December 2016


Charles Schulz, the creator of the “Peanuts” comic strip, wrote the following. You don’t have to actually answer the questions. Just read it through and you’ll get the point.

  1. Name the five wealthiest people in the world.
  2. Name the last five Heisman trophy winners.
  3. Name the last five winners of the Miss America pageant.
  4. Name ten people who have won the Nobel or Pulitzer Prize.
  5. Name the last half dozen Academy Award winners for best actor and actress.
  6. Name the last decade’s worth of World Series winners.

How did you do?

The point is, none of us remember the headliners of yesterday. These are no second-rate achievers. They are the best in their fields. But the applause dies. Awards tarnish. Achievements are forgotten. Accolades and certificates are buried with their owners.

Here’s another quiz. See how you do on this one:

  1. List a few teachers who aided your journey through school.
  2. Name three friends who have helped you through a difficult time.
  3. Name five people who have taught you something worthwhile.
  4. Think of a few people who have made you feel appreciated and special.
  5. Think of five people you enjoy spending time with.

WEasier?

The lesson: The people who make a difference in your life are not necessarily the ones with the most credentials, the most money, or the most awards. They are the ones who care.

This monthly newsletter is published for your benefit because we care about your financial well-being.

Happy Holidays!


OUT-OF-THE-BOX THINKING ON A VERY POPULAR SUBJECT-MONEY



1. Many advisors recommend being debt free when you retire. Debt free usually means no mortgage, revolving credit card, or any other financial obligations. Many agree that is sound advice. However, very few people discuss the looming debt on qualified plans (IRAs, 401(k)s, etc.). These plans have a debt obligation to the federal government. Uncle Sam stands to be first in line for collecting this obligation, and he will get paid. We won’t know his share until the money is withdrawn. Good tax planning can minimize some of this obligation. It is important to start early. This is a good time because tax rates are low compared to other decades of federal taxes, and the new Administration is committed, at least in the short term, to lowering federal income taxes.

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2. Are you turning 65 in the near future?
It is important to know the ins and outs of Medicare so you can rule it instead of it ruling you. There is no coordinated government communications program to let people know about their Medicare options and responsibilities. Seek advice from someone who is independent and not an employee of an insurance company. They can guide you through the maze of confusion and help you make an educated decision on the best course of action.


3. Is the Affordable Care Act really affordable health care coverage? Open enrollment for individual coverage is coming to a close. The last day to enroll is January 31st for a March 1st, 2017 effective date. Many individuals are realizing that the new law has substantially increased premiums and limited options in both insurance carriers and provider networks. In many parts of the US there is only one insurance provider handling the local market. Shop early and exhaust all of your options before making your final decision on the best course of action.


4. Are you a small business owner interested in providing health care coverage for your employees? Small firms that offer health coverage can get a tax credit. The full credit is available only to firms with less than 10 full-time employees with average wages of $25,900 or less. The credit diminishes for employers with more than 25 workers or average pay in excess of $51,800.

Source – The Kiplinger Tax Letter


5. Most key dollar ceilings on retirement plans do not change this year.

  • The 401(k) contribution limit remains at $18,000 plus a catch-up provision of $6,000 for people born before 1967.
  • The pay-in limits on IRAs and Roth IRAs remain at $5,500 plus a catch-up provision of $1,000 for folks 50 and older.
  • There is no hike in the 2016 Social Security wage base. It remains at $118,500.
  • The earnings test limit for people wanting to collect Social Security did not change. Individuals 62 through 65 can make a maximum of $15,720 before they lose any of their benefits.

6. Pensions in both the public and private sectors have disappeared or are being reduced. Governments and businesses can’t handle the risk of people living longer. Creating a personal pension underwritten by a strong insurance company is a very efficient way of transferring longevity risk to an insurance company guarantee. It gives you control of your own destiny.


7. Our annual inflation report is completed. We’ve been following six major indicators and tracking their cost increases since 1975. The products are: new car, average rent, Harvard tuition, prime time movie ticket, gasoline, and the postage stamp. The average annual increase over the forty-one years is 4.63%. If you eliminate Harvard tuition the inflation decreases to 4.38%. We believe this is the most accurate way to calculate the “real cost” of inflation.

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8. Why is the inflation factor important? It gives you a good estimate on how to project costs in the future, and the cost of living adjustment you need to make for your after tax life style expenses when you stop earning income. The buying power of $100,000 today will only by $63,898 in 10 years, and $40,830 in 20 years.


9. How much life insurance is enough? A lot of Americans underestimate the amount of life insurance a family would require if the breadwinner were to pass away. Let’s look at a young couple in their early 30′s who recently had their second child. Dad has a good job that is paying $80,000 per year, and Mom is a school teacher making about $50,000. They have $25,000 in savings and a comfortable life style. Dad has an unexpected accident and is tragically killed. He has a $500,000 life insurance policy but his paycheck stops. Those proceeds will last his widow about 7 years assuming she continues to work. Having enough life insurance is about options for the surviving spouse and family. As the ad goes “Don’t leave home without it.”


10. Medicare facts and changes for 2016:

  • If you don’t enroll when required you will forfeit Social Security.
  • The law on this forfeiture was created in 1993 and upheld by the courts on January 11, 2013.
  • Medicare Part B premiums are increasing a minimum of 9% in 2017
  • Cost of Living adjustments on Social Security only increased .02% during that time frame.
  • Medicare Part B premiums are automatically deducted from Social Security if you are collecting. If not, Medicare bills quarterly for the premiums.

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