23) 'Tax Season, Wabbit Season, Lame Duck Season, FIRE!'

O n February 2nd, Staten Island Chuck (AKA Charles G. Hogg) didn't see his shadow, but Punxsutawney Phil did.  So is spring six weeks away?             We do know that at least four major Washington D.C. factors will affect taxes this year - after all, as Ben Franklin said, "the only things certain in life are death and taxes".             The four factors are: 1) February: Payroll Tax Cut (a version of which passed this week) 2) Spring: The Supreme Court's Ruling on the Constitutionality of Health Care Reform 3) November: The Presidential Election 4) November/December: The Renewal/Expiration of the Bush-era Tax Cuts (renewal of key portions are unlikely)             This could mean higher income taxes for some, higher capital gains taxes on investment profits for all (possibly further hindering or stalling the stock market), and a reversion to higher estate taxes upon death (reducing inheritances).             Tax planning, estate planning, and investment harvesting should be considered this year.  You don't want to be Daffy Duck arguing with Bugs while Elmer's got the gun pointed at your face.             Who's doing your tax planning, Acme Products?             Wile E. Coyote,             Super-Genius

22) 'Fails' and the ‘Lagunas Mentales'

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don’t like to be fussy in restaurants, and hassle the wait staff.  I know too many people who make dining out an uncomfortable proposition.

            When I dine, I do not want stress; that defeats the experience (I distinguish between dining and simply eating).

            It's too easy to stay at home and prepare my own healthy meals, saving money, practicing what I preach, putting my feet up, and controlling my portions, calories and content.

            Like on Seinfeld, I went to one of my Upper West Side coffee shops, just blocks from Tom's (the one in Seinfeld).  I got a new waitress whose face constantly remained expressionless in spite of my desire for friendship or compassion (during tax season I rarely get out around people).  I was particularly dismayed because I have frequented the establishment for years.

            As usual, I ordered, "water - no ice, coffee, a scrambled egg on a roll w/bacon" - simple, direct, concise; no minced words, no possibility of confusion, a list that makes a hurried, professional,  NYC Greek coffee shop, wait person's life easier.

            I wasn't substituting menu items,  customizing an omelet, asking for egg whites, or for the toast to be buttered in the kitchen while still hot; I wasn't  asking to have my food placed on my plate at a precise 37° angle from something else on the plate that it's not allowed to touch.

            The waitress proved her understanding by asking, "one egg?"

             I said, "yes"; she asked if I wanted cheese.

             I said "no cheese" with a horrified look on my face (due to the thought of the punishment my arteries were already about to undertake).

            Again, I answered  simply, directly, concisely, and now, with a visual aid.  No intercourse, no chatter.

            She immediately brought me an ice-filled glass of water, followed very soon after, by an egg on a roll with cheese.

            When I called her back, she became defensive, and tried to blame it on me!  Then, annoyingly she started to repeat, “no problem, no problem”, like a broken American record.

            At least she was fast.

However, my experience changed.

            I was taught early in life that I have two ears and one mouth, so I should listen twice as much as I talk.

            I was also trained to take notes, which she did not.

            Working with women in a service business, and having acquired decent communication skills, I have learned to listen.  I also try to 'speak for my listener'.

            And, I prefer to do things just slightly slower, and get them right the first time - it's still less time than doing it twice - and it excludes the stress.  It also offers a successful feeling of accomplishment - a job well done.

            I wonder what happens to the brain that causes these 'fails', as my young fraternity Brother/assistant from Columbia University calls them.  My Peruvian girlfriend refers to them as the 'lagunas mentales' - the mental lagoons, to which the brain escapes or falls into.

            Initially, I take pause: if humans can't correctly do something simple, can they be trusted with something difficult or important?  However, the two performances might not be judged the same way unless there is a previously identified pattern.  Performance may be based on circumstance in addition to behavior and skill.

            Nevertheless, the brain recognizes these ‘fails’, and if we're conscious of it, we're reminded that trust is best earned.  A form of disclosure.

            I did get a blog out it, and writing things down for me is a cure for getting things out of my head, where I probably spend too much time.

            For many, managing money is a scarier topic than managing breakfast; who's your Trusted Family Advisor?

21) Ho, Ho, Ho! I’m Back.

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‘m back. I’m calm and chocolate. Apologies to my loyal readers for my extended hiatus.

           It was a challenging 15 months. It was the best of times; it was the worst. Trials and tribulations abound.

           My constant companion was WQXR, New York’s revamped classical station.

           I reunited with many old friends who either went through life changes (e.g. divorce), moved back to the NYC area, or whom I visited on the Left Coast. I made new friends and connected with family. Many of us having aquatics backgrounds, I made my overdue return to swimming. I’ve been 9 months nursing injured wrists from a cab door colliding with my 10-speed.

          After 3 years, the longest beach breach of my life, I returned to the shores of Wildwood Crest, NJ, one of the most beautiful beaches in the world. I returned with my childhood friend who introduced me to the barrier island in the early 1970s. We saw our landlady of 30 years, but who could no longer remember him; I fear it broke his heart. They spent many a summer evening chatting in her kitchen. I also went with my young fraternity Brothers, who had never been there (and I pretended it was 1981).

          I experienced my first and second high school circle '2nd Thanksgiving', on the Friday after Thanksgiving, with my classmates from the High School of Music & Art (the 'Fame' school, now La Guardia); we enjoyed 24-hour jam sessions filled with wine, laughter, and song.

           I visited the Cloisters for my annual Christmas outing, a ritual initiated by my Dad when I was a kid. I then gathered with HS classmates at The New Leaf Restaurant in Fort Tryon Park to toast the season. I took my annual hike in the New York Botanical Gardens in the Bronx, to reflect upon my year - another ritual, started with a friend now on the Left Coast. I celebrated New Year's Eve with childhood, and new friends, in an Upper West Side pre-war building, and then a New Year’s Day vegan, kosher brunch in Chinatown.

          This is my New York, and life according to me, not TV’s ‘Sex and the City’.

          I faced the challenges of business, but survived. I built an excellent new team for marketing. We're overhauling our website, planning educational videos, and started an educational MeetUp group, 'Women and Money', which we will inaugurate on Valentine's Day in midtown. (Please join us: www.MeetUp.com, join for free (top right: ‘Sign Up’), then search (top right) 'Women and Money' and sign up.)

          I traveled the US researching real estate investments for clients and staying in 5-star hotels. I finally returned to the BWI (British West Indies) for my almost-annual, pre-tax season escape. I sunned, rested, exercised, and enjoyed social intercourse with an international crowd of guests. I hadn’t had a vacation in two years in spite of my attempts to adhere to Free/Focus/Buffer time. Someone died on a SCUBA dive.

          I experienced a plethora of deaths, including too many classmates. There was a blur of a half dozen in the two weeks between Western and Eastern Christmas.

         There are many changes on the horizon, even if we can't foresee them, such as this years' forecasted sun spot activity (which I'm told already created the highest ultra-violet radiation in the history of humankind, just 10 days ago). And the Mayan Calendar ends on 12/21/2012.

         The one constant in life is change, a process to which most people have an aversion, but which we must embrace. The only certainties are death and taxes (- and for me, not being able to get a date).

         And of course, the world will end on 12/21/2012 to which the silver lining is that we need not Christmas shop. I've already scheduled my 'End of the World Party' for the Saturday prior.

         Although we must live for today, while planning for tomorrow, don't forget to do both - just in case.

         But enough about me, how did you like my performance?

20) Under the Cover of Darkness

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onight began Rosh Hashanah, the beginning of the religious, ritualistic, Jewish New Year.

            The Jewish Holidays are either early or late, but never on time.

            One year, in the Peruvian Andes, I climbed Machu Picchu (‘Old Mountain’) on Rosh Hashanah (‘Head of the Year’)  The same day was the Autumn Equinox/First Day of Autumn and my birthday.  Not being allowed to further climb Huayna Picchu to confer with G-d, we didn’
t get to speak, but the day was magical just the same. 
And obviously, my name was inscribed in the Book of Life for another year.

            So with the passage of time and the balance of life that requires us to juggle body-mind and spirit, and that forces us to periodically reflect and ask forgiveness, first of ourselves, then of others and finally, of God, it time is time to move on.

            We reroll the scroll of the Bible and read it again, weekly, from cover to cover.  We set goals and set about our daily chores.  We plan, we organize, we manage.  We have work, we play; we eat, we rest.  We count our money, we count our blessings.  We watch the sun, we watch the moon.  We watch our family and friends grow.  We watch ourselves grow.

            To everything, there is a season, turn, turn, turn.

For more information, contact Eric or Andrew at AArnold@SimonsFinancialNetwork.com or (917) 267.7800.

www.SimonsFinancialNetwork.com

Medicare - Medi-coup?

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edicare Supplement (MediGap) Insurance coverage changed on June 1, 2010.

This will change Medicare Part C (Medicare Advantage) and private Medicare Supplement/MediGap policies.

Some versions of MediGap will be discontinued, new ones will appear, and the surviving plans will all change.  Our red lines in the accompanying chart, “MediGap’s Alphabet Soup”, show which plans are discontinuing.  Supposedly, everyone will get the right level of coverage, at a cost he/she can afford.

As of June 1^st, Medicare dropped policies E, H, I, & J, while adding 2 new policies (M & N):

·         Plan M comes with a 50 percent benefit for the Part A deductible.

·         Plan N comes with a $20 copayment for Part B office visits, and up to a $50 co-pay for emergency room care when not admitted to the hospital

·         Medicare added hospice coverage to all plans

·         Medicare removed preventative care & home recovery benefits from all plans

For more information, contact Eric or Andrew at AArnold@SimonsFinancialNetwork.com or (917) 267.7800.

www.SimonsFinancialNetwork.com

18) HSAs: Riskless Retirement?

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peaking of the flexibility that insurance products can offer, consider the HSA (Health Savings Account).

            A health savings account must be sponsored by a business (either your employer or yourself, if self-employed).

            It’s like an IRA for medical expenses instead of retirement.

            Your contributions are tax-deductible, and if you withdraw the funds for qualified medical expenses, the distributions come out tax-free.   Unlike a Flexible Spending Account, which is ‘use it or lose’ come year-end; an HSA’s money remains and continues to accumulate earnings.

            When HSA funds are needed, you generally have both a checkbook and a Visa/MC debit card.  The funds can be used for a wider variety of medically related expenses than heath insurance will generally cover.  This list is, basically, the same as the medical expenses that are deducted from income taxes.

            Over time, if you accumulate a lot of cash, you can invest the money in savings accounts or mutual funds.  Later (e.g. age 65), it can be used for retirement.

            Annually, if you use the funds, you stop at the point that you’ve satisfied the deductible on the sister health insurance policy (e.g. $5,000); then that health insurance kicks in.

            You must pair an HSA with a special high-deductible health insurance policy, which is available and referred to as ‘High-Deductible Health Plan’ (HDHP), versus any other kind of health insurance.

            There are limits on how much you can contribute (they change each year); and there are limits on how much of your costs and contributions can be deducted from your taxes.

            So the benefits and advantages of an HSA include:

·         You can open an HSA until April 15^th for the prior year

·         Your contributions are tax-deductible all the way until your timely tax filing date

·         You can use it on any tax-deductible medical expense

·         You can choose your own medical practitioners (no referrals/gatekeepers)

·         Your distributions are tax-free if used for qualified medical expenses (you get a tax form at the end of the year)

·         You have an ‘emergency fund’ - you can access the money for non-qualified reasons should you have an emergency (unlike health insurance) - however, you may owe taxes and penalties)

·         The funds are not "use it or lose it"

·         You can invest the money and it grows tax-free

·         You can use the unused balance for retirement at age 65

·         You incur lower insurance premiums (due to the high deductible on the HDHP)

·         You, the employee, are the owner of the account

·         The account is transferable to your spouse at divorce, separation or death

·         You can name beneficiaries

            HSAs are pretty cool.  I use one.  I’m cool.

            For a list of acceptable and unacceptable HSA expenses, go to www.SimonsFinancialNetwork.com.

            Also, please see our blog advertisers and call us to discuss their services.

17) Annuities: One Size Does NOT Fit All

 

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nnutities can be the most comprehensive and flexible financial product available; they are also one of the most sophisticated.

            Annuities are a contract between an individual and an insurance company.  They are both an insurance product and an investment. They can have insurance benefits, tax benefits, and retirement benefits.

            I’m so tired of hearing financial gurus, like Suze Orman and the Dolans’, talk smack about annuities.  Sure, they can be slightly expensive, but you get what you pay for, and sometimes they’re just what the Dr. ordered.  You just want to know how to use them, but that’s what people like me are for; a money doctor, the Trusted Family Advisor.

            There are two phases to an annuity, the Accumulation Phase (where you put money in and let it grow) and the Annuitization Phase (where, guess what, you take money out).

            When you put money in, you usually can have a choice of one or more fixed interest periods (similar to a CD rate) and/or you might have other investment choices, reminiscent of mutual funds.

            You’re not supposed to take your money out before a certain time or there could be all sorts of fees and penalties.  And in certain circumstances, it may be worth, or necessary, incurring them.  If you’re younger than 59 ½, there could be tax penalties.  (Sounds like an IRA, huh?)  If you own the annuity less than, maybe, 7-10 years, the insurance company might penalize you for early withdrawal (again similar in concept to a bank CD).

            While your money grows, it accrues earnings tax-deferred.  When the money comes out, some day, only the earnings are taxable.

            There are two major ways to withdraw.  The first is to Annuitize.  Annuitization is a steady stream of guaranteed payments.  Most people choose monthly payments, and most people choose a minimum of 10 years of payments, but then for life if they live more than 10 years.  There are all sorts of ‘Settlement Options’.  Each payment is partly your original investment, which comes back tax-free and the remainder is the taxable earnings.  This way, your taxes are stretched out over a long period of time, which is better than IRA distribution (where the entire amount is taxable.)

            Some people like this because it becomes a retirement account that they can’t outlive!  However, it’s important to note that when you annuitize, you give up all rights to your principal in return for the guaranteed income.  This is one reason why insurance company ratings are important; you don’t want them going bankrupt when they hold your retirement money or someone’s inheritance.  (NYS-licensed insurance companies tend to be the safest in the nation.)

            Now, some people want to get their money out before the end of the penalty period.  Some annuity contracts allow withdrawals of the interest and/or a small part of the contract value, which can be great for budget items or emergencies.  Some people want the entire amount, though; maybe they found a better investment.

            If the better investment is another annuity, they can usually roll the existing annuity to the new one without taxes, kind of like an IRA.  But if they’re simply surrendering and getting their original money plus the earnings, then the earnings become taxable.  And there may still be insurance company surrender fees, although there are important exceptions, such as when the annuity was used inside an IRA and the owner has to take out Required Minimum Distributions, or maybe the new annuity is with the same insurance company.

            Some annuities will have guarantees for minimum interest rates or minimum values.  Some insurance companies will put a ‘bonus’ into your annuity for signing up.

            There are three legal parties to the contract from the investor’s side of the table: the Owner (who signs and controls everything), the Annuitant (the person who’s entitled to the payments), and, the Beneficiary.  The owner and the annuitant can be the same person.

            Sometimes the beneficiary collects when the owner dies, sometimes, when the annuitant dies, so this is an important issue.  And, sometimes, there can be a Successor Owner, Annuitant, or Beneficiary, which can keep the contract going.

            Like any beneficiary designation (which functions as ‘Will Substitutes’ bypassing the Probate process, time, publicity, and fees), the beneficiary can usually collect immediately (subject to death certificates, paperwork, ID, and a choice about how to collect).

            So, the annuity can be part of your financial plan addressing death, Estate Planning, and Charitable Giving.

            Annuities can be great for education funding, because they are usually an exempt asset for Financial Aid, and their ownership can be changed to another person to help you qualify for financial aid.  They accrue tax free and they pay out with only part of the payout being taxable,  Also, should the owner wish to keep the money in the child’s name, and even their own, they can prevent control by the child who might wish to use the money on something other than education.  In fact, if the owner agrees, they can do so where other education funding accounts (e.g. Savings Bonds, 529 Plans, and Coverdell IRAs) cannot be used!  Finally, should the owner die, the money should, again, become available for education.

            Annuities can be used for planned giving.  Maybe the owner wants to keep control of the money whether it’s still accruing or if it’s in annuitization.  The corpus of whatever’s left at death can eventually go to charity or a loved one.

            So, depending on your financial planning needs, you’ll need to know the options an annuity can offer.

            In the 1970’s or 1980’s, ‘one size fits all’ pantyhose were introduced.  We see how popular they remain…  Isn’t it nice to have things that fit?

            Generally, there ain’t no absolutes.  You should call us to tailor your annuity.

www.SimonsFinancialNetwork.com