Money Matters…

Six Ways to Protect Your Identity

Recent data breaches at several national retailers illustrate the importance of keeping your identity safe and secure. Not only are identity thieves getting more brazen — hacking into retail computer systems and pilfering data and dollars from millions of debit cards — they continue to find new ways to abuse the electronic systems created to make our lives easier.

Not only is identity theft a personal violation, it is a costly problem for law-abiding citizens. Even if your personal bank account hasn't been drained, you pay the price for identity theft every day in the form of higher-priced goods and services, inflated insurance premiums and higher taxes.”

 

Identity theft is a broad term for unauthorized use of your personal data, typically for financial gain. It starts when someone "steals" your name, address, social security number, checking account or credit card numbers, passwords and other personal information. Your information is then used to falsely obtain credit cards, loans, cash, merchandise, medical services — even government benefits and tax refunds.

Not only is identity theft a personal violation, it is a costly problem for law-abiding citizens. Even if your personal bank account hasn't been drained, you pay the price for identity theft every day in the form of higher-priced goods and services, inflated insurance premiums and higher taxes.

It may seem tedious to keep a close eye on your identity and the financials attached to it, but it's worth the effort. After all, it's doubly aggravating and time consuming to undo the damage caused by identity theft. Do what you can to avoid the headache and hard work of being a victim of identity theft with these simple tips.

Monitor your accounts regularly. Even if you prefer printed versus online bank statements, you shouldn't wait until the end of the month to check that your accounts are reconciled (and nothing's amiss). Take advantage of online access to your financial accounts and watch for fraudulent transactions. You know something's not right with a transaction if someone has used your credit card to purchase train tickets in a foreign country. In a situation like this, contact your bank immediately.

Keep tabs on your electronic devices. Identity thieves will look for your private information on any electronic device with a wired or wireless connection to the Internet. Never leave your desktop computer, laptop, tablet or smart phone out and unattended in public places. You may want to rethink plans to sell or give away an electronic device that you've used to store sensitive information. At a minimum, clear stored data by restoring factory settings and removing SIM cards (phones) or wiping your hard disk (computers).

Clear your history often. Get in the habit of clearing the cache or history in your Internet browser before you log out or step away from your computer. Doing so may not stop the most persistent thieves with forensic skills, but it will slow down the process of retrieving data you'd rather keep private.

Change your PINs and passwords. If you regularly access financial accounts and complete credit card transactions online, it's particularly important to have several layers of security in place. For example, you can easily require a PIN or password log-in whenever you turn on your phone or start your computer. But if you use the same password to log on to your computer and your bank account, or to open your phone or retrieve your email, you've defeated the purpose and made the identity thief's job that much easier. Make your passwords inscrutable to outsiders. While nonsensical strings of letters, symbols and numbers can be hard to remember, they will be tougher passwords for criminals to crack.

When in doubt, pay with cash. Another way to limit your exposure to identity theft is by reducing your credit card transactions. For instance, you might try using cash for all transactions under $100. For larger transactions, it's often better to use plastic. Not only do credit cards remain more convenient, carrying around large sums of cash makes you more vulnerable to old-fashioned theft targeting your wallet or purse.

Stay informed and alert. Because of the annual cost of identity theft, the federal government is interested in helping consumers stop identity theft before it happens. Stay informed about consumer identity theft with alerts, tips and other resources provided by the Federal Trade Commission at www.consumer.ftc.gov.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families plan and achieve their financial goals.

Retirement When You're Self Employed

If you call yourself a consultant, a freelancer or an independent contractor, you're one of the growing numbers of Americans without an employer-sponsored retirement savings plan. As a solo entity, you're left without the luxury of the "employer match," which many use to help grow their retirement nest eggs. Meanwhile, the full retirement age for Social Security eligibility has been pushed out, making it more important than ever for self-employed individuals to put retirement planning strategies in place. Here are three tips to help you prepare financially for your retirement years.

With the Roth, your contributions are not tax deductible in the year in which you make them. Down the road, however, your withdrawals in retirement will be tax-free if you have met all the qualifications.”

Max out your retirement savings

As a self-employed worker, have you established a SEP IRA or Solo 401(k)? These retirement savings plans are not mutually exclusive, and you can contribute the maximum (as much as 25 percent of your adjusted growth income) to both plans to accelerate your savings in any given year. But, you don't need to stop there. If you're looking for more ways to save, consider a Roth IRA as a vehicle for accruing supplemental retirement savings.

With the Roth, your contributions are not tax deductible in the year in which you make them. Down the road, however, your withdrawals in retirement will be tax-free if you have met all the qualifications. Because the tax rates of the future are not entirely predictable, this is a plus. Since you can withdraw direct contributions from the Roth at any time, you needn't worry about not being able to access the money for emergencies. Earnings in your Roth account can also be withdrawn tax-or penalty-free once you reach age 59 ½ (sooner if your eligibility changes due to disability) and have had the Roth for five years or more. For 2014, you can contribute up to $5,500 to your Roth IRA (if your income falls within certain income limits). If you are 50 or older, this maximum goes up to $6,500.

The more you have working for your future security, and the more predictable your retirement income can be the better. Consult your financial advisor and visit IRS.gov for more complete rules on retirement savings plans.

Budget for healthcare costs

Nearly all of us will eventually need costly medical care at one time or another and that possibility rises in retirement. Evaluate income streams such as annuity or interest income that may help you defray eventual medical expenses. If you're within five years of leaving the workforce, it's a good idea to anticipate what your healthcare needs may be and how you will pay for those expenses.

It's important to know that regardless of your work status, you must sign up for Medicare by age 65 to avoid potentially delaying your coverage and paying higher premiums. Visit Medicare.gov to familiarize yourself with premium and deductible costs for hospital, general medical and prescription coverage offered by the government. Talk to your insurance broker to explore supplemental plans that can help you manage deductibles and pay for services not allowed by Medicare. By all means, do what you can to maintain your health, but don't ignore the likelihood that you'll need costly medical care at some point in retirement.

Keep working if you're able

The amount of your monthly Social Security check is determined by how much you earned annually over your working life and your retirement date. This means delaying your retirement will result in a bigger monthly Social Security check. If you're in good health and enjoy working, there's no hard and fast rule that says you have to remove yourself from the workforce.

These retirement planning tips are especially important for self-employed individuals, but they also have value for workers of every variety. As more employers retreat from the business of providing extensive retiree benefits, everyone in the workforce needs to be mindful of how they will manage the bills in retirement. At the end of the day, you're the boss of your own retirement. Make your retirement finances a priority by working with a financial professional who can help you establish a solid retirement plan.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

March2014

Smart Moves for Retirement Relocation

Retirement opens the door for many retirees to consider a change in residence. Here are answers to questions about the financial implications of relocation at this stage in life.

Q:When I retire, I'd like to spend the winter in a warmer climate. Should I purchase a second home in my favorite destination?

A: The decision to buy a second home in another state may depend on how well your budget can endure the costs. Can you afford to take part of your nest egg to buy another home or allocate monthly income to new mortgage payments? Will you be left with sufficient funds to manage unpredictable retirement expenses, such as future medical care? And are you prepared to hire a property management company to maintain your property when you're away? You also need to think about travel, upkeep, homeowner's insurance and taxes as you tally up projected expenses of owning a second home.

It's also important to recognize that real estate may not be the best investment for your situation. As the recent recession clearly demonstrated, there's no guarantee that a property purchased today will retain its value when you want to sell. Additionally, many warm weather states were hit hard by the real estate crash and remain vulnerable.

As an alternative to buying a second home, consider renting a vacation property in the desired area. This option poses less financial risk, and ultimately offers more flexibility, including the freedom to visit other locations to get your warm weather fix.

…living in a foreign land can have drawbacks. Medicare dollars will not follow you overseas. If you're wary of healthcare services in your new country of residence or can't afford to purchase care abroad, you'll have to travel to the U.S. to use these benefits.”

Q: My spouse and I are debating whether to stay in our current home or move to a smaller residence once we retire. What are the pros and cons of downsizing?

A: Trading in the family home for something smaller can be a good financial decision for some people. Generally speaking, a smaller home is easier to maintain. That means less work and expense for the occupants. Assuming your new home is less expensive, you can put the difference toward retirement savings or remodeling projects in your new home. Downsizing also provides the option to choose a home with fewer levels or other features that may be more suitable as you age. And, with less room to fill, you won't be as tempted to make unnecessary purchases.

Moving also gives families the opportunity to look at all of your possessions, pass on some heirlooms to loved ones and "let go" of nonessentials. Clearing away the clutter is not only personally freeing, it can reduce the burden on those who will ultimately be responsible for dividing your estate at some point.

Q: I've heard of retirees moving abroad to stretch their retirement dollars. Is this a good idea?

A: It's true that some Americans are moving abroad in retirement. If you're eager to experience a different country and culture firsthand and have the resources to make such a move, foreign relocation might be a dream come true. Popular relocation spots in Europe, Central America and South America can provide a warmer climate, more relaxed lifestyle and may be more affordable.

On the other hand, living in a foreign land can have drawbacks. Medicare dollars will not follow you overseas. If you're wary of healthcare services in your new country of residence or can't afford to purchase care abroad, you'll have to travel to the U.S. to use these benefits. Trips home will be subject to fluctuating airfares and may become more difficult to manage as you age. In addition, social security dollars generally can't go to foreign banks, and Americans retired abroad will likely still need to file a U.S. tax return. Furthermore, foreign currencies can be unpredictable. Should conversion rates change abruptly, the buying power of your American dollars may fall quickly.

If you're serious about foreign relocation, consider a trial run to see how it goes. After the experience, you'll be more likely to make the right decision for you and your family.

Regardless of where you end up living in retirement, it's important to consider the implications that relocating may have on your financial goals in retirement. Consider meeting with a financial advisor to discuss this topic.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco.

February 2014

Begin Preparing for 2013 Tax Filing Today

Although Tax Day may seem like it's a long time from now, it's never too early to evaluate your current tax situation. Doing so can enable you to take a few last-minute steps to ensure that you're approaching your tax planning in the most efficient way.

Last-minute tax-savings strategies

The end of the year is just around the corner, but there are still a few things you can do to ensure your upcoming tax bill isn't higher than expected. Consider:

Increasing your employer-sponsored retirement plan contribution — The money you contribute to your plan (if it's not a Roth) is excluded from your taxable income. So, if you aren't on track to max out your 401(k) contribution, consider directing extra dollars to your retirement plan today. Over the course of a year (in 2013), you can contribute up to $17,500 — or 100 percent — of your compensation, whichever is less. If you are age 50 or older before the end of the calendar year, you may contribute up to $23,000.

Put all the documents that begin rolling in after the first of the year recording your annual earnings, gains and losses in a file as they arrive so you don't misplace them or have to hunt for them later.”

Boosting your withholding — If it looks like you'll likely owe taxes, you can increase your withholding now to help take the bite out of the amount you'll pay later.

Looking for losses — If you have taken capital gains on sales of stock or other assets, you may consider offsetting those gains by taking losses elsewhere in your portfolio. Year-end is a good time to review your portfolio with your tax advisor to see if sales of depreciated assets now can benefit you on tax day. Remember, mutual funds can pay long-term capital gain dividends at year-end, so you may want to check on any fund investments to see if this is right for you.

Gifting to your favorite charities — If you itemize your deductions, you can write off your charitable contributions, whether you donate clothing and household items in good used condition or give a gift of cash or appreciated securities, such as stocks or mutual fund shares that you've owned for at least one year (IRS rules and restrictions apply). If you are wondering whether an organization you're giving to is approved by the IRS, visit Search for Charities at www.irs.gov.

Simple ways to get organized

When it comes to tax preparation, organization is key and the earlier you start the easier it is. Your best bet is to have a filing system that you keep in a secure location. It should include the following information:

Personal information file — List the birthdates and Social Security Numbers for you, your spouse and any children or other dependents.

Deductions file — Include the receipts for any items that may qualify for deductions, such as paid medical and dental invoices, charitable donations or monetary gifts, and child-care, educational and business expenses. If you have multiple deductions in several areas, consider keeping an individual file for each subject. To get a jump-start on next year's taxes, have your filing system in place at the start of the year so that you can file as you go.

Incoming tax documents — Put all the documents that begin rolling in after the first of the year recording your annual earnings, gains and losses in a file as they arrive so you don't misplace them or have to hunt for them later.

Depending on your financial situation, there may be additional opportunities for you to reduce the amount you owe or include tax efficiency as part of your overall financial plan. For help assessing your tax situation or identifying strategies that may benefit you, consult your tax professional or financial advisor.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

December 2013

Convert your Workplace Savings to a Roth

If you are like many people, the majority of the money you’ve set aside for retirement is held in your workplace savings plan, such as a 401(k) or 403(b). When the time comes to draw income from this portion of your nest egg, most or all of the distributions from your plan will likely be subject to income tax.

the cost of converting assets and paying tax on the conversion at your current rate may actually cost you more money in the long run...”

There is a growing appreciation for the idea of “tax diversification” in retirement. That means having access to income sources that are subject to different tax treatment. A good tax-diversification strategy includes a “tax-free” category of assets. A Roth IRA, for example, allows money contributed after tax to grow and receive qualified withdrawals tax-free.

You are now allowed to make a direct rollover of assets in a workplace plan to a Roth IRA, provided you are eligible to move the money in the first place. You can move money from a workplace plan when you separate from service (either retire or leave the employer), or in the event of death or disability. Depending on your retirement plan, you may also be eligible for so-called “in-service distributions,” allowing you to roll some of your retirement savings out of a plan and into an IRA before you leave your job. As with any rollover from an employer-sponsored plan, the money must move directly from the current plan to the administrator of the account (IRA or other employer’s plan) you are moving it to if you want to avoid unnecessary taxes or penalties.

Pay taxes now or later The big question you should ask yourself before converting money to a Roth IRA is whether the benefit of tax-free income later in life is worth the cost of paying taxes now on the converted amount, which is required. All pre-tax contributions and earnings accumulated in your workplace plan that are converted to a Roth IRA are subject to current tax at your ordinary income tax rate(s).

Note that not all of the money needs to be converted at one time. To limit current tax liability when executing a direct rollover and conversion to a Roth IRA, you can choose to move just a portion out of the 401(k) and into the Roth in a given year. You should be aware that if the conversion drives your total income to certain levels, higher tax rates may apply and make the conversion more costly.

When it makes sense Converting workplace plan dollars to a Roth IRA may be most worthwhile if you:

• expect to be in a similar or higher tax bracket later in life when you need to make withdrawals

• can pay the current tax liability on the converted amount from other available resources without drawing down your retirement savings

• want to reduce your exposure to Required Minimum Distributions later in life. Distributions are required to begin after you reach age 70-1/2 from your workplace plan or traditional IRA. Distributions are never required from Roth IRAs during your lifetime, so you can maximize the tax advantages by keeping money in the account.

• are trying to create more flexibility to manage your tax liability in retirement by owning a mix of assets subject to different tax treatment.

Holding off on a Roth conversion While the potential of future tax-free income makes a Roth conversion worth considering, it may not always work to your advantage. Situations where you may want to avoid such a conversion include:

• if you own company stock in your workplace plan. There is the potential to take advantage of special tax treatment of these assets when you take a lump-sum distribution, move employer securities out of the plan and take direct control of the assets (referred to as Net Unrealized Appreciation rules). Work with your tax adviser to be sure you meet requirements.

• if you expect your tax bracket in retirement will be lower than it is today. Then the cost of converting assets and paying tax on the conversion at your current rate may actually cost you more money in the long run.

There are a number of factors that go into a Roth conversion decision. Be sure to explore all of your options with guidance from financial and tax professionals to be sure you are doing what’s best for your long-term financial future.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. helping individuals and families plan and achieve their financial goals.

November 2013

Small Business Owners: think about your personal bottom line

If you’re a small business owner, you probably devote most of your time to making your business successful and functioning well each day. You focus on the obligations you have to customers and employees, and you surely put considerable energy into maintaining a healthy bottom line.

Careful follow-through with a well planned, reasonable transition strategy is a logical step to achieve the ultimate reward from the years you dedicated to your business.”

All of these things are important, but with so much going on, it can be too easy to neglect your own finances. It’s important to think long-term about your business, your personal financial future and how the two impact one another. As a business owner, you are in a unique position to address both business and personal needs together. Here are some important areas to consider as you work to keep your personal financial goals on track:

Retirement planning

Business owners typically have much of their money (and therefore their future financial security) tied up in their businesses. For that reason, it’s important to supplement that equity with a separate workplace retirement plan that is invested outside of the business. Setting up an employer-sponsored savings plan at your business helps your employees build a secure retirement while giving you the opportunity to save in a tax-advantaged way.

Protecting yourself and your business

You take significant risks as a business owner. One is that the business relies on your continued presence. It is crucial to determine how your business would keep functioning (and generating income for your family) if something prevented you from overseeing it, such as an untimely accident, illness or premature death. Also consider the impact it would have on your business if something happened to your business partner or any of your most critical employees.

Providing protection for your family by having adequate life and disability insurance in place is the first step in helping secure the financial stability of your business and your family should something happen to you. A good policy can provide income for you and your family, and as a business owner, replace lost revenue and provide funds to help keep your business operating in your absence.

Life and disability insurance may also be purchased by your business to protect against an untimely incident affecting a key employee. So-called “key person insurance” is often considered an important part of a business operation.

Managing cash flow

As a business owner, you should consider maintaining a larger emergency cash fund than what might be required for people who work for a large employer. This is especially true if your business activity tends to be unpredictable and you are forced to reduce your own income from time-to-time to meet business expenses. Having a cash cushion in your personal account will help you manage through difficult times.

Moving on from your business

Assuming you ultimately plan to sell or turn over your business to a successor, your goal should be to have a succession strategy in place well in advance. If you own a family business, there are special considerations and unique ways you can structure a transition plan to your family members. If you have partners in your business, think about establishing a buy-sell agreement that is funded by insurance. This allows one or more partners to be in a position to purchase your share of the company at its true value if something should happen to you.

Building personal financial security was probably one of the reasons you started or acquired your business in the first place. Careful follow-through with a well planned, reasonable transition strategy is a logical step to achieve the ultimate reward from the years you dedicated to your business. Consider working with a financial professional who can help you develop and evaluate a personal financial plan that keeps your goals and dreams for your small business in mind.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families achieve their financial goals.

October 2013

Covering Essential Expenses in Retirement

Today’s retirees face unique challenges — including prolonged periods of market uncertainty and longer average lifespans — which make thoughtfully planning for retirement more critical than ever. For most, feeling more confident about retirement comes down to the ability to pay for essential expenses — the predictable and recurring costs of life’s necessities. Some of the most commonessential expenses include food, home maintenance costs, mortgage or rent payments, taxes and insurance premiums.

All of these investment choices can provide a regular stream of income over time, so you can count on payments to help you meet the challenges of an uncertain environment.”

How can you cover these expenses?

Since markets will always fluctuate, having a concrete financial strategy that includes guaranteed or stable income sources can help you cover your essential expenses in all market environments. In fact, it’s a good idea to aim to cover 100 percent of your essential expenses with these sources of income during retirement.

If you’re nearing retirement, you may already have one or more sources of guaranteed or stable income in place, most notably Social Security. You may also have a defined benefit plan through your employer. Yet, no matter how strong these two sources of income may be, they might not be sufficient to cover your essential expenses in retirement. This means that you will likely have to rely on your savings to pay some of your basic living costs.

There are several financial solutions that offer guaranteed or stable income and can help you cover the gap between what you have in place and what you’ll need, for example:

Annuities Annuities can generate a reliable stream of income throughout retirement. Annuity contract guarantees are backed by the claims-paying ability of the issuing insurance company. They can provide a stable income for a desired period of time, or for life. Some annuity contracts may also provide principle protection.

The unique features of annuities offer opportunities for tax deferred future income growth. There are also many different optional features and benefits that may be available for an additional cost with annuities. In return for the benefits they provide, annuities carry a surrender charge and other fees.

Bank deposits Most savings accounts, Certificates of Deposit (CDs) and other deposit arrangements at a bank offer a set interest rate and return of principal, and are protected by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account registration. (For more information, visit FDIC.gov.)

U.S. Government Securities Savings bonds and United States Treasury Securities are backed by the full faith and credit of the U.S. Government. They may pay a stated interest rate,or be purchased at a discount of face value. There are many strategies that can be used to generate income with these instruments. Interest income from Treasury bonds is generally exempt from state and local income taxes, but is subject to federal income taxes.

Having the financial security you need to enjoy retirement takes planning and hard work. All of these investment choices can provide a regular stream of income over time, so you can count on payments to help you meet the challenges of an uncertain environment. Consider working with a financial professional who can help you find the best financial strategy for you based on your financial situation and goals.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families plan and achieve their financial goals.

September 2013

Sure you need life insurance - but how much?

Chances are you recognize the importance of life insurance. If you have dependents that rely on the income you generate, there is little question they need the protection life insurance can provide. For most of us, it's not a question of whether life insurance is necessary; it's a matter of how much coverage is needed.

Like most people, you want to keep the costs of insurance under control, but you also don't want to underestimate your actual need. The face amount of a life insurance policy may look significant, but that can be deceiving. For instance, a policy that would pay your family $500,000 upon your death may appear to be a windfall, but can it really provide for their living expenses over 20-30 years or more?

Measuring the need more accurately

A financial professional can help you assess whether you have sufficient coverage, but you can do a quick self-assessment by considering three primary factors that go into the calculation:

1. Covering living expenses

One of the most important considerations is how much money your family will need to meet basic living costs over time if something unexpected happened to you. Although some expenses may be lower because one person is no longer living, don't automatically assume that all expenses will be lower. For instance, if one spouse performed a number of household tasks that the surviving spouse would have a difficult time duplicating, it may be necessary to factor in the cost of hiring somebody to handle those tasks.

There are several ways to calculate a ballpark figure for how much life insurance coverage you may need. One method is to come up with a workable number by calculating your average monthly living costs. Extrapolate that out over 12 months. When you settle on the annual cost of living for survivors, multiply that number by 25, and you will have a good sense of the primary life insurance need. This formula assumes that you can draw down 4 percent of the lump sum total to meet your annual expenses. Note that this formula is fairly simple, but determining how much your family might really need for their unique needs can be complex. You may consider using several different coverage estimate methods. It's strongly recommended that anyone considering purchasing or changing their life insurance policy meet with a financial professional before making a decision.

2. Paying Debts

In an ideal situation, a portion of the insurance settlement could be used to pay off a mortgage, car loans, student loans and credit card debts. Then the family is not burdened with these expenses when an important income earner is no longer in the picture. Depending on the life stages of your family members, it may be difficult to determine these costs, but creating an informed estimate can be crucial to providing the right amount of coverage if something were to happen to you tomorrow, or fifteen years down the road.

3. Meeting savings goals

If part of your income is set aside to meet major financial goals such as funding college education for your children or retirement, those goals remain as important as ever when factoring how much life insurance coverage you may need. Whether applying a lump sum from the insurance settlement to meet these goals, or devoting a set amount of income annually to fund them as you do today, these goals should be accounted for.

Adding these different aspects of life funding together will give you a basis for how much life insurance is adequate, but there's more to consider.

Adjustments to your estimate

Your family's insurance needs may be reduced by other factors. A major consideration is whether a surviving spouse would earn income after the death of his or her spouse. Also, as a couple gets older, the total amount of replacement income required will decline assuming sufficient funding is in place for retirement. It's important to re-evaluate your life insurance needs at major life milestones like a marriage or having a child, but it may also be worth it to re-evaluate every few years to ensure the coverage you have in place is still accurate.

If your current life insurance coverage is based on simply guessing at how much is enough, it makes sense for you to use these tips, and consider meeting with a professional, to try to get more specific in determining an appropriate level of protection for your family.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals

July 2013

Health-Care Reform:
Looking Back and Ahead

Discussing financial planning with our clients consistently involves protecting the assets we are working so hard to accumulate. Medical insurance is just one example. Over three years ago, on March 23, 2010, President Obama signed the Affordable Care Act (ACA) into law. While several substantial provisions don't take effect until 2014, many of the Act's requirements already have been implemented, including:

• Insurance policies must allow young adults up to age 26 to remain covered on their parents' health insurance.

• Insurers cannot deny coverage to children due to their health status, nor can companies exclude children's coverage for pre-existing conditions.

• Lifetime coverage limits have been eliminated from private insurance policies.

• State-based health insurance Exchanges, intended to provide a marketplace for individuals and small businesses to compare and shop for affordable health insurance, are scheduled to be implemented by October 1, 2013.

• Insurance policies must provide an easy-to-read description of plan benefits, including what's covered, policy limits, coverage exclusions, and cost-sharing provisions.

• Medical loss ratio and rate review requirements mandate that insurers spend 80% to 85% of premiums on direct medical care instead of on profits, marketing, or administrative costs. Insurers failing to meet the loss ratio requirements must pay a rebate to consumers.

The ACA provides federal funds for states to implement plans that expand Medicaid long-term care services to include home and community-based settings, instead of just institutions.

The ACA provides funding to the National Health Service Corps, which provides loan repayments to medical students and others in exchange for service in low-income underserved communities.

Medicare and private insurance plans that haven't been grandfathered must provide certain preventive benefits with no patient cost-sharing, including immunizations and preventive tests.

Through rebates, subsidies, and mandated manufacturers' discounts, the ACA reduces the amount that Part D Medicare drug benefit enrollees are required to pay for prescriptions falling in the donut hole.

Major provisions coming in 2014

Several important provisions of the ACA are due to take effect in 2014, such as:

• U.S. citizens and legal residents must have qualifying health coverage (subject to certain exemptions) or face a penalty.

• Employers with more than 50 full-time equivalent employees are required to offer affordable coverage or pay a fee.

• Premium and cost-sharing subsidies that reduce the cost of insurance are available to individuals and families based on income.

• Policies (other than grandfathered individual plans) are prohibited from imposing pre-existing condition exclusions, and must guarantee issue of coverage to anyone who applies, regardless of their health status. Also, health insurance can't be rescinded due to a change in health status, but only for fraud or intentional misrepresentation.

• Policies (except grandfathered individual plans) cannot impose annual dollar limits on the value of coverage.

• Individual and small group plans (except grandfathered individual plans), including those offered inside and outside of insurance Exchanges, must offer a comprehensive package of items and services known as essential health benefits. Also, non-grandfathered plans in the individual and small business market must be categorized based on the percentage of the total average cost of benefits the insurance plan covers, so consumers can determine how much the plan covers and how much of the medical expense is the consumer's responsibility. Bronze plans cover 60% of the covered expenses, Silver plans cover 70%, Gold plans cover 80%, and Platinum plans cover 90% of covered expenses.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals

June 2013

Socially Responsible Investing

As the global climate change discussions heat up in Washington, many investors are paying attention to the impact of their investments on the environment and well-being of people around the world. As this trend increases, so does the demand for investment choices that demonstrate not only financial soundness, but also a concern for quality of life. This investment philosophy, known as socially responsible investing (SRI), has a special appeal to many individuals concerned with the future of our planet.

What constitutes socially responsible investing?

Investors who adopt an SRI strategy believe their decisions should be governed not only by economics, but also by social issues. This often means refraining from investing in companies or industries that produce products or offer services the investor disapproves of, regardless of the company’s or industry’s potential for profit or value. Investors who maintain an SRI strategy may choose to avoid investing in companies related to alcohol, tobacco, gambling and weapons. It can also mean investing in companies that promote workplace diversity, actively participate in community volunteer programs or work to improve the environment.

Benefits, drawbacks and strategies of SRI

As with all types of investing, there are tradeoffs that come with socially responsible investing. Those who practice SRI can feel good that their investment choices reflect their values. However, socially responsible investors must balance this benefit with more limited choices with regard to portfolio diversification.

Some strategies that those interested in SRI may employ include divesting from companies that don’t align with their personal morals or beliefs, and participating in shareholder activism or engagement. They may also include:

Investing in SRI mutual funds.

These funds include companies that many socially responsible investors support. They use SRI strategies as part of their fund objectives and portfolio choices.

Micro-financing.

Money invested in micro-financing service companies is used to support small businesses that otherwise would not be eligible for traditional financing.

Community-investing.

Community-investing directs capital from investors and lenders to communities that are underserved by traditional financial services institutions. It makes it possible for local organizations to provide financial services to low-income individuals and to supply capital for small businesses and vital community services, such as affordable housing, child care, and healthcare.

Building a socially responsible portfolio

To invest according to your ethical standards, research your investment decisions carefully. SocialFunds.com is a website of SRI World Group, Inc., a news, research, and consulting firm that advises clients regarding sustainability investment issues and corporate responsibility practices. The Forum for Sustainable and Responsible Investment (socialinvest.org) is a nonprofit organization that promotes socially and environmentally responsible investing. Their website also provides extensive information that may help you get started.

If you think a SRI strategy fits your financial objectives, consider working with a financial advisor to get professional advice about possible investment opportunities. A financial advisor can help you find appropriate SRIs and brainstorm options for future investments that satisfy both your financial goals and your desire to invest ethically and responsibly.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families plan and achieve their financial goals.

May 2013

Estate Planning

When It’s Just the Two of You

Planning for the future can take a different shape when children aren’t involved. With no braces to pay for or tuition bills to finance, couples don’t have many of the financial obligations that require resources and can impact an estate. On the other hand, these couples must plan for a future that will not include adult children to give them a helping hand — physically, emotionally or financially — as they age.

Estate planning is important regardless of your parental status. A well-crafted estate plan assigns decision makers, designates heirs and specifies who gets what after you and your partner pass away. It allows couples to create contingencies for individual survivorship and can help minimize taxes. It also can help ensure your mutual wishes are respected as health or cognitive abilities decline.

A financial advisor … In conjunction with legal and tax advisors who understand state and federal tax and estate planning laws, you can take steps to ensure you both have sufficient means to live well after the other passes and that your mutual wishes are respected regarding the legacy you leave.”

Assign decision makers.

Couples without children can each execute a power of attorney naming their spouse to act on their behalf. Each can also designate an alternate attorney-in-fact to act on your behalf in the event you both become unable to make decisions regarding your finances and property. This person may also be assigned the responsibility of executor of your estate. If you have no children to name, you might consider asking a trusted family member or friend (generally someone younger) or a professional in the estate planning business to take on these responsibilities.

A living will—also called an advance healthcare directive—is another important legal document both of you should have on file. It specifies your wishes in the event of an incapacitating illness and enables your assigned designee to make decisions about your health care on your behalf.

Decide how your assets will be distributed.

An attorney can help you draw up a will that specifies how and to whom your assets will be distributed when one or both of you pass away. Without a will in place, your estate will be handled according to the statutes of the state in which you reside. Often, when there are no children or designated heirs identified in a last will and testament, the surviving spouse is the primary heir, then other living relatives, which could include parents and/or grandparents, siblings and siblings’ children. If this is what you intend, you can make that clear in your will; if not, determine how you want to split your assets among your relatives, loved ones and causes that are important to you.

Your estate plan can include strategies for giving financial gifts before or after your death. Under current federal tax law for 2013, an individual may gift up to $14,000 per person to as many people as he or she would like without gift tax consequences. You can also pay college tuition for anyone without being subject to gift taxes or using any of your annual or lifetime gift tax exclusions, as long as you pay the institution directly.

Create avenues for charitable giving.

If you don’t plan to leave a significant amount of your assets to family, you may choose to give charitably to causes you’re passionate about. There are other ways to be generous in a tax-efficient way while you and your partner are both are still living. You can donate to a donor-advised fund and receive tax benefits upfront, while suggesting how the funds should be invested and later distributed to your chosen nonprofit organization. With a charitable lead trust, the charity receives payments for a period of time after which you or your heirs receive any remaining assets in the trust. A charitable remainder trust operates in the reverse, giving you or your heirs a stream of payments for a period of time (not exceeding 20 years) or for life, and leaving any remaining amount to the selected charity.

Plan for the unexpected.

Your estate plan should include adequate insurance coverage for unexpected events. Be sure to name the appropriate beneficiaries, including one another, on your respective policies. Since moving in with a child isn’t an option, you may wish to purchase long-term care insurance policies that help cover assisted living services or nursing home care as needed later in life.

Consult the experts to create a comprehensive estate plan.

A financial advisor can help you and your spouse or partner make plans for the handling of your estate. In conjunction with legal and tax advisors who understand state and federal tax and estate planning laws, you can take steps to ensure you both have sufficient means to live well after the other passes and that your mutual wishes are respected regarding the legacy you leave.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

April 2013

Five Financial Disclosures You Must Tell Your Significant Other

There are few topics of conversation that are less romantic than finances, but if your relationship is getting serious, consider planning a date in the near future to discuss money. Understanding your own and your partner’s financial history and habits before you make a formal commitment such as marriage, cohabitation, or a big joint purchase, can help alleviate a host of unpleasant surprises — and maybe some heartache — over the long term. To prepare for this conversation, make sure you can share the following things with the one you love.

It takes more than one conversation to determine whether you and your significant other are genuinely and equally committed to an agreed-upon approach to finances, but starting with full financial disclosure is an important first step to a healthy relationship between you, your loved one, and your finances.”

Your credit score. Before lending you money, creditors assess what the risk may be in doing so. Your credit score, which can range from 300 to 850, helps them determine how likely you are to pay them back. A low score can negatively affect your eligibility to receive a loan or to finance a purchase. If you and your partner were to apply for a loan or credit account, your significant other may have to shoulder the debt if your personal credit score is unsuitable.

If you don’t already know your credit score, request a report from a reputable credit-reporting agency, such as Equifax, Experian or TransUnion. These top three national agencies will provide you with a free report annually.

Your debt. Whether you carry student loan, credit card or other forms of debt, your financial obligations — or those of your partner — may affect your credit rating, day-to-day spending and ability to save for future financial goals. Understand and discuss exactly what you owe, and how it may impact your partner if you plan to combine finances in the future. If either of you has significant debt, being upfront about it can open lines of communication and help you evaluate together how your relationship may continue to grow despite financial hardship. If the amount you owe is too complex for you to determine on your own, meet with a financial, tax or legal professional who can help you to figure it out.

Your personal money values. This includes how you spend, save and manage finances. It also involves assessing how comfortable you are with investment risk, which ranges from conservative to aggressive. Because every relationship involves compromise, it’s important to understand what falls inside, and outside, your financial comfort zone. Work to resolve areas of disagreement by deciding how you’ll approach future financial situations together.

Your retirement goals. No matter what age you are, it’s important to identify and discuss your dreams for tomorrow. Ask yourself such questions as:

How career oriented am I?

What would my ideal career path look like?

Do I want to go into business for myself?

What age would I like to retire?

What type of lifestyle do I want in retirement?

Understanding and communicating your personal goals and dreams for the future will help you set expectations, and begin to think about the compatibility of your long-term plans. It will also help to determine how much you need to start saving today to reach your shared retirement goals.

An accurate picture of your overall financial situation. Before you can talk about your joint financial situation, you need to have a clear and accurate understanding of your own finances. Pull together your budget, insurance policies and investment information, including your 401(k) or other retirement plan statement, to share with each other.

It takes more than one conversation to determine whether you and your significant other are genuinely and equally committed to an agreed-upon approach to finances, but starting with full financial disclosure is an important first step to a healthy relationship between you, your loved one, and your finances.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

March 2013

Caring for Aging Parents: Don’t Wing It

As the boomers and their parents age, more and more family members are managing eldercare responsibilities. The emotional, physical and financial demands of caring for aging parents can be extensive. What’s more, the healthcare needs of aging parents can become overwhelmingly expensive — and may include costs that affect family members in ways that aren’t immediately apparent.

Healthcare and finances aren’t easy topics for many families to broach. In fact, research from the Money Across Generations II study shows that 36 percent of boomers’ parents feel that healthcare discussions with their family members are likely or very likely to create tension or spark an argument.

Thinking about caring for an ill or aging parent isn’t always easy to do, but creating a plan now can save you headaches down the road when new circumstances may suddenly arise as your parents age. ”

Having a long-term road map and a savings plan in place can help you care for your parents in the way they desire while enabling you to continue working towards your financial goals. This can be helpful in making informed short-term decisions, especially when there are unexpected expenses and emotions involved.

To get started:

Talk about finances now. While it may be uncomfortable for your parents to discuss their finances with you, it’s essential that you are familiar with their financial strategy and resources. This includes knowing what type of medical, disability and long-term care insurance they have and what those policies cover. Use this information – along with if and how much you’re willing to help from your own funds – to evaluate which healthcare options are realistically within reach when medical needs arise.

Create a contact list. Medical emergencies and sudden changes in health can happen as parents age. Because you may eventually need access to your parents’ bank accounts and other financial resources on short notice, make sure they’ve compiled a list of account numbers, computer login names and passwords, and the names, addresses and phone numbers of the professionals with whom they work. In addition to knowing the location of the list, you’ll also need to know the location of important financial and legal documents and lockbox keys.

Identify current healthcare costs and needs. Become familiar with the medical and pharmaceutical costs that your parent(s) currently incur and determine if there are ways to reduce these expenses. For example, you or your parents may consider moving from a name brand to a generic prescription or, instead of filling prescriptions at your local pharmacy, ordering a long-term supply from a mail-order provider.

Build a support network. Talk with siblings or other family members, neighbors and industry professionals to determine who can help you care for your aging parents — and in what capacity and at what cost. Proactively establishing a support network can help you avoid a strain on your time and energy down the road.

Anticipate future lifestyle changes and challenges. Even if they aren’t yet needed, explore the costs of in-home, senior apartment, assisted living and memory care housing and services, as well as the costs of having a parent live with you. This includes determining whether your home would need to be modified to provide additional space or comforts, such as wheelchair access. Understanding these costs ahead of time can help you identify what you and your parents can afford and will give you time to consider the pros and cons of each option.

Become familiar with assistance programs. Your parents may qualify for government programs, supplements or services. Visit the government hosted benefits site — www.Govbenefits.gov — for information. Also, your county or city has a federally-mandated Area Agency on Aging staffed by professionals who can provide you with information about elder programs and services in your area.

Keep your retirement goals in mind. Continue to manage your budget and save for your future. Be mindful that leaving the workforce even temporarily may seem tempting — and in some cases may be necessary — but exiting and re-entering affects your immediate income and can impact your ability to maintain your earning power. What’s more, it can impact your ability to take advantage of an employer-sponsored retirement plan. Consider these factors when you evaluate the total costs of any option.

Know your rights at work. The Federal Family and Medical Leave Act of 1993 (FMLA) allows covered employees up to 12 weeks of unpaid leave to provide care for a family member with a serious health condition.2 If you are caring for a parent, inform your Human Resources department about your situation to take advantage of this legal protection, if relevant, and create a workable plan within your company’s policies.

Thinking about caring for an ill or aging parent isn’t always easy to do, but creating a plan now can save you headaches down the road when new circumstances may suddenly arise as your parents age. Consider working with a financial advisor who can help you plan for unexpected expenses and prepare for the costs of healthcare during your own retirement.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. helping families plan financial goals.

February 2013

Preparing for the “Fiscal Cliff”

A phrase that has found its way into our daily lexicon this year is “fiscal cliff.” It refers to a combination of Federal government spending cuts and expiring tax cuts that many fear could be a serious drag on the U.S. economy beginning at the start of 2013. These scheduled spending cuts and tax increases have many economists concerned that if nothing is done legislatively to change current plans and avoid the cliff, a recession could result due to consumers having less to spend just as government reduces its own spending.

it also offers the opportunity to carefully review your finances, everything from day-to-day spending to investment strategies and tax planning, to determine the best way to limit the impact on your own bottom line and move forward with your best financial strategies.”

Changes on the docket

The estimated impact on the economy comes from a combination of expiring tax cuts, new taxes and automatic spending cuts. The most direct effect on individuals has to do with tax changes. They include:

• The expiration of the “Bush era” tax cuts of 2001 and 2003. Most notably, this would raise income tax rates for most people to levels that were in place prior to 2001. It would also change other tax provisions, including an increase in taxes on dividends and capital gains, a decrease in the child tax credit, and a reinstatement of phasing out some itemized deductions and personal exemptions for higher income individuals.

• The end of the “payroll tax holiday” that reduced an individuals’ Social Security taxes by two percent.

• Less benefit from the American Opportunity Tax Credit, which provided up to $2,500 per student in credits (a dollar-for-dollar reduction in taxes) to offset qualified higher education expenses. In 2013, income limits to qualify for the credit – which will revert back to its prior name, the Hope Scholarship Credit – are lowered and the maximum credit is reduced to a projected $1,950.

• The loss of the “patch” that allowed many middle income Americans to avoid exposure to the Alternative Minimum Tax (AMT).

• A drastic reduction in the exclusion amount for the estate tax from $5.12 million per person to $1 million, and an upturn in the highest maximum estate tax rate, from 35 percent to 55 percent.

• The implementation of a higher income threshold to qualify to deduct out-of-pocket medical costs as an itemized deduction. Currently, expenses valued at more than 7.5 percent of Adjusted Gross Income (AGI) can be deducted. The threshold rises to 10 percent in 2013 for most taxpayers. For those at least age 65, the higher threshold phases in through 2016.

• The addition of new taxes that will apply to individuals earning higher incomes as part of the new Patient Protection and Affordable Care Act.

The effect these changes would have on individuals over the next year could be dramatic, anywhere from several hundred dollars to several thousand dollars or more in increased taxes for 2013 depending on individual circumstances.

The other aspect of the fiscal cliff is scheduled federal government spending cuts that are due to take hold in 2013 – another potential blow to the economy. These include:

• $110 billion in spending cuts agreed to in the Budget Control Act of 2011

• $26 billion from the expiration of emergency unemployment benefits

• $11 billion in reduced Medicare reimbursements for physicians

• $105 billion in other scheduled changes to revenue or spending.

What should you plan for?

Nobody can be certain what policymakers in Washington may choose to do – or not do – to limit the potential economic shock created by the confluence of events that have led to the fiscal cliff. They could vote to alter the planned changes to tax laws and government outlays in order to temper the impact. However, any action in that regard may not occur before late this year or into 2013.

In the meantime, be prepared for what may come. It appears likely that the amount of taxes you pay in 2013 will be higher than what you paid in 2012. Whether it will be as severe as what exists under the currently scheduled changes remains to be seen. Despite this, changes to the national economy or your personal financial circumstances will not occur overnight.

The tax changes would take place all at once, but from a personal perspective, they would have a gradual effect. It could be dramatic over a year’s time, but it will be applied in smaller increments such as through wage withholding. Even the government’s spending cuts will be implemented gradually over the year. The situation will create challenges and should not be taken lightly. But it also offers the opportunity to carefully review your finances, everything from day-to-day spending to investment strategies and tax planning, to determine the best way to limit the impact on your own bottom line and move forward with your best financial strategies.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. , specializing in helping individuals and families plan and achieve their financial goals.

December 2012

Don’t Let Divorce Derail Your Financial Security

Divorce is rarely a life event that one plans for, but while many couples live happily ever after, some will undoubtedly go their separate ways. A divorce can be emotionally devastating, but it doesn’t have to derail your long-term financial security. If you’re facing a divorce, consider these steps to protect and claim what’s yours.

Understand your assets.

A divorce can be expensive, especially if you fail to spend the appropriate amount of time reviewing and discussing your finances as you go through the process. Educate yourself by examining investment and bank statements, qualified plan and pension information, tax returns, mortgage information and insurance policies. Before you can begin to split the assets you’ve accumulated as a couple, you should know your total net worth so that you’ll be able to assess how the divorce will impact your financial goals.

Consider the big picture.

When deciding how to split the nest egg, it helps to look into the future and think about how your lives will look post-divorce. Will you have short-term needs – like buying a home and furniture, new or continued childcare costs or paying a lawyer – that require immediate funding? Will you be able to replenish your retirement assets if you must use them to pay for these unexpected expenses? Develop a detailed written financial plan as a soon-to-be single so that you may act in your best interest when deciding which assets will best fit your needs.

Think about tax consequences.

Most retirement plans are made up of pre-tax dollars, meaning your contributions won’t be taxed until you withdraw them. This can be beneficial if you believe your income and tax rate will be lower in retirement – but it also means the amount of cash you’ll be able to use to meet your day-to-day expenses will be less than what you actually withdraw.

Be sure you’re aware of how taxes may affect your retirement income as you divide assets with your former spouse. Trusted financial, tax and legal advisors are especially valuable as you make such important decisions.

Follow the rules.

If you decide that it makes sense to divide funds from you and your former spouse’s 401(k) plans and IRAs, it’s important to carefully follow state and local guidelines. This process is complicated so be sure that your divorce settlement states specifically how assets are to be divided and transferred.

Dividing a pension or 401(k) plan may require a Qualified Domestic Relations Order (QDRO), which allows funds to be withdrawn without penalty and deposited into a separate retirement account. Make sure that you discuss preparation of such an instrument with your attorney.

Update your financial accounts.

Once your divorce is final, revise the beneficiaries on your checking and savings accounts, investments, retirement plans and life insurance. Also reevaluate your insurance policies and confirm that you still have adequate coverage for you and any dependents. Nothing can undermine your financial security faster than an uninsured accident or illness. Once the dust has settled on your divorce, create a new will or update the existing document to reflect your new marital status.

Seek expert advice.

It’s no doubt that your attorney will play an essential role in your divorce proceedings, but don’t assume that he or she is a financial expert. Consider working with a financial advisor who can help you with all aspects of your financial life before, during and after your divorce.

Let’s face it…there’s no sure thing when it comes to marriage. But even if you end up going at it alone, it doesn’t have to mean the end of your financial security. With the help of trusted professionals and determination, you can face the new financial situation that your single life will bring.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. , specializing in helping individuals and families plan and achieve their financial goals.

November 2012

The Retirement Wild Card

Planning for Your Future
Healthcare Costs

Planning financially for retirement is becoming an increasingly complex task, and the rising cost of healthcare isn’t helping matters. Household and national budgets are pinched in part thanks to more expensive care, a population with longer life expectancies and growing healthcare debt. Add to this an aging boomer population that’s expected to experience an uptick in their need for healthcare services with each passing year, and it’s easy to see that costs will likely continue to soar. All told, it’s apparent that Americans need to be prepared for significant healthcare spending in their golden years and adjust their retirement plans (and expectations) accordingly.

One common misunderstanding about Medicare is the notion that it provides total coverage for retirees. Participant costs — including premiums and co-insurance — do vary, but middle-and high-income families can expect to contribute significantly to their healthcare costs in retirement. ”

Are you overwhelmed yet? There is a great deal to know, so spend some time researching and finding answers to your questions well in advance of retirement. Whether you plan to retire in the near future or much further down the road, it’s important to understand how leaving the workforce will affect your healthcare options and your wallet.

The following discussion provides an overview of what to consider, and may help you determine how best to manage your medical costs in retirement.

Understand Your Medicare Benefits. In 1965, the United States government implemented Medicare, a government-subsidized healthcare program designed to provide affordable healthcare to older and disabled Americans. One common misunderstanding about Medicare is the notion that it provides total coverage for retirees. Participant costs — including premiums and co-insurance — do vary, but middle-and high-income families can expect to contribute significantly to their healthcare costs in retirement.

Medicare includes several parts and can be tricky to understand. Part A is hospital insurance, Part B is medical insurance and Part D provides prescription drug coverage. Then there are supplemental plans, which include Medicare Advantage plans (formerly called Medicare Part C) and Medigap plans. These optional plans are designed to help cover deductibles and copays; they may include provisions for prescription drugs, vision and dental care. Many retirees opt to pay a premium for supplemental plan coverage to avoid spikes in their monthly expenses.

Medicare eligibility starts at age 65, or sooner if you have a qualifying disability. If you’re nearing retirement age, pay close attention to enrollment timelines and requirements to ensure eligibility.

Evaluate your need for long-term care insurance. Like all forms of insurance, long-term care insurance is a way of protecting yourself against an adverse event that could possibly never occur, but there’s a good chance you would make use of a policy. Cost and eligibility are tied to age and overall health, so this type of policy is not practical for everyone. Also, these plans are not standardized, so compare options before you buy.

Incorporate healthcare cost planning into your overall financial plan. While it’s valuable to understand how healthcare costs play out in retirement in a general sense, it’s even more useful to apply this information to your unique set of circumstances. A financial advisor can help you examine your family’s situation, project your costs to the extent possible, and recommend strategies to help you enhance your savings options and potentially reduce expenses in retirement.

For example, if you or your spouse have not paid Medicare taxes over the course of ten years while working, your retirement plan should reflect an allocation for the monthly premium attached to the benefit of Medicare Part A, which others will receive free and clear. If you have a chronic condition, you can expect to incur more out-of-pocket costs. Your circumstances may also be different if you have a generous pension plan or if your former employer offers insurance coverage into retirement.

Will you be able to retire early? Some people may have dreams of leaving fulltime employment before Medicare kicks in at age 65. The Affordable Care Act includes a provision to encourage employers to maintain retirement insurance coverage for early retirees through the Early Retiree Reinsurance Program. Find out if your employer participates and think carefully about the pros and cons of leaving the workforce early.

Keep in mind that our healthcare system may seem “unwell” at the moment, but just like our bodies, there is tremendous potential for healing if each of us takes responsibility where we can by finding ways to improve our health and spend our healthcare dollars wisely.

*Kaiser Family Foundation, 2010 Medicare Chartbook, “Section 1: Medicare Beneficiaries.”

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families plan and achieve their financial goals.

October 2012

Extra Money to Save for Retirement

Chances are you would like to be able to save more money each month toward your retirement or other financial goals. Who couldn’t use a little more? Given the reality of lower interest rates and investment returns that many have experienced in recent years, simply saving more money is the key to building a sufficient nest egg for retirement. But unfortunately, it’s not so simple to come up with the extra cash to sock away.

It may be challenging, but not impossible. Start by looking at it this way: if you decide to set aside another $100 per month for your retirement, it amounts to $3.33 per day. If you’d like to be more aggressive and save an extra $500 per month, you would need to set aside $17 per day or about $120 each week. In some cases, saving these manageable amounts daily can add up – and lead to a more secure financial future. Here are a few savings opportunities to consider:

Refinancing your mortgage

If the equity position in your home is favorable and you are paying interest on your mortgage at a rate that is noticeably higher than today’s low rates, refinancing could save you a significant amount on your mortgage. The way to benefit the most from refinancing is not to increase your spending on other things, but to invest each dollar saved in a retirement plan, or to help you fund other financial goals.

Changing your tax withholding

According to the IRS, as of the end of April 2012, the average tax refund paid on a 2011 tax return was $2,700. If you are consistently receiving a sizable refund and don’t anticipate major changes in your income or deductions claimed on a tax return, you can adjust the amount withheld from your paycheck. Talk to your employer about completing a new W-4 form, and put your bigger paycheck to good use.

Reducing gas costs

With gas prices hovering around $3 to $4 or more per gallon, it’s become more expensive to drive. Cut back on unnecessary driving and consider finding alternative ways to get to work such as public transit. Walk and bike more to nearby places. More careful use of vehicles could generate $50 to $100 extra dollars each month.

Managing your food budget

Food can be one of the biggest expenses for a family. Better meal planning can help you stretch your grocery dollars by reducing the amount of food you throw out and the number of times you pay for meals at restaurants. In addition, think about other ways to cut back, such as eating fewer lunches out during the week, or cutting back on expensive coffee drinks that can easily add up.

Identifying home expenses you can live without

Many of us pay exorbitant bills for services like cable or satellite TV without actually using the service enough to justify the expense. Consider whether a movie rental service might be a cheaper alternative. Explore whether there are cheaper ways to access phone service than what you pay now. A little frugality now could make a difference in the future.

Making a big difference over time

Nobody will claim that saving an extra $5 here or there will create instant financial security. But a patient, consistent strategy of saving and investing more for your retirement or other financial goals can truly add up.

If you can save an extra $100 per month and invest it in a tax-deferred IRA or workplace retirement plan earning an average annual return of seven percent per year, that money would accumulate to a before-tax value of:

• $17,409 in ten years

• $52,394 in 20 years

• $122,699 in 30 years.

If you increase your contribution to $300, it would, based on the same return and tax assumptions, grow to a value of approximately $368,000 in 30 years. Saving an extra $500 per month with the same assumptions would accumulate $613,495 in retirement assets in 30 years.

Extra effort now could significantly improve your financial standing in retirement. Consider meeting with a financial advisor to help you get started and explore more saving and investment options.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Assoc., A Private Wealth Advisory Practice of Ameriprise Financial Inc. specializing in helping individuals and families plan and achieve their financial goals.

September 2012

 

The Long Road Back:
A Progress Report on the Economic Recovery

It was just four years ago when investors faced their most dramatic challenge of recent times. In September 2008, Lehman Brothers collapsed and other financial giants were teetering on the edge of a similar fate. The government stepped in with the Troubled Assets Relief Program (TARP) and the bailout helped avoid a deeper crisis. Yet investors paid a price. A severe bear market would see stocks (valued by broad measures like the Dow Jones Industrial Average and S&P 500) lose more than half of their value in a period of 18 months.

A recession also took hold in 2008, the most severe America has seen since the Great Depression of the 1930s. Two of the most notable aspects of the economic slide that impacted Americans were the housing market bust and the unemployment rate rising above 10 percent.

For some of us, the sense of fear about the markets might have dwindled, but hasn’t disappeared since that time – though much has changed for the better. Here is a brief summary of what’s happened in various aspects of the economy and the investment markets since those dark days four years ago:

Economic Growth

The economy slipped into a recession in the summer of 2008, declining at an annualized rate of almost nine percent in the fourth quarter of that year, according to statistics from the Bureau of Economic Analysis. Positive economic growth did not return until mid-2009 and the recovery has remained modest since. The U.S. economy grew by three percent in 2010 but just 1.7 percent last year, and started this year with an annualized growth rate of about two percent. Things are moving in the right direction, but this is considered a very sluggish rate of recovery.

Jobs

In the midst of the crisis four years ago, the unemployment rate was around six percent, according to the Bureau of Labor Statistics. As the recession deepened, job losses multiplied and unemployment topped out at over 10 percent in October 2009. Now it stands at around eight percent, still higher than at any time since 1983, but an improvement from several years ago. Positive job growth began in 2009 and gained some steam in late 2011 before slowing recently. Again, progress has been made, but it could be better.

Inflation

Through the recession and the recovery, the inflation rate has remained relatively modest. After a cost of living hike of just under four percent in 2008, it dropped to 1.5 percent in 2010 and stood at three percent for 2011 (according to the Bureau of Labor Statistics’ Consumer Price Index). This is considered a modest rate of inflation that is not producing any significant economic concerns.

Housing

Nationally we continue to pay the price for a housing market that overheated over the last decade when the Case-Shiller Home Price Composite U.S. Index peaked. By 2008, it had fallen dramatically, and nationally home values continued to decline through 2011, losing on average one-third of their value. Foreclosure levels remain high, and the housing market is not expected to show significant strength anytime soon.

Investment Markets

In September 2008, the Dow Jones Industrial Average stood at 10,850, already down about 25 percent from its peak less than a year earlier. It would proceed to dip to 6,547 by March, 2009. Since then the Dow has steadily recovered much of that lost ground, reaching above 13,000 in recent months before retreating somewhat in light of political and economic turmoil in Europe. The performance of individual stocks, mutual funds, ETFs or other investments varies. Bond markets have been stronger performers in that same time period. When the financial crisis hit in September 2008, the yield on the benchmark 10-year U.S. Treasury note stood at 3.82 percent. It has dropped well below two percent in 2012, and lower yields mean higher values for existing bonds. So the slow pace of economic recovery has actually benefited the bond market in recent times.

The road from here

We’ve come a long way from the crisis environment that existed in 2008. While the economy and investors are still feeling the impact, it is also notable that both have shown tremendous resiliency. Despite moving in fits and starts, the U.S. economy has managed to avoid another recession since 2009 and stocks have gradually recovered much of the ground that was lost during the meltdown. More challenges may lay ahead, with Europe’s debt problems and worries over the slowing pace of economic expansion in China and other places looming over the global marketplace. But our experience since 2008 demonstrates why a patient, long-term approach to investing may be the most effective way to react to challenges facing the economy, no matter how severe they are. For advice on investing, consider working with a financial professional.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping plan and achieve financial goals.

July-Aug 2012

What You Should Consider Before Supporting A Family Member Financially

Families are comprised of people with very different personalities, values, and financial habits. You may, like many of us, also consider close friends or ex-spouses as members of your family. There may be high earners, low earners and no earners—and even those who are currently financially comfortable can hit hard times and need help with their finances.

Consider whether your family member’s circumstances or past behavior indicate that they’ll actually be able to repay you. Also ask yourself whether you’ll be okay — financially and emotionally — if they don’t. When you come to a conclusion, be sure to clarify with the recipient if the money is a loan or a gift...”

According to recent research commissioned by Ameriprise Financial*, more often than not, family members—especially those that are part of the sandwich generation—oblige when a family member is short on cash. Of 1,000 baby boomers surveyed, more than half (58%) report assisting their aging parents in some way, and most (93%) report providing financial support to their adult children.

Helping family is admirable, but boomers may be failing to recognize the impact this support can have on their own retirement security. Only one-in-ten (10%) admit that helping their parents has slowed down their retirement savings; one-third (34%) feel the same about the support they’ve provided their adult children.

It can be difficult to turn down a family member who needs support, but before you say “yes,” think carefully about your ability and willingness to provide financial support.

Want vs. Need

When it comes to living expenses, there is an important difference between a true need and a perceived need. If you are hesitant to help, consider how critical the request really is. Ensuring that a family member can make their rent payment or buy groceries is critical—but helping them afford a nice spring break or pay off a credit card debt may not be a necessity. If the expense isn’t a basic need, or if you’ve assisted with the same expense in the past, ask yourself if you are enabling irresponsible financial behavior.

Loan vs. Gift

Often family members who ask for financial help expect to be able to pay you back, but unfortunately these good intentions don’t always materialize. Consider whether your family member’s circumstances or past behavior indicate that they’ll actually be able to repay you. Also ask yourself whether you’ll be okay — financially and emotionally — if they don’t. When you come to a conclusion, be sure to clarify with the recipient if the money is a loan or a gift, and decide if you will charge interest on the loan and if you’re willing to continue providing financial support in the future.

Expectations vs. Reality

It can be easy to say “yes” to a request for financial help, only to have mixed emotions down the road. Consider your own feelings and ask yourself if you’ll resent your decision—or your family member—in the future. Are you expecting the person to respond in a certain way, such as with appreciation or reciprocity? Are you doing it to feel needed or simply following a parental instinct? If your expectations aren’t met, will you be disappointed? If so, it may be better to say “no” than risk damaging your relationship.

The most important question to ask yourself is, “How will this affect my own financial well-being?” It’s crucial to take a look at your short-and long-term goals and determine if you can really afford to help. It’s natural to want to provide support, but don’t let a struggling family member jeopardize your own financial security, especially if you’re approaching retirement. By prioritizing your own financial goals and stability, you may even have the ability to comfortably help family members in the future.

Making financial decisions can be difficult—and communicating about finances can be even more challenging when you have a family member in need. Consider working with a financial advisor who can help you set goals, track your progress and include any support you’d like to give to family members into your overall financial plan.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc.* in San Francisco.

June 2012

Preparing for One of Retirement’s Major Expenses – Taxes

As you plan for retirement, you’re likely considering the major expenses you may encounter, such as housing and health care. But are you overlooking something that may have a significant impact on your ability to achieve a financially secure retirement?

If the bulk of your retirement savings are in tax-deferred accounts (workplace plans and traditional IRAs), most or all of your distributions will be subject to ordinary income tax rates. This may leave you with less cash flow than you expect, which could impact your ability to meet your day-to-day expenses.

A starting point – spread your savings out
So how can you reduce the impact of taxes on your retirement portfolio? Just as portfolio diversification is recognized as a good approach to investing, tax diversification can play an important role in helping you potentially enhance your retirement savings when the time comes to withdraw money from your accounts. You may have the ability to stretch your retirement dollars further if you can manage retirement distributions in a tax efficient way. Consider diversifying your savings into three different tax “buckets”:
•      Tax-deferred accounts – workplace savings programs (including 401(k) and 403(b) plans), traditional IRAs and annuities.
•      Tax-free accounts – Roth IRAs, cash value life insurance, municipal bonds, if appropriate
•      Taxable accounts – savings and investments outside of tax-advantaged vehicles

The biggest challenge is often directing enough money into tax-free accounts such as Roth IRAs. Because there can be tax consequences in that event, Roth conversion is not always a viable option for investors to consider – so keep in mind that if you choose this process, the earlier you begin the better. Also be aware that you are not able to deduct any contributions to a Roth, as they are after tax dollars.

In retirement – manage your distributions
Efficiently managing distributions from your tax-deferred accounts is important because most distributions from 401(k) plans and traditional IRAs are subject to ordinary income tax rates, and will increase your taxable income. Investors with a tax-diversified portfolio, comprised of assets in taxable, tax-deferred and tax-free accounts, are often best positioned to manage cash flow during retirement.

For example, let’s assume you expect to use your 401(k) plan to meet your annual income requirements. You will need to pull out more than what you need as annual income from your plan – or tap your bank account – to cover the taxes you’ll owe on this income. (The actual amount depends on your income tax rate.) If you didn’t account for this in advance, your savings may be depleted more quickly than you planned. And depending upon where you are in the tax brackets, the actual amount you withdraw may push some of your income into a higher tax bracket, making it more important to manage your distributions.

If you have the ability to pull part of your necessary cash flow from a tax-free account, such as a Roth IRA, you may be able to reduce the amount of taxes you pay throughout your retirement, stretch out your qualified plan distributions and still meet your income needs. (Remember of course, that you did pay tax on the money that’s saved in your Roth account. You simply paid it before you invested it for retirement or at the time you converted it from a traditional retirement savings plan.)

Also keep in mind that there’s a common assumption that your income tax rate in retirement will be lower than it was during your working years. While that is true for some retirees, it is not true for all. Your individual retirement savings and distribution strategy needs to be based on how you intend to spend your retirement years, with the potential impact of taxes only being one piece of the puzzle.

Consider working with a financial advisor who can help you to plan for retirement and other long-term financial goals while keeping tax expenses in mind. Though your financial planner will not be able to give you direct tax advice, he or she will work with you and your tax advisor. By being proactive in the years when you are still accumulating wealth for retirement, you can achieve greater tax-diversification in your overall portfolio by the time retirement begins, giving you more flexibility with the money you’ve saved.

 

Joanne Jordan, CFP ® and Brandon Miller, CFP® are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco.

May 2012

Top Five Financial Reasons for Delaying Marriage

It’s become rather obvious that marriage has lost some of its luster in America. According to 2010 census data, the number of adults aged 18 and older that are married has dropped from 72 percent in 1960 to just 51 percent in 2010. And not only are people opting out, but those who do marry are waiting longer before they walk down the aisle. According to a Pew Research Center study released in December, the average age at first marriage for both men and women has risen significantly, from the early 20s in 1960 to upwards of 27 for both sexes (higher for men) in 20111.

Why the delay? Finances often play a significant role in the decision to wed or wait. Presumably, money has always had some influence in timing of matrimony for younger couples. The surprising news is that all age groups face financial roadblocks that may have implications for a marital commitment. Following are five financial circumstances that may influence the timing of when people decide to tie the knot.

1) The debt downer. Taking time to improve a personal balance sheet is a good reason to wait before getting married. If the bride or groom is saddled with hefty college loans or maxed-out credit cards, the “honeymoon phase” may be over in a hurry. For example, an individual who has a strong credit history might also be less willing to commit financially to spouse with a recent bankruptcy on the books.

2) Job insecurity. Unemployment rates are still high, which can create anxiety about exchanging vows. It’s hard to plan for the future when the here-and-now is unpredictable. Lack of a regular paycheck, or the likelihood of job loss, can affect the ability to make other commitments that often go hand-in-hand with marriage, such as signing a lease on an apartment, purchasing a first home or starting a family.

3) Health insurance quandaries. Health insurance is costly, but increasingly critical to have in order to avoid financial turmoil in the event of a catastrophic illness. It’s a factor that needs to be addressed when two households become one. Fortunately, with the new healthcare reforms, adults 25 and under can still be covered under their parent’s plans, even if they are otherwise independent (and married). In fact, health insurance may provide an incentive to get married, when one party has a good health insurance plan that becomes available to the other only through marriage.

4) Child and spousal support. A marriage can render alimony payments null or void, and may affect other financial agreements for a previously single parent, such as child support. According to a University of Michigan study, a divorced parent who remarries may see a substantial drop in child support payments2. That’s enough to give some pause before taking a leap into marriage.

5) Sticker shock. The cost of a wedding can push marriage plans far into the future. Even a barebones wedding can easily cost $5,000, and it’s not unusual for the tab reach $25,000 or more. Costs add up quickly when you consider the expense of the rings, followed by invitations, the wedding gown, tuxedos, photography, plus the reception and all it entails. If the bride and groom have their hearts set on a long guest list and pricey affair — and mom and dad aren’t prepared to chip in —it may take time to accumulate the funds for the wedding.

The other side of the coin
While many of the reasons to delay marriage have merit, following through with it isn’t all bad for our pocketbooks. The Pew Research Center also reported that the household income of married folks is significantly higher than their unmarried counterparts. That’s true for both college-educated and non-college educated couples. This may in part be a result of the federal tax benefits that apply to married couples filing jointly, but it’s quite possibly more than that. Couples who enter into the legal contract of marriage may take the step because they feel that it will lead to more stable circumstances that will contribute to their income-earning potential. They also may have more incentive to pool their resources and therefore may do so more efficiently, helping them to acquire a better financial position.

Say ‘I Do” to financial planning
If you’re thinking about marriage, include financial planning as a couple on your list of to-dos. Have a conversation about what kinds of things each of you plans to do, and what your financial situation is like. Since money is often a leading cause of discord between couples, it’s wise to pay special attention to the role it may play in your relationship. A financial advisor can help you and your future spouse explore your individual attitudes about money and develop a plan that reflects your shared goals, so you are better able to make the most of your lives together.
Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

April 2012

Recovering from Identity Theft

You’ve read about it, and you thought it would never happen to you. But suddenly your bank account is empty, your credit card bills are through the roof, and you’re getting late notices for accounts you don’t own. Your identity has been stolen. What now?

Time is money To minimize your losses, act fast. Contact, in this order:

• Your credit card companies

• Your bank

• The three major credit bureaus

• Local, state, or federal law enforcement authorities

Your credit card companies Credit card companies are getting better at detecting fraud; in many cases, if they spot activity outside the mainstream of your normal card usage, they’ll call you to confirm that you made the charges. But the responsibility to notify them of lost or stolen cards is still yours. If you do so in a reasonable time (within 30 days after you discover the loss), you won’t be responsible for more than $50 per card in fraudulent charges. Ask that the accounts be closed at your request, and open new accounts with password protection.

If an identity thief opens new accounts in your name, you’ll need to prove it wasn’t you who opened them. Ask the creditors for copies of application forms or other transaction records to verify that the signature on them isn’t yours.

Follow up your initial creditor contacts with letters indicating the date you reported the loss or theft. Watch your subsequent monthly statements from the creditor; if any fraudulent charges appear, contest them in writing.

Your bank if your debit (ATM) card is lost or stolen, you won’t be held responsible for any unauthorized withdrawals if you report the loss before it’s used. Otherwise, the extent of your liability depends on how quickly you report the loss.

• If you report the loss within two business days after you notice the card is missing, you’ll be held liable for up to $50 of unauthorized withdrawals. (If the card doubles as a credit card, you may not be protected by this limit.)

• If you fail to report the loss within two days after you notice the card is missing, you can be held responsible for up to $500 in unauthorized withdrawals.

• If you fail to report an unauthorized transfer or withdrawal that’s posted on your bank statement within 60 days after the statement is mailed to you, you risk unlimited loss.

If your checkbook is lost or stolen, stop payment on any outstanding checks, then close the account and open a new one. Dispute any fraudulent checks accepted by merchants in order to prevent collection activity against you. And notify the check-guarantee bureaus:

• Certegy (FIS) www.certegy.com

• Check Rite www.checkritesystems.com

• ChexSystems www.chexhelp.com

• NPC www.npc.net

• SCAN www.nobouncedchecks.com

• TeleCheck www.telecheck.com

The three major credit bureaus If your credit cards have been lost or stolen, call the fraud number of any one of the three national credit reporting agencies:

• Equifax (888) 766-0008

• Experian (888) 397-3742

• TransUnion (800) 680-7289

You need to contact only one of the three; the one you call is required to contact the other two.

Next, place a fraud alert on your credit report. If your credit cards have been lost or stolen, and you think you may be victimized by identity theft, you may place an initial fraud alert on your report. If you become a victim of identity theft (an existing account is used fraudulently or the thief opens new credit in your name), you may place an extended fraud alert on your credit report once you file a report with a law enforcement agency.

Once a fraud alert has been placed on your credit report, any user of your report is required to verify your identity before extending any existing credit or issuing new credit in your name. For extended fraud alerts, this verification process must include contacting you personally by telephone at a number you provide for that purpose.

Most states now allow you to “freeze” your credit report. (In the few that don’t, the credit bureaus allow state residents to freeze their reports voluntarily.) Once you freeze your report, no one--creditors, insurers, and even potential employers—will be allowed access to your credit report unless you “thaw” it for them.

To freeze your credit report, you must contact all three major credit reporting agencies. In many cases, victims of identity theft are not charged a fee to freeze and/or thaw their credit reports, but the laws vary from state to state. Contact the office of the attorney general in your state for more information.

If you discover fraudulent transactions on your credit reports, contest them through the credit bureaus. Do so in writing, and provide a copy of the identity theft report you file. You should also contest the fraudulent transaction in the same fashion with the merchant, bank, or creditor who reported the information to the credit bureau. Both the credit bureaus and those who provide information to them are responsible for correcting fraudulent information on your credit report, and for taking pains to assure that it doesn’t resurface there.

Law enforcement agencies While the police may not catch the person who stole your identity, you should file a report about the theft with a federal, state, or local law enforcement agency. Once you’ve filed the report, get a copy of it; you’ll need it in order to file an extended fraud alert with the credit bureaus. You may also need to provide it to banks or creditors before they’ll forgive any unauthorized transactions.

When you file the report, give the law enforcement officer as much information about the crime as possible: the date and location of the loss or theft, information about any existing accounts that have been compromised, and/or information about any new credit accounts that have been opened fraudulently. Write down the name and contact information of the investigator who took your report, and give it to creditors, banks, or credit bureaus that may need to verify your case.

If the theft of your identity involved any mail tampering (such as stealing credit card offers or statements from your mailbox, or filing a fraudulent change of address form), notify the U.S. Postal Inspection Service. If your driver’s license has been used to pass bad checks or perpetrate other forms of fraud, contact your state’s Department of Motor Vehicles. If you lose your passport, contact the U.S. Department of State. Finally, if your Social Security card is lost or stolen, notify the Social Security Administration.

Follow through Once resolved, most instances of identity theft stay resolved. But stay alert: Monitor your credit reports regularly, check your monthly statements for any unauthorized activity, and be on the lookout for other signs (such as missing mail and debt collection activity) that someone is pretending to be you.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families plan and achieve their financial goals.

More info: www.ameripriseadvisors.com/brandon.j.miller/profile

March 2012

 

Five Questions about Long-Term Care

1. What is long-term care?

Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities. There are three levels of long-term care:

• Skilled care: Generally round-the-clock care that’s given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.

• Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.

• Custodial care: Personal care that’s often given by family caregivers, nurses’ aides, or home health workers who provide assistance with what are called “activities of daily living” such as bathing, eating, and dressing.

Long-term care is not just provided in nursing homes—in fact, the most common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.

2. Why is it important to plan for long-term care?

No one expects to need long-term care, but it’s important to plan for it nonetheless. Here are two important reasons why:

The odds of needing long-term care are high:

• Approximately 40% of people will need long-term care at some point during their lifetimes after reaching age 65*

• Approximately 14% of people age 71 and older have Alzheimer’s disease, a disorder that often leads to the need for nursing home care**

• Younger people may need long-term care too, as a result of a disabling accident or illness

The cost of long-term care is rising:

Currently, the average annual cost of a 1-year nursing home stay is $74,820* and in many states the cost is much higher. In the future, long-term care is likely to be even more expensive. If costs rise at just 3% a year (a conservative estimate), in 20 years, a 1-year nursing home stay will cost approximately $135,133.

*National Clearinghouse for Long-Term Care Information, U.S. Department of Health and Human Services, 2011

**Alzheimer’s Association, 2011 The Rising Cost of Long-Term Care

3. Doesn’t Medicare pay for long-term care?

Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But Medicare provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. And although Medicare provides some home health care benefits, it doesn’t cover custodial care, the type of care older individuals most often need. Medicaid, which is often confused with Medicare, is the joint federal-state program that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. But to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.

4. Can’t I pay for care out of pocket?

The major advantage to using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. But because the cost of long-term care is high, you may have trouble affording extended care if you need it.

5. Should I buy long-term care insurance?

Like other types of insurance, long-term care insurance protects you against a specific financial risk—in this case, the chance that long-term care will cost more than you can afford. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and guarantee that you’ll have access to a range of care options. However, it can be expensive, so before you purchase a policy, make sure you can afford the premiums both now and in the future.

The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:

• Benefit amount: The daily benefit amount is the maximum your policy will pay for your care each day, and generally ranges from $50 to $350.

• Benefit period: The length of time your policy will pay benefits (e.g., 2 years, 4 years, lifetime).

• Elimination period: The number of days you must pay for your own care before the policy begins paying benefits (e.g., 20 days, 90 days).

• Types of facilities included: Many policies cover care in a variety of settings including your own home, assisted living facilities, adult day care centers, and nursing homes.

• Inflation protection: With inflation protection, your benefit will increase by a certain percentage each year. It’s an optional feature available at additional cost, but having it will enable your coverage to keep pace with rising prices.

Your insurance agent or a financial professional can help you compare long-term care insurance policies and answer any questions you may have.

Deductions for Long-Term Care Insurance Premiums: 2011 & 2012

Age

2011 Limit

2012 Limit

40 or under

$340

$350

41-50

$640

$660

51-60

$1,270

$1,310

61-70

$3,390

$3,500

70+

$4,240

$4,370

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals. For more information, please visit jordanmilleradvisors.com.

February 2012

 

Time Right to Refinance?

"Rates can't go lower." Or so advertisements from mortgage companies have been claiming for years. But it's possible that now, it's more true than ever. According to research done by Freddie Mac, the average rate on a 30-year mortgage in the U.S. dropped below 4% for the first time ever in 2011. Rates on shorter-term, 15-year mortgages are even lower.

For some, this may create a great opportunity to refinance your mortgage, but doing so often isn't the best decision financially for families in certain circumstances. Here are four things to consider before you make any decisions:

1. How much equity do you have?Refinancing may be a priority for homeowners with disadvantageous loan terms, or who owe more on their homes than they are worth. But these situations can make it difficult to qualify for refinancing. Your first step should be to consult with your mortgage company about whether arrangements can be made to structure a different financing package for your home.

If you do have equity in your home, you have more flexibility. In cases where the amount you owe on the mortgage is significantly less than the value of the home, it's possible to structure a payment that may be dramatically lower than your current monthly mortgage expense. If the amount of equity is not much different than the current value, the payment will be closer to what you already have, but would likely be an improvement due to the recent decline in interest rates.

2. Why do you want to refinance? Locking in a historically low rate can be appealing, but is it a fit for you? If you are within a few years of paying off your mortgage, it may not make sense for you to re-start with another 15- or 30-year mortgage. If you're focused on reducing your total debt, financing your home for an extended period of time may not be a favorable move.

Many who do have significant equity in their home refinance to "cash out" some of that equity for other purposes. But it can be risky; this strategy backfired on many homeowners when housing prices crashed in recent years. Those who took out too much cash were suddenly "underwater," owing more on their house than it was worth when its value declined. If the rationale for refinancing is to access cash, be sure it is for a worthwhile purpose like paying down more expensive debts such as credit card balances, or financing an improvement on your home that could boost its value.

3. Are you in a position to refinance? If you have run into credit problems due to the sluggish economy, refinancing may not be as easy as it used to be. Households need to have a sufficient credit score — usually 700 or higher — to be able to qualify for a conventional mortgage.

Employment status could be another factor. A number of Americans, some involuntarily, have recently left the workforce and started their own businesses. If you don't have an established record of income yet as a business owner, it might be a difficult time to obtain a new mortgage. Ask about this upfront when you contact your mortgage company to make sure it's worthwhile for you to pursue the mortgage application process.

4. Determine the terms that suit your needs. If everything else works out and refinancing seems to be a good choice, the final question is whether to opt for a 15-year or 30-year mortgage. An adjustable-rate mortgage is also an option, but since the terms of those loans are subject to change, it may not make sense given the historically low rates that exist today.>

If your primary goal is the lowest possible payment, a 30-year loan makes sense. If you are trying to focus on reducing debt and accumulating wealth, a shorter-term loan may make more sense; the total interest paid on a 15-year loan will be significantly lower than with a 30-year mortgage. While monthly payments will be higher, a 15-year loan offers you more long-term advantages, since the financial obligation of a mortgage will no longer exist after 15 years, allowing you to concentrate on retirement or education savings.

If you ultimately decide to refinance, be sure to compare costs of different lenders. The breakeven point on the cost of the loan (the number of years you need to keep the mortgage before the costs of obtaining a new loan are overcome) is a critical measure of whether refinancing is a worthwhile move for you.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping individuals and families plan and achieve their financial goals. For more information, please visit jordanmilleradvisors.com.

December 2011

 

Got Wealth? Here's Why You May Want to Give It Away

It's hard to miss all the controversy arising from the average Joe's frustration with how the money in this country is unfairly dispersed. But no one is talking about an easy way to redistribute some of that wealth.

For the tax years 2011 and 2012, you can give someone (or several someones) up to $5 million dollars tax free. This lifetime gift tax exemption is usually $1 million, so this is a substantial opportunity.

Now before you start laughing, "yeah, like I even have one million to give away," you might want to consider this: Your estate, especially if you own multiple properties, may be worth much more than you think. There may be some instances where shifting a sizeable portion of your assets to someone else makes sense from a financial standpoint. And since same-sex couples don't enjoy the same unlimited marital deduction that heterosexual spouses do, this may be an ideal time to equalize each partner's wealth.

Tax-free generosity

There are two levels of tax exemptions for non-charitable gifts. The first is the annual gift amount of $13,000. You can give as many people as you want up to $13,000 each year and neither of you will owe tax on that amount.

The second level is the lifetime gift exemption. If you give one person more than the annual exemption amount in a single year, the excess amount counts toward your total lifetime exemption amount. For example, if you give someone $20,000 in one year, $13,000 is tax free and the remaining $7,000 counts toward your lifetime limit. You'll have to file a gift tax return for that excess amount, but you won't have to pay any gift taxes unless you exceed the amount allowable in a lifetime.

With the lifetime gift exemption temporarily raised to $5 million (versus the usual $1 million), you can obviously shift ownership of many more of your assets. But you have to do that before the end of 2012.

When it's good to give

There are a lot of advantages to giving gifts of cash, stocks, real estate and other assets during your lifetime. These can range from reducing the size of your estate for tax purposes to making someone really, really happy while you're still around to enjoy their gratitude. Gifting can work for you if you want to:

• Give less to Uncle Sam while you're alive. Reducing your assets through gifting may put you in a lower tax bracket.

• Give less to Uncle Sam once you're gone. Probate is an estate-eating legal process that includes, among other things, identifying and inventorying your property after you die. The less you have to inventory, the lower the probate costs for your heirs.

• Eliminate inequality. If you and your partner have a significant income disparity, giving him or her a sizable chunk of your estate can put you on more equal footing.

• Get rid of landlord duties. Deeding a rental or business property to someone else relieves you of property management worries. This may also be a way of providing a partner with an income—and job.

• Take care of business (partners). If you own a business and are nearing retirement, you can transfer ownership to your business partner(s) to keep unhappy heirs from later obtaining any part of your company.

You can make an outright gift directly to your recipient or put it in a trust. A trust may involve fees for trustees, accountants and attorneys, but it also offers advantages such as professional asset management and control over how the gift amount is dispersed (as needed, a set amount per year, etc.). Forgiving a substantial debt and making interest-free or below-market loans are other ways of gifting.

Another strategy is to title your property jointly. For example, if you want to give your partner half ownership of a home you own, you are essentially giving a gift of 50% of your property's value at the time the additional name is added to the title.

However you choose to make a gift, you'll want to work with of financial, estate planning and tax professionals to ensure the gift works within your financial plan and offers all of the benefit you want for your estate.

If you're one of the lucky ones with considerable assets to shift to someone else, the rest of 2011 and 2012 is an excellent time to make your gifts and capitalize on the $5 million lifetime gifting amount.

And if you don't have any assets to shift, maybe it's time to find that sugar daddy or mama you've always wanted. But start looking now because you only have until the end of 2012.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco, helping individuals and families plan and achieve their financial goals. For more information, please visit jordanmilleradvisors.com.

November 2011

 

Raising a Bundle for Your Bundle of Joy

You're longing to be a parent. You fuss over every baby you see on the street. You can't stop scrolling through the Baby CZ and Svan of Sweden websites. And in your mind, you've already turned the spare bedroom into a nursery decorated in a gorgeous shade of earthy chocolate with light turquoise accents.

If you're choosing the adoption or surrogacy route, you might find the costs a bit sobering. Adoption expenses average $40,0001 and can be much more, depending on the agency you use. A quick survey of surrogacy agencies shows an average cost of $60,000, though it can be as high as $150,000.

What's all that money for? If you're adopting, you'll probably pay fees for applying, counseling, background and home checks and finalizing the papers. For surrogacy, you'll have to pay the agency, surrogate mother and lawyers their share, and you may be on the hook for medical expenses and even maternity clothes. And if all this is taking place internationally, figure on travel expenses, visas and perhaps gifts (a.k.a. bribes) for local officials.

Now that you have an idea of what you're in for—at least financially—how can you make your dream of parenthood a reality? Here are some suggestions you might consider:

• Save it or borrow it. Obviously if you have the money already in your savings, you're in good shape. But if your savings won't go far enough, you have several options. If you own your home, you can apply for a home equity loan. You also might be able to borrow against your 401(k) or pension plan to drum up the cash. Just remember to pay back the amount you borrow as soon as possible so your retirement doesn't suffer. While taking a cash advance on a credit card may be tempting, do your best to avoid this unless you're confident you can pay it back relatively quickly. Otherwise, the high interest rates work against you.

And check with the agency you're working with—some offer adoption grants or low-cost loans to adoptive parents.

• Get someone else to help pay. Your boss and even Uncle Sam may be willing to lessen your burden. Many companies offer adoption and surrogacy benefits as part of their employee compensation plan. These benefits take many forms including lump sum payments, reimbursement for certain fees or expenses, or financial assistance at an attractive interest rate. At the very least, you may be entitled to parental leave, which can keep you from using your vacation and sick time or taking a leave of absence. Check with your human resources department to see if any benefits are available to you.

If you adopt your child, the IRS offers tax credits for some qualified expenses to help offset the financial hit you'll be taking. You may be eligible for up to $13,170 in refundable tax credits. What this means is that you'll get the cash back for qualifying expenses, minus any taxes owed. So you'll have to have the cash up front, but may receive a hefty check after you file your tax returns. Some states, including California, also offer adoption tax credits, though these are usually for children who were part of the state's public agency. (Note that adopting from a public agency may be a less-expensive alternative, which means you'll have to raise less money.)

Unfortunately, no such federal or state tax credits exist for surrogacy.

• Be creative. If your savings and what you can borrow from traditional sources still isn't letting you clear the financial hurdle, look for some alternative sources. Perhaps you can work overtime, get a part-time job or even enter a different line of work that pays better. Maybe it's time to sell your share of the ski condo in Tahoe or something else of value with which you're willing to part. If you have a rich uncle or daddy or some other loved one who might provide a short-term loan, that's a great option too. You might also find some helpful suggestions online for how others have handled their adoption and surrogacy expenses.

Long-term Planning for a Lifetime Commitment

Of course, your initial costs are just the start of what you'll be paying and paying and paying once the child joins your family. A financial planner can help you look at and prepare for the realities of your new situation, such as a drop in income if you or a partner stop working to take care of the child. With a professional's help, you can create a solid financial plan that accounts for these inevitable expenses so your life goals stay on track and your child can have the future you envision.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Private Wealth Advisory Practice of Ameriprise Financial Inc. in San Francisco.For more information, please visit jordanmilleradvisors.com.

1 U.S. Department of Health and Human Services.

October 2011

 

Smart Ways To Get Smarter

Are the season's hottest accessories—a cap and gown—in your future? You might be returning to school to advance your career—or start a whole new one. Maybe you've heard a rumor that your department is slated for the next round of layoffs. Perhaps your little one now needs diplomas instead of diapers. Or maybe you're finally ready to fulfill that promise to yourself.

Great, you've made a smart decision. Now the question is, will you be the one paying—or can you get someone else to do it? For many people, it's a combination of the two. But before you start figuring out who owes what on the bill, you have to know the total.

Decide When Enough Is Enough

Obviously, the school you choose is a key factor in how much money you'll need. Average annual tuition and fee costs range from $35,000 or more for a private four-year college to $2,700 for public two-year colleges.* If the upper end is beyond your reach, perhaps you can receive comparable training from online courses. It might also be possible to take prerequisites at an affordable community college and transfer those credits to a more expensive school later. If all else fails, there are tuition-free colleges, though they're very difficult to get into.

Your life—and living expenses—won't stop once your studies begin, so how will you balance school and work? Continue to work full time, shift to part time or not work at all? If your income will drop while you're in school, remember to add the gap in living expenses into your total equation. If you're only going to school at night, it will take longer to graduate and tuition costs may rise significantly during that time.

There are other factors that will influence your total sum, so be realistic to get a clear idea of how much help you need.

Leverage What You've Got

Since most student aid has to be repaid, a smaller debt load will make life easier once you've graduated. Here are some resources you might already have access to:

• Savings. Basic savings accounts, money market accounts, CDs, bonds, the cash under your mattress— the source doesn't matter. Just the amount.

• Traditional or Roth IRAs. Even if you're not 59½, you may be able to make early withdrawals without penalty to pay for school. Restrictions apply, of course, such as distributions can only be used for qualified higher education expenses and you have to own the IRA for at least five years. Just remember that any amount you withdraw will not be available for your retirement.

• 529 savings plan. If you have a few years to save, you can open this account where earnings grow tax-free, but must be used for tuition, books and other related education expenses. You have to designate a student beneficiary, which can be yourself or a child.

Find a Helping Hand(out)

To help you cover what your savings won't, look at these sources:

• Government-sponsored financial aid. Federal student loans usually offer lower interest rates and more flexible repayment options than loans from private sources. That's why it's wise to start here before turning elsewhere. At www.FAFSA.ed.gov, you can fill out one application to determine your eligibility for available grants, scholarships, work-study opportunities and federal student loans.

• Employer financing. Many employers offer education assistance as part of their benefits package. Even if you're facing a layoff, some companies will pay for all or part of education costs for training in a new field. Check with your HR department to see if you're eligible for any assistance.

• Pension plan. If you can borrow against your contributions, this could help you meet education expenses. The advantage to this loan type is that you don't need to worry about qualifying as long as you meet your plan's eligibility requirements.

• Private and home equity loans. Your great credit might qualify you for funding from a bank, credit union, etc. Just be aware that you'll probably have to begin repaying immediately. Other forms of student aid often defer repayment until after you leave school.

Any loans you secure could mean years—even decades—of repayment. Depending on where you borrowed, you can possibly modify the terms to suit your circumstances, such as making payments that get gradually higher as your salary increases. There are also some government jobs that will forgive all or part of your education debt if you stay in the job for a set number of years.

A smart first step may be to sit down with a financial professional to assess your situation before, during and after school. With a little planning—and a lot of hard work—you could be hanging a tassel from your rear-view mirror sooner than you think.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associ., A Private Wealth Advisory Practice of Ameriprise Financial Inc., helping individuals and families plan and achieve goals. For more information, please visit jordanmilleradvisors.com.

*Trends in College Pricing 2010, College Board, 2011.

September 2011

 

Reverse Mortgage:
Sound Option for Retirement Income?

The concept behind reverse mortgages is nothing new. They provide a way for those who are retired or about to retire to generate cash flow based on the value of their home. The terminology may sound confusing, but a reverse mortgage is considered a loan to the individual—similar to a home equity loan.

A reverse mortgage is an option for retirees to tap into the equity they've accumulated on their home, particularly if the mortgage is paid off or if the balance on the mortgage is low. But reverse mortgages can take different forms, and it's important for homeowners to clearly understand the terms of any agreement they consider.

Given the financial strain many retirees feel today as a result of the volatile investment markets of recent years and despite the fact that home values were hard hit in recent years, curiosity about reverse mortgages remains high. Retired homeowners who are looking for income in addition to what they will receive from retirement plan savings, pensions and Social Security often consider this option to help meet their financial needs in retirement.

Key facts about reverse mortgages:

• A reverse mortgage allows one to receive income based on his or her home's value while continuing to own and live in the home.

• Reverse mortgages are typically limited to individuals age 62 and older.

• Although payments are based on the equity in your home (among other factors), there is an obligation to repay the full amount received plus interest either at the death of the homeowner or when the home is sold. However, in many cases, the amount due will not exceed the value of the home when it is sold.

• Those who receive reverse mortgage payments remain obligated to pay taxes and insurance on the property. This becomes difficult for some—the number of borrowers who default on reverse mortgages has increased in recent years. Many don't have sufficient assets to make property tax and home insurance payments, or they simply weren't aware of this requirement. A good solution is to set up an automatic payment program through a bank or cash management account.

• The biggest factors that affect the amount one can borrow are current age (older individuals may receive larger reverse mortgage payments), and the amount of equity one has on the house.

Three different options

There are three different types of reverse mortgages. They include:

• Home Equity Conversion Mortgages (or HECMs), insured by the Federal Housing Administration

• Single Purpose Reverse Mortgages (offered by some state and local government agencies and nonprofit organizations), typically aimed at low and moderate-income homeowners

• Proprietary Reverse Mortgages – private loans backed by the companies that originate the loan

The vast majority of loans in the market today are government-sponsored HECM's. Participants can receive payments monthly or even establish a line of credit that can be opened when or if needed.

Obligations of the borrower

In many ways, reverse mortgages are similar to home equity loans in which the value of the home is used to generate cash flow while you continue to own and live in the property. There are costs involved and private loans tend to be more expensive than those offered through government agencies.

Unlike a home mortgage, the amount you owe on a reverse mortgage increases over time. Interest is charged on the outstanding balance and added to the amount owed each month.

Repayment occurs by selling the home or having heirs take care of repayment after the death of the homeowner. Therefore, it is important to let heirs know in advance that the reverse mortgage is in place. Most of these loans have a "nonrecourse clause," protecting heirs from owing more than the value of the home when the loan becomes due and the home is sold.

It's also vital to be cognizant of the interest rate charged on a home equity line. Although some have fixed rates, most utilize a variable rate, so the net value of payments made can decline over time if interest rates rise.

Be sure to meet with an advisor for advice on the terms of any reverse mortgage you consider. This meeting is required for all who apply for a federally-backed Home Equity Conversion Mortgage.

Brandon Miller, CFP and Joanne Jordan, CFP are San Francisco financial consultants Info: brandonmilleradvisor.com.

July-August 2011

Get Smart About Getting Smart

Are the season's hottest accessories—a cap and gown—in your future? You might be returning to school to advance your career, or start a whole new one. Maybe you've heard a rumor that your department is slated for the next round of layoffs. Perhaps your little one now needs diplomas instead of diapers. Or maybe you're finally ready to fulfill that promise to yourself.

Great, you've made a smart decision. Now the question is, will you be the one paying, or can you get someone else to do it? For many people, it's a combination of the two. But before you start figuring out who owes what on the bill, you have to know the total.

Decide When Enough Is Enough Obviously, the school you choose is a key factor in how much money you'll need. Average annual tuition and fee costs range from $35,000 or more for a private four-year college to $2,700 for public two-year colleges.¹ If the upper end is beyond your reach, perhaps you can receive comparable training from online courses. It might also be possible to take prerequisites at an affordable community college and transfer those credits to a more expensive school later. If all else fails, there are tuition-free colleges, though they're very difficult to get into.

Your life and living expenses won't stop once your studies begin, so how will you balance school and work? Continue to work full time, shift to part time, or not work at all? If your income will drop while you're in school, remember to add the gap in living expenses into your total equation. If you're only going to school at night, it will take longer to graduate and tuition costs may rise significantly during that time.

There are other factors that will influence your total sum, so be realistic to get a clear idea of how much help you need.

Leverage What You've Got Since most student aid has to be repaid, a smaller debt load will make life easier once you've graduated. Here are some resources you might already have access to:

• Savings. Basic savings accounts, money market accounts, CDs, bonds, the cash under your mattress— the source doesn't matter. Just the amount.

• Traditional or Roth IRAs. Even if you're not 59½, you may be able to make early withdrawals without penalty to pay for school. Restrictions apply, of course, such as distributions can only be used for qualified higher education expenses and you have to own the IRA for at least five years. Just remember that any amount you withdraw will not be available for your retirement.

• 529 savings plan. If you have a few years to save, you can open this account where earnings grow tax-free, but must be used for tuition, books and other related education expenses. You have to designate a student beneficiary, which can be yourself or a child.

Find a Helping Hand(out) To help you cover what your savings won't, look at these sources:

• Government-sponsored financial aid. Federal student loans usually offer lower interest rates and more flexible repayment options than loans from private sources. That's why it's wise to start here before turning elsewhere. At www.FAFSA.ed.gov, you can fill out one application to determine your eligibility for available grants, scholarships, work-study opportunities and federal student loans.

• Employer financing. Many employers offer education assistance as part of their benefits package. Even if you're facing a layoff, some companies will pay for all or part of education costs for training in a new field. Check with your HR department to see if you're eligible for any assistance.

• Pension plan. If you can borrow against your contributions, this could help you meet education expenses. The advantage to this loan type is that you don't need to worry about qualifying as long as you meet your plan's eligibility requirements.

• Private and home equity loans. Your great credit might qualify you for funding from a bank, credit union, etc. Just be aware that you'll probably have to begin repaying immediately. Other forms of student aid often defer repayment until after you leave school.

Any loans you secure could mean years—even decades—of repayment. Depending on where you borrowed, you can possibly modify the terms to suit your circumstances, such as making payments that get gradually higher as your salary increases. There are also some government jobs that will forgive all or part of your education debt if you stay in the job for a set number of years.

A smart first step may be to sit down with a financial professional to assess your situation before, during and after school. With a little planning—and a lot of hard work—you could be hanging a tassel from your rear-view mirror sooner than you think.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Financial Advisory Practice of Ameriprise Financial Inc. in San Francisco.

¹Trends in College Pricing 2010, College Board, 2011.

June 2011

How to Keep Rising Costs from Sinking Your Mood

Your favorite brunch spot has a new menu. With higher prices. Airfare for the trip you’re planning to Buenos Aires jumped over $80 from the last time you checked. And the gas station you pass on your way to work is raising prices every other day.

Welcome to what could be a new era of high inflation. Blame it on the sluggish economy that refuses to pick up, devastating disasters happening all over the world or unrest in the Middle East. Whatever the underlying causes, the truth is, prices are going up. And yes, the truth hurts.

For the past two decades, inflation hasn’t really been on our radar. Only six years of the past 20 had even a modest annual increase of 3% (as measured by the Consumer Price Index). Contrast that with the previous 20 years, when prices rose by over 3% annually for all but one year.1

Right now, economic experts are growing concerned about the recent rises in essentials such as food, energy and metals (okay, maybe you don’t see the latter as an essential—unless you’re really into bling). The World Bank reports that food costs have risen 30% globally in the 12 months ending in January 2011.2 The average price of a gallon of regular gasoline jumped 18% in 2010 according to the U.S. Energy Information Agency.3 And that was before things got so dicey in the oil-producing nations.

If these higher costs persist, the effect will likely spill over into other areas of the economy. After all, you can’t expect the chic boutique you frequent to hold prices steady when they’re being squeezed by rising rent and utilities on top of price hikes from their suppliers to cover higher material costs, labor and transportation.

So now that you’re depressed about a slimmer wallet (the one area where thin isn’t in), here’s the good news. There are some strategies you can employ today to lessen the impact of inflation and its strain on your budget in the coming months.

5 Ways to Fight Inflation

You can combat rising prices with a smart approach to spending, saving and investing. Here are a few tips to consider:

•Make frugal your friend. Common sense tells you that the more you spend, the more costly your life will become if inflation becomes a serious issue. So now is the time to closely review your spending. Figure out ways to cut costs, such as taking public transportation more often to save on gas or buying grocery store brands instead of name brands to cut food costs.

•If it’s big, buy it. “Big ticket” purchases—think home, car or major home remodel—may be less expensive in today’s dollars than they will be if inflation causes prices to skyrocket. If it fits into your current budget, making these big purchases now may give you greater spending power.

•Get fixed. If you’re paying an adjustable interest rate for money you’ve borrowed, including a home loan, consider switching to a fixed rate. Right now, interest rates are low, but there’s no guarantee that they’ll stay that way when everything else costs more. So locking in a low fixed rate for an extended term now may make sense if you can possibly swing it.

•Don’t be negative. While low rates are great for borrowing, they don’t provide much of an advantage for your savings. With today’s paltry interest rates, putting a large amount of money into a bond or certificate of deposit for an extended period of time doesn’t buy you much—literally. And if inflation becomes more significant down the road, your return could actually be negative after you take into account rising living costs.

•Appreciate your assets. There are some companies that invariably grow during periods of high inflation. History has shown that commodities such as precious metals, agriculture, energy and real estate tend to perform well even as living costs rise dramatically. So investing in stocks or mutual funds comprised of these companies can work to your advantage. Just make sure your investment decisions are consistent with your long-term objectives and risk tolerance.

A review of your financial plan to make sure it can compensate for inflation is also a good idea. Your financial professional can help you determine which investments make the most sense for your situation.

Preparing now for higher prices may help lessen inflation’s sting—and let you still indulge in the things that make life fun.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Financial Advisory Practice of Ameriprise Financial Inc. in San Francisco. We specialize in helping LGBT individuals and families plan and achieve their financial goals.

http://data.bls.gov/pdq/SurveyOutputServlet

2 http://www.worldbank.org/foodcrisis/food_price_watch_report_feb2011.html

3 http://www.eia.gov/dnav/pet/pet_pri_gnd_a_epmr_pte_dpgal_a.htm

May 2011

Uncle Sam, Retirement and Being Self Employed

Being your own boss at this time of year can feel more like you work for Uncle Sam than for yourself. By the time you pay federal, state and self-employment taxes (for Social Security and Medicare)—not to mention what you owe if you have employees—your wallet may be feeling pretty thin.But there are several (legal) ways you can keep more of your earnings for yourself—and build your investments for the future.

You're probably already familiar with a traditional IRA (Individual Retirement Account). It lets you contribute up to $5,000 – $6,000 if you're 50 or over—and deduct that amount from your taxable income. It's a quick and easy way to reduce your taxes now. Of course, when you're ready to withdraw your money, Uncle Sam will be there with his hand out and you'll have to pay taxes at the going rate.

A Roth IRA reverses this arrangement and has you pay taxes now at today's tax rate, which may be lower than when you retire. While this doesn't reduce your tax bill now, it does allow you to have tax-free distributions during retirement. And like a traditional IRA, you can contribute up to $5,000 or $6,000 if you're 50 or over.

Both plans have some restrictions based on your income bracket, marital status and other factors, so check with a tax or investment advisor to make sure you qualify.

While investing in a traditional or Roth IRA can help keep you from dining on cat food during your retirement, you may be seeking more significant tax advantages and investment opportunities.

If you're totally on your own with no employees, consider a SEP IRA (Simplified Employee Pension). Like a traditional IRA, it reduces your current taxable income, but the government takes its cut when you take out money later. The difference is that this plan lets you contribute up to 25% of your self-employment earnings up to a maximum of $49,000. That translates into significantly more money in your pocket today and during retirement. One drawback is that you need to know your income before you know exactly how much you can contribute. But you have until the April 15th tax deadline to set up and fund this plan for 2010.

If you want your retirement years to be more fabulous than frugal, you may want to look at a Solo 401(k). For most individuals, this plan allows even higher contributions—and therefore tax deductions—than a SEP. You can contribute up to $16,500 ($22,000 if you're 50 or over), plus an additional $32,500 in profit-sharing contributions. The actual amount is based on a percentage of your net income. If your spouse is your only employee, he or she can contribute this same amount. (This is a bit of a grey area if you're a same-sex couple, so please see an investment professional for advice.)

A Solo 401(k) is very easy to set up and administer and there are no income restrictions that would keep you from contributing. If you don't need to lower your tax bill, you can even set up all or part of your contributions as a Roth Solo 401(k) for tax-free distributions later.

If you have a small staff, a SIMPLE IRA may work well for you. While you "save now, pay later" on taxes like a traditional IRA, both you and your employees can contribute up to $11,500 per year—$14,000 for that magic age of 50 or over. Employees do not have to contribute. But as the employer, you are required to match 1-3% of each employee's annual salary. That means you have to ensure the ability to fund contributions each year for each employee. The good news though, is that your taxable income is reduced by the amount you contribute for yourself and your employees. And as its name implies, a SIMPLE IRA is simple and inexpensive to administer.

If you run a slightly larger or more profitable business, you can set up a regular 401(k). Maximum annual contributions for you and your employees is $16,500 or $22,000 for those 50 or older. While you'll need a third-party administrator for the required annual compliance, these plans are becoming easier for smaller companies to establish. In fact, many payroll services will now set up and administer a 401(k) for you. Besides the tax advantages, having a 401(k) plan can help you hire and retain great employees, which can lead to even greater profitability.

Our lawyers would like us to remind you that all of these plans have restrictions, including deadlines for plan set up, contributions and distributions. Make sure you understand your plan so you can meet your obligations.

Armed with the right advice and plan, you can keep Uncle Sam from taking more than his fair share at tax time—and fund your dreams for the future as well.

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, of Ameriprise Financial Inc. We specialize in helping LGBT individuals and families plan and achieve their financial goals. Info: www.ameripriseadvisors.com/brandon.j.miller/profile

March 2011

 

Love and Money

So you’ve met the love of your life. Congratulations! After you’ve moved in together and agreed on where to put the sofa, how do you join your finances? And should you? There’s one commitment that should be agreed upon from the beginning or quickly move to the head of the line; agree to a simple process for communicating your newly-joined financial lives. Here are a few tips we recommend to our lovebird clients, ensuring each is protected during a happy long-term relationship or the unfortunate break-up.

First, commit to a regular financial discussion. Scheduling a quiet monthly Sunday morning over croissants and coffee to review your finances may just save your relationship. Decisions should be simple in the first meeting, such as who will be responsible for paying the joint bills and what is considered a joint bill. Start with a cash flow analysis, listing all the committed expenses, such as rent or mortgage, utilities, food and then all the discretionary expenses, such as entertainment. Then identify the expenses you agree will be joint versus the ones that will be individual.

Next determine how to pay joint and individual expenses. We typically recommend creating a joint account to pay all the joint household expenses, while keeping your individual accounts separate to maintain your own credit (and autonomy). Each partner simply deposits an agreed upon amount to the joint account in a predetermined manner (monthly or with each pay period).

But how much do you contribute? Most clients do either an equal 50/50 deposit or a pro-rata deposit, where each person’s contribution mirrors their income. For example, if you make 2/3 of the income, you might decide to pay for 2/3 of the joint expenses. The balance of each person’s paycheck goes to their individual accounts and used at their discretion. (Shoe fetish anyone?)

Another Sunday morning topic should be where are you headed in life? Perhaps you are dreaming of a new house, a baby, early retirement or just paying down debt? Try to prioritize your goals as a couple so that future discussions, such as cutting back on spending, are shared sacrifices. If you’re currently carrying any credit card debt, this should be one of the first things to tackle. Concurrently, we recommend that you build up a cash reserve. Once these two things are accomplished, then move to your longer term goals.

But what if things turn south and your love runs off with the scuba instructor from Puerto Vallarta? Now what?

The answer depends on how far you’ve taken this relationship. If you are legally married or registered as domestic partners you’re faced with legal proceedings to divide your assets. In California, these formal relationships mean that you are subject to community property rules and all community property assets and debts the couple accumulated must be split equally, including that prized collection of antique toasters.

For example, let’s assume Pat and Kelly decide to tie the knot. From that point on, all assets and income are owned 50/50 (with some limited exceptions such as gifts and inheritances which remain as separate property unless they get commingled as community property). Pat earns $50,000 per year and Kelly earns $250,000 per year. According to the law, each must report $150,000 on their individual federal tax return and must also file a joint California tax return. Over the years, Pat has accumulated $100,000 in their 401(k) plan, while Kelly’s is only worth $50,000. Upon divorce, Pat would likely need to give Kelly $25,000 in retirement assets. This also applies to debts. If your partner has $20,000 in credit card debt (whether you knew about it or not), you’re still legally liable for half of that! And of course spousal support may also be awarded.

So with the joy and benefits of marriage or registered domestic partnership, there are also liabilities if your relationship changes from “forever” to “never”. If you haven’t formalized your relationship, then you generally have little legal recourse regarding the division of your assets and debts. Hopefully, you will both be fair and rely on the consistent Sunday morning conversations to ensure your financial lives are headed in the right direction, regardless of where your relationship is headed.

If you have significant assets or are concerned about them, consider drafting a pre-nuptial agreement. Be sure to keep your separate assets separate, while consulting an attorney, tax advisor and financial advisor familiar with these issues.

At the end of the day, combining households and creating lives together can be extremely empowering and productive. Just make sure it’s done with thought, intention and caution. Happy Valentine’s Day!

Brandon Miller, CFP and Joanne Jordan, CFP are financial consultants at Jordan Miller & Associates, A Financial Advisory Practice of Ameriprise Financial Inc. in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.

February 2011

Politics and Personal Financial Planning

You may be aware that the Senate recently passed bill s. 3217, known as the Restoring American Financial Stability Act bill (“RAFSA”), in a vote of 59-39 and renamed it H.R. 4173, the Wall Street Reform and Consumer Protection Act. Broadly speaking, this 1,500 page bill seeks to overhaul the financial markets in order to avert the next financial meltdown.

Do you really think this bloated behemoth of a bill is going to do that?

Where were the lawmakers before the mortgage meltdown? Before the fall of Lehman Brothers? Before Merrill Lynch was bought by Bank of America? Before Madoff?

The answer is: asleep at the wheel, completely ignoring their responsibility as elected officials to take steps to avoid problems, BIG problems, before they boiled over into a terrible mess.

This isn’t a political party finger pointing exercise. The whole political system that seeks to protect citizens flat out failed us all. Why? Because status quo, business as usual reigns.

So in order to lock that barn door tightly as the parade of horses frolic and gallop freely in the pasture, the federal legislature now addresses the tremendous problems that permeate the financial markets by passing this obese monstrosity of a bill to once again fleece the American public into believing that they are doing something to make your financial markets safer. “That’ll never happen again!” is the refrain from Capitol Hill while the Senators seek to attach 300 (!) various pet amendments to the bill. Among the amendments attached to this blimp of a piece of legislature are such that seek to regulate certain transactions involving material mined in the Congo, to allow lead-paint removal by uncertified contractors, and to condemn Myanmar for human rights violations. And they question why the American public is fed up with our political system?

Granted, there is some good that will come out of this bill when it is signed into law. One amendment to the bill, proposed by our very own Dianne Feinstein, seeks to prevent social security numbers from getting into convicts’ hands when they handle paperwork in data entry positions while incarcerated. Another part of the legislation seeks to force banks to divest of their swap trading desks and hedge fund activities. But even these measures beg the question: Why have our politicians allowed this until now?!

In addition to this Johnny-come-lately approach to staving off the next financial crisis, our national debt stands at nearly $13 Trillion at this time and it simply is not being addressed by our elected officials. (See www.usdebtclock.org as well as www.treas.gov). Not only did they do nothing to stop the financial crises that have gripped our nation but they continue to do nothing about this insane amount of money that we owe to the rest of the world, including $895.2 Billion to China and $784.9 Billion to Japan as of March 2010 (see http://www.treas.gov/tic/mfh.txt).

So what the heck does this have to do with you and your finances?

The crystal clear message is not to wait for government largesse to be there for you in your time of need. Not only is there a raging debate over the future of Social Security and unfunded entitlement programs such as Medicare, but the government can’t stop the frauds it says it can as exemplified by the SEC snoozing while Madoff continued to rip folks off to the tune of billions of dollars. Legislators were asleep at the wheel while the mortgage crisis unraveled and financial markets crumbled. There is no viable plan to reduce the country’s annual deficit much less the overwhelming debt our country faces.

Instead, the only way to avoid being subject to letdown in your time of need is to take your financial matters into your own hands.

Some of you may be saying to yourself that you already have. You have your investment brokerage account that contains your well thought out stock and bond portfolio, you have your house and investment property which thankfully has not tanked (much)in San Francisco, and you have your pension and/or Social Security credited to your bank account each month while having little or no debt. For those that have your financial house in order, good job.

One frequent oversight for this seemingly ‘made’ group is lack of an incapacity and estate plan. Without one, all you have worked for may evaporate at the time you are least able to personally deal with it. There are strategies that exist for you to ensure that your wishes are upheld while you are incapacitated or dead, to minimize taxes in the process, and to cement your legacy in the way that you wish. If you have not taken the steps to implement these strategies, your ‘back end’ is seriously exposed.

For those with nice sums in their IRAs or other tax-deferred accounts, with the national debt as large as it is, do you think that income taxes will be higher or lower in the future than they are now? If you, like so many others, think that they will be higher, there are steps you can take now to minimize your future income tax exposure. Keeping your funds tied up in tax-deferred accounts will not reduce your taxes, but rather just push them out into the future when you have no control over what the tax rates will be. To avoid a potentially serious future income tax bite you can reposition your assets now, before any tax increases take effect.

For those of you who are not in financial nirvana, the first step is to climb out of debt. I believe some debt is OK when used strategically such as to purchase a house because you need a place to live or to buy a car which is needed to go to work and earn a living. It’s advisable to keep spending under control to minimize unnecessary debt so it doesn’t consume you.

When your debt is low so that your income is funding your living expenses and there is actually ‘extra’ left over each month, the next step is to take it and build up a rainy day account. Put some aside each month automatically via auto deposit to pay for those unexpected needs such as car repairs or new appliances when the old O’Keefe and Merritt breaks down. A rule of thumb is to aim for 3 to 6 months of living expenses set aside in a readily available liquid account such as a savings or money market account. Don’t insist on a high interest rate on those funds – you just want it to be there when you need it.

But there are even bigger expenses to consider.

What happens if you have taken out a large home loan and become disabled to the point that you cannot go to work and earn your living? Other than losing your job due to downsizing or being fired, disability looms as a big reason why folks are unable to pay their loans back. It is advisable to have adequate disability insurance which you may be able to obtain through your employer. If that coverage does not cover enough of your living expenses, seek out a personal policy that once you obtain, you have as long as you pay your premiums when due. Then, you don’t need to worry about whether your current employer will continue to offer a disability benefit or if your future employer even offers one.

If you are still in your wage earning years and have not yet built up your nest egg, life insurance is the way to leave something behind for the ones you love to provide for what you would have if you were still around. Broadly, there are 2 types of life insurance, term and permanent, and they both have their merits. Although nothing can ease the pain of loss of a loved one, if you are gone you will not be able to provide for your family and life insurance pays out to your loved ones to at least help with the financial loss.

Our politicians enact measures too late to address the problems wrought and put things in place with significant questions as to whether the new measures will do any good. Our country is in a mind-boggling amount of debt. You would be well-suited to take your financial matters into your own hands in a comprehensive manner instead of leaving them in the hands of Uncle Sam.

Christopher L. Arnold is a Certified Financial Planner® Professional, Chartered Financial Consultant®, and Chartered Advisor for Senior Living® as well as an Insurance Broker licensed in California, license# 0C73573. His offices are in San Francisco and Chris can be reached via email at Chris@ProperlyCovered.com or (415) 333-9700.

June 2010

What to consider when considering a financial advisor

As a professional in the financial services industry I am often asked questions concerning financial planning. I am pleased to be able to share my views in the Westside Observer writing about financial matters. In each article I will discuss one of the many topics concerning personal and business finance.

In this inaugural column, let’s examine a question that many of you could find yourself asking: “Should you seek a financial advisor to help you meet your financial goals?” If yes, what should you look for?

To determine whether a financial advisor would be a good fit for you, start with the following question: Do I feel comfortable managing my own money or am I overwhelmed by it? Then, ask yourself: Have you taken the steps to determine what your disposable income is? Do you know what your marginal tax bracket is? Are you doing what your parents did to manage their money? If your answers to the questions are no/yes, no, no, and yes, you should strongly consider seeking the assistance of a qualified financial advisor.

If you determine you can do it yourself, there is no lack of tools readily available to you. You can get company research reports and stock quotes as well as mutual fund and bond information online. When you are ready to buy, there are several online brokerage companies you can use to build your mid to long-term portfolio.

San Francisco has many physical bank and credit union branch locations if you are more comfortable with a physical place to go to manage your cash type of assets. It is rare to find a bank or credit union that does not offer access and use of your accounts online. This makes it easy to manage your cash flow and credit as well as pay bills electronically. An added bonus is that you save 44¢ each time you don’t mail an envelope. Banks and credit unions also serve the need for short-term asset management while providing bill payment services along with cash flow and credit management.

You will also want to sync up your finances by making sure that your long-term assets are in line with your short-term assets. In addition, it’s wise to regularly review other pieces of your financial situation such as your debt and asset protection strategies as well as your asset distribution plan. Of course, do this in as tax-efficient manner as possible.

Taxes do matter! That’s why I included the questions about disposable income and tax bracket. The old adage goes, “It’s not what you make, it’s what you keep.” It is important that your approach takes into account the effect of taxes and how to minimize your tax liability.

I asked earlier if you were managing your assets in the same manner as your parents. Our parents were in their 30’s, 40’s and 50’s in a different time. When they were young, the main breadwinner was usually Dad and he frequently stayed at his job for life; receiving a pension when he retired. Our parents were more inclined to stay where they bought their house rather than frequently move. Of course that mortgage had to be paid off and credit wasused sparsely.

Today’s financial reality is much different. Women are fully incorporated into the workplace and in many places it frequently takes two incomes to make ends meet. Pensions are rare so it is now more incumbent on employees to build their own portfolios to meet their individual goals. Today’s working population picks up and moves more frequently from place to place than the generation before us did. Credit use has now mushroomed to the point that the term ‘credit crunch’ has become a regular phrase in our vocabulary.

If your parents fit all or some of the traditional profile I sketched above and the reality for you today is different than what theirs was, do you think it makes sense to manage your assets the same way that they did? The answer is probably not. Today’s world requires an approach consistent with today’s realities, not yesteryear’s. Even if you can handle most of what is required of you to competently take care of your finances, there still may be good reason for you to engage a financial advisor to accomplish the things that you are not addressing as well as you could.

So if you think an advisor may be able to help you manage your financial affairs, what should you look for? There are many criteria to consider as you vet potential financial advisors including experience, education, and ethics. All these criteria are important and experience and education is easy enough to factually determine. In light of the recent scandals involving financial advisors, the ethics issue has become a big one. How do you determine the ethical foundation of the advisor you are considering?

One way you could get some insight about your prospective advisor is to see what designations they hold and the thresholds cleared to earn the right to call themselves one. For example, the Certified Financial Planner®, Chartered Financial Consultant TM, and Chartered Advisor for Senior Living TM designations all require substantive experience, education, and ethical standing in order to use them.

The stakes are high. The way you approach your finances can result in a big difference in the end. You owe it to yourself to ask the frank questions laid out above and answer them as honestly as possible. You owe it to yourself to find an advisor that passes muster. If you don’t, what you have worked so hard for can be a fraction of what you could have had by using better financial management.

Christopher Arnold is an independent financial advisor based in San Francisco and can be reached at (415) 333-9700. His office does not provide tax or legal advice nor should anything in this article be deemed as such. The publishers do not represent the opinions expressed within, and each person must make informed choices about their financial well-being.

September 2009