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

Uncle Sam, Retirement and Being Self Employed

By Brandon Miller, CFP
and Joanne Jordan, CFP

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

By Brandon Miller, CFP and Joanne Jordan, CFP

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

By Chris Arnold

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

By Chris Arnold, CFP®, ChFCTM, CASLTM

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