2011: A Year In Review

This week’s CBTV show is entitled, “2011 – A Year of Many Financial Ups and Downs!”

The end of the year is usually a time for reflection on what “happened” over the previous 12 months.  But in 2011, some of the top financial news stories have been on what “did NOT happen.”  One of the biggest stories was the U.S. long-term credit rating downgrade from AAA to AA+ by Standard & Poor’s on August 5th.  The downgrade sent the stock market in a tailspin, with the Dow Jones Industrial Average suffering its sixth-biggest, single day decline ever, of 635 points.  The S&P downgrade was a result of the federal government’s inability to make a decision on how to cut the federal deficit.  The debt ceiling was raised by Congress three days before the S&P downgrade was issued.  The failure of the Congressional “Super Committee” to trim at least $1.2 trillion dollars out of our budget over the next 10 years, has made 2011, the “Year of Inaction.”

When the “super committee” failed to fulfill their assignment, they essentially handed off the responsibility of slashing our country’s deficit back to Congress, and possibly a new president, in November of 2012.  The automatic spending cuts, totaling $1.2 trillion dollars, will not become effective until 2013, which means Congress has another full year to argue against them, or figure out an alternative solution.  As it stands now, these cuts must be divided equally between defense and select domestic programs.  Leaders of the U.S. Armed Forces have already fought against these measures, expressing deep concerns over cutting our military budget and strategic presence around the globe, as well as compromising our national security.

While the “Year of Inaction” is nearly over, we may very well be talking about the “Years of Inaction” at the end of 2012.  The indecision of our elected officials to change the financial course of our country this year, shows a lack of true leadership.  But there is a silver lining to this year’s indecision by Congress that helped some Americans in 2011.  The failure of the “super committee” faired well for retirees, who had feared cuts to Social Security and Medicare.  Some Americans also found ways to make the most of a bad situation by cashing in on timely investment opportunities such as gold.  Mortgage rates also fell below 4% for the first time in 30 years, and made it very tempting for many to buy a home.  Yes, 2011 was an interesting year, but it also furthered the U.S. on a financial path it cannot sustain.  While the forecast for 2012 looks like more of the same, take advantage of the good while you can, but also brace yourself for more rough waters ahead.

Again, I’d like to hear from you on this week’s show. How do you think our government officials are doing in making decisions to improve our financial future?

Until next week, Dump Debt, Invest Wisely, Believe in Yourself and Make it Happen!

 -Matt

http://www.ChecksandBalances.TV

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The Perfect Gift For Yourself

This week’s CBTV show is entitled, “How to Choose the Perfect Gift for Yourself this Holiday Season- Financial Security in Retirement.”

In this week’s financial tip, tool, or technique portion of the show I said, if you’re lucky enough to have an employer who still offers a defined benefit plan, you have several payout options available to you, come retirement time. Here are the 4 basic payout options to consider when creating an income stream from your pension in retirement:

1) Single Life Payout: This option pays out the biggest benefit, and is calculated based on a single life – yours, which means it ends at your death.  No benefit is available for your surviving spouse, so this might be appropriate for a single retiree, or a couple who can cover the loss of income, if the spouse who is receiving the pension dies first.

2) Spousal Continuation Payout: Unlike the single life payout, these benefits continue on, if survived by a spouse. The downside, is the monthly benefit paid to the retired spouse is reduced vs. the single life payout. The upside, is the monthly payments are paid out for the life of the retiree and the surviving spouse, no matter how long each one lives. 

3) Lump-Sum Distribution Payout: Some plans give you the option to take your pension funds in a lump sum, that can then be “rolled over” into an Individual Retirement Account (IRA).  Taking the lump-sum distribution allows you to invest your money as you wish, and gives you many more options to choose from, which may give you even more income in retirement.

4) Pension Arbitrage Payout- If you’re married consider taking the higher “single life pension payout” and buying a life insurance policy on yourself. With this strategy, you will receive a higher monthly income during your lifetime, and your surviving spouse will receive a “lump sum” income tax-free benefit upon your death.

Knowing all your options before you structure your pension payout, can help you maximize your retirement income stream.  I also recommend you consult with a qualified professional before making any decisions on this important election of benefits. Because once you decide which option to choose, you can never go back and change it!

 I would like to hear from you this week on whether or not you have a Pension Plan distribution coming to you when you retire. Many employees do not have this valuable option available to them anymore. If you do, you’re one of the lucky ones.

Until next week, Dump Debt, Invest Wisely, Believe in Yourself and Make it Happen!

 -Matt

http://www.ChecksandBalances.TV

http://www.facebook.com/ChecksandBalancesTV

http://www.twitter.com/MatthewJRettick

The Gift That Keeps On Giving

This week’s CBTV show is entitled, “This Holiday Season Give YOURSELF the Gift That Keeps on Giving – A Guaranteed Income Stream for Life.”

Retailers across the country cashed in on the most profitable Thanksgiving weekend ever last month, and they’re hopeful that December will produce strong fourth-quarter sales to carry them into the new year. Consumers spent a record $52.4 billion dollars over the “Black Friday” weekend, with an additional $1.25 billion generated in Internet sales on “Cyber Monday,” the heaviest online spending day in history.  A number of factors have contributed to these record sales, from stores opening earlier than ever before, to low sales prices being extended for longer periods of time.  While the country closes out another tough year, millions of Americans are giving the economy a boost, as they spend their way through the beginning of the holiday season.

While you’re spending money on great gifts for family and friends this holiday season, take a moment to think about yourself too.  The best gift you can give yourself is a gift that keeps on giving, such as an income for life!  This can be accomplished through saving for and then structuring your retirement assets to provide an income stream that will last throughout your retirement years.

Here are 4 financial challenges to be aware of as you create a master plan to live comfortably in retirement:

1) Inflation: Your income plan should figure inflation into the equation. Inflation has ranged between 3% and 4% for most of this year.  Costs will continue to go up for most goods and services, so make sure you plan for this expected rise in the cost of living when planning your income stream for retirement.

2) Life Expectancy: More Americans are reaching their 80’s, 90’s, and 100’s than ever before in history, which means our money must last longer too!  Therefore, you need to develop a plan that ensures your savings will go the distance.  For more and more people, that means working past the age of 65, so they can maintain an income to supplement Social Security and other retirement benefits.

3) Adequate Savings: An income plan should definitely include some form of retirement savings, whether it’s a 401(k), an IRA or an annuity.  The key is to put enough money away as soon as possible for the future, and not spend it on anything, but your retirement years!

4) Debt: You will never be able to truly enjoy retirement or even pre-retirement if you still owe money on anything you’ve purchased in the past. One of your goals should be to become debt-free as soon as possible. Stop being slave to the lender! Pay off all of your credit cards, home mortgage and car payments and watch your peace of mind, bank account and income increase!

Creating a solid income plan can keep your finances in good shape during retirement. So, as you shop `til you drop this holiday season, don’t forget to add “Your Name” to your list of gift recipients. This can truly be a gift that lasts a lifetime!

I would like to hear from you on this week’s important show topic. Have you given any thought to how you will create an income stream that will last as long as you do in retirement?

Until next week, Dump Debt, Invest Wisely, Believe in Yourself and Make it Happen!

 -Matt

http://www.ChecksandBalances.TV

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The Tax Man Cometh!

This week’s CBTV show is entitled, “The Tax Man Cometh! But Don’t Pay a Penny More Than You Have to This Year.”

As we all know, our U.S. tax code changes every year, and this up-coming year will be no exception, as you will see from my opening headline to the show:

 The end of the year is quickly approaching, and with it comes the expiration of a few key tax breaks that were put into effect by the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” Congress must now vote on whether or not they want to extend these benefits for 2012.  But, with the Congressional “super committee” failing to come to an agreement on a deficit reduction plan before the November 23rd deadline, no one knows what to expect from Congress in 2012. With the failure of the bipartisan Joint Select Committee on Deficit Reduction to cut out anything from our national budget, will Congress be able to come to an agreement on these “temporary” tax breaks? Only time will tell…

Nearly one year ago, payroll tax cuts were put in place by Congress in an effort to stimulate the economy.  Payroll taxes fund Social Security, and were cut 2%, from 6.2% to 4.2% for employees, as part of the 2010 Tax Relief Act. According to the Center on Budget and Policy Priorities, the payroll tax cut gives about $934 per year to the average worker, but is set to expire at the end of this year.  President Obama proposed extending and expanding this cut in 2012 as part of the American jobs act in September, which called for the tax rate to drop even further to 3.1%, for both employees and employers.

Extending the payroll tax cut in its current form through 2012, is expected to cost the government $120 billion dollars, and combined with the extension of emergency unemployment insurance, that number rises to $200 billion.  Increasing our country’s “spending” is obviously not what Congress should be focused on right now, especially when the goal of the “super committee” was to agree upon $1.2 trillion dollars in spending cuts and possible tax increases.  At the same time however, the backlash that could occur from raising payroll taxes or eliminating long-term unemployment benefits, could be substantial.

The “super committee” was formed as a result of the Budget Control Act of 2011, which raised the debt ceiling $400 billion dollars on August 2nd.  Unfortunately, the federal deficit passed the $15 trillion dollar mark last month, and the new debt ceiling of $15.2 trillion is expected to be hit sometime in January.  Debt continues to pile up, due to ongoing spending, and it looks like next year will be more of the same. In 2012, most Americans will likely have the same benefits they had in 2011, which means that retirees will not see cuts to programs like Social Security or Medicaid.  If there is a silver lining in the failure of the “super committee,” it’s that people will probably not have to worry about tax increases or benefit cuts until this time next year, when we’ll most likely, go through it all over again!

Again, I would like to hear your comments on this week’s show. Are you happy with your current federal tax rate you’re paying? Do you think the reduced payroll tax is helping you financially? And what taxes do you think should increase to pay down the national debt?

Until next week, Dump Debt, Invest Wisely, Believe in Yourself and Make it Happen!

 -Matt

http://www.ChecksandBalances.TV

http://www.facebook.com/ChecksandBalancesTV

http://www.twitter.com/MatthewJRettick

Financial Blunders of the Rich & Famous!

This week’s CBTV show is entitled, “Financial Blunders of the Rich and Famous.”

Everyone likes to hear how the rich and famous messed up their lives (that’s why the tabloids sell so many newspapers), but there is a real lesson to be learned with this one.

Christmas Day is now less than a month away, and this year will mark the fifth anniversary of the passing of the man known as the “Godfather of Soul,” James Brown.  Unfortunately, the legal team of the former, “hardest-working man in show business” continues to work hard themselves, as they attempt to fulfill his dying wishes, with the extremely poor estate planning documents he had in place prior to his death.  Nearly five years later, a final resolution of his estate is yet to be determined in probate court, mostly due to a controversial 4^th marriage, and an appeal of a 2009 settlement filed by two of Brown’s former trustees.  The appeal is currently waiting on the South Carolina Supreme Court, while his remains also wait for a final resting place.

James Brown died on December 25, 2006, and shortly thereafter his heirs started fighting over his assets.  The original value of Brown’s estate was estimated to be worth $100 million dollars, and he wanted all of the money to go into a “special trust” to provide college scholarships for underprivileged children.  However, none of those children have seen a penny so far, because he didn’t update his will or trust during a questionable marriage to his last wife, Tomi Rae Hynie. 

While Brown’s case is certainly one of the worst, in terms of what can happen due to a lack of proper estate planning, he is definitely not the only celebrity to make the same mistake.  Last year, the children of former St. Louis Rams owner, Georgia Frontiere, who died in January of 2008, were forced to sell their 60% stake in the team, to pay for the huge estate tax bill that was due. Nearly a decade earlier, the family of former Miami Dolphins founder, Joe Robbie, was faced with a similar problem when he passed away in 1990.  The Dolphins were sold to minority owner, Wayne Huizenga in 1993, so they could pay a reported $47 million dollars in estate taxes.

And now for some good news:

Steve Jobs was one of the co-founders of Apple, and went on to become one of the richest men in the world. Forbes estimated his wealth at $7 billion dollars shortly after his death on October 5th of pancreatic cancer. However, his legacy will live on through proper estate planning and the trusts he established.  Jobs placed at least three properties into trusts in 2009, according to Reuters, which helped his family to minimize estate taxes and keep these assets from being publicly disclosed in probate court.

A Living Trust is an important estate planning document to consider. So, here are the 4 main benefits of a Living Trust:

1) Protection: There are certain cases when beneficiaries are simply too young or immature, to handle the financial responsibilities associated with property or money that will be passed down to them.  A living trust allows you to dictate when and how much of their share of the estate will be given to them.

2) Management: If for some reason you become seriously ill or incapacitated and can no longer manage your financial assets or property, a living trust will allow your successor trustee to take over in your place.  There is no court supervision, and the management of your financial affairs continues without interruption.  However, this can only be done as long as those assets are in the name of your trust.

3) Savings: Beneficiaries of a living trust may also be able to minimize the estate taxes due with a living trust, but there are also additional savings.  For example, you can avoid many of the legal fees associated with probating a will, and the time it takes to administer your estate can also be reduced.

4) Privacy: Probate is a public process that reveals all of the contents of your will, as well as who your beneficiaries are, and how much money or assets they will inherit.  A living trust is a private document that does not get filed with the probate court, and does not allow anyone to view it, unless the grantor or trustee gives them permission.

A living trust is a valuable component of a comprehensive estate plan.  No one has a “contact with life,” so to avoid the same financial blunders of the rich and famous, take action now to insure your wishes become a reality! 

Again, I would like to hear from you about this topic. Do you think that celebrities think they can take care of important financial matters in the future so they procrastinate like the rest of us? Or do you think they believe everything is already taken care of, as is?

Until next week, Dump Debt, Invest Wisely, Believe in Yourself and Make it Happen!

 -Matt

http://www.ChecksandBalances.TV

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http://www.twitter.com/MatthewJRettick