New Company Name- this is not a myth

I got a nasty and obtuse letter from a California attorney threatening all kinds of things if I didn't stop using the name "Silver Sage Advisers". My doing so would apparently cause great harm to his client, who doesn't even do business in Oregon under that name. Not really caring one way or the other, and not wanting to harm anybody, I'm bypassing this battle and have re-registered my investment adviser company (RIA) under the name "Duell Wealth Preservation", which more accurately reflects my main mission anyway.

In a weirdly literal interpretation of Oregon Statutes, the Department of Finance & Corporate Securities (which regulates RIAs) says I must charge fees for my services or I can't be a Registered Investment Adviser. My advisory contract and fee schedule are posted on my website under "Links". Fees are split into three different areas: (1)Assets under management, (2)Flat fee for a comprehensive financial plan, and (3)Hourly fees for specific tasks. With any particular client I charge only one type of fee; there will be no Dagwood sandwiching of fees. I'm not sure how this protects consumers but I'm Mr. Compliance when it comes to the regulatory agencies.

Avoid the most dangerous "predator" of your retirement funds

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20 years ago I and my industry hounded everyone to defer as much income as possible to retirement because one’s income would be less and tax rates lower. Then 10-12 years ago I advised “tax diversification”, half your retirement money should be taxable, half tax-free. That way if your savings plans were successful, and you retired into a higher bracket, you could take the tax-free income first. If your bracket was lower, you could take the taxable income first and let the tax-free portion keep building.

But now several factors have created a perfect storm of big tax increases in the near and long term:

· Current tax rates are the lowest since the 1920’s
· As a % of GDP, the Federal deficit is the highest since WWII
· The boomers will skyrocket demand for Federal entitlements

So regardless of whether your income is lower in retirement we will all most likely pay higher tax rates.  What should you do? Here are my recommendations:

1. If you have a matched retirement plan at work, keep contributing enough to get every matching dollar. That’s free money.

2. If you can still afford to save more, ask your employer about a Roth 401(k).  Employers have been able to do this with 401(k) & 403(b) plans since 1996.

3. If they won’t accommodate you, set up Roth IRAs if your income level qualifies.

4. Convert Traditional IRAs & accessible retirement accounts to a Roth IRA. If your single or joint income exceeds $100,000 you can do this starting in 2010.  This is a perfect time to take the tax hit: low account values and low tax rates.

5. Want to bypass most of the conversion restrictions?  You can do a strategic rollout into other financial vehicles that will be tax-free to you and your kids. Some even have long term care benefits & minimum guaranteed returns built in.  Effective January 1, some previously taxable withdrawals can now be tax free.  And, you can avoid the pre-age-59 1/2 excise tax through reg. 72(t) distributions.

Of course, it is always dangerous to take any action without expert analysis and advice. It’s possible none of this would work for you and could actually be harmful.  Please don't do it yourself.  The first step?  Take my Wealth Index Questionnaire while it is still free.  It takes 15-20 minutes online.  Then when your results are in, we'll spend an hour reviewing them in a face-to-face meeting.

Best Regards always,

Gary

Myth: Our Health Care System is what Americans want

Thom Hartmann posted this Walter Conkite quote:
"America's health care system is neither healthy, caring, nor a system."
How did it get this way? Well if you're looking for places to lay blame, go no further than the railroad companies, J.C. Bancroft Davis, and a careless (or corrupt) Supreme Court in the 1886 U.S. Supreme Court case Santa Clara County v. Southern Pacific Railroad Company (118 U.S. 394) which dealt with the railroad's refusal to pay taxes in California. But, although the court's decision had nothing to do with granting corporations the same Constitutional rights as living breathing human beings, Mr. Davis- the court reporter in this case -titled the decision as awarding personhood to corporations. (He was a former Southern Pacific employee.) Subsequent cases relied on this phony precedent.
So now we have paper fictions (corporations) with free speech rights they were never intended to have, which allow them to buy the airwaves, the newspapers, the magazines, our members of Congress and , yes, even the Presidency. That is why even though the vast majority of Americans want Universal Health Care for all, our representatives keep refusing to implement it.

Myth: The Government Will Take Care of Me

As we live longer and longer, the uncertain and usually untold story about quality of life needs to be looked at. The number one cause of debilitating but not immediately fatal conditions such as arthritis, dementia, heart & respiratory decline is longevity. How is this affecting us as families, communities and a society? How will it affect us?
I've met with more couples than I care to admit who are "in betweeners", that is, they are cornered into taking care of adult children and at the same time saddled with caring for one or both sets of their parents. The stress is palpable, incredibly emotionally and financially draining.
Right now, Medicare does not pay for long term care. State Medicaid programs do but only if you are virtually impoverished. I won't go into the details here, but the legal consequences of shifting assets to qualify for Medicaid keep getting more punitive as the financial solvency of the program becomes more and more scary. What are the options?
Well, you can:

• Be really rich or have really rich kids. Seriously. This is an option that works for a few people.
• Spend down your assets to qualify for Medicaid.
• Set up an Income Cap Trust- see http://www.dhs.state.or.us/spd/tools/program/osip/wg5.htm
• Buy Long Term Care insurance
• Hope and pray that the health care reform bills in Congress will deal with this issue (not likely).
• Only get malignantly terminal illnesses

Let's examine these primary alternatives.

The first one is the best but, based on statistics, the least probable. Even so, the reality is that even well-off folks buy Long Term Care insurance because they've done the math: If you could save the monthly premium for long term care insurance in an account earning 6% for 20 years- instead of buying the insurance -then you would have enough money to pay for about 9 months of care. The insurance, on the other hand, would give you inflation adjusted care for 5 years.
The second possibility is commonly used, but usually involuntarily. Plus, it leaves your spouse in a world of financial hurt, if you care about that.
The Income Cap Trust should be drafted by an attorney. It can allow you to qualify for Medicaid earlier, and stay on longer, by meeting the "300% of SSI standard income limit" test.
Buying Long Term Care insurance LTCi) is actually the cheapest option for all of us, if you can qualify. This is especially true in Oregon which is a "partnership" state, meaning that to the extent you have private long term care insurance you will be exempted from Medicaid recovery from your estate. For example, let's say you have LTCi, go on claim, and your insurer pays out a total of $300,000 before you die. Your Medicaid exempt assets will be increased by $300,000.
The fourth option, hoping Congress will fix it, doesn't look too promising. We can't afford the programs they've already promised us.
The last option is out of our control. And, I wouldn't wish that on anyone.

Don't listen to the hype about the Baucus Bill

S. 1796, the 1,502-page America's Healthy Future Act bill (aka the Baucus Bill) has been excreted from the Senate Finance Committee. And the hysteria about its length has already begun. Oh my, the table of contents alone is over 12 pages!
What you will not hear, however, is that all such bills are issued in "markup" format. They are double and triple spaced. They only use up the middle third of the page. This leaves room for Senators, staff & lobbyists to mark up the bill to render it totally contrary to its purpose, I mean, to be sure all interests are taken into account.
If you cut and paste the bill into Word, take out most of the spacing, and use 2/3 of the page instead of 1/3, the bill shrinks to 439 pages, about the size of the average trashy novel. So it is short enough for anyone to read and understand. Anyone. You can do it yourself at:
http://finance.senate.gov/press/Bpress/2009press/prb101909.pdf
So if your Congressperson bloviates about this bill being too huge to read, you might help him or her find another career when the next election comes around.
I would hope the bill is as long as it needs to be to be sure no one ever again goes bankrupt because of our health care system, that everyone is covered, and that our costs are reduced by 1/3. I'll let you know after I finish reading the bill. But of course by the time the mark ups are done it will be unrecognizable from its current form.
I guarantee you one thing though: this is a momentous moment in our country's history. Health care reform will only be as good as what is demanded by each and every American. I wish I could remember who first said this: the best measure of our humanity is how large a circle we have to draw to include everyone we think of as "us". On this issue, let's draw a circle large enough to include every citizen.

The Economy is Recovering

I circulated this article in one of my client e-letters back in April. I still contend that it is a myth that our economy will "recover", whatever that means. The key idea here is WE DON"T WANT IT TO GO BACK TO THE WAY IT WAS. Our economy was (and still is to a large extent) based on fluff, fantasy, unsustainable excess, magical thinking and unrealistic expectations.

You might find it helpful to peruse an excerpt from General Electric CEO Jeffrey Immelt's speech, delivered in Toronto on February 11, where he discusses the concept of "reset".

"If you think this [recession] is only a cycle you're just wrong. This is a permanent reset," he said. "There are going to be elements of the economy that will never be the same, ever. Smart businesses are the ones that are going to hunker down in the cycle, which you've got to do, but that also understand we're going to come out of this in a different world."

This is what I've been saying for over a year now. And this is why cycle theorists like Harry Dent (chief economist for AIM funds) had been wrong over and over again. The media tend to discount such "negativity" as they keep propagating the "optimistic" myths that Wallstreet keeps feeding the investing public:

"This is just a cycle. Things will bounce back.", "Everyone has lost money.", "No one can predict the market.", "We're doing the best we can.", "We've hit bottom. The market can only go up from here.", "Things will bounce back.", "Don't lock in your losses by selling out now." etc. ad nauseum. None of those things are true! Here is what is true:

You can protect your money from the future market declines that are on the horizon without missing out on gains if and when the market recovers. But only if you take action. Take the Wealth Index questionnaire as a first step. It is free. It takes 20 minutes. It helps me assess the best course of action for you. Here's the link: WEALTH INDEX

Myth: Fee-only advisers are always better

Dear readers, 

How advisers are paid is no guarantee of honesty. Often it is a good sign if a fee-based planner doesn't charge you a fee. Most of the best financial products pay commissions because the best companies recognize that advisers add value in screening and recommending financial alternatives for their clients. That's why I usually don't charge a fee for the often substantial services I provide, such as the wonderful Wealth Index: I don't believe in "double dipping" my clients. 

 This lady, however, will coin a new epithet about the financial services industry, "My investments went Zabalaoui!". February 19, 2009- Financial Adviser Magazine Fee-Only Pioneer Guilty In Ponzi Scheme A woman considered among the pioneers of the fee-only financial planning movement has pleaded guilty to using a Ponzi scheme to embezzle more than $3 million from clients. Judith Zabalaoui, 71, bilked her New Orleans area clients between 1993 and 2007 while working as an independent advisor, according to published reports. Zabalaoui was charged with gaining limited power of attorney over client funds by promising returns of between 13% and 26% if clients invested in two companies, the reports said. The companies, however, were nothing more than UPS store mailboxes that Zabalaoui rented in Colorado and Delaware. She also set up phone lines and created phony letterhead and employee names to support the ruse. The funds were embezzled using multiple wire transfers from Charles Schwab custodial accounts to her personal account. She then used the money for on an array of personal items—including clothing, vacations and rent payments—for herself, friends and family members, according to the Times Picayune in New Orleans. Most of her clients, according to published reports, came from Resource Management Inc. in Metairie, La., which she founded in 1974, according to the Times Picayune. By the time she left the firm in 1991 to set up her own business, Zabalaoui was regarded as one of the pioneers of the financial advisory profession and among the first advisors to transition to a fee-only model in the early 1980s. She became a certified financial planner (CFP) in 1979, but the certification expired in 1999, according to the Times Picayune. Resource Management has denied any involvement with Zabalaoui since she left the firm and has not been accused of any wrongdoing, according to the Times Picayune. She pleaded guilty in Federal District Court in New Orleans on Wednesday to five counts of mail fraud as part of a plea agreement in which she has agreed to pay restitution to clients. At her plea hearing, she told the court that she moved to Birmingham, Ala., after Hurricane Katrina and that she has suffered from depression, according to the Times Picayune. Zabalaoui faces a maximum sentence of 20 years in prison, a fine of $250,000 and three years of supervised release for each count against her, according to published reports. Her sentencing is scheduled for May 20.

What's true about life. This is no myth.

Nellie

I was feeling down the other day; overwhelmed, angry and sad, as if my priorities were all helter skelter. So I walked up the hill by my office to get some advice from my wise friend Nellie.
I whined and complained and shed some tears. She was patiently silent.
I asked her, “Tell me what’s important. Where should my focus be? What are the big three or five or six things I’m forgetting?”
“Well”, she began, “I start with the heart, the faithful heart. It so easily and consistently holds us mere seconds away from death. So start with the heart.
Next, the breath. Isn’t it a joy to sit here with me and share this fresh sweet air and all that it carries?: Oxygen, the fragrance of the unseen, the eternal ebb and flow of life, universally shared by all beings. The harmony of the heart and the breath is a key lesson for us. Pay attention to the breath.
Then, I would rank being fed way up there on the list. Think of all the hundreds of ways that the world sustains you and how you help sustain it. We are here to be fed.
And finally I personally really enjoy being held in loving arms, in the gaze of a beloved for whom I am also beloved.
These aren’t in order of importance of course; they all hinge on one another. ”
She was right. I was taking life’s most important basics for granted. I released a big sigh, thanked her and turned to walk down the hill, glancing briefly back at her weathered headstone which reads:
Nellie Hunter
Lived 22 days.

The Market is Recovering

Two years ago it was obvious to a lot of us that the market was held up solely by Wall Street's hot air, the unrealistically limitless expectations of the public, and unprecedented phantom value (a record % of our economy consisting of financials, most notably derivatives, & most notably credit default swaps which- before they blew up -comprised nearly $40 tril. of the global economy!)
The scariest fact about the current economy is that the US debt to GDP chart looks like a hockey stick. The only other time in our history it has been that high was just before the Great Depression. But here's a link to the most skeptical article about that:
http://www.businessinsider.com/2009/2/us-debt-levels-are-fine-debt-to-gdp-chart-is-wrong-and-meaningless
If the chart is so "wrong and meaningless" why is it correlated with economic debacle?
The second fact is price/earnings ratios. Here's another contrarian article:
http://moneynews.newsmax.com/michael_carr/michael_carr/2009/02/26/185905.html
The bump up in recent quarterly earnings is not from sales in most cases. It's from expense reductions and accounting magic as overpaid "managements" attempt to justify their existence. Layoffs are one short term strategy being used to the hilt.
Which leads us to the 3rd factor; unemployment. We have yet to feel the multiplier effects of this job decimation. Who is going to buy all the stuff? Who is going to make all the stuff to buy? See the most recent report at: http://www.bls.gov/news.release/pdf/empsit.pdf
No one has given me any evidence that the market will not seek new bottoms. Soon. And there is plenty of evidence that it will. But I could be wrong.
So, regardless, wouldn't it make sense to eliminate risk of loss without missing out on market recovery if I'm wrong and it indeed happens? Most folks don't even know that it's possible to do that, much less how easy it is.

20 Questions for your Financial Adviser

20 Questions You Must Ask Your Financial Adviser

If you have a financial adviser, or are in the process of selecting one, ask these questions to be sure you’re getting all the information you need to determine if that adviser is a good fit for you. Remember, not everyone has your best interest at heart. It’s up to you to make informed decisions about who is going to guide you in the management of your money and assets. You have to ask the right questions or you may not get the important information you need.
If you don’t have an adviser, I would urge you to get one. There are simply too many new products and ideas to keep up with. A good adviser will be on top of the market, market alternatives and new approaches that can best serve your needs. While selecting your adviser may take a little work, the payoff should be well worth the effort.

1. What makes you different from other advisers?
Since many advisers offer the same products, most advisers will tell you that they are different because they offer high quality personal service. While this is important and may also be true, you should still carefully consider the adviser’s philosophy of creating a plan, investing, product specification, etc. Remember, at the end of the day, selecting an adviser is not just a personality contest but also an important business decision about your hard earned assets. The people who help you with your money should be worthy of handling it and be able to relate to your specific wants and needs.

2. Are you an independent adviser or do you work for a company as a captured agent?
Be wary of advisers who are associated with or employed by one company and who only recommend that company’s products. These products may or may not be the best product for you. Sometimes, if you know what you want, it is good to work with a specialist who represents only one type of product i.e. bonds or annuities. Still, think twice if that person only represents one company and feels that that company’s products are always the best for you. An independent adviser works with multiple companies and can find the best product amongst the many companies he or she represents.

3. What kind of clients are a good fit for you?
Good advisers are selective about the people that they want to work with and have clearly defined who those people are. For example, some advisers require that they make all investment decisions without your input. Others might want to work with people who are more socially conscious. For some advisers, it’s all about the money and they don’t really relate with how money affects other things in your life. And for others, they take a more holistic approach and want to work with people that think in a more holistic way. When you are working with or interviewing an adviser ask yourself, ‘Are we on the same page in the way we think about money and life?’ If so, that may be the adviser for you.

4. What percentage of your business are people like me, in my situation?
Find out what types of people the adviser usually works with. If you are retired, for example, perhaps you would have more confidence in an adviser who specializes in retirement. If you are younger, maybe you would prefer an adviser that works with younger people. Advisers are much like doctors. You wouldn’t go to a knee surgeon to have your heart repaired. Think about your adviser the same way.

5. What products do you sell the most?
Every adviser leans to one product or another. Find out from the adviser you are talking to what that is. For example, maybe the adviser likes to use bonds. That’s OK, but bonds may not be for you. Another adviser may use annuities a lot. That’s OK too, but what if you’re the kind of person that doesn’t like annuities? There are no rights or wrongs here, just good data so that you know what to expect and what your adviser will probably recommend for you.

6. Are the products you sell the most from just one company?
Does the adviser, even if he or she is an independent adviser, primarily use the products of one company? If he does, find out why. Maybe those are the products he knows best. Perhaps those products have higher commissions. Or maybe the adviser works for the company whose products he or she is recommending. Remember, many advisers will tell you that they represent many companies, but will still have their favorites and biases. You need to know if those biases are right for you.

7. How do I know you’re not just selling me high commission products?
Ask the adviser how much he or she is making on the products that are being offered to you. If its management fees, are they published? If it’s trading fees, are there discounts? If it’s insurance or annuities, just ask how much they are making –what is the commission that they are going to earn on that product? See if they give you an honest, open answer. Many advisers, for some reason, don’t want you to know what they are making. Remember, at the end of the day, it is you who is paying, either up front or behind the scenes. So, you have a right to know.

8. Do I always meet with you or do you send me off to an assistant once I’m a client?
In the name of efficiency many advisers will spend a lot of time with you when they are trying to get your business and then, once the sale is made, disappear and move you off to an assistant. Find out what the adviser you are interviewing does. Sometimes it’s OK to work with an assistant, especially if it’s just paperwork or data gathering. Too often, however, the assistant tends to become a total replacement of the adviser, leaving you behind. Find out how your adviser will work and make sure you feel comfortable with his style.

9. Can you rank my portfolio against the S&P Index for growth and risk?
Most advisers want to talk a lot about how your money will grow, and very little about how much you could potentially lose. Don’t get caught in that trap. While it’s great to talk about making money, there is always the danger of losing money. Make sure you know the potential downside losses of your portfolio. Ask your adviser to compare the growth and risk of your portfolio with a standard like the S&P 500’s growth and risk. He should put that on a chart for you so you can see historically if you are taking the appropriate amount of risk for the growth you are getting.

10. What is your theory of asset allocation?
There are two general types of asset allocation. The first is the number of different types of positions you own (i.e. individual stocks). The second is the number of different types of products you own. If your portfolio is exclusively mutual funds, you many own many different stocks through the mutual funds, but you only own one type of product, mutual funds. There are many other types of products and a well allocated portfolio will include more than one type of product.

11. How long have you been in business?
The best thing an adviser can offer you is his or her experience. Advisers that are new to the field may have only worked in an up market and not been tested in a down market. Some new advisers may only understand a few different product types i.e. annuities, and recommend what they know best as a ‘fix it’ for everything, rather than what is good for you. It’s not that newer advisers can’t do a good job for you, but experience is definitely a plus. Work with a more experienced adviser unless you are quite confident that the newer adviser is knowledgeable and competent.

12. How long have you been with the same company?
Advisers that jump from company to company may not give you the feeling of stability and trust that you would like to have. If you are working with someone who changes companies often it’s better to know that up front rather then getting a stream of announcements in the mail that your adviser has moved once again.

13. Are you an active money manager or a passive money manager?
If you’re looking to buy stocks or mutual funds, this is important. Active money managers try to pick stocks, bonds etc. that they feel will beat the market. Passive money managers believe that you cannot consistently beat the market by picking stocks and buy indexes or a majority of the stocks in a market sector or class. These types of advisers are called passive money managers and are concerned only with market classes, not with how each individual stock within the class will perform. This can get very complicated but you should know on which side of the fence your adviser is and if that is the side you prefer.

14. Why do you believe you can pick stocks or mutual funds that can consistently beat the market?
If you’re looking to invest in the market and the adviser is an active money manager, or someone who uses a lot of mutual funds (who most often are also active money manager), find out why he or she is so confident that they can consistently pick winners in the market. If the adviser tries to convince you based on past results be very wary. Most mutual funds that are ranked #1 one year are ranked far lower the next. The same is true of individual stocks and individual stock classifications.

15. What percentage do you think my portfolio could lose if we had another crash like in 2000 –2001?
The adviser should be able to answer this question in specifics i.e. if you had this type of portfolio in the year 2000 it may have lost as much as 40%. If he can’t or won’t, it might be time for you to move on. Knowing your downside risk and exposure to loss is very important and should be discussed.

16. How do you get my financial plan to get me where I want to go –to integrate with the things in my life that are more important than money?
Your money is just fuel for the journey to reach your goals, hopes and dreams. If you worry about money, ask the adviser how he is going to deal with your worry, not just the money. If you want to purchase a second home, that should be a primary consideration in picking your portfolio allocation. Make sure your adviser can see beyond the money into your material and emotional needs and make your money work for you in the full scope of your life.

17. What process do you use to determine if we are a good fit or not?
Get agreement when you are interviewing advisers as to how they plan to work with you. How many meetings; what will you get at each meeting; when and what decisions do they expect; what happens if you say ‘no’, how will they handle that; how will they help you get through your decision process? Understand what your adviser expects so that you don’t feel pressured or get blind sided during the planning process.

18. How do you decide whether I need an aggressive or conservative portfolio?
Advisers are required to determine your risk tolerance and choose products accordingly. Yet, this is not enough. The adviser must also determine what growth rate you need, and this may not be the growth rate that you expect to get or are wishing for. It’s one thing, for example, for an adviser to tell you that you should get 10% -12% return in the market. It’s quite another thing when the adviser tells you that you must have 10% -12% return to, let’s say, not run out of income. You may be taking more risk than you need to take by aiming for a return far higher than you need to make. Get your adviser to talk about your needs, not your wants.

19. If you had to pick one weakness you have as an adviser what would that be?
Getting the adviser to talk about his or her weaknesses will reveal a lot about who the adviser ‘really’ is. Nobody is perfect. Everyone is better at some things and not so good at others. If your adviser thinks he or she is perfect, you probably should go somewhere else. Sooner or later your advisers imperfection will show up. Maybe he doesn’t return calls as quickly as he should; is weak on follow through of servicing projects; gets too excited about up markets. Find out ahead of time and you won’t be disappointed or surprised later.

20. What would you say is your major strength as an adviser?
Here’s your advisers chance to toot his or her horn. Just sit back and listen and see if you like what is said. Does it appeal to you or not? Do you and the adviser share the same focus? Is the adviser’s strength a strength you would like on your team? If the adviser goes on and on about himself and doesn’t relate what he can do to your particular situation, you might want to reconsider whether he or she is a good fit for you.

If you are looking for an adviser, are unhappy with your current adviser, or just want a second opinion about how you are doing, I would welcome the opportunity of meeting and speaking with you. When you are working with me or any representative from WealthFinancial Group, there is never any pressure or obligation. And, of course, we will answer all your questions.

Gary Duell
Managing Member
Silver Sage Advisers LLC
13100 SE Sunnyside Rd Suite B
Clackamas OR 97015
503-698-4812

PS: Many of my clients build real wealth by knowing their Personal Wealth Index numbers. Have you taken your Wealth Index yet? The 20 minute Wealth Index questionnaire is easy to take and will help you integrate your finances in the full context of your life. It provides invaluable information and scores as important as your credit score, blood pressure, weight and cholesterol levels. Know you number, build your wealth! Call for your Wealth Index Booklet now and I will get it off to you right away. Or do it now online at http://www.wfgnetwork.com/garyduell

20 Questions to Ask Your Adviser is published courtesy of Wealth Financial Group

Do-it-yourself Personal Stimulus Package

Because the last administration squandered trillions of our money, Obama's anti-recession toolkit is virtually empty; his Stimulus Package will be too little too late. But take heart! You can execute your own do-it-yourself Stimulus Package. But first, a quick discussion about one glaring economic myth.
One of the many weaknesses of economic forecasting is that it attempts to capture and project human behavior in gross numerical terms. What's worse, the measurements we use tell us little about what we really need to know about ourselves as a community.
For example, few people know that Gross Domestic Product (GDP) includes money we spend on waging war, building & running prisons, cleaning up superfund pollution sites, treating drug babies, fighting meth addiction . . . you get the picture. These are failures. But they all increase GDP, our primary measure of economic success. Yay, our GDP increased!
But closer to home, visualize your own Household Domestic Product, that is, your total household spending. Just having it increase wouldn't alway make you feel better would it? What if your spending doubled because you got cancer? Or went through a messy divorce? Or were in a car crash. No, to feel successful it matters what you got for your money.
Having said that, my suggested DIY Personal Stimulus Package isn't about spending money, per se. It is about taking action, which I've classified under three C's, Conserve, Connect, Create. The three C's are interrelated, not separate and distinct steps. And what's best is they don't take any money, necessarily:

CONSERVE: If you've lost your shirt in the stock market, what do you have left that you value most? Your health? Your family? Your job? The balance of your IRA? Sit down and take time to list what really matters to you and how to prevent losses in those areas. If you're depressed about losing half your retirement and you start drinking too much cheap booze then you're squandering your primary remaining asset: your health. You should be doing the opposite! Conserve your health. Take up yoga. Eat right. Get enough sleep. Meditate. Go to church, I don't know. Whatever works for you to conserve your remaining, top priority assets.

CONNECT: I keep hearing from all the business gurus that those who advertise and promote themselves during a recession will do best in the recovery. All that means is connect, whether you are a successful business or an unemployed dishwasher. Connect.
The worst thing you can do is withdraw into your cave, eating & drinking too much in front of the TV. That will trigger a downward spiral from which it will be difficult to extricate yourself. Get out and get known. If nothing else, have a party! Who can you go see, email, write to, call, have lunch with, invite to an event? Where can you look for work, for business, volunteer, or get help? Connect.

CREATE: This is similar to connect. How can you create value out of thin air? Anything you can do to increase your value in society will benefit all of us, thereby stimulating the economy as well as rewarding you.
What if you pledged to visit once per week an elderly shut-in down the street. You may perk her up enough to sufficiently improve her health- or provide early intervention -saving Medicare money, for example. What if you followed your dream of creating art, took some classes, interned at a school or business, and parlayed that into a new career? What if you started a blog that got noticed and made you famous (every blogger's fatuous dream)? Create.

They Myth That Government and Taxes Are Evil

In her book, "10 Excellent Reasons Not To Hate Taxes", editor Stephanie Greenwood outlines just that. For your convenience, I will summarize them for you.

1. Progressive Taxes Are A Good Deal
2. They are a moral obligation
3. They can strengthen the economy
4. Excellent public schools depend on taxes. And we all benefit from the education of others.
5. Taxes help families raise kids
6. Pollution taxes may save life on earth. And they will definitely reduce health care costs.
7. Taxes can promote economic justice for all. That is far different than "socialism".
8. Taxes pay for economic opportunity, supporting a system that rewards hard work and creativity rather than "winning the ovarian lottery" [inheritance] as Warren Buffet puts it.
9. Taxes are good for business, providing the necessary collective infrastructure, resources, and law inforcement necessary to invest and profit from running a business.
10. Taxes fuel democracy

The Myth that Indexed Annuities are Evil

Any financial choice has only three potentials: it will either improve your financial situation, harm it, or have no effect at all. If a financial choice improves one's financial situation, then it would probably be a very popular choice. Equity indexed annuities are taking in billions.

The fact is, conservative savers are fleeing for safety because:

• Talk of U.S./global recession is widespread
• Banks continue experiencing massive losses
• Inflation is the highest since early 1980’s
• Rising unemployment becoming a big problem
• The sub-prime/housing problems will not go away
• Stock market is wildly volatile & nerve-wracking

Safety, principal guarantee & peace of mind are very much in demand. There's only one safe money place to get upside potential with zero downside risk — index-linked annuities.

Re-Engineering Retirement- the myth of being saved by "the market"

Re-Engineering Retirement:

Take the "oops" out of retirement uncertainty

The expression "oops" doesn't inspire confidence in procedural matters of either health or finance. If your surgeon says it just before you go under, you're probably going to have some concerns as soon as you wake up. An "oops" in a retirement strategy can be just as worrying. In the good old days of sustained bull markets, no real strategy appeared to be needed: The Market would make up for starting too late, saving too little, and investing in the wrong places.

To help reduce complexity and uncertainty in this potential "oops" situation, Allianz Life has developed the "Re-Engineering Retirement" program. It involves discussions around three levels of retirement expenses, seven sources of retirement income, and five retirement options.

Re-Engineering Retirement is a solutions-based process. Through it, you can come to understand many of the elements that contribute to a confident retirement. Hopefully, with my assistance, it will take the "oops" out of your retirement party.

The five retirement options allow me to show you that if your current assets will not meet your future retirement goals, there are still some pre-planning solutions for you to consider.

Option 1: Do nothing

Your first option is to do nothing and simply be satisfied with the way things are. When you finally assess the reality of a significant reduction in your standard of living, it may be too late to do anything about it. As a financial professional, I want to have a well-documented file. Our Re-Engineering Retirement workbook reminds me to make notes on what you decide- or don't decide -to do.

Option 2: Save more

The second option deals with putting more away now for future delivery. This is always easier said than done considering all the current economic pressures; but putting away even a little more now is helpful.

Option 3: Work longer

The third option involves you working more years before taking retirement. This is always a little emotional since many people work because they have to, not because they want to continue in a profession they really enjoy. This option could also mean working part time, considered to be supplemental, to allow for the maximum benefit from Social Security.

Option 4: Risk more

The fourth option is to take on more risk in the accumulation phase. We all know that this can lead to greater uncertainty. No one's risk tolerance goes up when anxiety sets in. It's just the opposite, and what you have already accumulated might be jeopardized by taking on additional risk and then possibly bailing out of the market at the worst possible time.

Option 5: Re-Engineer

The fifth option is a combination of all these elements.

If you want to learn how to "re-engineer" the five options discussed above and help mitigate the possible "oops" potential in your retirement process, call me about Re-engineering your retirement. 503-698-1110

All the Best,

gary

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Ten Steps to Being a Savvy Retiree

If you haven't figured it out already, I like lists. I don't like failure. Aviators- regardless of their experience -all use preflight checklists due to the extreme consequences of failure in their avocation. So to keep my clients from crashing and burning, I like to promote checklists. This one is from an old American Skandia publication: "Ten Steps to Being a Savvy Retireee" according to my editorial license. By the way, nothing here is a myth, contrary to the blog title.

ONE: Meet with your financial adviser(s). The original publication had this as step #10. But why waste time or take the risk of missing out on the latest developments? Advisers who have been around for a while have seen just about every possible type of client, from extremely successful to woefully unsuccessful. Wouldn't you like to know who to emulate and who to avoid?

TWO: Calculate the financial impact of working in retirement. You may suffer reduced Social Security benefits or higher taxes. You need to know your Social Security "breakeven corridor".

THREE: Understand the outcome of early retirement. 71% of retirees who retire earlier than they preferred (due to health or layoff) wished they had saved more. Plus, you may incur penalties and miss out on substantial compounding by retiring too early. Finally, you may unduly reduce your Social Security benefits. Permanently.

FOUR: Choose the right assets for income. This is a relatively old statistic but it's probably even worse today; American incomes decline by roughly 50% between ages 65 & 85. An often neglected factor is taking income from the wrong assets at the wrong time. If I were a financial journalist, I would give you a snappy rule of thumb. But it just depends on your unique circumstances.

FIVE: Compare your payout/income options. This was more relevant when pensions were common. They're not anymore. But generally, if you can, take the smallest distributions you possibly can from qualified accounts (IRAs, 401k's, etc.).

SIX: Build a diversified portfolio. Actually, the word "diversified" has assumed more meaning than it deserves. The idea of "safety" has been bundled into it, illegitimately. You can have a diversified stock portfolio and still lose your shirt. I would say, build an appropriate portfolio that does not subject you to greater odds and degrees of loss than your lifestyle can handle, and then only if the rewards are commensurate with the risk. Finally, why take any risk when you don't have to? The greatest risks result from doing nothing.

SEVEN: Develop a prudent strategy to meet your lifetime expenses. This all depends on your plans. Are you more concerned about security, leaving money to your kids, charitable donations? Be sure your strategy deals first with your financial survival. Be sure you will be able to pay the electric bill and buy your prescriptions before you get grandiose about the grandkids.

EIGHT: Take care of the legal stuff! Is your will old? Do you even have one? How about powers of attorney, advance directives, and trusts. If you would like to be a financial and administrative burden to those you leave behind, then ignore this step.

NINE: Be sure your beneficiary designations are appropriate. For example, many IRA custodians & annuity companies now allow you to just check a "Stretch" box in the beneficiary section if you want your IRA balance doled out over a number of years to your beneficiaries so they don't take a big tax hit in one year. Beneficiary designations are a simple, free, and automatic method to pass most of your money assets outside of probate. But don't fiddle with them without expert advice.

TEN: Plan your retirement lifestyle. I know few who do this. They just hope for the best and brace themselves for the worst. Or, they hunker down and deny themselves unnecessarily. What do you want to do, have, be? Those are the questions.

Asset Protection now easier

Think You’re Leaving the “Family Farm” to the Kids? Think Again. The State of Oregon May Have Other Plans.

You’ve worked hard all your life, been retired for quite a while, but now the old bod’ is wearing out and you need help. Your fixed income isn’t enough to pay for in-home assistance so you scour the area for facilities and settle on a facility in Oregon City. However, you and your wife’s $4000/mo. income- which seemed handsome before –is no match for the $6000 monthly fee. Your liquid assets are quickly kaput. You go on Medicaid. Five years later you die. Your wife remains healthy until her death a year later. The kids inherit your $500,000 “farm”, right? Nope.

Ever hear of the ominously named Omnibus Budget Reconciliation Act and, specifically, the 1993 Estate Recovery Mandate for:

• Nursing home or long term care
• Home and community based services
• Hospitalization and prescriptions (at state’s option)?

This provision requires States to go after Medicaid beneficiaries’ assets to recover the State's costs of proving your care.

Ironically, the act was modeled after Oregon, which has had estate recovery provisions since the 1940’s. But here’s why you find this so interesting: In the above example, assuming Medicaid pays 100% of your nursing home costs for the 5 years, that’s $360,000 ($6000 x 12 months x 5 years). Plus, you had to be hospitalized twice for those heart attacks, at $25,000 each (they were having a special) for a total of $410,000. Before any of your estate passes to anybody, Oregon is there with its pre-death TEFRA recovery lien to collect its $410,000. The three kids get $30,000 each; $30,000 each from your lifetime of labor and frugality.

Naturally it’s not that simple. You can retain some property and income, called “exempt assets” as shown below. Until your spouse dies you can keep:

• Up to $1911/mo. gross income
• $104,400 in “Community Spouse Resource Allowance” (“community” means the spouse is not institutionalized)
• a home
• a car
• household goods
• business property & business real estate
• prepaid burial provisions up to $1500

The State can take the following nonexempt assets:

• Cash over $2000
• Stocks, bonds, IRA’s, Keogh’s. CD’s, T-bills, T-notes, Savings bonds (you get the picture)
• Whole life insurance
• Vacation homes
• Second vehicles (kiss the Harley goodbye, Grandma).

“Well”, you might say, “I’ll just give all my stuff to my kids before the State comes knocking on my door.” Trouble is, with a few exceptions, if you do that within 60 months of your application to Medicaid then you will be subject to penalties. Say for example you give your $200,000 in CDs to the kids just before you go on Medicaid. Based on a $5360/mo. formula, Medicaid would then deny benefits for 200,000/5360 = 37.31 months, requiring you to spend $200,000 of your own money anyway, assuming you even have it. If you do not, they will recover it from your spouse’s estate.

What can you do about this? Here are some advanced planning ideas, the first of which just received an additional boost for Oregonians this year, and I’ll discuss that one first because it’s the easiest no-brainer solution.

#1: BUY LONG TERM CARE INSURANCE !
Let me confess. This is an area of significant frustration for me, not just from the behavior of other people but my own as well. If you know in advance that there is a 100% chance a specific event will take place in the future then of course you would prepare for that event now, right? Rarely. For example, I’m never ready to do my taxes until mid-April the following year. Never. And we all know about the following certainties. Someday,

• We will stop working
• We will be unable to care for ourselves
• We will die

Sure, for some unlucky folks (or lucky, depending on your point of view) all three may happen simultaneously. But for most of us these stages will happen in this order: we will stop working, we will need assistance, we will die. And for the really unlucky (and their unlucky families), the middle period will be the longest.

The odds of a male needing long term care in his lifetime are one in three. For the women, the odds are one in two. Yet why is it that only about 8% of eligible Americans take responsibility and do something about this? And why do even fewer take other advanced steps to deal with it? It’s not fun to think about these things while watching American Idol (Actually, I much prefer thinking about disability and death versus watching American Idol.)

Here is why you should buy long term care insurance as soon as possible:

1. I really need the business. No, even though that’s true, you should never buy a financial product to meet the needs of the salesperson no matter how much he begs. Seriously, here are the real reasons:
2. The Government will not take care of you. The Government is sending ever stronger signals that you’d better be self-sufficient, signals in the form of tax deductions, credits, estate protection, etc. It’s not going to get any better in the near future. You buy long term care insurance with your health in addition to your premiums. Once you need it, it’s too late to buy it. You are reaching out with the long arm of foresight to keep a door open for yourself in the future, the door to choice and security.
3. You can’t ever save enough. If, instead of buying insurance, you and your spouse just invested your premiums, and, could earn a consistent 6% rate over the next 20 years then you would have enough money to pay for about one year of care. For one of you. The average length of care is 3-5 years. Even the wealthy buy Long Term Care insurance because they understand the concept of risk transference, i.e. having an insurance company assume most of the risk of loss of their home, their cars, their assets & income. Just because you could afford to rebuild your burned up home doesn’t mean you should. The same is true for long term care.
4. There is no advantage, at all, to waiting. No matter when you eventually buy Long Term Care Insurance, you will spend more in total premiums than if you buy it now. That’s because every eight years that you procrastinate, the premiums double. Lock them in now (caveat: not all policies have premium guarantees).
5. The tax man will help you pay for it. Federal deductions and Oregon tax credits can reduce your total net premium cost by 50% or more. If offered as an employee or executive benefit, premiums are fully deductible to your corporation and benefits and premiums remain tax-free to the employee/executive.
6. Long term care is already costing your company big bucks, $2772 per care giving employee per year.
7. The State of Oregon, on January 1st, became a Long-Term Care Partnership state. Remember those State Medicaid liens? To the extent you collect benefits from your own Long Term Care insurance policy, those liens are eliminated, your assets shielded. For example, if your policy paid you $300,000 while you were in a nursing home, Medicaid would exempt that amount from its estate recovery.

#2: Have an attorney draft an Income Cap Trust for you. See http://www.dhs.state.or.us/spd/tools/program/osip/incap.pdf for a sample. This is an irrevocable living trust agreement that can help you qualify for Medicaid by diverting income into a trust, subject to certain limitations.

#3: Begin the legal transfer of assets to your heirs as soon as possible to take advantage of your $12,000 ($24,000 four couples this year) annual gift tax exemption. The limitation is not per donor, it is per donee. In other words, one person can give $12,000 to as many people as she likes. Such asset transfers are easy to screw up so don’t even try without consulting with an elder law and/or estate attorney.

#5: Consider charitable annuities and trusts, especially for highly appreciated assets such as real estate and stocks which you’ve owned for a long time. These arrangements can provide surprising benefits including guaranteed lifetime income, generous current and ongoing tax deductions, as well as the ability to do well while you’re doing good. In many cases you can be much better off by gifting rather than through an outright sale of an asset. A knowledgeable adviser can help you sort through the many options available here locally.

So, going back to our original example, wouldn’t you prefer that your three kids get $167,000 each- instead of a paltry $30,000 -out of your $500,000 estate? Then get smart, get help, and get going!

[DISCLAIMER: this is an unofficial opinion piece based on the author’s best knowledge of the subject. It is not intended to be legal interpretation of State or Federal law or tax regulatioins, nor is it intended or implied to be legal or tax advice. Consult with your elder law attorney and CPA to see how your specific circumstances might be affected]

Annuity Myths

Annuities have gotten a lot of bad press lately, mainly because there are some terrible annuities out there- which I will list later -as well as some terrible "advisers" selling them. The "Top Ten" myths are ubiquitous, appearing on numerous websites such as http://www.annuitiesinstitute.com
These myths appear to be propagated principally by journalists, none of whom have or are required to have any industry training, licensure, or regulatory oversight. Although I wholeheartedly welcome well-intentioned investigative journalism, all I've seen so far with respect to annuities is sensationalism. Just because someone somewhere got burned by a crook peddling a lousy annuity does not mean annuities are not excellent options for many investors. If it did mean that, then we should also never buy a used car.
The best defense is an educated consumer. So please take time to review the myths debunked below as well as the ending comments.
Gary

Myth #1: Every Annuity is a Variable Annuity

Very often, the risk properties and high expenses of the variable annuity are incorrectly attributed to all types of annuities, undermining consumer knowledge and confidence in non-securities based annuities such as fixed, immediate and indexed investments. Nearly half of all annuities purchased have nothing to do with stock market performance, and, offer guarantees through fixed minimum interest rates, guaranteed lifetime income, and future protection against loss of principal and earnings. They should not be lumped together with Variable Annuities. Plus, you can actually have the best of both worlds with index annuities which allow you to participate in market gains but not losses with lower expenses than most mutual funds.

Myth #2: Your Insurance Agent Isn’t Qualified to Offer Financial Planning

Some investment managers will diminish the value of annuities on the grounds that insurance representatives do not need securities licenses to provide investment advice. However, a securities license is only required when selling speculative investments where the potential for loss exists. Many insurance providers focus on fixed and indexed annuities for retirement where loss to principal and earnings is not an option for our clients. We undergo continual training and professional courses year round to improve our knowledge and capabilities for senior planning. In addition, we are deluged with product offerings from many companies and are therefore kept aware of the full range of annuities available on the market. But as a matter of fact, I am securities licensed so that I can discuss and give advice on most financial vehicles. I also own my own Registered Investment Adviser Firm in Oregon, Duell Wealth Preservation.

Myth #3: Fixed Annuities Will Never Outperform Inflation

The fixed annuity offers security in knowing you are guaranteed a set interest rate over a specific period of time, and is often used to give long term investments more tax-advantaged growth far superior to CDs. Some investment advisers are against fixed annuities because of their perception of future inflation. They feel that some risk must be taken to grow savings to maximize personal wealth. But for investors who cannot afford to lose any more of their life savings, risk should never be a substitute for long term planning and the many available income guarantees.

Myth #4: All Commission Based Insurance Planners Are Biased

It wasn’t all that long ago that fee-based planning was created by large financial firms to ease client fears of non-objectivity. Their goal was to maximize medium term earnings and residual income while having more direct control over client investments. Ironically, many within that field do not even actively sell fixed or immediate annuities for safe retirement income purposes. They focus only on securities with minimum account requirements before they even offer investment management services and support. In further contradiction, earning reports for 2001 showed that only the top ten percent of insurance planners earned as much as the average stockbroker did. Crooks will be crooks no matter how you pay them. Would you rather pay 1.5% of your money for the next 20 years in "wrap" fees to your broker, or, pay a one-time commission of 0% to 5%?

Myth #5: Annuities Are All About Penalties and Surrender Charges

Like the 401k and IRA, the annuity takes advantage of special legislation passed by Congress that provides tax incentives for us to save more money for our retirement. The long term savings approach allows annuity providers to offer higher interest rates, guarantees, tax deferred accumulation, and advantageous planning benefits for tax and distribution planning. No one would typically write negative articles about how an IRA or 401k incurs unnecessary penalties for accessing money prior to age 59 ½, so why would they criticize annuities for similar parameters? IRS makes the rules, not the annuity companies. Plus, annuities exist for which there are no surrender charges, if you are willing to give up some other features.

Myth #6: Never Invest Your IRA Money in an Annuity

A frequent caveat found within tips on how to qualify your financial adviser is to automatically disregard anyone who ever recommends an annuity within an IRA. The should-be obvious exception to this is when safety is paramount, loss to principal is not an option, and a fixed annuity offers a higher rate of return than other forms of traditional conservative savings. More often than not, fixed and indexed annuities way outperform other non-security investments when protection of principal and earnings is paramount. The annuity would have been selected for its interest paying capabilities as a growth investment and it's pension-like income features, not as a tax deferred tool within a tax deferred account. The tax deferral is free, granted by IRS.

Myth #7: Only Deal with Big Names You Are Familiar With

While people typically gravitate towards big companies with names that are instantly familiar, brand visibility doesn’t automatically equate to the best rates, service, performance or safety. Need I bring up AIG, Enron, Citi, etc.? Many planners can be placed into two categories when it comes to helping select annuities for a retirement plan: those who only sell products that their parent company creates, and those who remain independent to ensure they have access to the widest possible range of products on behalf of their clients. Restrictive affiliations and objective advice do not normally go hand-in-hand as they can limit the guidance you receive for key financial decisions. Make sure the adviser you select is not restricted in the advice and recommendations she can make to you.

Myth #8: Only Deal With Registered Investment Advisors

Much of the criticism towards annuities comes from professional asset managers who earn their commission as a percentage of the total money they manage- and keep at risk, by the way -for "maximum growth" (or, these days, maximum shrinkage). Many of them forget that not every investor is after great wealth in the stock market, and too often seniors are talked into placing their money into vehicles that could instantly reduce their life savings. There is a significant difference between the professional investor who wants to aggressively grow her multi-million dollar portfolio, and the retiree with $150,000 that will likely need every single dollar- and more -to get through their retirement without outliving their savings. Having said that, I do happen to be an RIA.  You should only deal with legal fidcuiaries.

Myth #9: Indexed Annuities are Often Sold Inappropriately

Well, this is actually not a myth. It's true. Every product on the face of the earth has been sold inappropriately. But the opinion of some stockbrokers is that equity indexed annuities are never suitable for retirement planning. A top complaint is that they limit the total earnings an investor can receive during upswings in market performance. The EIA, though, was purposely created as a hybrid investment product that combined the growth potential of the stock market with the safety features of a fixed annuity. While upsides may be capped at 7% to 12%, an investor never has to worry about losing principal or earnings, and typically has several options by which to guarantee minimum interest rates paid regardless of market performance. As far as suitability goes, according to consumer data from the National Association of Insurance Commissioners, in 2004 equity indexed annuities reached sales of $23.3 billion [$50+ bil. by 2008], with only 38 closed complaints nationally, or $614 million of sales for each complaint received.

Myth #10: Our Financial Designation is Better Than Yours

Many planners and consumers rightfully look to financial designations as an indicator of professional service, dedication, and commitment to excellence on behalf of clients. Some investment groups go so far, though, as stating that only two designators should be utilized for financial planning, ChFC & CFP, and that the rest should be instantly dismissed. I tend to agree. But, ironically, many of the members within these two bodies do not even carry insurance licenses [I do], as they focus on risk based investments (oxymoronically referred to as "securities") for aggressive growth purposes. They offer little support to risk-adverse seniors looking for maximum security and safety for their life savings. Regardless of her financial designations, always make sure that your financial adviser understands your risk tolerance and provides service and products suited to your individual investment requirements. Ask for guarantees. They do exist.

About Annuities

Annuities provide real advantages, ranging from competitive interest rates, to guaranteed income for life, to the often cited tax deferral advantages of compounding principal and interest over long periods of time in preparation for retirement distributions. They also offer many unique and beneficial ways to protect estates, avoid probate, and pass money to future heirs.

Many individuals looking for safety within their investments are being exposed to significant and unnecessary risk to their savings and are not even aware of it. To maximize the safety of retirement plan, ensure you deal with a knowledgeable adviser who can provide independent and objective advice, buy only from reputable companies with a strong performance history in annuities, and never agree to anything that concerns your retirement and financial security that you don't fully understand. That's worth repeating: never agree to anything you don't fully understand.