Social Security made a little bit easier

The Social Security Adminstration (SSA) has just announced that it will resume sending annual earning statements on a limited basis. This is an important tool for many people who are currently planning their retirement and those who may think about it in the future. (You should always be planning, though, right?)

Letters will resume in February to some workers, and information should be available to all workers by the end of the fiscal year.

Since 1999, Social Security Act has required that SSA provide a statement each year to eligible individuals—people 25 and older with a social security number and wage or self-employment income—who are not receiving social security benefits. The statement must inform each individual of wages paid to, and self-employment income derived by, the eligible individual as shown by SSA records and, for individuals who have attained age 50, estimates of monthly retirement benefits to which they will be entitled. 

However, in March 2011, SSA suspended providing statements for the remainder of the fiscal year, citing budgetary concerns. 

Some other updates:

Beginning in February 2012, SSA will resume mailing paper statements to workers 60 and over who are not already receiving social security benefits.

In months to come, SSA will introduce an online statement service as an alternative to provide workers (of all ages) immediate access to their statement information. In addition, workers 60 and over may opt to sign up for the online service in lieu of receiving the annual paper statements.

Later in fiscal year 2012 (which ends September 30), SSA plans to resume a first time mailing to workers at age 25. This one-time statement will include a welcome message providing information about the social security program, where to go for further information, what services SSA offers, and what business can be conducted online, including signing up for access to online statements.

Individuals who cannot access their information through online channels, including victims of domestic violence or identity theft who have blocked electronic access to SSA services, will be able to request a paper statement. In addition, Spanish language versions of the statement will be available on request.

California Probate Changes

Some good news for those of us who live in California and have to deal with the dreadful probate laws and expenses.  California is one of the most expensive probate states in the Union.

Effective January 1, 2012 a beneficiary can collect up to $150,000 (formerly $100,000) as an heir and not have to go thru probate.  As long as these assets are titled in the decedent's name alone.  For example, if I have a savings account with a $150,000 in my name only, my beneficiary can transfer these assets to her name with out having to go thru probate.  It is a much simplified affidavit procedure.

In addition, real estate transfers up to $50,000 (formerly $20,000) can occur at a much simplified procedure in the court without excessive expenses and time to transfer.  This is especially useful for small parcels of land, timeshares etc....

And the last good news is that a surviving spouse or domestic partner can collect via affidavit salary owed to a deceased person up to a maximum of $15,000 (formerly $5,000)

However, if you have a Trust, make sure that you still title all your non retirement assets in the name of the Trust.  After all, why have a Trust in the first place? 

Thanks California for giving our heirs a break! 

Jazzy January Financial Resolutions

OK, folks, 2012 is here and my plan is to give you some financial "must do's" for each month of the year.  By the time December, 2012 rolls around, you will be well on your way to having your financial house in order. 

January is a good time to do the following:

1.  Check your credit score. 
Since 2005, consumers have had the right by law to get a free annual credit report from the credit reporting bureaus. To do this, go to AnnualCreditReport.com. While there are other websites that may promise to provide your credit report, this is the official website, supported by the free credit report law. In other words, it’s been sanctioned by the US government.

When you arrive at AnnualCreditReport.com, you’ll find that you have three options: Equifax, Experian, and TransUnion. Each of these represents a different credit reporting bureau, and each has to give you a free credit report once a year.

If this is your first time checking your credit report, we advise you to check all three now. A 2004 study found that 25% of all credit reports had some mistakes, so it’s critical to make sure that all of your credit reports are accurate

2.  Consider Refinancing
Mortgage interest rates are ridiculously low right now--I can not imagine them descending any lower.  If you have not taken advantage of these low rates, then seriously consider refinancing.  But only if you plan on remaining in your house for at least 4 or more years.  And only if you can refinance for no more than 80% of the value of your home.  Lock into a 30 year fixed and then pat yourself on the back for making a really smart financial move.

3.  Organize Tax Records
Start collecting and organizing all your tax records.  It is amazing the money you can save on taxes if you take the time to organize!  Your tax preparer will LOVE you if you have all your records together. 

4.  Set Realistic Goals
This is a good month to set some financial goals.  Maybe you need to save for a car, or set up an emergency savings fund or more aggressively save for retirement.  Write down your goals and create an action plan.  The best and most effective way to save has always been to "pay yourself first."  This means setting up automatic transfers from either your payroll or your checking account to the savings plan of choice.  There is no other way to do this.  If you wait till the end of the month, you will have more month left than money.

Here's wishing each of my readers a year of financial prosperity and abundance and a heart to share. 

Renting versus Buying

We have all been sold the "American Dream" which is to own our own home.  And while there are some great buying opportunities in the market right now coupled with ridiculously low interest rates, it may not make sense for you to buy but rather to rent.

• If you have substantial credit card debt, you should work towards paying this off first
• Not having the 10-20% for a down payment means that you are not ready to buy
• If you plan on moving in the next 5 years or are unsure that you will remain in the house it makes sense to rent.  Selling a house is expensive with realtor fees and closing costs.
• Run the numbers and sometimes it makes much more sense to rent than buy.  There are online calculators that let you input all the data and make an informed decision.
• If you are unsure about the responsibilities of being a homeowner such as deferred maintenance on the house, landscaping, repairs, upkeep etc...  then just rent! 

The "American Dream: is not for everyone.  Make sure you weigh all the pros and cons before jumping in and buying a house especially when some realtor tells you "it's the steal of the century." 

Military Holiday Homecoming Surprises

Guest post by Marcie


While I save and "spend within my means" (sometimes I really hate that term!) during this holiday season, sometimes it can get a little frustrating knowing that I need to keep within my budget for gifts. It's pretty hard not to get caught up in the 'buying' madness. 


First it was just Black Friday, but now I need to resist spending for Small Business Saturday AND Cyber Monday, too?! And while subscribing to Groupon and other local coupon deals help save money, it's not been helping me to resist the temptation to go beyond that budget and shop 'til I drop. Because, heck, it's 60% off for crying out loud!!!!


I needed to come back to Earth before I destroyed my checking account. 


I began to search for heartwarming photos and stories to help me see beyond the lie that having the perfect gifts would automatically equate to a perfect holiday season. I found it.


The following videos are surprise holiday homecomings from our men and women who sacrifice every day: our military. I often forget that many families go without the one thing they want most, their friends and family...


After watching these, much humbled and a bit puffy-eyed, I am reminded how thankful I am for these families that serve together. I hope you'll join me in this spirit and watch these videos. 

And a whole montage of great surprise military holiday homecoming here, too.

Thank you, United States Military, for serving. I wish you a peaceful and safe holiday.

Free Tax Saving Strategies Help (Part Two)

Even this cat disapproves of this tax organizing technique!

Last month we posted Part One of a two part blog: great strategies on how to save on your 2011 taxes this year. Click here to visit the previous blog. Here are some more great tips!:

• If you expect to owe state and local income taxes when you file your return next year, consider asking your employer to increase withholdings of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2011 if doing so won't create an alternative minimum tax (AMT) problem.
• Estimate the effect of any year-end planning moves on the alternative minimum tax (AMT) for 2011, keeping in mind that many tax breaks allowed for purposes of calculating regular taxes are disallowed for AMT purposes. These include the deduction for state property taxes on your residence, state income taxes (or state sales tax if you elect this deduction option), miscellaneous itemized deductions, and personal exemption deductions.
• Accelerate big ticket purchases into 2011 in order to assure a deduction for sales taxes on the purchases if you will elect to claim a state and local general sales tax deduction instead of a state and local income tax deduction. Unless Congress acts, this election won't be available after 2011.
• You may be able to save taxes this year and next by applying a bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions as these deductions are allowed only after exceeding a percentage of adjusted gross income.
• If you are a homeowner, make energy saving improvements to the residence, such as putting in extra insulation or installing energy saving windows, or an energy efficient heater or air conditioner. You may qualify for a tax credit if the assets are installed in your home before 2012.
• Unless Congress extends it, the up-to-$4,000 above-the-line deduction for qualified higher education expenses will not be available after 2011. Thus, consider prepaying eligible expenses if doing so will increase your deduction for qualified higher education expenses.
• If you are age 70-1/2 or older, own IRAs and are thinking of making a charitable gift, consider arranging for the gift to be made directly by the IRA trustee. Such a transfer, if made before year-end, can achieve important tax savings.

Remember, make sure you are working with a pro who can help you navigate all the complex tax strategies mentioned here.  Have a dialogue!

Should I Refinance?

This is one of the most frequently asked questions from clients.  Here are some rules of thumb:

• Mortgage rates are historically low right now and most likely the lowest we will ever see so it is wise to take advantage of the opportunity in today's economic environment
• You need to have at least 20% equity in your home to refi
• You should be planning to stay in your home for at least 3 years or longer to offset the cost of the refi
• It only makes sense if you can lower your interest rate by a 1/2 percent or more
• Always get a fixed rate loan

Many folks think that getting a 15 year loan is a smart deal as their house will be paid off quicker.  While that is true, I always counsel folks to get the 30 year fixed loan because it doesn't lock you into the higher payment.  And you always have the option of paying extra principal on your loan and shortening the payoff time.  And, for example, what if you lost your job or had significant unexpected expenses to deal with, then the 30 year loan is a welcome relief.  A 30 year loan gives you peace of mind at night. 

What about the costs of refinancing?  Many mortgage companies promote "no cost mortgages" This certainly sounds appealing.  You pay no costs to refinance.  But is it truly free?  Unfortunately, there is no "free lunch" in business.  You will pay these costs one way or another.  Your interest rate will be higher with the "no cost mortgage".  Anywhere from .5% to 1.25% and over the period of 30 years, this higher interest rate really adds to the cost of the loan.  In most cases, it makes more sense to pay the closing costs either out of pocket or added to the loan balance. 

Bankrate (www.bankrate.com) is a good place to start to get an idea of the current refinance rates.  That way, you are are prepared to talk to a lender with competitive information.  The refi marketplace is highly competitive so do your homework! 

Free Tax Saving Strategies Help (Part One)

Photo by soukup on Flickr.

Whether you like it or not, you have to pay taxes.  But understanding the tax code these days requires a rocket scientist to interpret.  Even Albert Einstein said “the hardest thing in the world to understand is the income tax.”  There is hope and that’s where a good tax advisor comes to the rescue.  Our firm take a very proactive approach to tax planning.  Let’s look at some ways that your taxes can be reduced for 2011:

• Increase the amount you set aside for next year in your employer's health flexible spending account (FSA) if you set aside too little for this year. Don't forget that you can no longer set aside amounts to get tax-free reimbursements for over-the-counter drugs, such as aspirin and antacids.
• If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year's worth of deductible HSA contributions for 2011.
• Sell the stock/mutual fund losses in your taxable portfolio and capture the losses.  Even if you cannot use all the losses in 2011, they can be carried over.  You can always claim at least $3,000 in losses in any one year.  That’s a savings of $1000 in taxes for most folks.
• Postpone income until 2012 and accelerate deductions into 2011 to lower your 2011 tax bill
• Consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA if eligible to do so. Keep in mind, however, that such a conversion will increase your adjusted gross income for 2011. However, Roth IRAs are tax free forever. 
• If you converted assets in a traditional IRA to a Roth IRA earlier this year and the assets in the Roth IRA account have declined in value and if you leave things as-is, you will wind up paying a higher tax than is necessary. You can back out of the transaction by recharacterizing the rollover or conversion, that is, by transferring the converted amount (plus earnings, or minus losses) from the Roth IRA back to a traditional IRA via a trustee-to-trustee transfer. You can later reconvert to a Roth IRA. 
• Consider deferring any bonuses into early 2012.
• Consider using a credit card to prepay expenses that can generate deductions for this year.

Tomorrow, I'll have more free tax saving tips to save you even more in 2011! Remember, make sure you are working with a pro who can help you navigate all the complex tax strategies mentioned here.  Have a dialogue!

10 Financial Truths that are Just Plain Wrong

Many of the financial planning concepts and strategies that have been around for many years are just not applicable to most folks. A lot of these so called “truths” developed out of the need to sell products rather than doing what is right for the client. In the next few blogs, we are going to debunk these financial “truths” and set the record straight. Much of this information comes from a real pioneer in the fee-only financial planning arena and his name is Bert Whitehead, the founder of Alliance of Cambridge Advisors, of which I fortunate to have been a member for the past 13 years. And am still actively involved. So, let’s get started


1. Risk Tolerance is an important consideration in your portfolio---WRONG

Most financial advisors, stock brokers etc…. administer a psychological test to clients to assess their psychological tolerance for risk. This is really a CYA strategy that is more about protecting the advisor or broker. The real question that needs to be probed and addressed is how much risk the client currently has in his/her life. Based on an analysis of current risk, we then determine how much risk is appropriate for the client.


We look at things like job stability, persons dependent on your income, current savings level, protection against inflation and deflation and risk needed to meet the client’s goals. I am a big fan on only taking as much risk as is needed. This is totally counterintuitive to psychological risk questionnaires. For example, let’s assume that a person answers test questions that show an enormous appetite and tolerance for risk. However, they are in an unstable job, married with 3 people dependent on him/her and have not been saving much. It doesn’t matter how the test scores came out, this person should not be taking a great deal of risk in their investments. Get the picture?


Bottom line… It is the current risks in your life/job/circumstances that are important and not some risk tolerance score based on a set of questions.


Next blog…we will look at debunking myths about inflation. Stay tuned.

Willeen: A Life Well Lived

Last Friday I attended the memorial service for a dear friend and client of ours. She lived 82 years and listening to the eulogy, I was in awe of how she lived those 82 years.

I met Willeen Hasler when I was a budding entrepreneur in 1998 with the lofty goal of starting my own financial planning practice. Willeen was involved in Score Counseling and also the Carlsbad Chamber of Commerce. She took me under her wing and introduced me to several folks.  She chaired the North County Women’s Roundtable and there I met many women who were instrumental in getting my business off the ground. She managed to rope me into chairing the Chamber’s First Friday breakfasts and also involved me in several other committees.  Somewhere along the way, she became my client, which was the highest form of friendship and trust.  

As I sat there last Friday listening to her life story, I was struck by how she lived her life. I would sum it up in two words: Servant Leadership. She loved to serve people and she did so with a forever expanding heart and unconditional love. She always had the other person’s best interest in mind. She wanted others to succeed and she stood by cheering them on. She loved business and used her God given talents and gifts to help others in business. She was a friend to all and she always had positive things to say about everyone.  

She also served her church and was generous with her time, talent and treasure. When one passes away at 82 years of age, there usually are not a lot of people in attendance at the funeral because so many friends and loved ones have passed away and often, elderly people just do not socialize any more. Not in the case of Willeen as the church was filled with folks of all ages. It was a beautiful testament to a treasured soul.

Oh, and did I forget to mention that Willeen only retired in 2010!  

Rest in peace, dear friend, you were a good and faithful servant.