Toledo Newspaper » Retirement Guys

A will? Or a trust?

Nolan Baker Mark Clair — Fri, 05 Mar 2010 04:00:07 +0000

If you are like most that are long overdue to get your estate plan done, or perhaps it is done but it is very out of date, one of the common questions asked is “do I need a will or a trust?”

First, let’s define what a will is. It is a declaration of how one desires his or her property to be disposed of after death. To put it simply it is a statement of where you want all your stuff to go after you die. You can decide whether you want the grandfather clock to go to Cousin Susie or Uncle Joe, decide who you want to be the executor to see that your wishes are carried out, and decide who will be the guardian of your children. A will is considered a testamentary document which means it is not actually carried out until after death occurs. It is kind of morbid to think about, which is perhaps why most of us put off doing it. As we get older we realize how time flies, and that life is fleeting which usually leads to a higher sense of urgency to get it done.

The legal definition of a trust is “property held by one party for the benefit of another.” The two parties’ are the trustee who holds the property for the second party, the beneficiary. Many times a trust is referred to as a “living” trust since a trust is created and in effect while you are still living. There are many different kinds of trusts but probably the most common one is referred to as the Revocable Living Trust. We already talked about the “living” part, but “revocable” means changeable or the idea that you can undo what you did in the first place.

Some of the common reasons for creating a trust are, 1. Creating a plan of distribution of your assets. 2. Probate Avoidance. 3. Estate Tax Reduction. 4. Management of assets during incapacity. The most common of these is the desire to avoid probate. Probate is not necessarily a bad thing, it’s just that the public has wanted a way that is less time consuming and lest costly. The biggest cost associated with probate is typically the attorney fees and many folks would rather see their hard earned assets go to their loved ones instead of lawyers.

The way I (Mark) usually talk about a Revocable Living Trust is that it is typically a replacement for the traditional will. It has a plan of distribution like a will, but the key is how you actually hold title to your assets. The key is transferring title of certain assets like real estate, bank accounts, stock, bonds, etc. to the trust. When you do this you can avoid probate by not having assets in the name of a person who has died. The trust is still living and its instructions can be carried out by the trustee after the death of the person(s) who created it. By the way, the biggest mistake people make when setting up a living trust is not funding it. Many times people pay thousands of dollars to set up a trust and then it does nothing later to avoid probate if it is not funded. So if you are looking to avoid probate then a trust may be the way to go to accomplish this. There are other ways to avoid probate, but usually the trust is the most comprehensive organized way to do it.

One of the drawbacks of doing a trust is how much it costs to set it up. The range is typically $1,500 to $3000 or more depending on the complexity. This becomes a personal decision regarding how much you want to accomplish and how far you want to take it to benefit your family. Some want to do everything they can to get every penny possible to their loved ones. Others have the attitude to let the heirs deal with it later even if it costs much more to settle the estate without a trust.

The key is talking to an attorney who focuses their practice on estate planning. Any attorney has a license to draft legal documents, but if they do not do it on a regular basis you may be better off with someone who has a lot of experience in this area of law. Have them do an analysis to help you determine if a trust or a will is the best way to go in your circumstances. And as always, make sure you get it done right away.

Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. NEXT Financial Group, Inc. nor its Representatives provide legal advice, always consult with an Attorney.

Titling accounts incorrectly could be a disaster (Part 2)

Nolan Baker Mark Clair — Fri, 26 Feb 2010 04:00:55 +0000

Last week, we wrote an article on how incorrectly titling accounts such as 401(k)s, IRAs, life insurance and annuities can be an absolute disaster. If this is not done correctly children and grandchildren can be unintentionally disinherited and IRA and other retirement accounts can turn into tax time bombs. This week, we wanted to point out two big mistakes we see people making to help you and your family avoid these traps.
Last week “Tom” came into our office because of the death of his wife. When this happens we sit down and go over all of the accounts and make sure everything that needs to be changed as a result of the death is taken care of. We look at the beneficiary of each account, who the owner now is, if there is a spouse and who the survivors are. It is called our BOSS review. After checking the beneficiary designation on an account, we noticed that there was no secondary beneficiary named. If this was never updated and Tom died, the account would go to his estate rather than his son as he intended. This could be a taxable event and could add additional probate costs and time delays. And before you know it, his son could lose as much as 50 percent of the account in the form of taxes, fees and expenses. Even if Tom’s son wanted to avoid the loss of 50 percent by fixing the forms, it would be too late after his father passed away. You only get one shot at getting the forms correct, in most cases there is no second chance.
Grandparents and Adult Children pay attention to default beneficiary designations. As an attorney, I (Mark) will throw some legalese at you. When considering your beneficiary designation it is important to understand the difference between the terms per stirpes and per capita. Per stirpes is “through the roots” or “by representation” which means that each distributee takes in a representative capacity and stands in place of a deceased ancestor, down the bloodline. This form of distribution is distinguished from per capita which is “an equal division of the property to be divided among the beneficiaries, each receiving the same share as each of the others, without reference to the immediate course of descent from the ancestor.” In plain English think of “by the head.” The money is paid out to the surviving named beneficiary only. To sum it up, if you have grandchildren it may be the perfect time to get a professional review of your forms so you aren’t confused on how your money would be paid out at death.
Here is an example that happened in my (Mark’s) family that may make this easier to understand. My grandfather David had an annuity account that he named his three children, Doug, Don and Lois, as equal beneficiaries. David died at the age of 94 and the proceeds were to be divided up. The problem was that Don had died prior to his father David. That left only Doug and Lois (two heads instead of three). By law the proceeds were to go to the surviving beneficiaries Doug and Lois and they were not obligated to share the money with Don’s wife or son (David’s grandson also named David). I have a feeling that my grandfather’s intention was to have his son Don’s share go down the bloodline. The problem was he never got around to changing it.
This is an example of the wording being per capita instead of per stirpes. By the way, my dad and aunt did the right thing and gave a third to Uncle Don’s wife to use for the benefit of David. Although this worked out in Mark’s family this simple mistake could have caused major family problems and could have been a tax nightmare.
Be sure to have complete information on beneficiary forms. There are five key elements of a good beneficiary designation. 1. Full name. 2. Date of Birth. 3. Social security number. 4. Physical address of the beneficiary. 5. Exact percentage each beneficiary is to receive. As we discussed earlier it is also important to indicate whether you want the proceeds of the account to go down the bloodline or merely be divided among the surviving heads.
All of this can be very confusing so here are a couple of ways you can take action to avoid a disaster. First, on our Web site at www.retirementguysradio.com we have made available a free copy of My Beneficiary Form Checklist. This is a great form that takes you through 15 important steps regarding your beneficiary designations from the basic idea of having a physical copy of your form and where do you keep it, to the legalese we talked about in this article. Second, The Retirement Guys are holding a series of upcoming workshops where we actually spend some time during the meeting going over this form with you. Third, send us an e-mail with specific questions to letters@toledofreepress.com. Make sure that you review each account to avert disaster and take steps to make sure your exact wishes are carried out.

Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. NEXT Financial Group, Inc. nor its Representatives provide tax advice, always consult with an Accountant.

Titling accounts incorrectly could be a financial disaster

Nolan Baker Mark Clair — Fri, 19 Feb 2010 04:00:00 +0000

A couple of years ago, an elderly lady came in to talk about her estate plan and have her documents reviewed. She had set up a living trust years ago and wanted to make sure everything was up-to-date. We looked over her documents for her and began to ask her questions about how her accounts were titled. She said that her accounts were all titled in her name. Mark asked her if she knew that if she died that all of her accounts would go through probate? She was shocked and almost in tears to find this out since the purpose of her living trust was to avoid probate. She said “you mean to tell me that if I died, my living trust would do nothing to help my assets avoid probate? What good is it?” We then explained how important it is to take the final step and actually fund the trust by changing the title of accounts and real estate to the trust.
This lady was smart enough to take the step to set up a trust with the goal of more of her money getting into the hands of her children, rather than going to lawyers, courts, fees, etc. The problem was that she did not take the important final step. Making sure the accounts were properly titled. Perhaps no one told her what to do. Maybe they did and she neglected to take these steps. This is the biggest mistake people make when setting up a living trust. To avoid probate certain accounts should be titled with the trust as owner. We helped her get things corrected very quickly, but what a shame it would have been if she had paid good money to set up a trust and it ended up not helping her a bit.
Here is something else to consider. If you own a 401(k), IRA, annuity, 403(b), life insurance or any other account that has a named beneficiary, listen very closely. A huge percentage of people do not have a correct updated beneficiary form on all of their financial accounts kept at home that they have quick access to. Most trust that the correct information is on file with their custodian. Unfortunately, many will be wrong about this and it will be too late.
Here is another story. Mary had been a teacher for 30 years when she suddenly passed away from a heart attack. She had remarried and had been with her current husband for many years. They were truly a loving couple. Some time after Mary’s death, her husband Todd started the process of addressing their financial affairs. He went to the school district and got the paperwork to file a claim on her teacher’s retirement only to find out he was not the beneficiary.
Mary had started teaching prior to being married to Todd. When Mary filled out the original paperwork, she listed her brother as beneficiary of her account.
Todd went to court and even the children testified that their mother loved Todd and would have wanted him to inherit her retirement account.
Unfortunately, with Mary gone, all the court had to rely on was her written instructions. You can guess what happened.
Think it couldn’t happen to you and your family? Think again. Here are just a few examples of potential pitfalls. Naming your trust as beneficiary, saying “divided equally among children”, forgetting per stirpes language (bloodline), unintentionally disinheriting grandkids and assuming your financial institution has your form on file.
Here is what to do. Review each and every financial, insurance and asset you own and review the titling and the beneficiary designation. For our clients, we use a checklist call our B.O.S.S. system.
This system is designed to review the beneficiary, owner, survivor, and spouse of each account. This step-by-step checklist helps provide peace of mind by significantly increasing the odds that the forms are up to date and filled out correctly.
Can you put your hands on your beneficiary forms and are they correct? You can get a copy of this helpful checklist by going online to www.retirementguysradio.com and requesting the beneficiary form checklist.
When someone passes away, there is no second chance, no “do over,” so get it right now before something happens.
Do it today. It is one more step to take that will lead to a happy and relaxing retirement.

Got a question for The Retirement Guys? Send your e-mails to letters@toledofreepress.com or you can reach them by calling (419) 842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Make a decision and change the world

Nolan Baker Mark Clair — Fri, 12 Feb 2010 04:00:39 +0000

We recently wrote about a great trip The Retirement Guys took to San Diego to acquire ideas and strategies on how to better serve our clients. We gained a lot of helpful information and had the opportunity to listen to several excellent speakers including bestselling author Andy Andrews. I (Mark) mentioned how I had picked up a copy of his book “The Travelers Gift” which is an inspirational story about the seven principles in life that determine personal success. Well, I was wrong about one thing. They are not the seven principles that determine personal success, but the seven decisions. It turns out there is a big difference. What is interesting is this goes right along with what The Retirement Guys have been saying for a long time. We say we are about providing good information to help you educate yourself, but it is a waste of time unless you take the information and apply it. In other words, make a decision on how you can use the information to your advantage.
I already told you about the first four, so I need to tell you about the last three. The first four were: 1. The buck stops here. I am responsible for my past and my future. 2. I will seek wisdom. I will be a servant to others. 3. I am a person of action. I will seize this moment. I choose now. 4. I have a decided heart. My destiny is assured. What makes this book interesting is that the main character learns about these crucial decisions by traveling through time to visit famous and influential people, like Harry Truman, Abraham Lincoln, Anne Frank, etc.
Decisions 5 through 7 are as follows: 5. Today, I will choose to be happy. I am the possessor of a grateful spirit. 6. I will greet this day with a forgiving spirit. I will forgive myself. 7. I will persist without exception. I am a person of great faith.
It is interesting how the decisions we make affect not only ourselves, but others as well. Obviously the path you have chosen, the attitude you take, affects you and your family but also can affect generations to come. There is an example given in the book of how a school teacher from Maine affected the destiny of the world. In July 1863, Joshua Lawrence Chamberlain, formerly a professor from Bowdoin College was a colonel in the Union Army at Gettysburg, Pa. ( I had the privilege of touring the battlefields at Gettysburg last summer and I would highly recommend it). Chamberlain’s troops faced an overwhelming situation trying to hold off the Confederate army of General Lee. After five bloody attacks they could not hold them off any longer. They were outnumbered five to one and had very little ammunition left. The situation looked hopeless and they faced almost certain defeat and certain death. Rather than retreat Col. Chamberlain chose to charge. The Confederates thought that this must be massive reinforcements and not the beaten regiment they had faced up until now. They surrendered. Before this happened it appeared that the Confederates were going to win the war and this battle at Gettysburg turned the tide.
Think about it. If Col. Chamberlain had not chosen to act, had not chosen to charge, the world would be very different today. Our country would not exist as we know it and would probably be divided into several different countries. We would not be the power we are today with the ability to help other countries in need, like Haiti. We would not be able to defend other countries’ freedom. Your decisions will have a far reaching effect also. They may not reach as far as the decision of Col. Chamberlain, but they will reach far. Decisions we make become a thin thread that weaves from you to hundreds and thousands of lives. And guess what? The decisions you make will obviously affect you.
I have paraphrased some of Andy Andrews’ book “The Travelers Gift” in this article. I cannot come near to doing it justice. I would suggest you pick up a copy and read it yourself. I think you will find it inspiring. As The Retirement Guys we are constantly encouraging people to make good decisions that will have a positive effect on themselves and their families. Reading “The Travelers Gift” is a good decision. Trust me. Typically, one thing leads to another. I read it and now I am writing this column about it. I hope all who read this consider the seven decisions that will determine personal success. Make a decision. You may just change the world!

Got a question for The Retirement Guys? Send your e-mails to letters@toledofreepress.com or you can reach them by calling (419) 842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Get financially fit in a hurry

Nolan Baker Mark Clair — Fri, 05 Feb 2010 00:12:43 +0000

The start of the new year is gone and many are back focused on daily routines as the holiday parties have come to an end. Many made New Year’s resolutions on things to personally improve on. One resolution, getting and staying financially fit, should be a top priority for 2010.
The problem with getting financially fit is it can seem like a major mountain to climb. We have had a decade lost in the stock market and fixed rates are still extremely low. Life continues to throw in other “what ifs.” Unexpected medical bills and family needs are common things that can get people off track. Last, it is common to just focus on getting through today and put the future on hold. Before you know it, another month has gone by and still no major changes have been made and the problems could be compounding.
The quicker a person realizes that the only person responsible for their financial situation is themselves, the faster he or she can work toward taking action and putting solutions in place.
The first step in getting financially fit is to focus on what is important to you. The way to greatly increase the chances of being financially fit is to write down three specific financial concerns that are the most important to you.
The second step is to write down the positives and negatives of changes on the three items that are most important to you. Try and be as specific as possible. Describe how much each of these problems is costing. What will the cost be over the next five years? Include who else is affected by these problems. Since this plan of action is based upon what is important to you, dream big dreams.
Follow through can be the hardest part for many people. It is easy to write down the three most important financial items to work on. Most can even detail specifically what each item is costing them and what the impact positive changes can make. Now it is time to take action. There are two ways to do this, first on your own and second in a “coaching” program. Both plans should include specific dates next to each item on when you want to have them accomplished. There has to be a deadline to measure results.
Finding the right coaching program can be the other option to staying on track. In many cases this involves working with a team to create an individual written plan of action and becoming educated and involved in the ongoing process. Financial Fitness works the same as so many other successful programs out there today, like joining a life group for spiritual growth or hiring a trainer for physical fitness. To get started, or to help you stay on track, head on over to our website at www.retirementguysradio.com and sign up for a complimentary six week e-mail training program by clicking on The Complete Retirement Toolkit.

Got a question for The Retirement Guys? Send your e-mails to letters@toledofreepress.com or you can reach them by calling 419-842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Toledoan reinforces ‘warrior’ creed: The buck stops here

Nolan Baker Mark Clair — Fri, 29 Jan 2010 04:00:33 +0000

Recently, the Retirement Guys had an opportunity to attend a business conference in the city of San Diego. It was sure nice to get a break from the cold weather in Toledo. The temperatures were in the 70’s each day and although we were inside attending meetings much of the time, we had the chance to enjoy some rays of sunshine.
At the conference, we attended various business strategy sessions and came away with some great ideas on how to better serve our clients. We even had one of our meeting sessions aboard the U.S.S. Midway. This meeting raised money for a great charity called Special Ops Warrior Foundation. The organization pays for the college education for children of special operations military soldiers who have died serving our country. We had the opportunity to meet a young lady whose father died serving our country. And guess what? Her name is Melinda Petrignani originally from Toledo, graduating from Clay High School in 2004. What are the chances of running into her in San Diego? Her father, Michael D. Rudess from Oregon, Ohio, was killed in a training accident in 1986. Shrapnel from a demolition exercise struck him near the heart. He served in Company A in the 1st Battalion 75th Ranger Regiment and received the Army Commendation Medal. Melinda was less than a year old when her father passed away and was his only child. Melinda attended DePaul University in Chicago, and graduated in 2008 with a Bachelors of Business Administration. She is living in Scottsdale, Ariz. and studying to take the GMAT so that she can study for an MBA.

Mark and Nolan with Melinda Petrignani.

The conference had several excellent speakers, among them David Walker who was the former comptroller and head of the Government Accountability Office; Scott McKain, an expert in customer service; and Andy Andrews, bestselling author of the book “The Traveling Gift.”
While we enjoyed all of the speakers at the conference, I (Mark) was especially struck by Andrews. He had a way of talking that captivated the audience. He spoke with a southern accent and was extremely funny in delivering his speech. His book is a fiction book that illustrates the seven principles that are keys to success in life. I have obtained a copy and am currently part way through it. As the Retirement Guys, we are constantly looking for ways to advise our clients on how best to achieve the relaxing and successful retirement that they deserve. Of the seven principles, I am through the first four and believe that they can be used to help our clients and how our clients plan. We always say on our radio show that we are all about information and the key is obtaining good information and applying it.
The first principle in “The Traveling Gift” is “the buck stops here.” In other words, nobody is responsible for your life and your circumstances. The sooner you accept this, the sooner you can begin to plan to make your life better. You won’t gain anything by sitting around complaining about bad things that have happened. The second principle is “seek wise counsel.” In other words, find a good source and get the information you can use to better your situation. Our Web site is full of free information and a schedule of upcoming educational meetings. Please feel free to take advantage of it. The third principle is “be a person of action.” This goes back to what was mentioned earlier about not only getting the information, but applying it. The fourth principle is “make a decision.” So many people get the information and do not make a decision on how to apply it. This is like getting the football down to the 1-yard line and then quitting the game and failing to score a touchdown.
I don’t know what the fifth, sixth and seventh principles are yet, but if they are good ones, I will let you know. Our friend Melinda has taken responsibility for her life even though she has experienced the tragedy of losing her father. She is acquiring education to give her the necessary skills to help her make decisions that will lead to a good life. No matter what stage you are in life, what are you doing to improve your life? My 94-year-old grandfather told me he is still learning and improving. I was amazed and thought what he told me was wise advice. Seek wise counsel, make a decision and take action. The buck stops with you.

Got a question for The Retirement Guys? Send your e-mails to letters@ToledoFreePress.com or you can reach them by calling 419-842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Let’s make a deal, but don’t play games

Nolan Baker Mark Clair — Fri, 22 Jan 2010 04:00:38 +0000

’m sure you have seen the show. People dressed in all sorts of wild outfits make up the audience for a chance to be on TV and a chance to win big prizes. I had thought the show was no longer on the air, until I had a chance to take a quick break at a conference last week and saw Wayne Brady running the show. All kinds of people just waiting for their chance to be a winner were going crazy.
This lady dressed as a cat was holding a box that contained a surprise amount of money. She could either keep the box and open it up to find out how much money was in it or trade the box for what was behind door No. 2. In this case, she kept her box and someone else got what was behind door No. 2. As the camera scanned the audience, there was a guy dressed like a chicken, a couple dressed like the president and first lady, and I think I saw Elvis. Mr. Brady picked a lady dressed as a hula girl. Behind door No. 2 was a world-class vacation and a jet ski with a total value of $9,471. Now it was the lady who kept the boxes to find out if she made a good deal. The safe was opened and inside was $111.
Things could have turned out differently. I didn’t have a chance to stick around and watch the rest of the show, yet I remember the show from my childhood. The box could have contained $10,000 and behind the door could have been a donkey. Not knowing is what is so exciting about the show.
We are surprised at how many people make investment decisions like they are on the game show, often willing to trade what could be a pot of gold for a chance to get a bigger prize. In real life, when it comes to investments you get to look inside the box and see what is behind door No. 2 before you decide.
Many people make wild, often quick decisions based upon their emotions, acting almost like a contestant on the game show. They sell investments that are in the stock market when they are losing money and buy fixed accounts and then wait till “things get better” to buy back into the stock market. The problem with this is when it comes to retirement, it’s not a game and the choices can be devastating.
An investor should not act like a game show contestant. Review every option carefully before you make a decision. If it is safety and security an investor wants, learn about what safe investment options offer the highest potential return. A ton of options are available and a small 1 or 2 percent increase in earnings can make a major difference in finding money. To learn more, visit www.safemoney places.com. If the investor is comfortable with equity investing; the way to find the money is to look at how to cut out wasted fees and expenses. Cutting fees by one or two percent can be another great way to find the money. Use www.morningstar.com to check up on your equity investments. Or if an investor is considering switching from safe to risky investments or vice versa consider the pros and cons first. Before you make the move, make sure you get educated.
On the show, the contestant only gets a few seconds to make a decision. In real life, when it comes to planning a secure and peaceful retirement, take some time to get a better understanding of all of the options. Don’t be rushed into making a quick decision. Attend a local educational event and then do some homework — no chicken suit is required.

Got a question? Ask The Retirement Guys. E-mail us at letters@toledofreepress.com. For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

To Roth or not to Roth — that is the question

Nolan Baker Mark Clair — Fri, 15 Jan 2010 04:00:23 +0000

One very important tax law change to pay attention to this year is the rule changes that apply to Roth IRAs. This year the income limitation goes away so almost everyone can take advantage of the Roth IRA and, for this year only, if a conversion is done from a traditional IRA to a Roth IRA, an investor can pay the taxes in two years, instead of just one. This tax planning opportunity could mean lower taxes in the future.
Let’s review the differences between a Roth IRA and a Traditional IRA. Normally, when contributions are put into a retirement account like a traditional IRA or 401(k), the money is pre-tax and the money grows tax-deferred. This in turn saves the person money in taxes today and in turn they will pay taxes in the future when a withdrawal is made, usually in retirement.
The Roth IRA contributions on the other hand are after-tax money and grow tax-free. The Roth IRA account grows tax-free and all withdrawals, including profits are not taxable under current tax rules as long as the account has been opened at least five years and the investor is over the age 59-and-a-half years old.
Will taxes be higher or lower in the future? That is the first question to ask. We think taxes will be higher. For one, the government has spent so much money that taxes are likely to go up. Currently, our tax rates are still one of the lowest in history. Second, the old concept of retirement accounts was save money on taxes now while you are working.
Then in retirement you will have less income and be in a lower tax bracket. For most of the people we meet with, retiring with a lower standard of living doesn’t really sound too good. Instead, most investors want to be successful in investing and savings and have a retirement that allows them to enjoy the fruits of their labor.
The old concept just doesn’t make a lot of sense for many families and the Roth is a great concept to consider. The Roth IRA usually benefits long-term successful investors who feel taxes will be higher in the future.
There are a lot of items that need to be reviewed before the conversion takes place. Consider using unique planning strategies. These options can offset a portion if not all of the taxes that would normally be due on the conversion. Some investment companies offer bonuses for long-term investors. If the account is going to stay open for 10 years or longer, consider using a bonus annuity to pay the taxes or to jump start the tax-free account.
Before you invest with any company, do your homework because annuity guarantees are only as good as the issuing company. Where the money is held at, known as the custodian is an important factor beyond product choices. The other important factor involves how your account will transfer to your beneficiaries at death.
Make sure the custodian offers beneficiaries stretch out options. This allows your family to take distributions over their lifetime, instead of being forced to take a lump sum payment at death. If the primary goal is to protect the spouse or to leave as much money to children or charities, a life insurance plan can be a better option. I know, life insurance … yuck! But, insurance can be a way to leverage dollars to get more benefits and still be a great part of a comprehensive investment plan.
If the primary attraction of a Roth IRA is the ability to have tax-free profits, then an investor should use products that limit losses. There are several options here that are safe, but still offer the potential for good returns. Our conclusion is before you sign the paperwork to convert your current account, you need to get educated and have a detailed analysis done first.

Got a question for The Retirement Guys? Send your e-mails to letters@toledofreepress.com or you can reach them by calling (419) 842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. NEXT Financial Group, Inc. nor its representatives provide tax advice.

How to pick stocks in four simple steps

Nolan Baker Mark Clair — Fri, 08 Jan 2010 04:00:34 +0000

In the last ten years, the stock market proved to be a very difficult place to invest and make money. This has lead many investors into looking at different stock market strategies. There are more alternatives and options than even publicly traded companies to invest into. So it is not surprise that the average investor can become overwhelmed and face many problems along the way to retirement.

The common problems with most investment approaches is human emotions, there is lack of complete transparency, poor diversification, no disciplined approach, and not being properly rebalanced. These problems can lead to investments that underperform and often have very high expenses. Instead of feeling overwhelmed, here is how to help avoid this problems using formula based investing.

The first step is to create a filter for choosing the investments. Just like a good filter in a furnace removes bacteria and viruses you breathe, a filter can be applied to investments to remove things you don’t want. Here is an example of how a filter could work on the S&P 500 Index. This index is the largest index in the United States and usually when the S&P 500 index is doing well, the whole US is doing well.

Step #1 in the filter is to remove any company in the index that has a negative net income. This will remove all of the currently unprofitable companies. Step #2; take the stocks that are left and rank them most profitable to least profitable. Then eliminate the bottom half. Step #3; since the stock market is simply an auction, we want stocks that are actively being traded. Rank the stocks based upon momentum, most traded to least traded and eliminate the bottom half of the group. Finally in Step #4, purchase an equal dollar amount of the stocks that passed through the filter. In this example, we created a four step filter process to identify what we want in our investments. Now, we know what to buy.

Diversification is important in creating an investment account. Just because there was a group of stocks that made it through the filter, doesn’t mean we should put all of our money on that one group of stocks. At the same time, owning a lot of different investments does not mean an investor is actually properly diversified. True diversification means investing the correct amount into large, medium, small, and international stocks. It can also mean investing a into growth and value stocks. Adjusting the diversification is like adjusting the thermostats on your furnace for how warn you want your house to be.

Proper rebalancing and determining when to sell an investment can be the hardest step in the process. I, Nolan, remember when my furnace stopped working last year. I had just gotten home from a trip, when I noticed how cold it was. The circuit breaker was tripped on my furnace and every time I turned the circuit back on, it tripped again. So I called in a local repair man. And to my embarrassment, it was because I haven’t changed my filter in a long time. The circuit was protecting us. This same type of protection can be applied to investments to automate the selling process. First, when a filter is used on your investments, we recommend updating the filter every 90 days. Stocks that don’t make it through the filter get sold automatically, this removes human emotions. Also, be sure to put a circuit breaker on the investment account. The way that can be done is to use specific shut off points when a problem occurs. Then you can fix the problem before it gets worse.

We just completed updating our list of stocks that pass our filter. There are currently 120 stocks that make our A+ list. There are several companies on the list that have a major presence right here in our local community and some on the list you may have never expected to make the grade. To get a complete list of those stocks and to learn more about how use investment filters, go to www.RetirementGuysRadio.com and click on the Freedom Formula.

Send your questions to letters@toledofreepress.com or for more information about The Retirement Guys, tune in every Saturday at 1 PM on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Retirement Guys: A decade of financial change

Nolan Baker Mark Clair — Wed, 23 Dec 2009 17:52:44 +0000

There are only a few days left to go until it’s a new decade and boy where did time go. We remember celebrating the new millennium with family and friends only a short time ago. In 1999, Michael Jordan retired for the 2nd time, President Clinton was acquitted, and The Dow Jones closed above 11,000 for the first time ever. Looking back over the past ten years, there is still no better NBA super star as the great Michael Jordan, politicians continue to fool around, and The Dow Jones is still not back above 11,000. There are many lessons to be learned.

In the 90’s it seemed like all the stock market did was go up. Yet, in the last decade we have suffered two major bear markets. In the first one, the S&P 500 Index went down 49% and this last time it went down 57%. Buying and holding onto investments for a retiree living off a stock market account just didn’t work. Today and in the future, a retiree needs to be prepared as the world has become faster moving and more volatile. There are steps that can be taken to protect your principal against loss.

Indexed annuities, proved to be one of the biggest advancements in the last decade. Sure they aren’t perfect and aren’t the solution for every investor, but the concept is simple with most accounts. Set aside money for the long-term and an investor can participate in the good years of the stock market, while avoiding losses in the bad years. Every time an investor makes money it becomes their new starting point. They can only go forward and never backwards, due to a stock market decline.

The last decade was a yo-yo economy. That is, “You are on Your own.” The 10 largest bankruptcies in US history occurred in the last decade. Toledo and Northwest Ohio has felt a large brunt of this as we still suffer with major employment problems and pensions that were once considered safe have been turned over to the Pension Benefit and Guarantee Corporation. Relying on someone else after years of service isn’t a sure bet anymore. Plus, many other companies in the last 10 years have done away with traditional defined pension plans and have turned to defined contribution plans putting your future retirement in your hands. For some, that may seem scary, while for others having more control over their own future is a great opportunity.

The government has spent our country into bankruptcy. In the last few years, our politicians have spent more money than we can even imagine. The website www.usdebtclock.org shows this point in real time. If you haven’t visited this site before, you really should. Here are a couple highlights. Our nation currently has over $12,000,000,000,000 in debt. It would take every US tax payer over $111,000 just to pay off our current level of debt. Keep in mind, we said tax payer, because only about 1/3 of the population of the US pays taxes.

Now let us look at what everyone owes. The total future liabilities for social security payments, medicare costs, and prescription drug benefits, each liability per citizen would be over $346,000. Add the estimated $54,000 that every person has in personal debt and we are literally in a world of hurt.

How will the government ever collect this debt? In our opinion it is simple, raise taxes. Taxes currently are at one of the lowest levels in history. According to some estimates 40% of a family’s net worth is in their retirement account, so where do you think higher taxes will come from? If you are like us and feel that taxes will be higher in the future, you will want to learn how to correctly move your money in the right direction. That means moving money from taxable to tax-deferred accounts to finally tax-free accounts.

The next decade will be history in the making. Change is coming, and depending upon how you plan for change, it can be your best friend or worst enemy. Take what you have learned in the last ten years and use that knowledge to put a plan in place to improve in the next decade. If you don’t feel that you know all you should know about retirement, take time to continue to get educated and then take action.

Holiday greetings and biblical-based investing

Nolan Baker Mark Clair — Fri, 11 Dec 2009 04:00:40 +0000

Mark and his family for years have been attending McCord Road Christian Church. My family and I (Nolan) have visited there a few times to enjoy the services and watch Mark play in the church band.
As the holidays grow closer, I realize that I need to continue to build my spiritual relationship for myself and my family. Recently my family and I took time to go to the new CedarCreek Church that just opened in Whitehouse. It was really a great experience.
CedarCreek Church was a wonderful place where we felt welcomed and saw many familiar faces. I didn’t realize it until we were attending, but that week they had a special guest, Dave Ramsey, sharing a message. For those who are not familiar with Dave Ramsey, he is a nationally syndicated financial radio show host who promotes getting out of debt. I thought his biblical based financial message was great, no matter what religion people practice. This week, we wanted to share his points on how our readers can continue to improve financially.
n Get out of debt. This seems so logical, yet so challenging for many of us living in a society that promotes spending. Get it now and you will pay for it later. That is really what the holiday ads should say. Yet, that probably would not sell too many cars or TVs. It is so easy to get into debt, yet so hard to get out of debt without a specific plan of action. Look at the debt our country is facing, it continues to get worse.
n Check it twice. Another list to make along with the holiday list is a list of your current debts. We don’t want to be Scrooge when it comes to the holidays. It is important to have a nice and enjoyable holiday with friends and family, just try not to go into more debt this season. One way to help curb spending is to pay for items in cash. It is harder to over spend when paying for items with cash instead of simply swiping a credit card.
n Act your wage. Trying to keep up with the Joneses is not a good idea. There will always be people who have more money than us. The best holiday gifts that we have all gotten aren’t usually items that cost much if any money at all. Having and spending more money, will only compound problems in the future. Short term impulse purchasing may feel good, but it could cost a fortune in the long run.
n Save and invest. It will rain one day in the future. For some people here in Northwest Ohio, it may seem like it has been raining for months, others may have seen a storm come and go, while others the sun continues to shine. We don’t know when it will start to rain, but unexpected expenses can arise at anytime. It doesn’t take much for rain to turn into snow and a small financial problem can snowball into a much bigger problem. For someone who isn’t saving and investing this snowball effect can get out of control quickly. Having three to six months worth of money set aside in a rainy day account will help prevent this from happening.
n Give to others. Mark and I talked about giving this week. Mark pointed out that giving should be at the top priority instead of at the bottom of the list. This is not always easy to do. Yet, by getting out of debt, acting your wage and saving and investing for the future, the gift of giving can get even bigger. Imagine the impact of not having to send $400 to the credit card company and instead being able to donate that money to a pregnant woman working overtime to cover expenses. This financial freedom can allow someone to make a big impact on others lives. If you cannot give of your finances, give of your time. Mark’s church recently had “Make a Difference Day” where more than 250 people on a Saturday worked on various projects that were of service to others. If you get outside your comfort zone a little and get involved in something like this, you will be amazed at how good it will make you feel.
The holiday season can be a fun and enjoyable time and can also be stressful. Ramsey’s message makes a lot of sense and by following his four principles of biblical based investing, it can help you and your family focus on having a more enjoyable holiday time together. Merry Christmas from The Retirement Guys.

Send your questions to The Retirement Guys by e-mailing us at letters@toledofreepress.com. For more information about The Retirement Guys, tune in every Saturday at 1 PM on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Protect your family from the ‘tax flu’

Nolan Baker Mark Clair — Fri, 04 Dec 2009 04:00:23 +0000

As a father of two boys, who are 6 and 3, I (Nolan) am always dealing with allergies, earaches, colds, shots and the normal issues of parenting.

My wife and I have the traditional roles in our family. I try to do my best to be the provider and she does a wonderful job protecting us.

So, it is natural for her to want to take our children to the doctors when they get sick.

I, on the other hand, tend to act like most men and believe the boys can tough it out for a bit. I think the human body, for the most part, can take care of itself, only opting for doctors when the problem gets worse or it is a crisis situation.

But both of us do like to turn to natural alternatives first.

For example, if our son starts to get sick, we give him lots of fluids and maybe some chicken noodle soup as opposed to putting him on an over-the-counter cold medicine at the first sign of a sniffle — this way his body can build his immune system.

At first, we were somewhat unsure as to whether we should give our sons the H1N1 flu shot or not.

Sure, it was all over the news, and the media talked about how sick our country has become and how many people were dying.

In reality, we knew that the flu sweeps the nation and there are, unfortunately, people who die from the flu each year.

Was this H1N1 really something we needed to be concerned with, plus what about the potential side effects?

Then, we received a letter from the school, letting us know it was providing the shots in a few days. We had to make a decision; the clock was ticking.

We talked with a couple of parents who had already gotten the shot, and we knew of others who had gotten sick. In the end, we decided it was a good idea to protect our children.

I wish when it comes to protecting our families for excess taxes, getting a shot was a simple solution.

I could see it now, a line of local residents outside our office walking in and getting a quick shot for their year-end tax planning.

The reality is year-end tax planning often takes time. It takes time to complete a review, work up a plan and implement strategies to save on taxes. The process often involves hours, not minutes. Yet, the results can be a savings of thousands of dollars. So, the investment of time can be well worth the long-term results.

In a few weeks, we will be ringing in another new year, and when the clock strikes midnight, there isn’t a whole lot anyone can do to change their taxes for 2009. You are pretty much stuck with the decisions. You did nothing and might end up overpaying or you have taken time to review your situation and made changes to help lower your tax bill.

Our advice is simple: Take time during the next week to set up an appointment with your financial team, attorney, accountant and investment professional and review options on how to lower your tax bill by making moves now. Consider this your notice from the “Retirement Guys School.” Don’t wait and put this off, doing so may only make you and your family come down with the tax flu in a few months.

For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit http://www.retirementguysradio.com/. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Count your blessings; name them one by one

Nolan Baker Mark Clair — Wed, 25 Nov 2009 19:10:05 +0000

Growing up the son of a preacher, “Count Your Blessings” was one of the songs I heard from time to time as I (Mark) sat in church as my dad preached the sermon and my mom played the piano. My parents’ work took our family to several towns in Michigan where my father was pastor of the local church and as far away as Seoul, South Korea as missionaries for five years. The huge city of Seoul seemed packed wall to wall with people.
As we enter the holiday season, if we can get past the hype and the many obligations, many of us take a moment or two to reflect on things like what we are really thankful for and what is really important in life. As I think back to the past, I am thankful that I had parents who brought me up in a home that focused on a strong faith.
Speaking of tough times, perhaps as you read this column you are going through difficulty. This is not the best time economically in our country.
Maybe you’re going through something personal. Our family has had a tough time over the past two years or so dealing with the deaths of my father and mother-in-law and the health struggles of my father-in-law. These circumstances can definitely be a downer.
I was reading a book by Norman Vincent Peale not too long ago and he told a story of someone who had come to him and said, “I have lost everything.” The man had made a fortune in business and lost it all in a bad economy. Peale asked the man several questions. “Do you have a wife and does she love you?” “Do you have children and do they love you?” “Do you have friends and do they support you?” Does God love you?” After thinking about it, the man was encouraged and realized he had not lost everything but that he still had much to be thankful for and decided to get back to living life.
As we enter this Thanksgiving and Christmas season, here are some of our conclusions and since you “can’t take it with you,” they are not all related to your money:
1. Life is short. Enjoy each day to the fullest. Look for all of the positives in each day and enjoy the time with family and friends.
2. Life is good. I bet if you count your blessings, they will far outnumber the trials you may have to go through.
3. These are the good old days. Don’t spend too much time looking forward or looking back.
4. God is faithful. He will do what He said He will do! He has never failed keeping His promises!
5. We are all works in progress. God will finish what he started in us.
6. We can choose what we focus our thoughts on; choose happiness.
7. Be grateful. If we are focused more on gratitude, we feel better and are more likely to have the desire to help and serve others.
8. Get your financial and estate plan in order. Smart planning will benefit you and your family for years to come.
We are thankful for you. Thankful we get to write this column, do our radio show and have the opportunity to meet and work with many great people. Count your blessings, name them one by one. Thanks for being a blessing to us.

For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Three choices with an old 401(k) account

Nolan Baker Mark Clair — Thu, 19 Nov 2009 21:13:42 +0000

Do you have an old 401(k) from a previous employer? We often times find that a lot of people leave their job and leave their 401(k).
Not sure what your best option is? Leaving your 401(k) could be a great idea or a terrible choice. Here is a summary of the three different choices you need to know about.
Those who are younger or only have a small account balance and have taken a new job or plan on getting a job in the future may want to consider transferring the old 401(k) into the new company’s 401(k) plan. Most people are not aware of the fact that if balance is low, typically $5,000 or less, the previous employer is not required to keep the account open forever.
After a limited amount of time, a check could be mailed out creating a taxable event and an additional 10 percent penalty for anyone under the age 59½.
Transferring the money into the new 401(k) plan can help consolidate the accounts and could reduce wasted fees and expenses. The new 401(k) loan provisions could be an important option as well for a family without a large emergency account. The new 401(k) plan could continue to be the foundation for a family’s future retirement.
The second option for people with larger balances is to leave the money where it is. Technically, an investor could leave the money in the current plan and would only need to begin to take distributions when they reach 70½. This strategy can make sense for someone who is between the age of 55 and 59½ and will need to take income off of their 401(k) plan. Some 401(k) plans allow a retiree access to the money after the age of 55; without the 10 percent tax penalty that could be applied in other retirement accounts. Be sure to check with your plan provider to see if these types of withdrawals are available, or leaving the money sit may not make sense.
Rolling the money over into a self directed individual retirement account (IRA) is the third choice. Often times we feel this is the best option for the majority of people with old 401(k)s. For one, an investor now has the flexibility to choose how his money should be invested.
In a 401(k) plan, an account owner is limited to the investment choices offered by the company plan. The 401(k) account owner also doesn’t have much, if any, control over decisions made about the plan.
On the other hand, the IRA will give the account owner control, flexibility and unlimited choices over how his or her money is invested. But watch out, if you fill out the rollover paperwork wrong, you could get stuck with a 20 percent tax withholding!
The recent law changes on planning for your family also make the IRA a more attractive option. Certain IRA companies that hold your account, called custodians, offer your family more choices when you die, avoiding a potential 41 percent tax trap. This is called a multigenerational IRA and gives a family the ability stretch out the taxes over their lifetime.
Although law changes like the Technical Correction Act of 2007 were passed to fix problems from the previous tax law changes, a stretch out 401(k) or IRA plan is not automatic!
Take note, the law is a voluntary, not a mandatory, rule. So if the 401(k) account was opened before Jan. 1, 2008, or the retirement plan chooses not to offer this feature, it could still all be taxable to anyone besides your spouse.
Imagine all of those years you spent building your retirement account to have your family lose up to 41 percent instantly just because you didn’t update your plan. So no matter if you leave the 401(k) or do the IRA rollover, make sure you completely understand your family’s distribution options at death and get it in writing.
The recent round of pink slips around Northwest Ohio has put our unemployment at record levels. Many people find themselves in a situation they have never been in before. It’s at this point that many of the decisions you make are irrevocable. Other decisions will have a long term impact on your financial future.
Get it right the first time. It’s like the big game with OSU versus Michigan in football, getting down the field is important, but the only thing that counts is scoring when in the end zone. And normally, it all comes down to the last 20 yards called the red zone.
The retirement red zone works the same way.
So before you make a move, be sure to check with a coach who knows the rules and has the playbook.

For more information about The Retirement Guys, tune in every Sunday at 11 a.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. NEXT Financial Group, Inc. nor its representatives provide tax advice. Always consult with an accountant.

Stay on track by reviewing the investment process

Nolan Baker Mark Clair — Fri, 13 Nov 2009 01:28:19 +0000

Now that the stock market has continued to rally from its March lows, many investors feel comfortable opening their statements and are happy to start heading back into a positive direction. Most people are no longer in a panic state and aren’t paralyzed by what seemed like daily losses on Wall Street last year and in the beginning of this year. Unfortunately, too often, we see people get comfortable at this point and put off updating their investment process because things seem to be fine. The problem with getting comfortable and not updating the investment process is the next time things get tough, an investor may just move back into a panic state and make poor investment decisions that could hurt their long-term plan. A great strategy to implement is to create an Investment Policy Statement to prevent emotions from getting involved in the future.
The Investment Policy Statement lays out the expectations of investments and details the process to reach various financial goals. This can be a great exercise to go through, as it helps an investor clarify the plan and process. It also is a great tool to use now that the stock market has improved because you are more likely to use realistic expectations, versus what may have been created in a panic a few months ago. Using this process will give you a guideline to follow next time things aren’t working as planned. Having the process detailed in writing can also make it easier to figure out what the actual problem is.
The Investment Policy Statement can be as unique as you are. There is no one statement that fits all investors. Start by figuring out what is important to you. For example, safety could be a primary concern for a retiree. Safety is important because retirees don’t want to run the risk of running out of money. They are concerned about not running out of money so they can be in control of their future. Complete this exercise with the three biggest financial concerns you have. One could be retirement, another could be putting a child through college and a third could be planning for a second home. Whatever your three goals are, write them down and ask yourself what is important about each of those goals. Expand on your answers at least three times as we did in our example.
The next step is to write down what has been done so far to reach those goals. Write down the amount of money allocated toward each goal. An investor should look at what is the current method or process used to try and fix a current concern or the steps to take to reach a goal. Think about what tools you have used to solve these problems in the past. Are those tools the most effective ones? Typically, we would write down how much time you are spending, what has been the focus and how much money it takes to solve these problems.
Now take a look at where improvements could be made. For one, take a look at how much risk there is. Write down the maximum amount of risk you are willing to take in both percentage terms and in dollar figures. Oftentimes, we find investors are taking too much risk and that could have a drastic negative impact on their plan if the stock market went down in the near future. So, look for ways to reach the goals, while at the same time lowering the risk level. This can be improved usually by proper diversification, asset allocation, using other investment products or taking a different approach. The other areas that seem to hold a lot of investors back is the fees and expenses that eat into the total return of an account. Look at both the disclosed and undisclosed fees and expenses in each of the investment accounts. Decide what fees can be eliminated that are not adding value to the approach and look at reducing the cost of the plan. Making these improvements could go a long way to helping create your perfect Investment Policy Statement.
Education is an ongoing process. It is good to know what is going on financially, but it is more important how you use that knowledge. If you are frustrated about any of your current financial management processes, then an Investment Policy Statement may be just what you need. If you would like a copy of the complete discovery form we use, simply go over to our Web site at www.RetirementGuysRadio.com and download a copy of the Investors Repair Kit.

For more information about The Retirement Guys, tune in every Sunday at 11 a.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.