Anticipating Abundance In A Changing World

If you pay attention to the headlines, you can’t help but think the general trend is downward, and that the economic and social prospects for the future are decidedly bleak. In this context, the discussion isn’t if the glass if half-full or half-empty; it’s whether there’s even a glass.

But all this pessimism may be obscuring a greater reality: Especially in the past 50 years, things have been getting better – for everyone – at a rapidly-increasing pace. Furthermore, considering the trajectory of past progress, as well as certain factors already in place, it is very likely that the next 10-20 years will be even better. Are you prepared for unprecedented abundance?

Life IS Getting Better: The Disappearance Of Traditional “Death Markers” In Life Insurance Underwriting.

In the life insurance industry, certain conditions or incidents in one’s medical history have historically been considered by actuaries as “death markers,” i.e., these were preexisting conditions that typically made applicants uninsurable. However, as modern medical treatments for these conditions have evolved, the growing track record of success is changing the underwriting paradigm.

These underwriting adjustments, while just beginning to move through the industry, are significant. As a result, hundreds of formerly uninsurable applicants are now obtaining coverage (or better classes of coverage) each year.

A Proposed Tax Change To Inherited IRAs Is Dropped, But Is It A Sign of Things To Come?

One of the unknowns that lurks in the shadows of many qualified retirement plans (such as IRAs, TSAs, and 401(k)’s) is future taxation. Especially in tough economic times, there is a strong tendency for governments to discover untapped sources of “revenue.” Since undistributed retirement accounts represent a large pool of unrealized tax revenue, legislators frequently contemplate ways to “improve” government access to these funds.

In February, Montana senator Max Baucus, the chairman of the Senate Finance Committee, floated a proposal as part of a highway funding bill, that inherited IRA accounts should be required to make a full distribution within five years after the death of the IRA owner.

Estate Planning #101: Preparing A Will

A will is written statement made by an individual that directs the distribution of their property when they die. A legal will is a fundamental financial document that is relevant for almost every adult, and for most people it is relatively easy to complete. Yet a December 2009 survey by Harris Interactive found that only 35% of adult Americans have a will.

To read this month’s full edition click here, Creative Wealth March Edition.

Will Robots Make the 401(k) a Dinosaur?

In a static employment situation, where steady paychecks and long-term employment are the norms, the 401(k) seems like a sound concept. Even today, generic financial advice from mainstream media still usually includes the phrase “max out your 401(k) contributions.” But the viability of a 401(k) hinges on ongoing employment and a steady income. Given the changing dynamics of employment, making 401(k) contributions a financial priority may be committing to an approach that is no longer well-suited for the current economic climate.

Checking (and fixing) Your Universal Life Policies… Before It’s Too Late

Universal Life (UL) is a type of permanent life insurance policy introduced in the early 1980s. Some of the features of UL were quite innovative, but because of the economic conditions in which UL was introduced, the true long-term impact of these UL innovations is only now becoming evident. Since many long-term owners of UL policies are just now coming to grips with these issues, it is important to understand the concepts and factors that impact UL contracts, and how to address them.

Gurus, Newsletters & “Financial Enlightenment”

Today’s financial gurus have TV shows, newsletters, DVDs and do-it-yourself money makeovers. They are smart enough to get your respect, entertaining enough to keep your attention, and down-to-earth enough to make you say, “hey, he/she is one of us! I can relate to this guy/gal!” But while a guru might make personal finance simple and entertaining, their “objective advice” is sometimes a thinly-disguised reach for your wallet. A recent Wall Street Journal highlighted the inaccuracies and questionable performance claims of a company affiliated with a prominent “personal-finance expert.”

Preparing for Your “Base Income Year”

For parents who anticipate their child/children will attend college, part of the process will almost assuredly include compiling personal financial documentation to apply for grants, loans and scholarships. Among the factors that determine financial aid eligibility, the base income year is the one that counts most because it establishes a baseline income level for successive years. With some foresight, parents may be able to adjust their asset positions to improve their financial aid profile.

To read this month’s full edition click here, Creative Wealth February Edition.

Nuclear Family Financial Models, Extended Family Realities

In Western societies, the Industrial Revolution freed nuclear family units from the need to remain connected to an extended family. Factory workers didn’t need land to make a living, didn’t need to become apprentices to find work, and didn’t need to stay in their hometowns. But even in “modern” society, it is difficult for a nuclear family to remain unaffected by its extended family connections. To make financial plans without considering one’s extended family is short-sighted and unrealistic.

Extended Family Issue: Financing Independent Living Arrangements

Generally classified as the population born between 1946 and 1964, the first of the Baby Boomers turned 65 in 2011. Not only are many of them retiring and collecting Social Security, these Boomers are also looking for long-term residential living options better suited to their lifestyle changes. This swell in demand is creating many different choices, as well as a new financial question: how will we pay for this?

Extended Family Issue: Special-Needs Planning

Raising a family is challenging under any circumstances, but for parents with special needs children the stakes are dramatically higher because the parenting responsibilities may last the child’s entire life. This reality can be overwhelming, both emotionally and financially. One of the best ways to face these long-term challenges is to systematically establish a long-term plan, one that considers both the emotional and financial issues likely to be encountered.

Some Retirement Plan Contribution Limits Change In 2012

Every year, the Internal Revenue Service announces changes in the amounts individuals can deposit to qualified retirement plans. And while tax deductibility can provide some extra saving incentive, it is prudent to consider these deductions (and restrictions) within the context of your larger financial picture. When was the last time you assessed your retirement plan saving?

To read this month’s full edition click here, Creative Wealth January Edition.

How Will The “Great Recession” Change Your Perception?
When it comes to money, the financial climate in which you grew up can have a life-long impact on your financial perceptions and behavior. The influence appears to be particularly strong if the financial events are extreme, such as those occurring in a boom or bust period. From a broad survey of current financial commentary, here are some possible perception changes that are in the making in the aftermath of the Great Recession.

Research Shows Financial I.Q. Declines – Just When You’ll Need It Most
For many Americans, their most important financial decisions come at the end of their lives. These decisions not only involve large dollars, some of them are irrevocable. Yet a new study shows that, regardless of gender or education level, Americans’ financial literacy diminishes rapidly after age 60. Some compelling information on the value of planning now, even if the big decisions are far in the future.

APPLES AND ORANGES: The Chance To Get Rich vs. The Guarantee Of Avoiding Poverty
Every now and then, a look backward can be enlightening. That’s the case with the on-going debate about how whole life insurance fits into individual financial programs. Because whole life insurance is a unique financial asset, the challenge for professionals and consumers has always been to properly evaluate its value in relation to other alternatives. Read a short 44-year-old commentary that clearly articulates the issues.

Inflation Distortions
We all know inflation exists. In fact, we expect it, and accept it as part of our financial lives. If you can remember when gas was $1.00/gallon and hamburgers were 50 cents, you’ll recognize it’s unlikely we will see those prices again. But over time, inflation distorts past values and makes it harder to determine our financial future. Inflation is why a 2011 Thanksgiving dinner can cost both more – and less – than the same meal in 1934. Really.

To read this month’s full edition click here, Creative Wealth December Edition.

Does Your Income Have “HIGH BETA”? (And if it does, what are you going to do about it?)
Financial analysts use a variety of mathematical metrics to evaluate the performance of individual stocks and indexes. One of these terms of evaluation is “beta,” the measure of a stock’s volatility in relation to a broader benchmark, usually an index. The higher the beta, the greater the volatility. Applying the concept to other areas of finance, economists are finding that many American households have “high beta” incomes, and this fluctuation is having a huge impact on personal finances as well as the national economy.

Hindsight Shows Three Days Have Mattered Most (But which three?)
What if the annual performance of your investments hinged on just three days each year? A statistical analysis shows how being in or out of the stock market for three days this year could have meant huge gains or losses. But is this information you can use?

RETIREMENT INCOME INSURANCE:
How to Make the Key Factor More than Just a Guess
“What’s my number? – That is, how much do I need to retire?”
These are pressing questions for individuals whose major financial objective is saving for retirement. And no matter how complex and sophisticated the process used to answer these questions, every retirement projection has at its core a calculation of Present Value. Most of the time, the critical factor in the generation of a Present Value calculation is nothing more than a guess, but there are ways to make retirement planning much more certain.

Deleveraging Vs. Saving
With the economic turmoil of the past few years still roiling their personal finances, many American households have made a focused effort to “deleverage,” that is, to pay down their debt balances. In fact, some people are even re-allocating their savings to pay off debt. However, while both debt reduction and saving are positive financial actions, it is important to remember that paying debt is not the same as saving.

Wishing you all the best this Thanksgiving weekend.

To read this month’s full edition click here, Creative Wealth November Edition.

“Can We Monetize It?
The process of converting something of value into money is called monetization. Because money has a superlative advantage over all other assets since it can be used to buy almost anything, monetization strategies are an essential part of financial decision-making for both businesses and individuals because monetization makes valuable assets spendable.
The concept of monetization is simple, and this simplicity may lead us to overlook its importance. But when we have valuable assets that are not monetized, we begin to see how crucial monetization is to financial success.

A “Hidden” Monetized Asset: Your Human Life Value
As a parent, spouse, employee, you have a unique human life value to others. While much of the value you bring into these relationships may not be not financial, or even financially quantifiable, a life insurance policy allows you monetize your human life value when you are no longer there in person. When you obtain life insurance, you have monetized yourself.

Monetizing Home Equity With A Reverse Mortgage
A typical method of monetizing real estate assets is taking a loan against the equity. But most monetizing strategies that involve conventional borrowing come with the obligation of regular, scheduled repayments. A reverse mortgage is a unique monetization-by-borrowing agreement that offers flexible and deferred repayment options. Along with several other unique advantages, a reverse mortgage can be a very attractive asset for older individuals to monetize.

The Best Resource for Life Insurance
An ongoing philosophical debate in the financial services community is how financial professionals should be compensated, either by commissions or advisory fees. Since both sides are fairly well-entrenched on philosophical grounds, it is perhaps a surprising to read a practical, real-world perspective on how to obtain reliable financial advice, particularly in regard to life insurance.

Required Minimum Distributions (RMD’s): The distribution may be required, but what if you don’t want to spend it?
As life expectancy continues to increase and general good health extends later in life, many qualified retirement account holders age 70½ or older may still be working, and/or may not want or need to take distributions from their accounts. For these individuals, liquidation from a retirement account will result in additional taxable income, and the funding of a new, non-qualified accumulation vehicle. Both facets of this distribution process could benefit from some forethought and planning.

To read this month’s full edition click here, Creative Wealth October Edition.

“Either-Or” Fixations In Life Insurance: Are You Missing the “C” Option?    
Why do some people insist on turning every issue into a black-or-white, either-or discussion? When it comes to financial decisions, most of the time an either-or approach is neither necessary nor desirable. In fact, finding a “C” option is often much better than choosing Option “A” and rejecting Option “B” (or vice versa). This is true even when the issue is life insurance.

The Confounding Tax Consequences of Complex Financial Instruments
There’s a long-standing guideline for individual investors that says you should never buy a particular financial instrument purely for its tax-favored status – the underlying investment opportunity needs to make sense apart from its tax treatment. However, this does not mean you can ignore the tax consequences when you evaluate a potential investment, because taxes can significantly impact overall returns. As more sophisticated investment vehicles have become available to a larger segment of individual investors, this issue has grown in importance.

The Economic Cost of Caring for Elderly Parents
In developed countries, a predominant demographic trend is the combination of falling birthrates and aging populations. These two trends are already in place, and the impact of these factors is inexorably working change on social and financial paradigms.

One of these areas of predictable change is the increasing number of children caring for elderly parents. As the combination of longer life expectancies and declining populations puts a greater strain on government-sponsored social safety-net programs, the default response will be placing a greater burden on children to care for their parents.

Getting Organized: Essential Documents to store in one file cabinet

From 107 to 1,124 IN 32 Years: Should you be impressed?
When someone provides “just the facts,” it is up to you to interpret them. A short discussion about how different formats of interpretation can suggest different conclusions – from the same information.

To read this month’s full edition click here, Creative Wealth September Edition

A Paternal “Nudge” Is No Substitute For a Personal Plan
When a well-intentioned financial “nudge” like automatic enrollment for 401(k) plans collides with the Law of Unintended Consequences, the results can be baffling. How can a procedure designed to increase retirement saving actually suppress it? This is just more evidence that there are no “auto-pilot” financial programs – although you might want a “Co-Pilot.”

Accredited Investor Status: The Opportunity to Make (or Lose) a Lot of Money
An accredited investor is either an individual or organization permitted by United States securities law to invest in certain types of higher-risk investments often broadly referred to as “private placements” or “private offerings.” These private offerings include items such as seed money investments in start-up companies, limited partnerships, hedge funds, and angel investor networks. By some estimates, almost half of all investment capital raised in the United States comes from private offerings, and some high-profile private offerings have made news recently because a few critics say the “little guys” are being frozen out of big profits. Is this really a big deal? What do you need to know if you are thinking about becoming an accredited investor?

Life Insurance Is Not a Disposable Product: “Don’t worry about it. We can always get another one.” (Or maybe not.)
We live in an increasingly disposable consumer culture. If something breaks, it’s often cheaper to buy a new one rather than fix it. But there are some financial instruments that don’t work as well when they are treated as disposable items, like life insurance. When individuals terminate a life insurance policy – for whatever reason – they have forfeited the certainty of their insurable status. And they may not be able to get it back.

Medical Expense Credit Cards: Using Plastic for Plastic Surgery?
In America, the default consumer response to a shortage of funds is to use plastic – to charge it now and pay for it later. So it should be no surprise that credit card issuers have begun marketing healthcare credit cards as a way to pay increasing out-of-pocket medical costs. An overview of the possibilities and pitfalls of using plastic to pay for plastic surgery and other expenses not covered by insurance.

To read this month’s full edition click here, Creative Wealth August Edition

Social Security: The Distant Future Is Here… 
For a long time, the prospect that Social Security might have to fundamentally change in order to continue operating as a safety net for all Americans was an issue for the “next generation” to resolve.. Now it appears the future is here. And the only silver bullet most Americans have in their financial holsters is to save more money – starting right now.  

If You Earned $310,000 A Year, Could You Survive a “Forced Retirement?”
“Forced retirement” is just another way of saying someone wants to work, but external events keep them from doing so. This could be the result of a layoff, downsizing, health problem, etc. Most Americans, whether they earn a lot of money (say, $310,000 in their first year on the job), or a little, are ill-equipped to financially survive a forced retirement. This is a serious problem, because even a short period of forced retirement – like 60 days – is enough to undo much of their financial progress.

Also … A Forced Retirement Protection Checklist
Four fundamental financial decisions that can make all the difference when you need to survive a forced retirement.

Estate Planning For Blended Families – Relevant In the American Colonies and Today
The social norms of the 17th century colonists would not appear to have much in common with 21st century cultural standards, but there is one unique parallel: A concern for the equitable distribution of the property and estates of blended families.

According to the U.S. Census Bureau, blended families now actually outnumber traditional nuclear families. For different reasons, blended families were also a prominent feature of the American colonies. Many of the basic estate and inheritance issues from both eras are similar. The difference is the financial particulars of contemporary blended families are typically more complex and require much more documentation.

To read this month’s full edition click here, Creative Wealth July Edition

Decreasing Debt and Increasing Liquidity
For almost every individual or household, decreasing debt and increasing liquidity are lifelong financial management tasks. Because there aren’t many financial products or sophisticated services that can be marketed to consumers in this area of personal finance, decreasing debt and increasing liquidity often end up being do-it-yourself financial activities. But it doesn’t have to be that way.

Decreasing debt: Get your priorities straight
While some debt may be necessary, even inevitable, dollars used for debt payments are enriching someone else’s financial condition instead of yours. Here’s a simple question to clarify borrowing decisions: Does this debt help me move from being a laborer to a capitalist?

Increasing liquidity: What type, how much
When the conventional paradigm for individual finances was to work 40 years for one employer, then retire with a watch, Social Security and a pension, the standard advice was that cash reserves, typically defined as savings in a bank, should equal 3-6 months of income. But when the definition of liquid assets is broader, the career track is less certain, and the global economy is more volatile, the old standards are not workable.

Estate Tax Rules for 2010 Still Up In The Air
In late December 2010, Congress finally crafted a short-term estate tax bill that modified both the exemption amount and the tax rates for 2011. But what to do about those estates that were settled in 2010 when there was no estate tax? Considering the lateness of the legislation, Congress allowed estates of taxpayers dying in 2010 to choose between the 2010 and 2011 systems. Which formula works best? It all depends.

529 Plan Withdrawals: The Devil Is In The Details
Parents (and grandparents) who used 529 plans to save for college expenses were often attracted to the programs because they offered tax-free accumulation on deposits and no taxation on withdrawals, provided the funds were used for educational expenses. And because of the special tax treatment of the deposits, it is no surprise that withdrawals require some careful handling to make sure they meet government qualifications.

Important Detail: Inform Your Beneficiaries!
It is the primary responsibility of a beneficiary to inform the insurance company of the death of an insured individual. But what if beneficiaries don’t know who they are? Every year, billions of dollars in insurance benefits, annuity payments and retirement accounts remain unclaimed. If these assets remain unpaid, many laws allow state governments to claim these assets. Here are ways to ensure your beneficiaries receive what is due them.  

To read this month’s full edition click here, Creative Wealth June Edition