Euro 101: Will the Euro Survive?

 This is the million-dollar question of recent history.  There is no clear-cut answer but William James Adams PhD, professor and expert on the European economy, thinks the Euro may survive.  There are two major opposing viewpoints to this question.  The first is the “Anglo-Saxon View” and second is the Continental Theory.

Anglo-Saxon View

This view is based on optimal currency area theory and examines whether or not an area would benefit from a common currency.  In order for a common currency to work, there must be at least one of the following tools available to the people:

  1. Labor mobility – Since there are major cultural differences and language barriers mobility, or the opportunity to move where the jobs are, between European countries is severely lacking for employees.
  2. Price and wage flexibility – Prices are very sticky, for example companies can’t just double the price of pasta because customers will simply buy something else instead.
  3. Transfer of tax revenues from one region to the other – This works in the U.S because the Federal government takes in $162 of tax revenue of every $100 in state tax revenue, so there is a lot to spread around as they see fit. In contrast, in Europe, the European Union only has $3 in revenue for every $100 of country revenue.

Supporters of the Anglo-Saxon view, feel that the currency has been doomed from the start. 

The Continental View

When the U.S. dollar came about, none of the above scenarios were in place for almost 150 years and yet the dollar survived.  This is the argument that proponents of the Continental View take.

These days, countries making a trade across borders of member nations, say from Germany to Spain, benefit greatly from the elimination of transaction costs and hedging of currency conversions that previously occurred.  Also, if the Euro didn’t exist, a deflationary bias could occur, which would hurt the sale of goods.  This happens when member nations start to adjust their interest rates to be more competitive and attract more investment money.

Ultimately, it is not in any country’s best interest to let the Euro collapse since they depend on exports to other European Union countries for their livelihoods.  As there is no clear cut answer, it will be interesting to continue to follow the developments across the Atlantic Ocean.  We are continually monitoring the situation in light of how this may impact our client’s portfolio. For more detailed information on how the Euro Zone crisis began, take a look at the other blogs in our Euro 101 series.

Please see the rest of the posts in our Euro 101 Series:

Lesson 1: A Little History Behind the Euro Zone Crisis

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

Lesson 3: The Beginning of the End

Lesson 4:  Scandals

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.  Expressions of opinion are as of this date and are subject to change without notice.

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5 Years and Running! The Center Remains Fit-Friendly

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 The Center has recently been recognized for the 5th consecutive year by the American Heart Association as a Fit-Friendly Worksite.  The credit for the award and recognition goes to Center team members who routinely make health and wellness a priority in their lives. Kudos and Congrats to all!   

Leading balanced lives is a core value Center team members aspire to and health and wellness is an important aspect of balance in life.  Health & Wellness Committee member and Client Service Manager Jennie Bauder said, “the AHA Platinum Award is displayed in a common area of The Center and it symbolizes our commitment to everyday healthy habits.” Here are some of the healthy habits practiced in our workplace that helped achieve American Heart Association recognition: 

  • Physical activity options are available during the workday
  • Healthy eating options are provided in the office lunch area
  • Intentional focus on wellness as part of our culture

Gerri Harmer, Client Service Assistant, has been a Health & Wellness Committee member since day one.  She added, “ I am energized by the positive impact our program has on my colleagues and look forward to bringing new ideas to the group for 2013.”

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Medicare Open Enrollment

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 For a retired couple*, healthcare costs can exceed $10,000 per year and over $250,000 for a lifetime. It’s pretty obvious, given those totals, why making the right Medicare choices is critical. In addition to ever-increasing health care costs, Medicare premiums are projected to go up at a rate that is higher than the 1.7% Social Security cost of living increase for 2013. So, even if you dread digging into your Medicare options, there is no time like the present. It is officially Medicare Open Enrollment (October 15-December 7, 2012) which means it is time to review your A’s, B’s, C’s and D’s. If you are age 65 or older and are enrolled in Medicare, during Open Enrollment, you can make changes to:  

  • Medicare Part D plans
  • Medicare Advantage *
  • Medigap Plans

*Medicare Advantage plans can also be changed from January 1 to February 12, 2012.

It is just a short window so it is important that you carefully evaluate your needs and the available plans to make sure that you are in the most appropriate and cost-effective plan for your situation. You can do your own analysis by using the online tools provided by or look for the help provided by local senior organizations or independent Medicare consultants. Taking the time to find the best plan for you can be financially life changing. Contact your financial planner for resources in your area.

Open Enrollment: Other Benefit Selections

 Various benefits offered by employers might not fit the mold when it comes to choices you have to make during Open Enrollment.  Some benefits are more obscure.  For example legal services, long-term care insurance and even professional development tracks could be perceived as benefits today.  

Professional Development:

Professional development encompasses all types of facilitated learning opportunities, ranging from college degrees to formal coursework, conferences and informal learning opportunities. There are a variety of approaches to professional development, including coaching, consultation, mentoring, technical assistance, and even reflective supervision.  If your employer has an annual budget for such activities, you know they are serious.  I suggest reading your employee handbook to see what resources are available to enhance your career and personal development.

At the Center for Financial planning our firm maintains professional development tracks. We have a professional development budget and provide at least one formal meeting each year with each employee discussing their career and personal development. There are other meetings and discussions throughout the year, like check-ins and group discussions that can help provide insight to employees as well.

Group Long-Term Care Insurance:

Here’s a startling fact: Over 40% of people receiving long-term care services are under the age of 65. These days, some forward-thinking companies are offering long-term care insurance. As an employee, you may want to consider this as part of your benefits package, because it’s a way to help:

✔ Protect your savings and assets

✔ Protect your family and friends from the burden of caregiving

✔ Protect your ability to choose where care is received

Employer-sponsored group coverage for LTCi brings up some thorny issues. While some group plans can be helpful for folks with certain, otherwise-disqualifying health conditions, in some cases LTCi coverage is best customized and purchased through an independent broker. That’s because many group plans entice younger, healthier people to enroll by offering them lower rates, but these rates may still be higher than an individual policy. Group plans typically have fewer selections in benefit choices and less amount of home care.

Pre-Paid Legal Services

Another rather new and uncommon employee benefit is pre-paid legal service.  This is an individual or group low-cost provider for specific, limited legal services. The services are usually pretty basic, but can sometimes be specialized and can cost considerably less than hiring an attorney on your own. These services can be helpful to participants with anything from automotive-related issues and ticket violations to various basic legal issues like purchasing a home without a realtor.

Pre-paid legal services may be provided on an "open" basis, with a subscriber selecting specialists relatively freely from a pool of participating providers. They may also be offered in a "closed" system, in which most or all services are provided to a subscriber by one central law firm. Pre-paid legal services have existed since the early 1900s, and have increased in popularity since the 1970s.

These might not all be benefits that you have to select during open enrollment. In some cases, they may be yours for the taking. But you can’t take advantage, if you don’t know what’s available. So find out about your own company policies and make the most of them. This is just one in our 8-part blog series dedicated to answering the tough questions during the open enrollment season.

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.  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 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.

Center Holds Medicare Workshops – led by Sandra D. Adams, CFP®

 Over the last month, the Center assisted over 60 clients and friends with Medicare workshops in preparation for Medicare Open Enrollment – October 15 through December 7, 2013.  For those Medicare open enrollment allows for changes to:

  • Medicare Part D plans
  • Medicare Advantage *
  • Medigap Plans  

*Medicare Advantage plans can also be changed from January 1 to February 12, 2012.

The workshops, highlighted changes in the Medicare plan offerings, changes to Medicare due to the Affordable Care Act, and the tools available for individuals to review and analyze their own plans to make the best choices for their specific circumstances.

Given that healthcare costs can exceed $10,000 per year (and over $250,000 lifetime) for a retired couple*,  making the right Medicare choices is critical for retirement success.  In addition to ever-increasing health care costs, Medicare premiums are scheduled to increase, likely at a rate in excess of the 1.7% increase for Social Security.  It is important that during this limited period of time you carefully evaluate your needs and the available plans to make sure that you are in the most appropriate and cost-effective plan for your situation.   You can do your own analysis by using the online tools provided by Medicare or look for the help provided by local senior organizations or independent Medicare consultants. 

Taking the time to find the right plan for you can be financially life changing.  Contact your financial planner at the Center for guidance in making your Medicare elections.

*Source:  MetLIfe Research Institute.  Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.  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 foregoiong 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.  Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.

 

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Investment Performance - 3rd Quarter 2012

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invcom_performance_q4.jpg

Source: Morningstar

Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.

Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.

Michigan Lowers Required Tax Withholding for IRA Distributions

 The Good News: 

If you are currently taking distributions from an IRA account the minimum withholding tax rate just dropped.  Effective October 1, 2012 Michigan taxpayers have the option to reduce withholding tax from the current minimum of 4.35% to 4.25%.

More Good News:  

Changing your Michigan withholding tax amount is far less complicated than the Tax Code.  Signing a new IRA distribution form to authorize the change is all that is needed. 

Thinking About Making a Change:  Please contact your planner if you currently have an IRA distribution schedule in place and want to discuss making a change to your Michigan withholding tax.

Note:  You should discuss any tax or legal matters with the appropriate professional.

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Open Enrollment: Disability Insurance

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 Too often disability insurance is overlooked or underutilized.  It is natural to assume good health enjoyed today will continue uninterrupted until retirement.  Because this is not always the case, paying for disability insurance today when it is not needed is like dotting the “i’s” and crossing the “t’s” in a comprehensive financial plan for the future.  In the event a health crisis occurs, disability insurance is designed to replace a portion of your income lost during the period of disability. 

Employers that include disability insurance on the menu of choices generally offer two types:

    ✔ Short term disability – provides benefits for a limited period of time – usually six months or less.

    ✔ Long term disability – provides extended benefits after an employee has been disabled for a period of time.

Short Term Disability Insurance:

    ✔ Bridges the gap between sick pay and long term disability coverage. 

    ✔ Coverage typically lasts between 10 to 26 weeks.

Long Term Disability:

    ✔ Benefits employees who are disabled as a result of sickness or accident and unable to work for a lengthy period of time (usually more than six months).

    ✔ Long term disability insurance does not provide insurance for work-related accidents or injuries that are covered by workers compensation insurance.

What else do you need to know?

    ✔ The cost of group coverage is often less expensive than the cost of individual coverage

    ✔ Group policies often have fewer underwriting restrictions than individual policies.  A physical exam is not typically required.

    ✔ “You can’t take it with you” is a phrase that normally applies to group disability insurance.  When you leave your job most often the coverage does not convert to an individual policy.

    ✔ If you know you are leaving your job, consider applying for individual coverage before you quit. Assuming you are insurable this strategy eliminates lapses in coverage.

    ✔ Consult a Certified Financial Planner™ to determine how disability insurance fits into your long-term financial picture.

We want to make sure you don’t miss your opportunity to take advantage of employer provided benefits during open enrollment period.  That’s why we are focusing an 8-blog series on your options when it comes to open enrollment. Typically, open enrollment is offered toward the end of each calendar year and provides a window of time to make new elections or change current benefit coverage.  It’s easy to confirm this period of time by checking with your human resource department or benefits coordinator.

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.

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