Hills, Bingham Farms, Birmingham, Bloomfield Hills, Bloomfield Township and Franklin attended.

Gleaners Community Food Bank provides surplus donated and low cost food and related personal care products to people in need in southeastern Michigan. For more information about Gleaner's Community Food Bank of Southeastern Michigan, please visit their website at: www.gcfb.org 

Watch Out for Senior Financial Fraud

 Imagine you get a call from your grandmother.  She asks that you take her to the bank because the neighbor that usually takes her is busy, and she needs to get another certified check.  On the way to the bank, your grandmother shares that the lottery company promises that this is the final fee that needs to be paid for her award check to be issued – it has only cost her $1,000 and the award will be $100,000. “What!?!” 

This isn’t just a made-up story meant to scare you.  In fact, Susan Tompor of the Detroit Free Press wrote an article about this very topic recently in an article titled “Time to Look Out for Granparents’ Money”.   It is also consistent with the types of scams that the State of Michigan Offices for Services to the Aging are reporting and trying to combat.

In the Free Press article, Susan Tompor referenced a recent survey conducted by the Investor Protection Trust and the Investor Protection Institute that identified the top three areas of senior scams:

  • Theft by family members – family members taking and cashing Social Security checks and/or misusing access to bank accounts.
  • Theft by caregivers – similar to family fraud, but by trusted caregivers that are not family members.
  • Financial scams involving strangers –
    • Scams can involve strangers pretending to be grandchildren in trouble in a foreign country requesting that money be wired to get them back to the U.S.;
    • Scams indicating that the senior has won a lottery, but needs to send a wire or check to cover processing fees; or
    • Scams requesting personal information (Social Security Numbers, etc.) to verify Medicare or other benefits (seniors providing the requested information can become victims of identity theft).

These scammers take advantage of the trust and good will of older adults.  If you are an older adult, a family member of an older adult, or professional that works with older adults, be aware of possible senior financial fraud.  Take steps to protect yourself or the older adults you know by:

  • Protect your information, including Social Security Numbers, account numbers, etc.
  • Verify the validity of anyone calling or contacting you asking for personal information and/or transfer of funds.
  • Do your due diligence before hiring professionals to assist with providing of care or any other professional services.
  • If fraud is suspected, contact the appropriate authorities:
    • Adult Protective Services Vulnerable Adult Helpline 1-800-996-6228
    • Senior Medicare Patrol 1-800-803-1714
    • State Office of Financial and Insurance Regulation 1-877-999-6442
    • OR your local police

If you have questions about this additional Elder Care Planning issues, contact me at Sandy.Adams@CenterFinPlan.com.

Euro 101: The Beginning of the End

 Europe is no stranger to crisis.  Not all of their crises are self-imposed, however.  Popular as it may be to blame the Europeans for the current crisis, we must dig a bit deeper to get at some of the root causes of today’s problems and look more globally. 

In 1971, President Nixon pulled out of the Bretton Woods Accord removing the gold backing from the US Dollar (during Bretton Woods the US dollar had been pegged to the price of gold and all other currencies were pegged to the US dollar), allowing the dollar to float as it does today. This action had far-reaching consequences.  Shortly thereafter, many European countries followed suit with their currencies.

Nations, including the US, started to increase their reserves by printing money in large amounts essentially decreasing the value of their currencies.  Because oil was priced in US dollars, this resulted in an immediate pay cut to the oil producers. The Organization of Petroleum Exporting Countries (OPEC) eventually answered by pricing a barrel of oil against gold instead.

This domino effect ultimately caused the "Oil Shock" of the mid-1970s.  For two decades prior, the price of oil in U.S. dollars had risen very slowly and steadily by less than two percent per year.  Look at the blue (Nominal) line in the graph below, that is the oil price unadjusted for inflation.  Suddenly after 1971, oil became extremely volatile and expensive. 

http://en.wikipedia.org/wiki/1973_oil_crisis

To add insult to injury, oil exports were limited to many European nations. This led to a drastic slowdown in the European standard of living in the 1970’s causing the local governments to take on more and more debt to mitigate these effects. And so it began until the establishment of the Maastricht Treaty, which I will discuss in our next lesson.

Lesson 1:  A Little History Behind the Euro Zone Crisis

Lesson 2:  Who’s In the Euro Zone and Why Was It Established?

The information contained in this report does not purport to be a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.    Any opinions are those of Center for Financial Planning, Inc., and are not necessarily those of RJFS or Raymond James.  Past performance may not be indicative of future results.  Gold is subject to the special risks associated with investing in precious metals, including but not limited to:  price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.  Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.

Head of the Class: Back-to School for Center Kids

 It’s back to school time and our own Center families were busy getting students ready for another year of fun learning.  From preschool to high school we helped our kids stuff their backpacks with brand new supplies and special treasures. 

Check out the abundance of smiles as our kids said "cheese" and we parents captured yet another special “first day of school” experience.

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Ford Pension Decision – Find Out What Really Matters

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 Back in May 2012, Ford Motor Company announced plans to offer pension lump sum buy out payments to 90,000 retirees (see my blog).  Not to be outdone, General Motors announced a similar program shortly thereafter (see my blog).   As our firm began to see many in the financial services industry swarm to get a piece of the lump sum money pie …. we issued a Consumer Alert to retirees faced with the lump sum decision (see our blog here).

Since these early writings, we have consulted with several retirees to assist in making an appropriate decision based upon their unique circumstances. Moreover, we have continued to be a resource to the local and national media.

On July 18, 2012, I shared my observations with Channel 4’s Business Editor, Rod Meloni, that there are a few financial decisions in our lives we need to get right and this is one of them, quite frankly.

Earlier this month, Melissa Joy, CFP® and I were interviewed for a story by the Dow Jones News Wire (see our blog here).  The story illustrated that there are non-financial factors that should be considered in making the lump sum decision.

So, after multiple individual consultations, contributions to the media, and internal conversations with my colleagues, I share what I believe to be what really matters in making a suitable decision as it relates to continuing a monthly pension or taking a lump sum buy out:

  1. Life expectancy: While not the most enjoyable topic – your life expectancy as compared to the IRS life expectancy tables [the table used is a “unisex” table] is a critical factor.  For example, a 65-year-old man or woman has a life expectancy of 84.14 years; a 70-year-old 85.25; and an 80-year-old 88.61. YOUR life expectancy is based on YOUR health, heredity and lifestyle.  Is it longer or shorter than the IRS life expectancy? If shorter, taking the lump sum is more appropriate.  If you expect it to be longer, consider continuing the monthly pension. If you know exactly when you will die, the decision is pretty straight-forward.  But, assuming you don’t know that date … there will be a degree of uncertainty in the decision.
  2. Assumed rate of return if lump sum invested: Federal law governs what rate employers must use when computing the lump sum. The rate is a blended corporate bond rate that is based on age and may fluctuate month to month. The rate for a 65-year-old is near 4.25% and is lower for older ages. If your plan is to invest in vehicles that are expected to return less than the rate used to compute the lump sum, and you have an average life expectancy, then continuing the monthly pension makes more sense.  Hypothetically, five year certificate of deposit rates are currently 1% or less.  If that is your investment plan for the lump sum, it will be hard to generate more income from a lump sum so you may want to continue the monthly pension.
  3. Unique circumstances: What unique circumstances do you and your family have? As I shared in the Dow Jones story, even though the number crunching may suggest one decision – the non-financial decisions might just trump the numbers. Do you have the discipline to take only monthly withdrawals equal to your previous pension if you take a lump sum?  Are you likely to give money away to others such as children when you really shouldn’t?  Do you have a gambling or substance abuse issue?  In one case, our client determined that they were likely to provide support to their kids (to their own detriment) if they had a lump sum. They therefore chose to continue the monthly pension.   

Ford and GM sure have stirred up both excitement and anxiety for many retirees.  While the GM Pension offers have come and gone, Ford salaried employees will be receiving offers and making these decisions going forward. The decision to continue a monthly pension or take a lump sum is an important one and one that you need to get correct.  To make an appropriate decision, you need to do the number crunching and consider the non-financial aspects.  Please let us know if we can help reduce some of the anxiety and assist in making a suitable decision based on your unique circumstances and goals.

The information contained in this report does not purport to be a complete description of the securities, markets or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.  Prior to making an investment decision, please consult with your financial advisory about your individual situation.

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The Center's Celebrated for Being "A Cool Place to Work"

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 Melissa Joy, CFP® shares her insights about The Center’s approach to creating a culture and workplace environment that is energizing and rewarding for all team members.   Below is an excerpt from the article titled  A Cool Place to Work by Ellen Uzelac.

Creating a Culture

With $685 million in assets under management and 20 firm “members,” as they are called, Center for Financial Planning in Southfield, Mich. considers itself a “one-firm firm” that treats employees like they are employees of a business and not employees of an individual advisor.

There is a flex-time policy, financial support for the pursuit of new credentials and learning opportunities, an incentive compensation formula and structured career paths for all positions.

“We want to service our employees the same way we want to service our clients. After all, they have as much or more contact with clients as we do,” says Melissa Joy, a partner and director of investments for the 27-year-old firm. “I really think if you are going to be a modern firm, it’s critical to put yourselves in the shoes of an employee.”

It’s a culture that is anything but static. This past April, for example, every employee was involved in a half-day retreat involving the firm’s vision for 2020. “What better way to have buy-in than to get it from the get-go?” observes Joy.

Center for Financial Planning also launched an employee satisfaction survey that resulted last year in enhancements to its benefits package. Among them: formalized bereavement time; time off for community involvement; the opportunity to take a sabbatical after seven years of service; and increased time off for life balance concerns and professional growth.

“One of the ways that we like to think about it is we like employees that have intellectual curiosity. We’re in an entrepreneurial business. Intellectual curiosity isn’t something that starts when you are a principal,” Joy says. “We want to encourage and reward innovation. We want to grow our leaders from within.”   Joy is an example of that. She started out as a client service assistant 13 years ago. Today, she’s an owner.

“We have a lot of friends in the business and lot of people talk about their successes as an employer but they’re always bemoaning their high turnover,” she adds. “We don’t experience that and we think there is a reason for it.”

Our culture is driven strongly by our company values.  More than words; they serve as guides in our actions. Everything we do is about our clients and our team with our values leading the way.

We invite you to take a closer look (click here) at our 8 guiding values we believe make The Center a COOL PLACE TO WORK!

"Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC." Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James

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VA Aid & Attendance Benefits: Beware of Bad Advice

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 Imagine this scenario:  You attend a presentation with your father at his assisted living facility.  The organization presenting is very official looking, with materials covered in flags and red, white and blue.  Although they are not the Veteran’s Services Organization or VA, they claim to be able to help all veteran’s get a monthly pension benefit from the VA, no matter what their financial situation.  They claim clients they work with have never been denied benefits.  Could this be true, or might there be a catch?

The U.S. government provides several benefits to military veterans as a way to honor them for their service.  One of the benefits that might be available to many veterans and their spouses in older age is the VA Aid & Attendance Benefit. 

  • Not all veterans are eligible for this benefit, as it is dependent on time of service and medical and financial need.
  •  This benefit provides a monthly pension to veterans and/or their spouses in older age when they begin to need assistance with activities of daily living. 
  • The Aid & Attendance Benefit is also based on financial need – income versus ongoing medical related expenses and value of assets.  In general, anyone with asset in excess of $80,000 is not eligible (note that this asset number can be adjusted based on age and life expectancy).   *Source:  U.S. Department of Veterans Affairs

If a veteran qualifies within the income and assets requirements, applications can be filed with the Veteran’s Services Organization at no cost.  For veterans who might not be eligible for benefits without additional planning, organizations like those described above will offer to assist by re-registering and/or gifting assets and repositioning assets into insurance based products that generate high commissions to the “advisors” selling them and are not necessary to qualify for benefits. 

If you or someone you know is a veteran or spouse of a veteran who thinks they might benefit from the Aid & Attendance Pension Benefit, here are a few things to remember:

  • If the veteran has limited income and assets, go directly to the Veteran’s Services Organization to apply for benefits.
  • If you think you may need additional planning to qualify for benefits, seek out a Certified Elder Law Attorney who has been certified by the VA to counsel veterans.  A qualified Elder Law Attorney will counsel you based on the client’s needs now and in the future (i.e. future need for Medicaid benefits), and may recommend that the VA Aid & Attendance Benefit is not appropriate for all clients.
  • Be aware of advisers who insist that the only way to qualify for benefits is to shift assets to an Irrevocable Trust and fund the trust with insurance based products (be especially aware if the recommendation is to buy multiple, smaller insurance products – as this may not be a suitable option and the advisors may only be trying to maximize their commissions).  The real truth is that if the trust is appropriate, it may not be necessary for it to be funded with insurance products that might have high commissions and might have surrender charges not appropriate for an older adult.

I don’t know about you, but whenever I think about U.S. military veterans, I think of respect, service and gratitude.  The best way to honor our military veterans is to provide them with the most suitable advice for their situation. Not bad advice that will cost them money. If you are a veteran or know one who might be eligible for the Aid & Attendance Benefit, make certain that the appropriate professionals are consulted. 

Watch for my upcoming post on additional Elder Financial Fraud scams.  Contact me at Sandy.Adams@CenterFinPlan.com if you have additional questions about any elder care related topics.

The information contained in this report does not purport to be a complete description of the securities, markets or developments referred to in this material.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Keep in mind that there is no assurance that any strategy will ultimately be successful or profitable nor protect against a loss.  You should discuss tax or legal matters with the appropriate professional.

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