Creative Wealth May 2011 Edition

Posted on May 19, 2011

In this issue of Creative Wealth:

Which Stones Will Make Big Ripples?
When it comes to making financial decisions, there is the belief that cause-and-effect relationships are at work in the universe, and that those who understand these relationships can both accurately discern the past and confidently predict the future. Theoretically, this paradigm is correct. But practical application of it is almost impossible. Why? Because there are so many inter-related causes and effects. Read more….

Two Overlooked Principles That Can Cause (or Prevent) Big Ripples
Most of us are familiar with basic financial principles like saving, reducing or eliminating debt, avoiding losses, and maintaining liquidity for emergencies and opportunities. We list here a couple of basic concepts that are perhaps not as well known, yet just as important, with great practical value.

Estate Planning: A Pebble that Can Ripple For Generations
It is an indelicate question, one that almost seems impolite to ask. But… What will happen to your stuff when you die? As much as it might seem crass or rude, this is a legitimate and critical question for spouses, children, creditors, business partners, charities, even the government. An estate plan serves as a legal road map for the disposition of your assets and obligations at the time of your death, and not only ensures that all property will be distributed according to your personal wishes, but also attempts to deliver the largest distributions possible with a minimum amount of delay to the appropriate parties.

Life Insurance in Estate Planning
Because of the financial leverage of life insurance (the ability to reserve a large amount of money for the future with a small premium), it is an ideal financial instrument to protect the best assets in an estate and maximize distributions to beneficiaries.

College-Loan Debt: A Millstone on a Graduate’s Future
Beginning a career with significant debt obligations is like entering a race with a grand piano tied around your waist. The dead weight of debt not only makes it harder to get started, but also means it will take longer to reach milestones. Conversely, if you want to give your children a financial advantage for the rest of their lives, help them graduate from college without any debt, particularly student loan debt.

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

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Creative Wealth April 2011 Edition

Posted on April 26, 2011

In this issue of Creative Wealth:

Is It Time To Say Good-Bye To Volatility?
Since December 2010 analysts have also reported an uptick in deposits to mutual funds, along with other indications of increased retail customer activity. It appears the average American is once again ready to entertain some risk in exchange for the possibility of higher returns. And at this point, it is fair to ask…Is this a prudent financial move or a typical “herd response” that often ends badly?

Have 401(k)s fallen short?
Ever since the stock market tanked in late 2008 and 2009, devastating the account balances of many 401(k) retirement accounts, an anguished cry has arisen lamenting the “failure” of the 401(k) to deliver on its retirement promises. Find out why a combination of misunderstandings, unrealistic expectations and unintended consequences has some Americans looking for a better retirement program.

Assumed Annual Rate of Investment Return: What the Pros Expect
The assumed annual rate of investment return, also known as the discount rate, is what a pension fund believes it can realistically earn from its investments on an annual basis when averaged over the course of 20 years or more. This assumption is a crucial calculation factor for pension managers, as a slight deviation can result in enormous savings – or losses. A look at what professional money managers consider realistic when it comes to investment returns.

Prudent and Compassionate End-of-Life Planning
Preparing for a loss is never easy. But not preparing for it can make a tough situation even harder. This can be particularly true when a family member or loved one is in failing health and close to death. Reports indicate that more than 75% of people will be unable to make some or all of their own medical decisions at the end of life, which is why preparing advance directives is both prudent and compassionate.

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

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Creative Wealth March 2011 Edition

Posted on March 31, 2011

In this issue of Creative Wealth:

Getting Slapped by the “Fat Tail”
People aren’t rational. That’s the basic conclusion of all sorts of studies in behavioral finance, a discipline which tries to understand what motivates and determines peoples’ financial decisions. But, in an ironic twist, it also appears that one of the factors in poor decision-making may be an over-reliance on logic and science. Some events may have an outsized impact on our financial lives, even though the probability of their occurrence is quite low. An important part of effective risk management is recognizing – and preparing for – the impact of the unexpected.  

Increased Saving: An Economic Stimulus Plan That  Moves the ‘ANIMAL SPIRITS’
“Animal spirits” refers to a phrase first used in the 1930s by economist John Maynard Keynes to describe the economic confidence that prompts people to spend money. For Keynesian economists, this is one of the justifications for using governments to provide economic stimulus packages. A recent uptick in real estate sales has some economists declaring the imminent revival of these animal spirits. But this resurgence has nothing to do with governmental and institutional policies. In fact, just the opposite: Banks and government agencies, through higher down payments and tighter lending standards, are making it harder to buy a home. The “stimulus” is coming from individuals with cash savings.

Ignorant Certainty: (“I know I don’t like it, even though I don’t know what it is”)
French essayist Michel de Montaigne “Nothing is so firmly believed as what is least known.” Although Montaigne’s comments are more than four centuries old, they still apply today – especially when the topic is cash value life insurance.

Given its 150-year history, it would seem that cash value life insurance would by now be a well-understood financial product. Yet a quick survey reveals many financial commentators have a strong distrust and outright animosity toward cash value life insurance. Why? Some of the problem is simply financial ignorance, and the tendency to denigrate what is not easily understood. Yet cash value life insurance is the logical integration of several sound financial concepts.

Re-shuffling the Reverse Mortgage
Some changes in the reverse mortgage market may make it easier for seniors to access their home equity, but also protects lenders from declining values in the real estate market.

Did You Know?…
Some interesting factoids on the historical background of life insurance.

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

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Creative Wealth February 2011 Edition

Posted on February 26, 2011

In this issue of Creative Wealth:

Perhaps more than any other issue, increased life expectancy has changed the financial metrics of retirement. While newspapers and media pundits attempt to divine the tea leaves of today’s economic activity, they often overlook the trends put in play by demographics, trends that almost certainly will play a larger role in everyone’s long-term economic well-being.  

Will 75 become the new 65?
For almost a century, age 65 has been associated with retirement. But as Americans live longer, a variety of demographic, social and financial factors may force them to keep working far past age 65.

Financial Protocol: How to Compensate Family Caregivers.
Another socioeconomic impact of increased longevity is the growing occurrence of children and/or other family members serving as caregivers for aging parents and relatives. Caregivers usually find their duties require significant financial sacrifices – cutting work hours, moving to live with an aging parent, etc. – and remuneration to family caregivers is a legitimate financial consideration. But as with many other financial transactions, the devil is in the details.

The Behavioral Nudge to Spend Built Into the 2011 “Payroll Tax Holiday”
White House officials state the average American family should see a $1,000 increase in take-home pay as a result of a one-year reduction in Social Security payroll taxes paid by their employers. Any tax reduction is good news, but a unique aspect of this tax break means you are more likely to spend the extra money rather than save it or pay down debt – unless you take steps to keep this money in your control.

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

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Creative Wealth January 2011 Edition

Posted on January 31, 2011

In this issue of Creative Wealth:

Retirement: Work longer. Spend more. Save less. Have fun. (Really?)
Math never lies, but sometimes its practical applications don’t add up in real-life circumstances. And when you take a purely mathematical approach to retirement planning, these practical limitations can be a problem. This has prompted some financial commentators to propose different models for retirement. Among the features: a fourth leg, more years in the workforce and a diminished emphasis on saving..

4th-leg Contrarian Indicator: Life Insurance Must Make Sense, Because Fewer People Have It.
Contrarians look for advantages in not following the herd. So when a recent survey reports that fewer American households own any kind of life insurance than at any time since the 1950s, it may be an indicator that having life insurance is really a smart move – especially if you need a fourth leg in retirement.

Saving: A Logical Response to Uncertainty
In the midst of a deep financial recession, many businesses and individuals are increasing their cash positions to record levels – even though the returns from these deposits are near zero. Why would anyone continue to save money under these circumstances? There are several very good reasons. 

Uncertainty Example: The Boss Of The Yankees And His Estate
When George Streinbrenner, the owner of the New York Yankees, died in July 2010, many publications noted that his estate would be exempt from federal income tax, due to legislation that called for a one-year elimination of the tax for 2010. However, Mr. Steinbrenner’s estate may be subject to other taxes, and the estimates of the cost of these taxes provides a telling example of the uncertainty that is prompting many to build their cash reserves.  

Knock, knock. “IT’S HOUSEKEEPING…We’re Here To Clean Up Your Beneficiaries”
Beneficiaries are a small yet important detail. As part of regular “financial housekeeping,” here are some factors to consider when evaluating the status of beneficiaries on your life insurance policies, retirement accounts, and other financial assets.

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

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