Randy Neumann Wealth Management

Passing stock options to the next generation

February 10, 2012 Stock options were once the bastion of the most highly paid executives. Today, they are given to “everyman.” Human nature, being what it is, causes people to procrastinate. “I’ll get around to it,” is a common alternative to good financial planning in today’s busy world. Well, as luck would have it, people are dying before they exercise their stock options, and these options represent a significant portion of their estate. What follows are some ideas on how to treat stock options when formulating an estate plan. To read the entire column, click here: Neumann: How to pass stock options to the next generation The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Tax law changes, and explanations, for 2012

February 3, 2012 Forewarned is forearmed. Here is some information, explanations and, hopefully, a few good ideas that you can use regarding tax law changes. Let's begin at the end - estate law changes for 2012. For those who remember, Congress made a circus of the estate tax in 2010 when the sunset provision of the law really “sunseted” for many months allowing some "lucky" people to die without paying an estate tax. Among those lucky folks (or should I say, their families) was George Steinbrenner (I loved the way my buddy Bill Gallo cartooned him with a World War I German helmet in the New York News). His family saved in the neighborhood of $500 million in estate taxes according to the AP. To read the entire column, click here: Neumann: Tax law changes, and explanations, for 2012 The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Truth Didn\'t Understand The Consequences

July 30, 1989 In the early 1980's, when I was old for a fighter and young for a referee, I met a man who made a profound change in the way I viewed boxing. Dr. Bennet Derby is a professor of Clinical Neurology and Pathology at New York University. I had the opportunity to study with him in his capacity as medical adviser to the New York State Athletic Commission when he was giving seminars on the subject of neurological assessments inside a boxing ring. These seminars were run after the death of Willie Classen, one of the regulars at Gleason's gym with whom I had sparred and who had died of injuries suffered during a fight with Wilford Scypion in 1979. Out of these seminars came what could be called the "New Dawn" of professional boxing. Prior to this New Dawn were the "Dark Ages," during which I toiled as a pugilist. In those Dark Ages we did things differently. Take, for example, the case of the lucky horizontal boxer. Assuming he had the misfortune to be flattened, but the propitious timing to have it happen near the end of a round, he could be saved by the bell. That was like having a Monopoly "Get Out of Jail" card in your trunks. You could get dragged back to your stool and be tended by the friendly folks in your corner. Knights in the Dark Ages had broad swords and bludgeons; cornermen had their own arsenal. One weapon was Monsel's paste, a ferric (iron based) compound that would stop bleeding at the neck should your head get knocked off. Notwithstanding, the stuff had two major drawbacks. Number one, if it got on your cornea you could go blind. Number two, it stopped bleeding by burning capillaries, thus forming crystals that, if not cut out with a scalpel before being sutured over, left rocks in your head. Another tool of the trade was ammonia capsules (smelling salts). After Dr.Derby delivered a tirade against the use of “bombs" (as they were known in the trade), I piped up, "Yeah, but when you come back from a tough round taking a few whiffs can really clear your head." The professor shot back, "You fool. Ammonia capsules are a painful stimulant. How would you like it if I shoved a fork up your nose?" I had to admit that I wouldn't like it. Today, we've cleaned up the act in the corners. We've changed the rule that allowed flattened fighters to be scraped off the floor at the end of a round (no more being saved by the bell) and prohibited fighters not ready for further action from being tossed into the ring at the beginning of a round (which is what happened to Classen). And, the more unsavory weapons of war have been banished. Monsel's has been replaced by compounds used in operating rooms, such as Avatine, and smelling salts are off limits because they override the body's natural mechanism to “just say no." But what about ring safety during the round? To the unschooled, the question must sound like an oxymoron in a sport where the basic intent is to render the opponent unconscious. This takes some edification. From the front of a laboratory filled with 15 boxing officials (mostly doctors) in Bellevue Hospital, Professor Derby explained that a concussion, like a faint, is a short circuit in the brain's electrical impulses and, in most cases, is merely a neurological episode that leaves no longterm harm. "If I turned the lights off and 10 seconds later turned them on, what would have happened?" he asked us. After a pregnant pause, he shouted, "Nothing!" The professor continued in a deliberate voice, "All I've done is temporarily turned off the power and turned it on again." But, if while the lights were out, Derby explained, we all started running about the room, chances are good that someone would get hurt. The same is true in boxing. If a fighter sufficiently punches and concusses his opponent so that the opponent cannot get up before the count of 10, the opponent is counted out, the episode is over, we look at him and very rarely find any damage. But when a fighter receives a concussion and you let the other guy get in there and beat on him, you could very well have a damaged fighter on your hands. We know a fighter with a concussion should not be allowed to continue, but how do we know when a fighter has been concussed enough to stop a fight? There are no short circuit indicators on his head, right? But there are, Dr. Derby revealed. _________________________________________________________________________________ The decision did not require a lot of knowledge of the soft signs of damage. _________________________________________________________________________________ “Just because these guys are on their feet and throwing punches doesn't mean that they are all right," he said. "It's so patterned in, they can do it in their sleep. You've got to look for the soft signs." Soft signs are not when a fighter's eyes roll up into the back of his head. That's such a clear sign that even a miscreant would stop a fight with that kind of indication. What is a soft sign? It could be the difference in the way a fighter reacts after getting hit; perhaps, he covered up earlier, but doesn't now. It could be in his gait or the way he throws punches. It could be anything that is different from the guy who came into the ring. The situation in which I made the decision to prevent Carl (the Truth) Williams from being further battered by Mike Tyson in their fight on July 21 did not require a lot of knowledge of the soft signs of a damaged fighter. Williams leaped into a Tysonset trap. He moved in with a jab while carrying his right hand low, leaving his chin exposed. Simultaneously, Tyson attacked with a left hook, thrown from the floor, and their combined 440pound force crashed onto Williams's chin. He went down without a "parachute reaction; " i.e., extending his arms to cushion the fall (soft sign). He got up clumsily at three, only to fall back down (soft sign). At six he was unsteadily on his feet leaning on the ropes. Cognizant of all the evidence of concussion, I asked him the simple question, "How are you?" Such a question is open ended. I was not so concerned with what he had to say but how he said it. A fighter who wants to continue should be looking to convince or at least acknowledge the referee. A good example is the response given by Jose Torres, who, after being beaten up and dropped by Eddie Cotton, said “I'm Jose Torres. I'm in Madison Square Garden and this guy is beating the hell out of me." I asked the question twice of Williams, between what would have been counts 9 and 10, and when he could not, or would not respond, he gave me a very clear sign of concussion. I stopped the fight because, at the count of 10, the juice was still off. On behalf of Randy Neumann, Carl Williams and the thousands of other boxers' lives that you have improved, thank you, Dr. Ben Derby. He went down without a "parachute reaction," i.e., extending his arms to cushion the fall (soft sign). He got up clumsily at three, only to fall back down (soft sign). At six, he was unsteady on his feet leaning on the ropes. Cognizant of all the evidence of concussion, I asked him the simple question, "How are you?" Such a question is open ended. I was not so concerned with what he had to say, but how he said it. A fighter who wants to continue should be looking to convince or at least acknowledge the referee. A good example is the response given by Jose Torres, who, after being beaten up and dropped by Eddie Cotton, said “I'm Jose Torres. I'm in Madison Square Garden and this guy is beating the hell out of me." I asked the question twice of Williams, between what would have been counts 9 and 10, and when he could not, or, would not, respond, he gave me a very clear sign of concussion. I stopped the fight because, at the count of 10, the juice was still off. On behalf of Randy Neumann, Carl Williams and the thousands of other boxers' lives that you have improved, thank you, Dr. Ben Derby. _________________________________________________________________________________ Randy Neumann is a former heavyweight contender and is a referee. _________________________________________________________________________________

\'Ali, being a living legend, is a hometown fighter wherever he fights\'

Sunday, October 10, 1976 There was some, but not many, who could truly empathize with Ken Norton in Yankee Stadium 12 days ago. I was one of the few. Others might have included Harold Johnson Jr., Billy Graham, Joey Archer and Joe Walcott. I’ve included myself in this group of fighters, not for reasons of comparison, but to show something of the nature of our sport or, more accurately, our business. The word in boxing circles is that Harold Johnson, Jr. got a one-way ticket to Las Vegas in 1963, when he was the light-heavyweight champion. He fought Willie Pastrano there. Johnson won 10 of the 15 rounds, but Pastrano got the decision and the tile. Billy Graham was taken to the Havana cleaners in 1952 when he fought Kid Gavilan and became known as the “uncrowned welterweight champion.” Joey Archer got the short end of the stick against Emile Griffith when they fought in Madison Square Garden in 1966, and many say the same thing happened to Walcott against Joe Louis in 1947. The list goes on and on because, on one hand, boxing is a sport that requires subjective judgment, and, on the other hand, it’s loaded with chicanery. I first learned of this at second hand. While training at Gleason’s Gym in the South Bronx, I heard bizarre tales from fighters who plied their trade on the road. Everything from bad decisions to unfair disqualifications to having the lights go out when the hometown boy hit the canvas. I thought little of it because I was still a “white hope” and those things don’t happen to white hopes. Only after my hopes had been dashed (I lost a fight), did I learn the facts of boxing life. I beat Chuck Wepner in December 1971 and became the heavyweight champion of New Jersey. In April 1972, against the advice of a crotchety old sports writer (“Kid, never fight a trial horse twice. You’ve got nothing to gain and everything to lose.”), I gave the Bayonne Bleeder a return match in the Jersey City Armory. I got a first-hand lesson in the business of boxing. Ten of 11 sports writers at ringside thought I won the fight comfortably. The referee, the only ring official in New Jersey, gave the fight to Wepner. I know just how Norton felt after losing the decision to Ali last week. After initial numbness that turned to disgust, I wanted to quit boxing at the age of 24. Associates said things like “Come on, kid. Don’t let it get you down; that’s boxing.” It did get me down and I realized that it was boxing, but boxing was still in my blood. I fought again, six months later. By the end of 1974, I had beaten fighters like Jimmy Young, Raoul Gorosito, Petro Agusto and Wepner. I was a journeyman fighter. I took my show on the road without a manager (who needs a 50 percent partner who never gets hit?) and was ready to take on the world. With one minute to go in the fight, I found the mark and dropped him on the seat of his pants. Four hands immediately shot into the ring with smelling salts, ice water and towels to revive the downed fighter. This was clearly against the rules, but the referee was busy tying his shoes in a neutral corner. I took the law into my own hands – or more accurately, my feet. I stormed across the ring to stomp a hand and kick a shoulder. After I had cleared the ring, the referee made a comeback and counted out my recumbent opponent. I received my Ph.D. from the school of hard knocks in Trinidad. I was fighting the local champion, Wendell Josephs, in Port of Spain, and the promoter asked me to carry the fight at least five rounds. It was difficult because Josephs couldn’t fight to keep warm. The whole thing became ridiculous, so I started to go to work on my small, weak and tired opponent. Near the end of the fifth round, the referee stepped between us. I thought he was stopping the fight on a technical knockout. He wasn’t. He was stopping it on disqualification. Guess who was disqualified? A riot ensued because I was a 3-1 betting favorite and hadn’t thrown a foul punch. Oh, well, that’s boxing. Ken, you have my commiseration. Ali, being a living legend, is a hometown fighter wherever he fights. The world is his backyard. Only he can score points by lying on the ropes, dancing around and auditioning for a position in a topless-bottomless lounge by shimmying his hips inside Everlast trunks. Beating Ali by a decision is like giving Jack Nicklaus a stroke a hole. You’re beat before you start. Randy describes himself as “an inactive fighter, like Floyd Patterson.” His seven years of professional boxing have left him with 31 victories, six losses and a sardonic perspective. He is a freelance writer and aspiring actor and is studying at the Warren Robertson Workshop.

On a Working Visit to Italy and Thoughts on Boxing

Sunday, May 25, 1986 I got the assignment to referee my first world title fight in Italy shortly after the bombing of Tripoli. The fight was between Reyes Cruz and Gary Hinton for Aaron Pryor's abdicated International Boxing Federation title. Friends and others warned of the dangers of the trip. People will always tell you what you can't do. They used to advise me of the ills of my profession, when I was a young boxer. The plane carrying the officials left New York at 8:30pm. on a Wednesday bound for another place and another time. The airport to Milan was scary. Shrouded in a morning mist, it was virtually empty except for stern faced soldiers with small machine guns and big dogs. The "we" consisted of judges Gene Grant, Frank Cairo, Phil Newman and Bob Lee, the I.F.B. president. Sleepily, I pictured German and Italian troops trekking the rugged countryside as the small bus followed a winding river. Four and a half hours later, we arrived at our hotel in Lucca, Italy. Thursday night was the first dinner feting the American officials at one of the city's unpretentious (the only kind they have) four star restaurants. After a superb meal, we were given a walking tour of the city with some of the local dignitaries (we were considered foreign dignitaries). The streets we walked were built by the Romans and the cathedrals we gaped at were I00 years old. In the middle of the city's central square, one of our escorts is admonished, “In America you build something that lasts 40 years, then you build another. Over here we build things to last!” The nature of the trip and the feelings of the evening caused one member of our party to observe, "Being here it seems strange that a country with a 200 year history is talking about banning a sport that predates Lucca's roadbuilders." At the Friday afternoon rules meeting, we had a discussion of the rules governing the bout with the opposing camps. It has always struck me as odd that fighters seldom attend these sessions. I guess it shouldn't as they are rarely consulted by the associations and legislatures who rule their lives. These confabs can be quite lively as some seconds see them as an opportunity to practice pre-fight one upmanship. This one was calm until Marvin Gordon, Hinton's trainer, stood up and, with a thundering voice, said to me, "I have been watching tapes of Cruz and he likes to come and grab the head after a flurry of punches. What are you going to do about that?" I responded, "I will enforce the rule against pulling down on an opponent's head just as I will enforce all of the other rules we have discovered here today." Establishing control of a fight can begin long before the opening bell. Gary Hinton, from Philadelphia, is a slick, stand-up boxer. Reyes Cruz of the Dominican Republic is a strong walk-in southpaw and a pretty good puncher. What was this fight doing in Italy? That has to do with the business of boxing, which is spelled t-e-l-e-v-i-s-i-on. American promoter, RusseI Peltz, had signed the fighters for purses of $30,000 and $20,000. Since you draw that kind of money with a live gate these days, you must peddle your wares electronically. In America, the people at the tube are more interested in putting on a "name" than they are in putting on good fights. Since neither Hinton nor Cruz are yet household commodities, Peltz could not make a sale stateside, so he called Italy. The Italians were only too glad to broadcast the fight. The fighters marched to the ring through an army of pompon girls while the public announce system reverberated the rafters with disco music. As the gloves were put on, the tension mounted. The crowd hankered for a real fight. The first round was a get acquainted session without much action. The fans responded with whistles and stamping of feet. The next 14 rounds were studies in just what a marvelous physical and mental chess game boxing could be. When two highly skilled, well conditioned fighters go at it hard (and get out of it themselves), the referee has the best seat in the house. His main function is to stay out of the way. That's how it was through the middle rounds. The punching was crisp, the movement fluid, and the pace torrid. The fans went crazy, as they had not before seen this caliber of fight in their Palazzetto Dello Sport. As I flew around the ring (fighters who weigh 140 pounds move quickly), I was glad a referee no longer scored fights. I was concerned with the well-being of the fighters and enforcing the rules rather than worrying about who was ahead. In the middle rounds, I had to become more involved. When fighters tire, they clinch to rest. A referee must move and motivate them to either punch while inside or get out. Also, as Hinton's trainer observed at the rules meeting, Cruz began grabbing his opponent's head after a flurry of punches. When I was a fighter, I prayed for opponents to grab my head. It left one less hand for punching and some wonderfully exposed ribs. I gave Cruz a few warnings, but I believe Hinton’s hard shots to the ribs had more to do with Cruz abandoning that tactic. After the 10th round, fatigue took its effect. Both fighters laid in the clinches a little longer and looked for "hidden" opportunities, like wrestling for position in a clinch, hitting at the break or hitting after the bell. In order to maintain control, you must be proactive, not reactive. You must he aware of something, like a late punch, before it happens. With a little direction from the referee, the fight was completed without mishap. At the end of a very close, truly outstanding fight, I had the pleasure of raising the hand of the champion. The day after the fight was wind down time, spent shopping, sight-seeing and discussing the fight. I didn't feel the excitement of victory or the frustration and deep disappointment of defeat that I felt as a boxer in a big fight, but I did feel a real sense of accomplished having been the third man. A great fight is like great drama. Powerful forces are pitted against each other, but in boxing, there's no script. Not knowing the outcome adds excitement. After the fight, knowing the outcome adds relief. That's why fighters eagerly embrace after a fight. The bus ride back to the airport was a lot better than the ride from It. The bus was big, not small. We were well rested, not exhausted. And we had lots of company--the fighters' camp replete with trainers, managers, wives and sparring partners. The officials were last to board and sat up front. The Hinton faction was in the middle and the Cruz group in the rear. There was little chatter during the first hour as it was very early and everybody was still half asleep. But as the sun rose and the bus rolled along the winding road, things loosened up. By the halfway mark, both camps were freely mingling.To a non-boxing person, it might appear odd that two groups of people who had faced each other in a heated battle 30 hours before were now acting like old friends. To a boxing person, it's not odd. The thinking is something like: "We were at the top of our game before the fight. We shared something special during the fight. We made a few bucks. We're still at the top. Life is good."

Randy Neumann Wealth Management has moved their offices from Paramus to Upper Saddle River, N.J.

Contact: Randy Neumann, CFP® 201-291-9000 randy@randyneumann.com Randy Neumann Wealth Management has moved their offices from Paramus to Upper Saddle River, N.J. Upper Saddle River, N.J., January 27, 2012 - Randy Neumann, CFP® is pleased to announce that they have moved their offices from Paramus to Upper Saddle River, N.J. Our new address is: 600 East Crescent Avenue, Suite 104 Upper Saddle River, N.J. 07458 201-291-9000 Randy Neumann Wealth Management is a financial planning firm located in Bergen County with over 50 years of collective experience. Randy Neumann Wealth Management is committed to help you plan for your financial security. They pride themselves in providing personal service to clients. Some of the services offered by the firm include: Cash Flow Planning, Investment & Retirement Planning, Risk Management, and Tax & Estate Planning. About Financial Randy Neumann, CFP®, President, Financial Planner “I help my clients achieve their goals and dreams. My goal is to simplify their complex financial situation, and concentrate on understanding, assessing and addressing their needs. I help my clients manage risk, plan for the future and retire comfortably. I believe that my clients expect and deserve the personal attention of a qualified advisor. In this world of voice mail, mergers of financial institutions and financial media bombardment, I pride myself in providing personal service. I communicate with my clients on a regular basis, weekly in a market commentary and quarterly in performance reports, newsletters and phone calls. I conduct annual meetings to carry out a comprehensive financial and investment review to ensure that my client’s needs are being met,” said Randy Neumann. Call them for a complimentary consultation, 201-291-9000, or visit their website: http://www.randyneumann.com to learn more about us. Securities offered exclusively through LPL Financial, LLC, Member FINRA/SIPC Financial Planning offered through Randy Neumann & Assoc., Inc., a Registered Investment Advisor and separate entity from LPL Financial. To download a copy of this press release, please click here

Part two on beneficiary designations

January 20, 2012 Last week's column was about beneficiaries on a life insurance policy. This column is about other types of beneficiaries. Let's begin with "qualified" retirement plans. Qualified means that the plan meets the government standards; therefore, it receives (in most cases) a deduction on the contributions and a deferral of earnings until withdrawals are taken. Most of these plans begin with the letter P—pension plans, profit-sharing plans, etc. or with the number 4—401(k), 403 (b), etc. To read the entire column, click here: Neumann: Part two on beneficiary designations The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The importance of proper beneficiary designations

January 13, 2012 You want to protect your loved ones and your loved ones want to protect you. One of the ways we protect one another is through beneficiary designations. We can designate beneficiaries in life insurance policies, annuities, IRAs and company retirement plans, to name a few. Beneficiary designations require correctness when they are set up and, like many other elements of a financial plan, they require periodic reviews. This column will give you some ideas on how to establish beneficiary designations for you and yours. To read the entire column, click here: Neumann: The importance of beneficiary designations The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The necessity of strategy

January 6, 2012 No matter what investors do with their money, there are risks involved that can derail their financial goals. If they invest, they can suffer losses. If they don't, inflation can erode the value of their savings. For investors to reach their goals, all of these risks need to be anticipated and managed through a solid financial plan. Building such a plan - one that can endure over the years - doesn't happen by accident. Investors need a solid understanding of every investment in their portfolio, and the risks they carry. They need a strategy that prepares them for a variety of economic environments. To read the entire column, click here: Neumann: Rethinking risk - NorthJersey.com www.northjersey.com The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

A leveraged plan can create rosy future

December 30, 2011 How would you like to receive the same income at retirement that you had when you were working? You can do it. And, the younger you are, the easier it is. You can do it the hard way, by taking after-tax money and putting it in the bank, or you can do it the easier way, by investing pre-tax money into the markets using dollar cost averaging. The hard way is as follows. To read the entire column, click here: Neumann: Some other ways to give during the Holiday Season The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Fighting For Your Financial Future Round 2

Contact: Randy Neumann, CFP® 201-291-9000 randy@randyneumann.com Fighting For Your Financial Future, Round 2 New Book Shares Tips on How to Win the Fight of Your Life – Your Financial Life Paramus,—N.J.—September 30, 2011—A former top ten heavyweight boxer is now a Certified Financial PlannerTM and syndicated financial columnist. Help secure your future through the useful financial planning tips in the book Fighting For Your Financial Future, Round 2 by author Randy Neumann, CFP®. Fighting For Your Financial Future, Round 2 tells you how to get in shape for the fight of your life--your financial life. It provides personal financial planning for anyone who needs to know more about their financial well-being. This book also offers insights on the importance of cash flow, investments, insurance, tax and estate planning, and more. This is truly a compelling read; you won’t even realize you’re getting financial advice. It will motivate readers and enable them to manage their financial life and prepare for retirement in a complex world. Grab a copy now and start planning your financial future! Randy Neumann, a graduate of Fairleigh Dickinson University, achieved a world ranking and came within one bout (a loss to top-ranked challenger Chuck Wepner) of a title fight against Muhammad Ali in the 1970s. After retiring from boxing, Randy worked as a commercial banker and became a financial planner in 1979. He earned the Certified Financial PlannerTM practitioner designation in 1983 and was admitted to the Registry of Financial Planning Practitioners in 1984. The author was an instructor for the National Institute of Finance, where he prepared candidates for the CFP® designation. His personal finance columns, Financial Fitness and Money Matters have run in The Bergen Record and The Ridgewood News, respectively, along with other regional and local newspapers. He has written articles for Forbes, The New York Times, Harper’s, New Jersey Lawyer, Microsoft Moneyinsider and other publications. Randy is a frequent seminar speaker, and has appeared on many local and network television programs. He has talked about financial planning on MSNBC’s Moneyline, and was a guest on the Fox Business Network program Money for Breakfast, where he discussed “Five Tips to Knockout Debt.” He has developed and written extensively on his firm’s sophisticated asset allocation system for managing clients’ investments, which is based on the Nobel Prize winning Modern Portfolio Theory. In 2011, Randy was named to Ten Leaders of Management of Northern New Jersey, and was selected as a 2011 FIVE STAR Wealth Manager. The author continues to be involved in boxing; he set up a worldwide pension plan for professional boxers through the International Boxing Federation, and he referees local fights in New Jersey as well as championship fights around the world. The book can be purchased in any major bookstore, or online at Amazon, Barnes & Noble or Xlibris. For more information, contact Xlibris at (888) 795-4274, or on the web at www.Xlibris.com. To download a copy of this press release, please click here

Randy Neumann Attends LPL 2011 National Conference

Contact: Randy Neumann, CFP® 201-291-9000 randy@randyneumann.com RANDY NEUMANN ATTENDS LPL FINANCIAL 2011 NATIONAL CONFERENCE, A LEADING FINANCIAL SERVICES EVENT FOCUSED ON INCREASING VALUE TO INVESTORS Paramus,—N.J.—August 26, 2011—Randy Neumann, CFP®—recently attended focus11, a leading financial services industry conference hosted by LPL Financial, the nation’s number one independent broker-dealer.* Held in Chicago, August 7–10, focus11 was one of the industry’s largest gatherings of independent financial advisors, and remains the industry’s premier sales and education event. Approximately 5,000 attendees from around the country assembled for the opportunity to learn new strategies and skills, expand knowledge in numerous product areas and network with peers and industry experts. They also heard from influential speakers who addressed current events and financial industry trends. The speakers included Condoleezza Rice, 66th United States Secretary of State; Michael Eisner, former CEO of The Walt Disney Company; and Sir Ken Robinson, author of Out of Our Minds. Additionally, through the hundreds of business sessions, technology training sessions and continuing education classes at this event, LPL Financial advisors gained valuable knowledge to help them continually improve the service they offer to clients and operate their independent practices more efficiently. Bill Dwyer, president of National Sales and Marketing for LPL Financial, noted that the conference’s theme, A Focus on the Future, speaks to the current economic outlook and its opportunities and challenges for advisors and their clients: “Our enduring mission at LPL Financial is to support our independent advisors as they help their clients reach their life goals. We believe our ability to enable the delivery of objective and conflict-free advice through trusted local advisors is critical in this ongoing effort.” Unlike many brokerage firms, LPL Financial does not develop its own proprietary investment products, so the unbiased advice given by its advisors is based solely on individual client needs. About LPL Financial LPL Financial, a wholly owned subsidiary of LPL Investment Holdings Inc., is an independent broker-dealer. LPL Financial and its affiliates offer proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 12,600 financial advisors and approximately 750 financial institutions. Additionally, LPL Financial supports over 4,000 financial advisors who are affiliated and licensed with insurance companies with customized clearing, advisory platforms and technology solutions. LPL Financial and its affiliates have approximately 2,700 employees with employees and offices in Boston, Charlotte, and San Diego. For more information, please visit www.lpl.com. Member FINRA/SIPC *Based on total revenues, Financial Planning magazine, June 1996-2011 To download a copy of this press release, please click here.

Randy Neumann Recognized as a Top Financial Advisor By LPL Financial

Contact: Randy Neumann, CFP® 201-291-9000 randy@randyneumann.com Randy Neumann Recognized as a Top Financial Advisor By LPL Financial Paramus, NJ—February 16, 2011—Randy Neumann, CFP®, an independent financial advisor at Randy Neumann & Associates, Inc., in Paramus, NJ today announced that he was recognized as a top financial advisor and named to the LPL Financial Chairman’s Club. This distinction is based on a ranking of all registered advisors supported by LPL Financial LLC (“LPL Financial”), the nation’s largest independent broker-dealer*, and is awarded to less than six percent of the firm’s more than 12,000 advisors nationwide. “We congratulate Randy Neumann for achieving this prestigious recognition, which is based on how successful advisors are in growing their businesses by delivering services and solutions to their clients,” said Bill Dwyer, President of National Sales and Marketing for LPL Financial. “We believe members of the Chairman’s Club are among the premier financial advisors in our industry. They serve as trusted resources and counselors for their clients and their communities.” Randy Neumann is affiliated with LPL Financial and provides access to independent financial planning services, investment advice and asset management services. About LPL Financial LPL Financial is one of the nation’s leading financial services companies and largest independent broker-dealer (based on total revenues as reported in Financial Planning magazine, June 1996-2010). Headquartered in Boston, Charlotte, and San Diego, LPL Financial and its affiliates offer industry-leading support to more than 12,000 financial advisors and over 750 financial institutions who, in turn, provide independent financial advice to millions of Americans. * Based on total revenues, Financial Planning magazine, June 1996-2010 Member FINRA/SIPC To download a copy of this press release, please clik here

Recently Awarded FIVE STAR Wealth Manager offers Retirement Advice

Contact: Randy Neumann, CFP® 201-291-9000 randy@randyneumann.com Recently Awarded FIVE STAR Wealth Managersm offers Retirement Advice Randy Neumann, CFP®, an independent financial advisor at Randy Neumann & Associates, Inc. in Paramus, NJ has been selected as a 2011 FIVE STAR Wealth Manager by New Jersey Monthly. The magazine formed a partnership with Crescendo Business Services to find out which wealth managers scored highest in overall satisfaction. The list of 2011 FIVE STAR Wealth Managers is an elite group representing less than 2 percent of the wealth managers in the New Jersey area. He is one of only 100 out of 38,000 wealth managers in New Jersey to receive the award. “I am privileged to have been selected for this prestigious honor,” said Randy Neumann. “It is our goal to give personalized service to each and every client.” The FIVE STAR Wealth Manager is an award based on client satisfaction. Respondents evaluate criteria such as service, expertise, value for fee charged and overall satisfaction. The overall evaluation score is based on an average of all respondents and may not be representative of any one client’s evaluation. To view the reprint, as seen in the January 2011 issue of New Jersey Monthly, click here. Conveniently located in Bergen County, New Jersey, Randy Neumann & Associates offers many financial services for businesses and individuals to meet both long and short term goals. A specialty of Neumann and his team of advisors is retirement planning. “In today’s volatile economic environment,” said Neumann. “There are hidden threats that can devastate your retirement years.” With diverse experience in all aspects of the financial marketplace, Neumann helps his clients pursue their goals and dreams through education and personal service. Neumann’s advice for a successful retirement includes strategic planning as well as understanding and evaluating risks. From leisure activities to health related choices, Neumann can assist a client in developing a plan designed to achieve the type of lifestyle a client wishes to enjoy during retirement. Neumann is a proponent of client education and therefore would discuss the risks associated with various investment choices. These are the fundamentals upon which a financial plan is established. To learn more about the steps you can take to avoid the Five Hidden Threats that Can Devastate Your Retirement and take charge of your financial future, visit the firm’s website at www.randyneumann.com or call 201-291-900 and request the full report. About Randy Neumann and Associates, Inc. Randy Neumann & Associates, Inc., an LPL Investment Advisor Representative, is a financial planning firm located in Bergen County with over 50 years of collective experience. With each client, we listen closely to understand their needs, then create and propose personalized solutions that address specific financial goals. Together we select and implement appropriate solutions and meet regularly to review our progress and make adjustments accordingly. We do not look for the “hot product” or the latest ”one-size fits all” investment strategy. Rather, we tailor our solutions to your specific goals. By focusing on your goals, we increase the likelihood of helping you achieve your financial dreams. For more information call (201) 291-9000 or visit www.randyneumann.com. About LPL Financial LPL Financial is one of the nation’s leading financial services companies and largest independent broker/dealer (based on total revenues as reported in Financial Planning magazine, June 1996-2010). Headquartered in Boston, Charlotte, and San Diego, LPL Financial and its affiliates offer industry-leading support to more than 12,000 financial advisors and over 750 financial institutions who, in turn, provide independent financial advice to millions of Americans. ### To download a copy of this press release, please click here

Ways to give for the holidays

December 23, 2011 The holiday season is the season of giving, and it's a wonderful time of the year. This column provides some additional ideas for giving. Ho ho ho! Let’s say that one grandchild spent a lot of time with you at your vacation home, so you wish to guarantee that the home passes to that grandchild at your death. Or perhaps you want to avoid probate, so you pass your brokerage account at the ABC Company to your son or daughter. In both cases, a common choice is the use of joint ownership of property to pass assets to a loved one. To read the entire column, click here: Neumann: Some other ways to give during the Holiday Season The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Some things never change

December 16, 2011 Thomas A. Edison once said: "Be courageous. I have seen many depressions in business. Always America has emerged from these stronger and more prosperous. Be brave as your fathers before you. Have faith! Go forward!" Nowadays, it seems the world is going to come to an end more often than predicted in the past. Last August, during the debt crisis debate in Congress, Armageddon was around the corner. Of course, the problem was not really fixed; instead, Congress merely kicked the can down the road with the "super committee" that was supposed to "fix everything." Since that didn't happen, there may be an apocalypse awaiting. To read the entire column, click here: Neumann: Some things never change The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Why is cash so critical?

December 9, 2011 When you walk into a doctor's office, one of the first things they do is measure your blood pressure and heart rate to check the circulatory system in your body. Similarly, in financial planning, one of the first things you should do is measure your cash flow. Cash flow is used to calculate, among other things, survivor needs, income taxes, and the all-important nest egg calculation. What is a nest egg calculation? It is a calculation used to determine whether or not you can live comfortably in retirement, or if should you develop a taste for Alpo. So, let's start with, “What is cash flow?” To read the entire column, click here: • Column: Why is cash flow critical? The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Another view of insider trading

December 2, 2011 I'm feeling clairvoyant! There is a big brouhaha about Congress people and their minions being able to profit (without punishment) from insider trading while others go to jail. The television show, “60 Minutes” had a story about how House Minority Leader, Nancy Pelosi's husband, Paul Pelosi, profited from trading shares of credit card company Visafollowing legislation. Former highflying lobbyist, Jack Abramoff, spoke of it on CNBC, and several other media sources had stories about this heinous activity. Interestingly, last year, on November 19, 2010, I wrote the following in my column. To read the entire column, click here: • Neumann: Another view of insider trading The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Some year-end tax planning

November 18, 2011 In a market like we’ve been in for the last several years, it’s not hard to find losers. Assuming that you have them, you can sell enough dogs to wipe out all your realized capital gains for the year, plus another $3,000 ($1,500 for married filing separately) in regular income. However, be careful to avoid a wash sale – buying the same security within 30 days before or after you sell shares, otherwise the tax rules disallow the loss. If you have realized losses over $3,000, consider selling enough winners to get back to that magic number. Taking the gains will add zero to your tax bill (however, remember the earlier advice and sell only shares that you can kiss goodbye without regret). To read the entire column, click here: Neumann: Some year-end tax planning ideas The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Social Security gets adjusted

November 11, 2011 Over the many years that I have been presenting retirement seminars at Bergen Community College and the Ridgewood Public Library, I have learned that most people cannot get enough of Social Security information. Therefore, I always make sure I have a Social Security expert on hand. Last month was no exception. We had a large turnout at the Ridgewood Library and our guest speaker was from BlackRock, the largest investment company in the world that sponsors a cadre of SS specialists who make presentations to the public. During his presentation, he mentioned that there would be an important update regarding Social Security. Here it is: In an October press release, the Social Security Administration announced the first Cost-of-Living Adjustment since 2009. To read the entire column, click here: Neumann: Social Security increases announced The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Keep Punching Newsletter September 2011

Role Reversal: When Adult Children Should Talk To Parents About Money Regardless of whether you and your parents have always talked freely about money or you have never discussed the subject, there may be important financial issues that you need to raise with them as they — and you — grow older. The following topics can help you start thinking about, and planning for, that conversation. Getting Started When you decide the time is right to discuss financial needs and priorities with your parents, be clear about your intentions, but also let them know that you are not trying to pry and that you respect their privacy. An initial conversation should be done one-on-one. Involving too many people can be overwhelming and appear threatening. If you would prefer not to take the lead and have siblings, select one — perhaps the oldest, most financially knowledgeable or one with whom your parents may feel most comfortable. Remember throughout the process to be sensitive to your parents’ feelings. To some extent, our financial lives influence how we view ourselves as independent human beings. For many, old age is a time of coping with a series of physical and emotional losses: hearing, eyesight, mobility, memory, as well as friendships. With any discussion of money, be sensitive to the fears and concerns your parents may harbor about their possible loss of control or independence. Household Finances Maybe you have already spoken with your parents about their handling of regular household finances, but haven’t brought the subject up in a while. If you think that they might appreciate your concern, then it may be a good idea to check in again. Determine whether they are staying on top of their household finances. Are bills getting paid on time? Are investments being monitored? Also, ask about their use of banking technologies, such as automatic teller machines, direct deposit and automatic bill paying. For instance, more than 80% of Social Security recipients use direct deposit for their benefits checks. Conveniences such as this can simplify money management for older individuals and provide a sense of security and control over day-to-day financial affairs. Estate Planning Estate planning is the key to making sure that everything you have worked for in life is passed on according to your wishes. An estate plan can be as simple as maintaining an up-to-date will, or it can be expanded to include other planning mechanisms such as trusts for passing assets to children and managing taxes. Estate plans may also include other legal arrangements, such as a power of attorney and health care proxy. A power of attorney is a legal document that designates an individual to make financial or legal decisions on behalf of another individual. A health care proxy is a legal document in which an individual designates another person to make health care decisions if he or she is rendered incapable of making their wishes known. The health care proxy has, in essence, the same rights to request or refuse treatment that the individual would have if capable of making and communicating decisions. Together, these documents can be very important should a parent become ill or incapacitated. Health Care Resources One of the biggest worries of elder Americans and their adult children is paying for the cost of long-term care, should it be needed. If your parents are healthy seniors who can look after themselves, they generally are eligible to enter a continuing-care retirement community that allows them to buy or rent an apartment and ensures them lifetime nursing care when it is necessary. Another option for healthy seniors is private long-term care insurance, which can help cover nursing-home costs or the cost of an in-home aide. Should you or your parents consider buying a long-term care insurance policy? According to current data, the average annual cost of nursing home care is now nearly $75,000 — well in excess of the average household income.* Also, keep in mind that the government provides limited financial assistance for families paying for nursing home care. Medicare will only pay for care on a short-term basis, and Medicaid is reserved for low-income individuals with limited assets. For that reason, long-term care insurance may be a prudent addition to your parents’ — or your own — financial plan. A Gradual Process Working out a financial plan for your parents’ elder years should be a gradual process that unfolds over time. Don’t wait until a crisis develops to start the dialogue or try to resolve all details in one meeting. Raise questions that your parents can consider for a follow-up conversation. After several informal conversations, you may want to consider the help of a financial professional. For Your Information There are many organizations that provide valuable information and referrals. In addition to the resources listed below, check your local library or senior services agency for other online support services, publications and resources. The National Council on Aging (www.ncoa.org) A nonprofit organization that helps older people remain healthy and independent, find jobs, increase access to benefits programs and discover meaningful ways to continue contributing to society. AARP (www.aarp.org) A nonprofit organization focused on enhancing the quality of life for Americans over the age of 50. The AARP offers a multitude of products and services to address health care, travel and leisure and financial issues for its 38+ million members. Administration on Aging (www.aoa.gov) An advocate agency of the federal government, the AOA offers a variety of print and online materials for elders, their families and professionals regarding housing, medical, caregiving and services for seniors. ElderWeb (www.elderweb.com) A rich collection of online resources for the elderly and their caregivers on financial matters, health care, living arrangements and social, mental and legal issues. *AARP Bulletin, March 16, 2007 Client Corner Ridgewood’s Yearing wins 400th On 9/12, the Maroons girls’ soccer team defeated Teaneck 8-1 making this win No. 400 for Ridgewood coach Jeff Yearing. Jeff reached a milestone in his career with 400 wins in his 25th season. He was quoted in the Record as saying, “The thing I am proudest about is that since 1987 we’ve never cut a girl from playing soccer at Ridgewood. If someone wants the opportunity to play, we want to give them that opportunity. We’ve always found a way to involve them.” Congratulations to Jeff! We wish him and his team continued success. Special Points of interest: · Oct. 15 is the final date to file a 2010 tax return · Fund your IRA, sooner, rather than later—let your money work for you! · Are you age 70? If so, call us for age 70 1/2 tax planning · IRA Required Minimum Distributions (RMDs) must be made by Dec. 31st for those who are 70 1/2 or older From the desk of Randy Neumann… I am pleased to announce the publication of my new book. Fighting For Your Financial Future Round 2 tells you how to get in shape for the fight of your life—your financial life. Click on the following link to read more about Randy and his new book: Fighting For Your Financial Future Round 2
Keep Punching is a quarterly newsletter for our clients. Click on the links below to read the news articles included in the Sept. 2011 issue: Neumann: Finding a good tax shelter The Ridgewood News Neumann: Why you want to be tax efficent in retirement The Ridgewood News Neumann: Imagine a fair tax The Ridgewood News If you would like to receive our newsletter and weekly market commentary via email, please call our office at 201-291-9000 or email your email address to karen@randyneumann.com.

What\'s going on in health care?

October 28, 2011 "We have to pass this bill so that you can find out what's in it, away from the fog of the controversy," Nancy Pelosi, Speaker of the House on March 09, 2010. The highly controversial bill passed Congress on March 22, 2010. The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. So, where are we, now that some of the fog has cleared? To read the entire column, click here: • Neumann: What's going on with health care these days? The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Harvesting your portfolio

October 14, 2011 Because of the turmoil in the markets these days, it's a good thing that there is some leeway in planning for Required Minimum Distributions. Let me explain. RMDs are a way for the government to collect taxes. The first Individual Retirement Account (IRA) was created by the ERISA legislation in 1974. Back then, you could put a maximum of $1,500 into your IRA. Over time, Congress has increased the contribution limits to qualified plans to the current levels: $16,500 for a 401(k), plus a catch-up of $5,500 if you're over age 50. Ditto for a Roth IRA and $5,000 for a Traditional IRA, plus a $1,000 catch-up if you're over 50. However, individual Roths still have ceilings. You cannot contribute if you make over $122,000 as a single or head of household, and$179,000 based on a joint return. Additionally, you are allowed to rollover from one qualified plan to another. To read the entire column, click here: • Neumann: It's that time of year again, time for your RMD planning The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Be tax efficient in retirement

October 7, 2011 Qualified retirement plans are great vehicles for saving money for retirement. You get an income tax deduction when you make the contribution. You get tax deferral on earnings in the account until you make withdrawals, but when you take money out of a retirement plan, you pay tax on every nickel (unless it’s a Roth IRA). However, as Meatloaf lamented, “Two out of three ain’t bad.” Okay, everything that comes out of a retirement plan is taxable. What’s so bad about that? Nothing, if you are in a low tax bracket. But what are the chances of that? Not good, if you hear what is coming out of Washington. To read the entire column, click here: http://www.northjersey.com/community/seniors/neumann/131309779_Be_tax_efficient_in_retirement.html The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Fair taxes: It isn\'t hard to do

September 9, 2011 "Imagine there's no Heaven. It's easy if you try. No hell below us. Above us only sky. Imagine all the people. Living for today." John Lennon, "Imagine" Let's imagine a tax system that allows workers to keep their entire paychecks and retirees to keep their entire pensions. A system that gives tax refunds in advance on purchases of basic necessities, allows American products to compete fairly, and brings transparency and accountability to tax policy. One that insures Social Security and Medicare funding, closes all loopholes and brings fairness to taxation, and abolishes the IRS. To read the entire article, click here: http://www.northjersey.com/community/seniors/neumann/129509838_Fair_taxes__It_isn_t_hard_to_do.html The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Seizing the silver lining

August 26, 2011 Oh boy, the media is in a frenzy regarding the economic situation, and with good reason. The gang in Washington recently increased the debt ceiling and decreased spending which won them a downgrade. According to the Wall Street Journal (WSJ), August 6, 2011, "S&P removed, for the first time, the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn't do enough to address the gloomy outlook for America's finances. It downgraded long-term U.S. debt to AA+, a score that ranks below more than a dozen governments', including Liechtenstein's, and on par with Belgium's and New Zealand's. S&P also put the new grade on 'negative outlook,' meaning the U.S. has little chance of regaining the top rating in the near term." To read the entire article, click here: http://www.northjersey.com/community/seniors/neumann/128446238_Seizing_the_silver_lining.html The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Finding a good tax shelter

August 19, 2011 My most recent column was about someone still working after having reached his "full retirement age." Full retirement age, in Social Security speak, is that time in your life when you are eligible to collect your “full retirement benefit” without any offsets while maintaining a full-time job. For those born between 1943 and 1954, the full retirement age is 66. So, although up to 85 percent of his Social Security benefit can be taxed, he avoided the tax by contributing his entire Social Security benefit into his company's 401(k). The icing on the cake was the 3 percent match made by his employer that also went into the plan and was not taxable to him. Needless to say, he was a happy camper. To read the entire article, click here: http://www.northjersey.com/community/seniors/neumann/128055518_Finding_a_good_tax_shelter.html The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Robbing Peter to pay Paul

July 29, 2011 Recently, I received a mailing I assumed was a check from the state of New Jersey. I receive checks from the New Jersey State Treasury when I referee fights here in the Garden State, but I hadn't worked in a while, so I wasn't expecting one. After opening the parcel, I discovered that it was not a check; it was a bill from the New Jersey Department of Labor and Workforce Development Division of Employer Accounts. Wow! The table that was below the following statements told me how much, as an employer, I owe the state. To read the entire article, click here:• Neumann: Robbing Peter to pay Paul The Ridgewood News. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

A great idea for retirement savings

July 22, 2011 Recently, a client came in to discuss a retirement idea. Someone told him that, although he is still working, he is eligible to collect his Social Security retirement benefits. He said, "I've been making money for my employers all of my life, now I'd like to do something for myself." First a little background. Today, this situation is not unusual. Economic conditions have caused many baby boomers (the first wave turned 65 this year) to change their retirement strategies. Some are delaying retirement. Others are planning to work after retirement, or interrupting their retirement to take a job or start a business. For many, the question becomes whether they can work and still collect Social Security, and what happens if they do. To read the entire column, click here: Column: A great idea for retirement savings The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Auto enrolling in retirement plans

July 8, 2011 Defined benefit pension plans, those fully paid for by an employer, went out with" your father's Oldsmobile." Today's defined contribution pension plans, mostly paid for by employees, are the new normal. The Pension Protection Act (PPA) passed by Congress in 2006 enabled employers to automatically enroll employees into their 401(k) plans. To take it a step further, chances are good that you will be automatically enrolled in your company's plan. To read the entire column, click here: • Neumann: Automatic enrollment in 401(k)s The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Finding some tax breaks

July 1, 2011 U.S. Representative Rob Portman (R-OH) recently said, “The income tax code and its associated regulations contain almost 5.6 million words – seven times as many words as the Bible. Taxpayers now spend about 5.4 billion hours a year trying to comply with 9,000-plus pages of tax laws.” Yes, the Internal Revenue Code is voluminous, but it is not all bad. In fact, some of it is good for the taxpayer; you just have to know where to look. To read the entire column, click here: • Neumann: Finding some tax breaks The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Millionaires, billionaires beware

June 24, 2011 The rhetoric coming from Washington these days about "millionaires and billionaires" is not just rhetoric. How do I know this? As the baseball sage Casey Stengel said, "You could look it up!" The IRS 2010 Data Book, released in March, provides a lot of interesting information. For the year beginning October 1, 2009 and ending September 30, 2010, the IRS processed 230 million tax returns. They provided $467 billion in refunds and collected $2.3 trillion for the federal government. They assisted more than 78 million taxpayers through telephone help lines or at walk-in sites. The publication also mentions, "The IRS pursued its international agenda to ensure that taxpayers cannot walk away from their responsibilities by hiding money in offshore accounts. Over the past few years, our voluntary disclosure program and enforcement efforts have brought thousands of taxpayers back into the system, and those numbers are growing." To read the entire column, click here: •Column: Millionaires, billionaires and business owners beware The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

A fight in East Germany

June 10, 2011 In early May, I was reading the Wall Street Journal while on a flight to Berlin for a business trip to Germany. The story in the Journal was about the upcoming mega-fight between Manny Pacquiao and Shane Mosley. It was written by a college professor, Gordon Marino, whom I boxed in the 1960s. My business in Germany was also related to boxing. I was there to referee a world championship fight between International Boxing Federation Champion Sebastian the "Hurricane" Sylvester and challenger, Daniel "Real Deal" Geale (rhymes with deal). My readers know that I have been in the financial services industry for some time: I started in 1979 as a banker. However, I got into the business of boxing in 1967 when I was a college freshman in New York City. I went to the West Side YMCA to stay in shape and began what became a 10-year career during which I was rated as the No. 6 heavyweight contender in the United States and No. 9 in the world. The people rated above me were named, Ali, Foreman, Frazier, Quarry, Young, et. al. To read the entire column, click here: Neumann: A fight in East Germany The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The value of life insurance

June 17, 2011 Today, a woman in the workplace is commonplace, but it wasn’t always that way. During World War II, Rosie the Riveter became an icon in America. While the men were overseas fighting, the women at home worked in the factories making the weapons of war. Their work was acknowledged and celebrated in the drawing of Rosie the Riveteron the cover of the Saturday Evening Postby famed artist Norman Rockwell, and through the millions of posters distributed by the Ad Council depicting a woman in manufacturing garb flexing her bicep with the caption, "We Can Do It!" In 1942, big-band leader James Kern "Kay" Kaiser’s big hit "Rosie the Riveter" began with these lyrics: "All the day long, Whether rain or shine She’s part of the assembly line. She’s making history, Working for victory Rosie the Riveter" To read the entire column, click here: • Column: Life insurance for women The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

There really are ways to dig out of debt steadily

May 27, 2011 Neither a borrower nor a lender be; for loan often losses both itself and friend, and borrowing dulls the edge of husbandry. William Shakespeare Those few words say a lot, especially today. In the last few weeks, Standard & Poor's, one of the big three rating agencies, lowered the outlook for America's long-term credit rating to "negative" from "stable." At about the same time, the BRICS nations (Brazil, Russia, India, China and South Africa) signed an agreement to use their own currencies instead of the predominant U.S. dollar in issuing credit or grants to each other. Not surprisingly, the value of the U.S dollar continues to drop against other currencies. If you'd like to get a lot of information, and maybe a little depressed, log onto USDebtClock.org. On this website you can see, in real time, the U.S. debt, debt per citizen, U.S. population, U.S. income taxpayers and a lot of other information. However, this column is not about debt and gloom, but rather, about how a lot of people have reduced their debt and some ideas on how to reduce yours. To read the entire column, click here: Digging out of a whole The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Navigating retirement plans

May 6, 2011 These days, there are many choices when it comes to retirement plans. Do you have the right plan? Let's begin with some history. The granddaddy of pension plans is generally considered to be ERISA. It was signed into law, on Labor Day, in 1974. Although it is the first comprehensive pension plan legislation, there were preceding forays prior to it. President John F. Kennedy created the President's Committee on Corporate Pension Plans after the Studebaker Corporation closed its plant in 1963 and was unable to pay its retirees. In 1967, Sen. Jacob Javits from New York proposed legislation that would address funding, vesting, reporting and disclosure issues, but the bill was opposed by business groups and labor unions, both of whom sought to retain the flexibility they enjoyed under pre-ERISA law. To read the entire column, click here: • Neumann: Navigating retirement plans The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The gift of giving to charity

May 20, 2011 Economically, 2008 was second only to the market crash of 1929 which began the Great Depression. To put the two into perspective, The Dow Jones Industrial Average (DJIA) lost 89percent of its value before finally bottoming out in1932. By March 6, 2009, the DJIA dropped 54percent from its peak of 14,164 on October 09, 2007. Last week, the Dow was at 12,505. Though not back to its market high, it has recaptured most of the loss. The stock market was not the only indicator of bad times. The credit markets were hit as hard or harder than the stock market. One of my clients bought a tax free bond (both state and federal) for $95,000 in 2006. It had a 5percent coupon and was guaranteed at maturity. The client's 2008 year-end statement showed the value of the bond to be $40,000. To read the entire column, click here: • Neumann: Some gifting ideas for your favorite charity The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Don\'t let the tax tail wag the dog

April 22, 2011 It started simply enough. It was tax season, early April, and I was returning a call from a client's accountant. The accountant started the conversation from a defensive position, probably because he had been browbeaten by our mutual client, but ended up on the offense. He said to me, "Last year (2009 in accountant speak), my client’s account earned $9,529 in interest and this year (2010), the account earned $44,000 in interest, dividends and gains." That was the defense, next came the offense, "Why don't you just invest this account in municipal bonds?" Wow! To read the entire column, click here: • Neumann: Don't let the tax tail wag the dog The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual

The oracle in the capital

April 15, 2011 Last week, I took the Acela train from the Metropark station in Woodbridge Township to Washington D.C. The high-speed train uses tilting technology which allows the train to travel at higher speeds on the sharply curved rail lines without disturbing passengers by lowering lateral centrifugal forces. It provided a quiet, comfortable two-hour ride. The train has a top speed of 150 mph, but obviously it did not maintain that speed because the distance to Washington is 183 miles. I didn't really want to go to the nation’s capital because of what they do there. Remember the old saw about making sausage,: if you saw it being made, you would never eat it? Most of all, I didn’t want to go there because of the epiphany I had the week prior. To read the entire column, click here: • Neumann: The oracle in the capital The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual

Finding a fitting financial plan

April 1, 2011 What is a safe number to withdraw from your retirement portfolio? That is an open-ended question. Is it $1 million? It might be, if your portfolio is worth many millions? Or, is it 8 percent annually? That would be pretty aggressive unless your portfolio is steadily earning 12 percent. Why do I say that? To read the entire column, click here: • Neumann: What to withdraw from your retirement portfolio The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Handling an inherited IRA

March 18, 2011 Recently, one of my clients passed away. Her children, who are also clients, came into my office to take care of business. I told them that the rules of the game had changed, to their benefit. In the old days, before 2005 to be specific, (not really that long ago), a non-spouse (I'll talk about spouses later) beneficiary of an IRA had three choices when dealing with an inherited IRA: 1) You could take the money and pay the tax in the year that the IRA owner died. Assuming that you did not need the money to buy groceries, this did not produce a good outcome. The proceeds were added to your regular income, and you had to pay tax on the inherited money at your highest marginal rate. 2) You could wait five years from the date of death and then withdraw the money. This outcome is better than the first because it allows you to enjoy five years of tax-deferred growth. 3) You could withdraw the money any time between the first and the fifth year and pay the tax at the time of withdrawal. Then along came the Deficit Reduction Act of 2005, which was signed into law in 2006, and under the new rules, we have much better alternatives. However, to get these benefits, you have to know how to play the game. First rule: You have to be named the beneficiary of the IRA. If there is no beneficiary form on file, heirs are at the mercy of the IRA custodians’ default policy. Some custodians award the IRA to a living spouse first and then to the deceased’s estate. Others send it directly to the estate. The lesson here is to make sure your IRAs have the proper beneficiaries designated, so they will not get the short end of the stick. To take it a step further, make sure you are named correctly on any IRA of which you are the beneficiary. The second rule of the game is: Handle the money properly. If this were your own IRA, you could take the money from one custodian and redeposit it with another custodian within the 60 day limit. You cannot do this with an inherited IRA. You can either leave it with the current custodian, and have them name “your” new inherited IRA, "John Smith, deceased, inherited IRA for the benefit of Mary Smith, beneficiary." Or, you could have one custodian send it to another using a "trustee-to-trustee" transfer naming it as mentioned above. Now, let's talk about spouses. Spouses get a better deal than anyone else. They get to treat the inherited IRA as if it were their own. Therefore, they can rollover the IRA under their own name and postpone distributions until they are 70½ years old. However, they are subject to the same 10 percent penalty if they withdraw money prior to age 59½. Non-spouses must begin Minimum Required Distributions (MRDs) by December 31 of the year following the original IRA owner’s death. MRDs are not a bad deal. If you are a female age 40, you have a life expectancy of about 80 years, so you can stretch your payments based on 40 years. Let's say that you inherited $300,000 and it earned 6 percent in an IRA that you properly rolled over into an inherited IRA as outlined above. If you are 40 years old, you must withdraw 1/40th from the account, which is $7,950 ($318,000/40). If the account continues to earn 6 percent, it will be worth $328,653 the following year. That year, you would be required to take out 1/39th, which is $8,427. Do you see what is happening here? The account is growing in spite of the annual withdrawals. It is not until older ages that the withdrawals will become greater than the growth. You are preserving wealth for your family through the deferral of income taxes. Additionally, because you can name a beneficiary, the deferral continues when you die. However, please note, the beneficiary cannot use their age for life expectancy when they inherit the IRA, they must continue using yours. In the trade, these are called S-T-R-E-T-C-H IRAs and you can see why. Additionally, the same rules apply to qualified accounts such as 401(k)s, 403(b)s, 457 plans, et al. However, the same sticky wicket rules apply to rolling over these types of accounts, so be sure to get professional advice prior to completing the transaction. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Framing your legacy plan

March 4, 201 I never saw a Brinks car in a funeral parade. -Dr. John In many cases, it's not how much you leave your loved ones; it’s the manner in which you do so. Although estate planning is not fun, for it usually involves lawyers drawing uncomplicated documents such as wills, trusts, durable powers of attorney, etc., it is important. It provides you with a plan that efficiently delivers your worldly goods to those you have chosen with minimal drag from the bureaucrats in terms of time and money (taxes). On the other hand, legacy planning can be fun. You get to tell those individuals who mean a lot to you how and why you have arranged matters, and, best of all, you don't have to die for your plan to take effect. It may be your preference to let your legacy plan come into effect after your death; however, the choice is yours. To read the entire column, click here: Neumann: Framing a legacy plan The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Estate tax law gets adjusted

February 25, 2011 Well, as I live and breathe. Congress finally got around to addressing the estate tax situation; well, at least for two years. Let’s begin with a little history. In 2000, the Republicans tried to repeal the estate tax or what they called the “death tax.” They couldn’t get the 60 votes necessary in the Senate, so they compromised by creating theEconomic Growth Tax Relief Reconciliation Act of 2001 which put the estate tax on a roller coaster ride that lasted 10 years. For those who think that 10 years is an "eternity," consider this: The first estate tax emerged from the Stamp Act in 1797, which required that federal tax stamps be purchased when transferring property from an estate. The cost of the stamp required to transfer property depended on the value of the estate and the size of the transfer. Interestingly, this tax was enacted because of the strained trade relations with France that compelled the United States to develop a powerful navy. It was repealed in 1802. To read the entire column, click here: • Neumann: Reviewing changes in the new estate tax law The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Maximizing a \'4\' plan

February 18, 2011 Are you maximizing your 401(k)? If not, why not? Let's begin by putting things in perspective. The national debt is $14 trillion. The quote, "A billion here, a billion there, pretty soon you're talking real money" is commonly attributed to Sen. Everett Dirksen from Illinois in the 1960s. But some research reveals that the phrase was used as early as 1917. The Jan. 10, 1938 New YorkTimes reported: “Well, now, about this new budget. It’s a billion here and a billion there, and by and by it begins to mount up into money.” Trillions and billions are one thing but millions are another. Today, $1 million is not all that much money in terms of retirement savings. In this, "new normal" economy, a $1 million portfolio is expected to generate $50,000 annually in retirement income. That's for this year. Using an inflation factor of 3 percent, next year's income will be $48,500. The following year will be $47,045, and so on. To read the entire column, click here: • Neumann: Are you maximizing your 401(k) contributions? The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

A disability insurance cure

February 11, 2011 A recent column warned of the dangers of disability. It gave some statistics, the most interesting of which stated that disabilities are not often the result of freak accidents or injuries on the job, but rather illnesses like cancer, heart attacks and diabetes. To make a medical analogy, these are the symptoms and the cure is disability insurance. This column is about finding the cure. The first place to look is through your employer. What are the benefits of buying a policy through your employer? It’s usually cheaper than buying an individual policy, and the underwriting for the policy is usually easier because of the law of large numbers. Often, the company will share the premium expense with you. Lastly, you may be able to pay the premiums through payroll deduction and have part of the premium tax deductible. Do not do this. To read the entire column, click here: Neumann: How to buy a disabilty insurance policy The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The dangers of disability

January 28, 2011 In the past, when you went to a bar or restaurant for lunch, all you had to watch on television (that is, if they had a TV) was sports and sports reporting. That’s because sports is a medium that sells commercials, i.e., soap, deodorant, airline travel, etc. Well, times have changed. The number of channels has increased exponentially and television now uses politics and finance, predominantly, to sell its commercials. Interestingly, many of the commercials (especially on the financial networks) want you to buy gold. Unfortunately, the horse is likely out of the barn with the price of gold at $1,300 an ounce, but that won't stop them. To read the entire column, click here: Column: A big bump in the road: disability The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Clearing the fog from the Affordable Care Act

January 21, 2011 On March 9, then Speaker of the House Nancy Pelosi uttered these words, "But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy." The bill she was referring to was the Patient Protection and Affordable Care Act (aka ObamaCare) that passed Congress on March 21 and was signed into law on March 25. Well, this is the beginning of a new year and the fog is beginning to clear, so let's take a look at "what is in it." But, before we get to the New Year, it is important to know that by December of 2010, 222 companies had obtained waivers exempting them from the law. More on this later. To read the entire column, click here: Neumann: How do the Patient Protection and Affordable Care Act affect ... The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

How to keep it \'SIMPLE\'

January 14, 2011 Beware the pundit. They will often tell you the wrong thing at the right time and the right thing at the wrong time. Here's a case in point - the recent increase in the stock market. At the end of 2010, the Dow Jones Industrial Average, which is a very old market index based on 30 large stocks, was at 11,500. The experts in the newspapers and on the airwaves were saying, "This is a great time to get into the stock market." Why are they saying this now? Because the market has risen from the doldrums of March 2009 when the Dow was at 6,626. What were they saying in March of 2009? "How is your 201(k)?" Although this was a snide remark based on the losses many of us took on our 401(k) investments, you have to remember that they are paid to be funny and amusing, so that they can sell gold and deodorant during the commercials. To read the entire column, click here:• Neumann: How to keep it 'SIMPLE' The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Keep Punching Newsletter February 2011

Keep Punching is a quarterly newsletter for our clients. Click on the links below to read the news articles included in this issue. February 2011 Why you need a power of attorney What makes a 'good' bank Teach your children well If you would like to receive our newsletter and weekly market commentary via email, please call our office at 201-291-9000 or email your email address to karen@randyneumann.com.
Naming Beneficiaries of Insurance Policies and Retirement Plans Whether you’re wealthy or earn a modest income, there is one estate planning concern that is shared by people from all walks of life—the decision of who gets what when you’re gone. While some individuals logically assume that a will is the only official forum to express such decisions, that’s not always the case. Often, an equally important issue in estate planning is who to name as beneficiary on life insurance policies, employer-sponsored retirement plan accounts and IRAs. Life Insurance No matter who is designated, the beneficiaries will receive the death benefit proceeds income tax free. Unlike property disposed of in a will, if the beneficiary designation form is properly completed, insurance proceeds do not go through probate. For many married individuals, a spouse will be the most logical beneficiary. A trust may be a prudent beneficiary choice, however, if a surviving spouse would not have the ability to prudently manage a large sum of money. The trustees (often a legal entity rather than an individual) would then take charge of managing, investing and disbursing the policy proceeds for the benefit of the surviving spouse. Be sure to name contingent or secondary beneficiaries. This means that if the primary beneficiary has died, the insurance proceeds will go to an individual or trust. If there are no surviving beneficiaries, then your beneficiary is generally the “estate of the insured,” which means the death benefits end up being probated and ultimately distributed according to the instructions of the decedent’s last will and testament. If an individual dies without a valid will (intestate), then the order of legal beneficiaries to whom assets are distributed is specified by that state’s law. Employer-Sponsored Retirement Plans and IRAs The law requires that a spouse be the primary beneficiary of a 401(k) or profit sharing account unless he or she waives that right in writing. A waiver may make sense in a second marriage—if a new spouse is already financially set or if children from a first marriage are more likely to need the money. Single people can name whomever they choose as beneficiary, and non-spouse beneficiaries are now eligible for a tax-free transfer to an Individual Retirement Account. The IRS has also issued regulations that dramatically simplify the way certain distributions affect IRA owners and their beneficiaries. Consult your tax advisor on how these rule changes may affect your situation. Naming Children May Not Be Best Naming children as beneficiaries may cause unforeseen problems. For example, insurance companies, pension plans and retirement accounts may not pay death benefits to minors. The benefits would likely be held until they could be made to a court-approved guardian or trustee of a children’s trust. A guardian, trust or trustee should be named beneficiary to ensure competent management of the proceeds for the children. By naming a children’s trust as a beneficiary, for example, the proceeds could be invested and managed by a competent trustee (a person or institution) you choose. A revocable living trust could also be named as a beneficiary, which keeps the proceeds out of probate. Also keep in mind that the IRS allows non-spousal beneficiaries to annuitize retirement plan distributions over the life of the beneficiary. Check with your employer to find out if this is an option under your plan prior to naming a child as a beneficiary. A competent financial professional and tax advisor can also offer guidance as to whether this action may be appropriate for you. Keep Your Plan Up-to-Date When completing overall estate plans and wills, it is imperative to readjust all beneficiary designations so that your estate plan accurately reflects your intentions. Remember, outdated beneficiary designations (e.g., older parents or ex-spouses) could misdirect the intended flow of an entire estate unless changed now. Also, keep in mind that beneficiaries are paid directly as named. Thus, beneficiary designations are not governed by the wording of wills. As is always the case with estate planning, consult with qualified professionals concerning your particular situation in order to ensure that your beneficiary designations are in tune with your goals. When Naming Beneficiaries, Remember to Consider … · The age of the beneficiary. Many policies and plans will not directly transfer assets to minors until a trustee or guardian is approved by a court. · The ability of the beneficiary to manage assets. Perhaps a trust set up in the person’s name would be better than a direct transfer. · Employer-sponsored retirement plans. Unless expressly waived by the spouse in writing, the law requires a spouse to be the primary beneficiary of the account. · Naming contingent beneficiaries. Should something happen to your primary beneficiary, the contingent beneficiary would receive your assets. This article was prepared by McGraw-Hill Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor or me if you have any questions. In Our Corner… Linda’s granddaughter, Addison Ann Bedford was born on 1/14, weighing 7lbs. 4oz. Addison joins her twin 19 month-old brothers, Michael and Aidan. Congratulations to the proud parents, Kristi & Ryan! From the desk of Randy Neumann, CFP®... I am pleased to announce that I have been selected as a FIVE STAR Wealth Manager by New Jersey Monthly magazine. If you haven't seen the January 2011 issue of the magazine, click on the following link to view the reprint: http://www.pageturnpro.com/Crescendo-Business-Services/21967-2011-NJ-WM-Randy-Neumann/index.html#1

Reviewing items in the new tax bill

January 7, 2011 On Friday, December 17, the President signed into law new legislation extending the Bush era tax cuts. The President said just before signing the bill, "We are here with some good news for the American people this holiday season with a bipartisan package that will create jobs for the American people." The law includes some other “goodies” just in time for Christmas, so let’s have a look into the 2,000 page bag of surprises left by a lame-duck Congress. In addition to extending the Bush era tax cuts, there is a myriad of items in the Tax Hike Prevention Act of 2010. One is a 2 percent reduction of Social Security payroll taxes. Another is a 13 month extension of unemployment insurance. Further, the law adjusts the estate tax to 35 percent for two years on estates of more than $5 million. This contrasts with a $1million exemption and a 55 percent rate under the old law. Although these are the major components of the law, the largest element of the bill legislation was the agreement between Democrats and Republicans on extending the tax cuts for all taxpayers, not just some... To read the entire colum click here: • Neumann: Reviewing a few items from the new tax bill The Ridgewood News The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Keep Punching Newsletter August 2010

Keep Punching is a quarterly newsletter for our clients. Click on the links below to read the news articles included in this issue. August 2010 Estate Tax Circus Some news on medical expenses in retirement Good news for parents If you would like to receive our newsletter and weekly market commentary via email, please call our office at 201-291-9000 or email your email address to karen@randyneumann.com.
Can I Lower the Interest Rate on My Credit Card? The simple answer is: It never hurts to ask. A study conducted by the U.S. Public Interest Research Group found that more than half (57%) of those who called their credit card issuer and requested a lower interest rate were successful. On average, the rate was lowered by between 7 and 10 percentage points. Now that most of the provisions of the Credit Card Act (signed into law last May) have finally gone into effect (as of February 22, 2010), there is no better time to review your own credit situation with an eye toward making improvements. Getting to Yes Your chances of getting a lower rate are improved if you meet most of these qualifying factors: Good credit rating. A good rating applies both in terms of your payment history with the card issuer and your overall credit score. You are entitled to a free copy of your credit report every year from each of the three major credit-reporting agencies: Experian, Equifax and TransUnion. To save time, log on to www.annualcreditreport.com to access reports from all three. For a small fee, these agencies also provide personal credit scores. Low card balance. You have a history of paying off the entire balance or paying more than the minimum required each month. Track record with card issuer. You have held the card for a year or two before requesting the rate change. Your card is not classified as “subprime.” The credit card is not marketed solely to consumers with bad credit. The Law of Averages To negotiate successfully with the credit card company, you will have to be prepared. Know what your current interest rate is and make sure that it is not a promotional rate that will expire within a matter of months. Also research what other banks and credit card companies are charging their customers. According to the Federal Reserve, the average interest rate on existing credit card balances is approximately 13.5%. If you are paying significantly more than that and have done your research, you are ready to make the call. Be sure to remain upbeat, confident and persistent. If the first person you speak with turns you down, ask for his or her manager. Base your argument on logic and facts and politely threaten to take your business elsewhere unless you get some satisfaction. Remember, the better your payment record with the card issuer and the higher your credit score, the better your bargaining position. One final word of advice: Be careful about getting overly zealous in your search for the lowest rate card. Applying for multiple new cards at the same time (three or more inquiries in one month) could cause your credit score to be lowered. Doing Your Homework Visit these Web sites for competitive rate information and more. http://www.creditcards.com http://www.lowcards.com/CreditCardIndex.aspx http://www.bankrate.com/brm/rate/brm_ccsearch.asp This article was prepared by Standard & Poor’s Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor or me if you have any questions.
What steps can I take to help me sell my home in a depressed market? You may be able to sell your home in a depressed market by pricing it appropriately, conducting necessary repairs before your home is officially listed for sale and making your home as attractive as possible. The process may start several months before the house formally goes on the market. The key is to view your property objectively as a potential buyer would. Structural Repairs. Take an inventory of items that are broken or outdated and could potentially emerge as issues during a home inspection. Windows or doors that will not open easily, peeling paint, shingles falling off a house or garage and similar issues convey the impression that the owner does not pay attention to a property. By fixing these or other items before putting the house on the market, you are eliminating something that a potential buyer could use as leverage in negotiating a lower price. If you forego repairs and attempt to sell your house as a handyman special, you may need to price it accordingly and it may take longer to sell. The Right Price. Setting an initial asking price that is too high may cause your house to sit on the market longer than it otherwise would. Either on your own or with help from a real estate agent, review selling prices of comparable properties in your neighborhood. Factors that determine a home’s worth include its size, its overall condition and the surrounding neighborhood. Buyers are likely to look at many properties before extending an offer, and it may be to your advantage to price your home equal to or slightly below comparable offerings if you want a quick sale. Eye Appeal. Go beyond structural repairs and try to create as much eye appeal as possible. If you store large items, such as building materials or a boat, try to locate them elsewhere while the house is on the market. The illusion of extra space will appeal to many buyers. Clean out your garage, porches, basement, attic, closets, cabinets and other storage spaces and discard items you no longer use. Tidy up counters, mantels and display areas. Keep up with lawn mowing, snow shoveling, weeding, pruning and other landscaping chores. Consider purchasing potted flowers or other items that could improve the appearance of your deck or porch. If you lack the time for home maintenance, consider hiring a cleaning service or lawn maintenance company before your home is advertised for sale. If the local real estate market is not in your favor, try capitalizing on areas that you can control, such as structural repairs, pricing and eye appeal, to move your house in a depressed market. This article was prepared by Standard & Poor’s Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor or me if you have any questions. Client Corner We would like to congratulate Brian Callanan, son of our client Lorraine Callanan, for participating in a 40–mile ride in Vermont on Sunday, July 18. His personal fundraising goal of $1,000 for the Cystic Fibrosis Lifestyle Foundation was far exceeded. Brian’s goal in life has been “to help others learn to successfully manage life with CF, with exercise and recreation being a major part of that.”

Keep Punching Newsletter January 2010

Protect Your Assets With A Trust Contrary to what many people think, trusts are not reserved for the wealthy. The truth is, people from all walks of life may benefit from a trust. You can, too. What Is a Trust? Generally speaking, a trust is a legal entity that is central to a three-part agreement in which the owner of an asset — the trust’s “grantor” — transfers the legal title of that asset to a trust for the purpose of benefiting one or more beneficiaries. One or more trustees then manage the trust. Trusts may be revocable or irrevocable and may be included in a will to take effect at death. Revocable trusts can be changed or revoked at any time. For this reason, the IRS considers any trust assets to still be included in the grantor’s taxable estate. This also means that the grantor must pay income taxes on revenue generated by the trust and possibly estate taxes on those assets remaining after his or her death. Irrevocable trusts cannot be changed once they are executed. The assets placed into an irrevocable trust are permanently removed from a grantor’s estate and transferred to the trust. Income and capital gains taxes on assets in the trust are paid by the trust. Upon a grantor’s death, the assets in the trust are not considered part of the estate and are therefore not subject to estate taxes. The trust’s grantor names a trustee to handle investments and manage trust assets. The grantor can work with the trustee on major decisions, or the trustee can be assigned full authority to act on the grantor’s behalf. A trustee may be an entity that offers experience in such areas as estate tax law and money management or it may be an individual such as an attorney or accountant. Trustees have a responsibility — known as a “fiduciary responsibility” — to act in the grantor’s best interest. Understanding the Role of a Trust Although trusts can be used in many ways, they are most commonly used to: Control assets and provide security for both the grantor and the beneficiaries Provide for beneficiaries who are minors or require assistance managing money Avoid estate or income taxes Provide expert management of estates Avoid probate expenses Maintain privacy Protect real estate holdings or a business Different kinds of trusts are designed to meet different needs and objectives. For example, if your primary goal is to ensure privacy in the settlement of your estate or to centralize control of assets, you might choose a living trust. A living trust allows you to remain both the trustee and the beneficiary of the trust while you’re alive. You maintain control of the assets and receive all income and benefits. Upon your death, a designated successor trustee manages and/or distributes the remaining assets according to the terms set in the trust, avoiding the probate process. As another example, an irrevocable life insurance trust (ILIT) is often used as an estate tax funding mechanism. Under this trust, you make gifts to an irrevocable trust, which in turn uses those gifts to purchase a life insurance policy for you. Upon your death, the policy’s death benefit proceeds are payable to the trust, which in turn provides tax-free cash to help beneficiaries meet estate tax obligations. If you want to leave money to your grandchildren, you might consider a generation-skipping trust. This trust can help preserveyour $3,500,000 generation skipping transfer tax exemption (for 2009) on bequests to your grandchildren and avoid the tax on bequests exceeding that amount, which can be up to 48%. These are just a few examples of the many types of trusts. Although not quite as popular as wills, trusts are becoming more widely used among Americans, wealthy or not. Increasing numbers of people are discovering the potential benefits of a trust — how they can help protect assets, reduce tax obligations, and define the management of assets according to their wishes in a private, effective way. Should you have any questions as to whether a trust would be beneficial to you, please call me. LPL Financial does not provide legal advice. Please consult your legal advisor. Special Points of Interest: For 2010, salary deferrals in 401(k), 403(b), and 547(e) plans remain the same at $16,500 ($22,500 for those age 50 and older) and SIMPLE plans remain the same at $11,500 ($14,000 for those 50 and older). The Younger Set: Congratulations to our clients, Lyn and Digby Wirtz of Ridgewood on the birth of their granddaughter, Olivia Mackintosh Kramer, on August 2, 2009. Olivia weighed 7 lbs. And measured 19 3/4 inches long.
Keep Punching is a quarterly newsletter for out clients. Click on the links below to read the news articles included in this issue. January 2010 What does the richest man in the world think? How to get 72(t) relief Why you need umbrella coverage If you would like to receive our newsletter and weekly market commentary via email, please call our office at 201-291-9000 or email your email address to karen@randyneumann.com.

Keep Punching Newsletter January 2009

Keep Punching is a quarterly newsletter for our clients. Click on the links below to read the news articles included in this issue. January 2009 Rebalancing: What it is and why it's important How to 'stretch an IRA' Optimize your employee benefits plan If you would like to receive our newsletter and weekly market commentary via email, please call our office at 201-291-9000 or email your email address to karen@randyneumann.com.
Don’t Need IRA Funds in 2009? You Can Leave Them in Place. Most of us have seen the value of our IRAs and employer-sponsored retirement plan accounts dwindle during the recent bear market declines. However, new legislation provides that if you’re already taking Required Minimum Distributions (RMDs) from your retirement accounts – or will soon have to because you are approaching 70½ - you can now choose to keep those assets working for you by not taking your 2009 RMD. The temporary relief came about because of concerns that seniors were being forced to withdraw funds from their traditional IRAs, Inherited IRAs, SEP IRAs and SIMPLE IRAs, as well as most employer-sponsored retirement plans, including profit sharing and 401(k), 403(b), and 457(b) plans, when the market is at a low point. Such withdrawals remove a larger percentage of savings than when the market is flourishing. The Worker, Retiree and Employer Recovery Act of 2008 allows you to skip these withdrawals in 2009. By leaving your savings in your retirement plan accounts, you not only eliminate the tax due on the distribution, you also give those assets time to recover value and grow in a tax-favored environment. Unless there is further legislation, the mandatory RMD will return in 2010. Some aspects of the law are a little less clear, but I’m actively monitoring developments. If you would like to discuss skipping your RMD and how doing so might fit into your financial plan, please don’t hesitate to call me at (201-291-9000). Preparing for your tax preparer What do you really need to have? It’s that time of year many may be dreading – tax season. Whether a tax advisor prepares your taxes or you handle them yourself, it’s always a good idea to organize the necessary documents beforehand. Use this checklist to determine what you’ll need to prepare your 2008 taxes. And, if you haven’t done so already, contact me about the many benefits of year-round tax planning so April 15 won’t seem as daunting in the future. Employment and income records 2008 W-2 forms for each employer Pension and annuity statements Alimony received Partnership and trust income Scholarship and fellowship awards State and local income tax files Self-Employment records K-1 forms on all partnerships Receipts and documentation for business-related expenses Homeowner records Form 1098 for mortgage interest Form 1099-S if you’ve sold your home or other real estate Second mortgage interest Real estate taxes Moving expenses Financial assets Interest income statements Dividend income statements Broker transaction proceeds Tax refunds Unemployment compensation Retirement plan distribution Financial liabilities and expenses Student loan interest Medical savings accounts Charitable donations Adoption expenses Alimony paid Childcare expenses Education expenses Investment expenses Other documentation IRA, Keogh, SEP and other retirement, plan contributions Income from other sources, such as real estate, rentals, etc. 2007 tax return Did You Know That… 44…Percentage of Americans who still think it’s a good idea to invest in stocks, bonds, and mutual funds versus 31 percent who think it’s a bad idea. 66…Percentage of Americans who still believe buying a home is the best investment they can make 60…Percentage of American couples who argue over money at least once a month 90…Percentage of parents who give money to their adult children to pay for major expenses such as credit card balances and student loans. Special Point of Interest For 2009, salary deferrals in 401(k), 403(b), and 547(e) plans have increased to $16,500 ($22,000 for those age 50 and older) and SIMPLE plans have increased to $11,500 ($14,000 for those 50 and older). Client Corner Kudos to our client, Addie Caputi for her commitment to helping Bergen County’s homeless population make the transition to independent living. Addie is the vice-president of the DACKKS Group board of directors. The DACKKS Group Mission is to offer affordable housing to people who are homeless. From The Desk of Randy Neumann One of the more difficult duties of a financial planner is helping the family should you become incapacitated or die. All too often, the heirs are unaware of the strategies put in place. To ensure that your plans are carried out according to your wishes, I recommend that you discuss your strategies with your heirs. The beginning of the New Year might be a good time to consider having a discussion regarding estate planning issues such as wills, trusts and long-term care with your heirs. If you would like to include me in these discussions, I would be more than happy to do so. I believe it is very important that your heirs get to know me so that they will feel comfortable discussing such matters with me in the future.

To save or to shred?

December 24, 2010 How long should you keep your financial statements? The answer is: it depends. On what, you might ask? It depends on what kind of records we are talking about, where you are economically and where are you in your lifecycle? Let's begin with the “Big Kahuna” - the Internal Revenue Service. The IRS urges taxpayers to keep federal tax returns until the period of limitations runs out. What does that mean? Well, limitations equal the timeframe that you have to claim a credit or refund, or the timeframe during which the IRS can levy additional taxes on you. This logic applies to state taxes as well. Let's flesh this out a bit. If you file a claim for a credit or refund after you have filed your tax return, the IRS expects you to keep the relevant tax records for three years from the date you filed your original return, or two years from the date on which you paid the tax, whichever comes later. If you claim a loss from worthless securities or bad debt deduction, you should retain those records for seven years. Lastly, if you filed fraudulent returns or no returns, you could try the Steve Martin defense, "I forgot!" However, it would make better sense to keep all related and relevant documents for seven years. The IRS suggests that you retain employment tax records for at least four years after the date the tax is due or paid, again, whichever comes later. Although tax people tend to advise clients to keep their records forever, most will concede that canceled checks, receipts and other documents supplemental to returns can usually be safely discarded after three years. This is because the standard IRS audit goes back three years. Now let's move on to assets. Tax records relating to real property or "real assets" should be kept for as long as you hold the asset and for at least seven years after you sell, exchange or liquidate the asset. These records can be used to calculate appreciation, depreciation, amortization or depletion of assets with regard to real property. You might also want to keep receipts and tax records related to major home improvements because, if you sell your home, you can show the buyer how much money you put into the house. How about brokerage and mutual fund statements? The annual statement is the one that counts, so you can dispose of your quarterly and monthly statements after you have checked to see that the annual statement agrees with them. This brings up a brand-new topic: how to properly dispose of financial records. The best way to do this is to purchase a shredder either online or at a business store (usually on the highway these days). Do not throw your statements in the garbage or leave them in the recycling receptacle. That would make it too easy for Dumpster divers to get their hands on your financial information. If you don't want to spring for a shredder, rip your statements up into little pieces while watching TV and shake well before you throw the shards out. What about monthly or quarterly statements from IRAs and 401(k) plans? Again, as with other investment statements, the annual statement is the important one. Also, you'll want to hang onto form 8606, 5498 and 1099-R. Form 8606 is the one used to report nondeductible contributions to traditional IRAs. Since most income from an IRA is taxable, someday, you might have to prove your point to the IRS when you take a nontaxable deduction. Form 5498 is the one your IRA custodian mails to you. It is also called the "IRA Contribution Information" or "Fair Market Value Information," and it usually arrives in May. This form details contributions to your traditional or Roth IRA, and the fair market value of that IRA at the end of the previous year (this is what your Required Minimum Distribution is based on) if you are over 70 1/2. Lastly, your IRA custodian will mail you form 1099-R, which shows any withdrawals taken during the previous year. What about bank statements? The rule of thumb is three years, in case you get audited. Some people shred bank statements immediately fearing identity theft: however, if push comes to shove, i.e. you get divorced, brought into court or a creditor comes knocking, you may want to refer to them. One solution would be to ask the bank for copies, but, these days, they usually charge for that service. To wind things up, based on advanced technologies available today, some financial advisors are offering clients a valuable service. They can scan client documents into a secure electronic vault, shred the paper and make the documents available to the client and other advisors whenever they are needed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The market is right for refinancing your mortgage

November 26, 2010 Recently, one of my clients told me that they were having trouble refinancing their mortgages through their bank. Most people view a bank, especially a large one (of which there are very few today), as “the” place to fill all of their borrowing needs. I learned that this was not necessarily so when I was the branch manager of Garden State National Bank in my hometown of Cliffside Park. When I was new to the game, I would send a mortgage application from a bank customer, who was often a friend, (Cliffside Park is a small town) to the mortgage department. More often than not, the mortgage was declined or offered at a less than competitive rate. I inquired as to why this was happening and I was told, "The bank was not looking to increase its mortgage portfolio at this time." Although I was disappointed when I was not able to fill my customer’s, need, I understood the bank's position. That was 32 years ago and things have not changed all that much. If banks want mortgages in their portfolio, they will make an attractive offer, but if they don't, they won't. Additionally, unless you took a Rip Van Winkle snooze over the past several years, you are aware that very few banks are aggressively pursuing mortgages these days. Why not? Not too long ago banks and other mortgage lenders were making irresponsible loans, at the government's urging, to people who could not afford to pay them back. They were making no doc (industry jargon for no documentation of income) loans. They were financing 100 percent of the cost of a house to people who were planning to "flip" the house in a few years when the price doubled. People were critical of my projected 3percent annual value increase of homes as stated in my financial plans telling me proudly, "My house increased by 20percent last year!" My response was, "Maybe so, but it won't always be that way." Well, things have changed a bit haven't they? Lenders today are back to the old rule of thumb requiring 20 percent down on a home. They also make sure that you have the income to pay the loan through a strict verification processes. They don't care if you have assets sufficient to purchase the house because they know you can spend down those assets on anything you want and they will not always be available to pay off the mortgage. They are more interested in your annual income. But despite all this, thanks to Uncle Sam's largess, mortgage interest rates are at 40 year lows, so it's a good time to refinance your mortgage, if you can. I referred the couple who had trouble getting a loan through their bank to Michael Klein, a loan officer with Luxury Mortgage in Paramus. This was not your run-of-the-mill homeowners refinance because it involved two properties: a home in Bergen County, a condo "down the shore," and a line of credit on the home. The mortgage on the home was $270,000 at a rate of 5.375percent for 15 years. The shore condo had a loan of $624,000 at 6.75percent. It was interest only, and it had a 7 year balloon (industry jargon that means the loan must be paid or refinanced in seven years). The new mortgages were for 30 years at 4.25percent. I ran a comparison of the old and the new scenarios. There were striking differences between the two. On the cash flow projection, there was an annual savings of $22,020 between the old and the new. Actually, the cash savings of the new plan over the old was over $25,000, but the clients lost $3,000 in income tax savings because their mortgage deduction was much lower. On the balance sheet, liabilities were much larger in the new versus the old because the mortgage on the home had been paid down considerably, but, oh well, we're leaving that to the next generation. Another benefit of the new program was that the clients were no longer facing a payoff of the $624,000 mortgage (the loan on the condo was interest only with a 7 year balloon) or a refinance at who knows what rate in 2013! So, the moral of the story is, if refinancing makes sense --do it. And, be sure to shop around for the best deal. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The long and short of long-term care insurance

December 17, 2010 Lately, long-term care insurance carriers have received a lot of negative attention in the press. The John Hancock Life and Health Insurance Company asked the regulators in New Jersey and other states for a 40 percent increase this fall. Being a policyholder, I received a letter of explanation, read it and understood it; unlike Monmouth County Congressman, Frank Pallone, Jr., who, on September 24, 2010, sent out a press release stating that he would be launching a probe into the double-digit rate hikes for long-term care insurance. The easy route for a politician is to bash insurance companies, which is a common occurrence today. The White House mounted a stinging, sustained broadside against health insurance company rate increases in March of this year as part of its healthcare program. President Obama and his aides staged a two-pronged attack with a stern letter to the health insurance chief executives and a speech in which the President castigated insurance companies 22 times. "How much higher do premiums have to rise," he demanded, "before we do something about it?" President Obama’s business experience before being elected to the Senate was that of a “community organizer” and a law professor. Congressman Pallone practiced law before being elected to Congress. Neither would be considered "heavyweights" in the business world, yet they are the elected officials who conduct the government's business. Let's look at the history of long-term care insurance. It's not that long. Although it began in the 1970s, it really didn't catch on until the late 1980s. At that time, only a handful of insurers offered long-term care insurance. During the 1980s, additional options for long-term care began to emerge. Assisted-living communities became more popular and many people found themselves on long waiting lists because there weren't enough facilities to meet the demand. As a result, the free market system kicked into gear, more facilities were built, and they began to offer graduated care, which made real sense. A person could live in a facility and receive varied degrees of care. Although this is all great stuff, it is very expensive. Simply stated, insurance companies underpriced the risk. What can they do now? They cannot arbitrarily raise the premiums on their existing policies. Instead, they have to petition the state insurance departments to increase the rates on their various “books of business.” In order to get rate increases, they must prove that their costs have gone up. Interestingly, this was always the way insurance companies conducted business, and it worked very well. However, we now have a different situation. The government, as evidenced by the policies carried on by Messrs. Obama and Pallone wants to have a bigger role in telling insurance companies how to run their business. It would be a fair assessment that based on the federal debt and deficit, the federal government is not very good at running a business, yet they are becoming more involved in all of our businesses. In my humble opinion, the federal government should leave the current situation intact where the insurance industry is regulated by the states. After I received my letter from John Hancock explaining the 40 percent rate hike, I was thankful that I had purchased an underpriced policy and had saved premium dollars over the years. I sent a letter to my clients who had purchased a similar policy and told them what my thoughts are on the subject. I have some personal experience with insurance carriers in turmoil. After a 10-year boxing career during the 1970s, during which I was recognized as the No.9 heavyweight in the world and No.6 in the United States, and there were other heavyweights by the name of Ali, Frazier, Foreman, Norton, Young, et. al., I was appointed branch manager of the Garden State National Bank in my hometown of Cliffside Park. Following a brief stint at the bank, I joined the fledgling financial planning industry in 1979. Because the Glass-Steagall legislation, passed during the Great Depression and based on the belief that the banks, brokerage houses and insurance companies colluded to cause the market crash of 1929, was still in force, I had to join separate companies to provide clients with both insurance and investment products. The insurance company I joined was Mutual Benefit Life, based in Newark. Not only was it an excellent company, it was the nation's 19th largest life insurer. However, because of the mismanagement of the senior officers, the company went into bankruptcy in 1991 (I had moved on during the mid-1980s: fortunately, I had learned how to duck in boxing). The state regulators in New Jersey ordered Prudential and the other carriers in the state to "circle the wagons" and pick up the assets and liabilities of Mutual Benefit. All annuitants and life insurance policyholders were made whole, and it did not cost taxpayers “one dime,” to quote the president. What is the moral of the story? Let the insurance companies compete in a free market as they always have, and continue to be regulated by the states and not the Fed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

How a Young Boxer of 18 Became Old, Tired and 28

November 20,1977 Randy Neumann, left and Duane Bobick before their 1975 fight I started when I was young. I was 18 years old and a freshman in college. Now that I’ve finished, at 28, I no longer feel young. The lure was never one of title or riches; it was more of a quixotic adventure that ended poetically. The rashness of youth provided the consummate will; it was skill that was wanting. But over the years, a trade-off took place that eventually reversed this relationship. Things that are commonplace in the Hades of professional boxing can melt the steel from the strongest of wills. I made an august entry into prizefighting in 1969 at Madison Square Garden. My opponent butted me and opened a cut over my left eye. I was young and willing, so the blood didn’t bother me; I waded in and flattened him. After 10 more victories, I was dubbed a “white hope,” a distinction given to any fighter who weighs more than 175 pounds and has the right complexion. I thought it more than coincidence that the first time my hopes were dashed (I lost my 12th fight) was the first time my manager cut the purse (he took 50 percent). In the next few years, I became a journeyman fighter. Among those I beat were Jimmy Young, Chuck Wepner and Boone Kirkman, and I lost a tough fight to Jerry Quarry. In the Quarry fight, my will reached its high point, with skill not far behind. I gave Quarry a boxing lesson for five rounds, but I lost the step I had on him after he pinned me against the ropes and hit me with a most outrageous low blow. I lost the fight in the late rounds. That night, I had sufficiently steeled my will so that the only way I could leave that ring was on a stretcher. That’s what the fans pay for. Let me be more specific on what I mean by “will.” In professional boxing, it comes close to irrationality. A rational person doesn’t make a good fighter because he is too cognizant of the imminent danger—being in a coop with someone skilled in beating your brains out—and wouldn’t take the risks sometimes required to win a fight. The successful fighter leaves his rationality with the seconds before the opening bell. Once, I could do that. In March 1974, I fought Wepner in the Garden. I had won our first fight. In the second fight, 10 of 11 sportswriters at ringside thought I won, he got the nod. I was doing well until the sixth round when Chuck’s head smacked my brow. Within 20 seconds a blood-soaked referee stopped the fight. My manager said, “It’s not that bad. He shouldn’t have stopped the fight.” And Chuck went on to grab a $100,000 payday against Mohammad Ali. After nine months of healing and soul-searching, I returned to boxing without a manager. I understood this bizarre business enough to handle my own affairs (I also had a degree in business) and decided that a 50 percent partner who never got hit was expendable. I had eight fights in 1975, the last with Duane Bobick in the Garden. A victory would have got me a title shot against Ali. Alas, I didn’t win. I was knocked down too many times in the fourth round. I retired to what one writer called “the real work of my life”—writing and acting. I wrote stories for magazines, acted in television commercials and studied at the Warren Robertson Theater Workshop. Then they rattled my cage. Like unslingers of the Old West, it’s hard for fighters to quit. Somebody always wants a piece of you. Made to Order I turned down offers for a year before I got one I couldn’t refuse. It was a three-fight television package for $50,000 and a new division with a ceiling of 200 pounds, and I was favored to win the title. It was too late. It didn’t matter that I was still young enough, in excellent shape and a better boxer than anyone else in the division. That iron resolve and that steel will I once had were gone. The bad decisions, the short purses, the disqualifications, the blood and the anguish over not being able to make ends meet, despite dedication to an arduous task, had taken their toll. Last April, I fought one Ibar Arrington on national television. To use an expression from the fight game, “The guy can’t fight.” I was having an easy time until he missed with a right hand, but caught my eyelid with his elbow. It started to bleed. When I sat on the stool after the fourth round with blood in my eye, I was ahead by 3-1 on the cards. I said to my trainer, Chickie Ferrara, “I think I've got enough."

Insider trading in the \'new normal\'

November 19, 2010 What is insider trading? Why is it bad? Who has done it in the past? Who has done it recently? How were they punished? Who is doing it now and getting away with it? This column will answer all of these questions. According to Wikipedia, the online free encyclopedia, "Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company. In most countries, trading by corporate insiders such as officers, key employees, directors, and large shareholders may be legal, if this trading is done in a way that does not take advantage of non-public information. However, the term is frequently used to refer to a practice in which an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise in breach of a fiduciary or other relationship of trust and confidence or where the non-public information was misappropriated from the company.” OK, now we know what insider trading is. But why is it bad? Illegal insider trading raises the cost of capital on securities issuers, thus decreasing overall economic growth. This is especially true today when we are in the "new normal" economy. Proponents of the new normal project that the economy will grow very slowly, unemployment will remain high, and returns on investments will be lower than they have been in the past. The treatment of those who are found guilty of insider training can be rather draconian. If you want an affirmation of this, just ask Samuel D. Waksal the founder of ImClone. ImClone's stock price dropped sharply at the end of 2001 when its drug, Erbitux, failed to get the expected FDA approval. It was later revealed by the SEC that prior to the announcement of the FDA's decision, numerous executive sold their shares. Sam told his family and friends to sell their stock in his company and Uncle Sam sent him to prison for seven years. But wait, the plot thickens. Our own, Martha Stewart, born Martha Helen Kostyra in nearby Nutley, was dragged into this case as well. Despite Martha's protestation of her innocence, the government sentenced Martha to five months in prison, five months of home confinement, and two years probation for selling $230,000 in ImClone shares on December 27, 2001, just one day before the announcement of the FDA decision. Here's one hot off the press. On October 16, the New York Times reported that Angelo R. Mozilo, the former chief executive of Countrywide Financial, once the nation's large mortgage lender, agreed to pay $67.5 million for insider trading and fraud charges. As part of the settlement, Mr. Mozilo also agreed to be permanently banned from serving as an officer or a director of any public company. A heavy hand, no doubt. All right, you, me, and just about everyone else is treated with a heavy hand when it comes to insider trading, but there is a very small, yet well-known group who is treated with kid gloves when they abuse the insider trading rules. Would you like to take a guess at who that group is? Here's a hint, many of them are coming up for election in November. Now, here is the answer from a Wall Street Journal story dated October 11. “Washington – Chris Miller nearly doubled his $3,500 stock investment in a renewable-energy firm in 2008. It was a perfectly legal bet, but he's no ordinary investor. Mr. Miller is the top energy-policy adviser to Nevada Democrat and Senate Majority Leader Harry Reid, who helped pass legislation that wound up benefiting the firm. Jim Manley, a spokesman for Mr. Reid's office, initially defended Mr. Miller's purchase of shares in the company, Energy Conversion Devices Inc. He said the aide had no influence over tax incentives for renewable-energy firms, and that other factors boosted the stock. But on Sunday, Mr. Manley added: "Mr. Miller showed poor judgment and Senator Reid has made it very clear to Chris and all his staff that their actions must not only follow the law, but must meet the higher standards the public has a right to expect from elected officials and their staffs." Why should they meet higher standards? Because the insider trading rules should apply to Congress as well! A story headlined by "Lawmaker Vows to Outlaw Insider Trading on the Hill," on Oct. 12 said: "Congress is immune from insider trading laws; federal regulators have never brought an insider trading case against either congressional members or their staffs." A few lawmakers proposed a bill that would prevent members and employees of Congress from trading securities based on nonpublic information they obtain. Unfortunately, the "Stop Trading on Congressional Knowledge Act” (STOCK Act) has languished since 2006, the year it was proposed. The Oct.11 story from the WSJ documents many examples of congressional aides, who make $170,000 annually, hitting "home runs" in the market without fear of insider trading charges and the resulting punishments. As the old saying goes, "You can't make this stuff up." The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Making Money moves at the end of the year

December10, 2010 Let's begin with you. What changes have occurred in 2010? Did you begin a new job? Did you retire? Did you start a family? If some notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and the next one begins. Even if little has changed for you in 2010, the end of the year is still a good time to see where you can plan to save some tax dollars or increase your net worth. Do you need some tax loss harvesting? Simply stated, this is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. You might want to consider this move, so either do-it-yourself or call your financial advisor. "Of course the game is rigged, but you can't win if you don't bet." This describes the unfair game of capital loss that you play with the IRS. The fact is you can only deduct $3,000 of capital losses in excess of capital gains from ordinary income. However, any remaining capital losses above $3,000 can be carried forward to offset capital gains in future years. Additionally, there is still the risk that if Congress doesn’t act soon, long-term capital gains will be taxed at 10 percent for those in the 15percent bracket and 20 percent for those in the higher brackets beginning in 2011. President Obama has himself proposed a 20 percent top tax rate for capital gains, so you might think of triggering excess capital losses in 2010 and using the losses to shelter future long-term capital gains that could be taxed at a higher rate. Let me count the ways. In addition to a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student-loan interest deduction, a military-related deduction, a deduction for the amount of estate tax paid on inherited IRA assets, an energy-saving credit, a homebuyer credit - there are so many possibilities. So clearly,now is the time to meet with your tax professional in order to set up strategies to claim as many deductions and credits that you are entitled to. If you’re planning on itemizing deductions, now is also the time to start gathering receipts and assorted paperwork (if you haven’t already done so). Are you maximizing your 401(k) or 403(b) contributions? If you are, this will lower your taxable income. Do it enough and you might be able to qualify for other tax credits or breaks available to those under certain income limits. Now for some estate tax ideas. It's still hard to believe that the inaction of Congress to change the estate tax law for 2010 cost the government billions of dollars in lost revenue. But it did, $500 million in the case of George Steinbrenner, so, as the year slips away, we look to next year when the estate tax exemption drops to $1 million. With a $1 million exemption, a lot of people will be filling out IRS form 706, the estate tax return, in 2011. One way to alleviate this tax, if you are married, is to make sure that you have a complex will instead of a simple will. If you have a simple will and an estate worth $2 million, at your death, the government will get to tax $1 million for a net tax of $435,000. Why? Because you did not use your estate tax exemption; instead, you took it to your grave. A simple will, between spouses, usually leaves everything to the surviving spouse. In our $2 million example, when the second spouse dies, he/she has a $1 million exemption and the other million is subject to tax. By having a complex will (one that sets up a trust at the first death) and owning your property correctly, at the first death a trust is established. In 2011, since the exemption is $1 million, that is the amount that is put into the trust. Although the spouse has access to the money/property in the trust, they do not own it because it is not in their estate. Therefore, in the above example, if the married couple has a $2 million estate and $1 millionis put into the trust, the surviving spouse has an estate of $1 million. With a $1 millionexemption, there is no tax. Having the proper will and owning their property correctly will save this couple (or, more accurately, their heirs) $435,000 in estate taxes. Securities and advisory services offered through LPL Financial, Member FINRA/SIPC

Visit To Italy

May 25, 1986 I got the assignment to referee my first world title fight in Italy shortly after the bombing of Tripoli. The fight was between Reyes Cruz and Gary Hinton for Aaron Pryor's abdicated International Boxing Federation title. Friends and others warned of the dangers of the trip. People will always tell you what you can't do. They used to advise me of the ills of my profession when I was a young boxer. The plane carrying the officials left New York at 8:30 P. M. on a Wednesday bound for another place and another time. The airport to Milan was scary. Shrouded in a morning mist it was virtually empty except for stern-faced soldiers with small machine guns and big dogs. The "we" consisted of judges Gene Grant, Frank Cairo, Phil Newman and Bob Lee, the I. F. B. president. Sleepily, I pictured German and Italian troops trekking the rugged countryside as the small bus followed a winding river. Four and a half hours later we arrived at our hotel in Lucca, Italy. Thursday night was the first dinner feting the American officials at one of the city's unpretentious (the only kind they have) four star restaurants. After a superb meal, we were given a walking tour of the city with some of the local dignitaries (we were considered foreign dignitaries). The streets we walked were built by the Romans and the cathedrals we gaped at were I00 years old. In the middle of the city's central square, one of our escorts is admonished, “In America you build something that lasts 40 years, then you build another. Over here we build things to last!” The nature of the trip and the feelings of the evening caused one member of our party to observe, "Being here it seems strange that a country with a 200 year history is talking about banning a sport that predates Lucca's roadbuilders." At the Friday afternoon rules meeting, we had a discussion of the rules governing the bout with the opposing camps. It has always struck me as odd that fighters seldom attend these sessions. I guess it shouldn't as they are rarely consulted by the associations and legislatures who rule their lives. These confabs can be quite lively as some seconds see them as an opportunity to practice pre-fight one upmanship. This one was calm until Marvin Gordon, Hinton's trainer, stood up and, with a thundering voice, said to me: "I have been watching tapes of Cruz and he likes to come and grab the head after a flurry of punches. What are you going to do about that?" I responded: "I will enforce the rule against pulling down on an opponent's head just as I will enforce all of the other rules we have discovered here today." Establishing control of a fight can begin long before the opening bell. Gary Hinton, from Philadelphia, is a slick, stand-up boxer. Reyes Cruz of the Dominican Republic is a strong walk-in southpaw and a pretty good puncher. What was this fight doing in Italy? That has to do with the business of boxing, which is spelled t-e-l-e-v-i-s-i-o-n. American promoter RusseI Peltz, had signed the fighters for purses of $30,000 and $20,000. Since you draw that kind of money with a live gate these days you must peddle your wares electronically. In America, the people at the tube are more interested in putting on a "name" than they are in putting on good fights. Since neither Hinton nor Cruz are yet household commodities, Peltz could not make a sale stateside so he called Italy. The Italians were only too glad to broadcast the fight. The fighters marched to the ring through an army of pompom girls while the Public announce system reverberated the rafters with disco music. As the gloves were put on, the tension mounted. The crowd hankered for a real fight. The first round was a get acquainted session without much action. The fans responded with whistles and stamping of feet. The next 14 rounds were studies in just what a marvelous physical and mental chess game boxing could be. When two highly skilled, well conditioned fighters go at it hard (and get out of it themselves), the referee has the best seat in the house. His main function is to stay out of the way. That's how it was through the middle rounds. The punching was crisp, the movement fluid, and the pace torrid. The fans went crazy, as they had not before seen this caliber of fight in their Palazzetto Dello Sport. As I flew around the ring (fighters who weigh 140 pounds move quickly) I was glad a referee no longer scored fights. I was concerned with the well being of the fighters and enforcing the rules rather than worrying about who was ahead. In the middle rounds, I had to become more involved. When fighters tire they clinch to rest. A referee must move and motivate them to either punch while inside or get out. Also, as Hinton's trainer observed at the rules meeting, Cruz began grabbing his opponent's head after a flurry of punches. When I was a fighter, I prayed for opponents to grab my head. It left one less hand for punching and some wonderfully exposed ribs. I gave Cruz a few warnings, but I believe Hinton’s hard shots to the ribs had more to do with Cruz abandoning that tactic. After the 10th round, fatigue took its effect. Both fighters laid in the clinches a little longer and looked for "hidden' opportunities, like wrestling for position in a clinch, hitting at the break or hitting after the bell. In order to maintain control you must be proactive not reactive. You must he aware of something. like a late punch, before it happens. With a little direction from the referee, the fight was completed without mishap. At the end of a very close, truly outstanding fight, I had the pleasure of raising the hand of the champion, Gary Hinton. The day after the fight was wind down time, spent shopping, sight-seeing and discussing the fight. I didn't feel the excitement of victory or the frustration and deep disappointment of defeat that I felt as a boxer in a big fight, but I did feel a real sense of accomplished having been the third man. A great fight is like great drama. Powerful forces are pitted against each other, but in boxing there's no script. Not knowing the outcome adds excitement. After the fight, knowing the outcome adds relief. That's why fighters eagerly embrace after a fight. The bus ride back to the airport was a lot better than the ride from It. The bus was big, not small. We were well rested, not exhausted. And we had lots of company—the fighters' camp replete with trainers, managers, wives and sparring partners. The officials were last to board and sat up front. The Hinton faction was in the middle and the Cruz group in the rear. There was little chatter during the first hour as it was very early and everybody was still half asleep. But as the sun rose and the bus rolled along the winding road, things loosened up. By the halfway mark, both camps were freely mingling. To a non-boxing person it might appear odd that two groups of people who had faced each other in a heated battle 30 hours before were now acting like old friends. To a boxing person, it's not odd. The thinking is something like: "We were at the top of our game before the fight. We shared something special during the fight. We made a few bucks. We're still at the top. Life is good."

The bull on the east versus the bear on the west

October 29, 2010 Two weeks ago, I traveled to Newport Beach California (where, by the way, a Mercedes is barely an acceptable car) to attend a due diligence meeting in the offices of Allianz Global Investors. What is a due diligence meeting and who are Allianz Global Investors? In my financial planning practice, I do not manage money, i.e., pick stocks, bonds and other securities for clients. Instead, I select money managers, such as Allianz Global Investors, to do that. A due diligence meeting is one in which you meet the managers, and learn about the system they use to manage money. A few years ago, Allianz Global Investors, a large international company based in Germany, bought PIMCO, a bond manager with $247,898 in millions in assets under management. Bill Gross, the longtime manager of the PIMCO Total Return Fund, the largest bond fund in the world, has been named the "Fixed Income Manager of the Year" three times. In the trade, bond pickers are usually dour folks. Why? Stocks make money on good news, bonds make money on bad news, so it stands to reason that bond managers like bad news. But Bill Gross brings misery to a subterranean level. His concept, "The New Normal," can be described as making Armageddon look attractive. In a nutshell, he believes that all the bad things that have been happening in the economy will to continue to happen, i.e., we will never come out of the economic funk in which we currently find ourselves. Here are a few of Gross’comments: "China doesn't need any carriers to do damage. All they need to do is cash in some of our bonds that they hold." He continued, "If I were to sell a lot of bonds, that would put a lot of pressure on the economy." Needless to say, I didn't leave that meeting as a happy camper. A week later, I came back to the right coast, to Manhattan for a due diligence meeting at the offices of BlackRock, a large international money manager with $3.19 billion under management. Bob Doll is a Vice-Chairman and Chief Equity Strategist at BlackRock. Since the 1990s, Doll has published a series of economic and market predictions at the beginning of each year. He is more often right than wrong, and, in 2007, he was 7 out of 10 for which he received media kudos. Here are his predictions for this year: 1) US equities experience high single-digit percentage total returns after the worst decade since the 1930s. Yes folks, the S&P (a measure of the broad market) lost money over the past 10 years. This is the first time that this has happened since the Great Depression. The silver lining to this is that 10 years of negative annual stock market returns has invariably produced attractive returns over the subsequent 10 years. Score one for Doll. Take one from Gross who sees nothing improving. 2) Recessions occur more frequently during this decade than only once a decade as occurred in the last 20 years. Since 1910, three recessions at an average frequency of 3.8 years. Since 1990, three recessions at an average frequency of every eight years (BlackRock, Inc.). We’ll call this a tie as Gross agrees. 3) Healthcare, information technology and energy alternatives are leading growth areas for the United States. Gross, being a bond guy did not have much to say about this. 4) The US dollar continues to become less dominant as the decade progresses. Both would agree on this, with Gross being more didactic. 5) Interest rates move more irregularly higher in the developed world. 6) Country self-interest leads to more trade and political conflicts. Gross would agree on this. 7) An aging and declining population gives Europe some of Japan's problems. Gross would agree. 8) World growth is led by emerging-market consumers. Gross would agree. 9) Emerging markets weighting in global indices rise significantly. Gross would agree on this also. 10) China's economic and political ascent continues. Based on his carrier comment, Gross agrees. Interestingly, one would not expect that a bull and a bear would agree on so much. However, the real difference between the two comes in the actions taken by each party. For example, Doll’s tips for long-term investors are as follows: · Overweighting stocks and other risk assets versus treasuries and cash. Gross sees the stock market continuing to be in a funk and would not put a nickel in it. · Overweight U.S. stocks versus other developed market equities. Doll says, "Although we are predicting a slower growth environment in the United States marked by more frequent recessions, on a comparative basis, U.S. growth should still be stronger than that of other developed markets.” · Focusing on opportunities in emerging markets. · Allocating to better positioned sectors. Who's right and who's wrong? It really doesn't matter as long as they both continue to make money for their investors. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual. To determine which investment(s) may be appropriate to you, consult your financial advisor prior to investing.

Will Law Create New Jobs?

October 15, 2010 On Monday, Sept. 27, President Obama signed the Small Business Jobs Act into law. What do we have to look forward to this time from Washington? Will it create jobs? Will it save taxes? Will it help you? To get those answers, let’s take a look at the latest from Washington. The bill promises $12 billion in projected tax breaks. It offers small business owners and small business investors some nice opportunities for federal tax savings. It will allow business owners to write off 50 percent of the cost of new equipment immediately, and raise the deduction for startup expenses all the way up to $10,000. Long-term investors in certain small businesses will be exempt from capital gains taxes. And, owners of retail shops and restaurants will be able to get deductions for remodeling expenses. The following is a general rundown of the provisions of Small Business Jobs Act: General Business Credit Carried Back Five Years. Under current law, a business’ unused general business credit may generally be carried back to offset taxes paid in the previous year, and the remaining amount may be carried forward for 20 years to offset future tax liabilities. This bill extends the one year carry back for general business credits to five years for certain small businesses. Increase Small Business Administration (SBA) Loan Limits. This provision increases 7(a) loan limits from $2 million to $5 million, 504 loans from $1.5 million to $5.5 million, and microloans from $35,000 to $50,000. Extend Elimination of Small Business Administration (SBA) Loan Fees. This provision extends the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75 percent to 90 percent. State Small Business Credit Initiative (SSBCI). This bill provides $1.5 billion in grants to states to support small business lending programs. States will apply for the funds to be used for approved programs that leverage private lenders to extend greater credit to small businesses and manufacturers. The program allows states to build upon successful models for state small business programs, including capital access, loan participation, collateral support, state-run venture capital and credit guarantee programs. Extension of Bonus Depreciation. Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Congress temporarily allowed businesses to recover the costs of certain capital expenditures made in 2008 and 2009 more quickly than under ordinary depreciation schedules by permitting those businesses to immediately write-off 50 percent of the cost of depreciable property placed in service in those years. This bill extends the additional, first-year 50 percent depreciation for qualifying property purchased and placed in service in 2010. Improved Small Business Contracting. This bill removes the red tape and closes loop holes that too often put government work into the hands of multinational corporations instead of Main Street businesses. Increasing contracts to small businesses by just 2 percent can create more than 60,000 jobs. This legislation also provides for a periodic review of small business size standards to ensure that size indicators are consistent with inflation and industry growth of small businesses. It establishes accountability of large business prime contractors for prompt payment to small business subcontractors. Enough already! Did you understand the above? If you did, you are either a Certified Public Accountant or a business owner, but what about the rest of the world? If you didn’t understand it, good for you, you can put your brain cells to much better use. I’ve got an idea. Let’s get rid of the complicated tax code that is, to put it mildly, overwhelming! Banish a system that deals out breaks based on an over lobbied Congress. Let’s make it simple. Let’s get rid of the IRS and replace it with a simple flat tax that everyone can mail in so that everybody pays their fair share of the cost of good governance! The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Giving gifts to kids

October 1, 2010 Do you have a child or a grandchild who owns an UGMA (Uniform Gift to Minors Act) or an UTMA (Uniform Transfer to Minors Act)? If you do, you might want to review them. Giving gifts to children is neither a novel nor contemporary idea. Back in 1956, the National Conference of Commissioners on Uniform State Laws (a group that tries to get the states to make laws that are similar; after all, we are a Republic) proposed a law regarding gifts of securities (stocks and bonds) to minors. Interestingly, the law was sponsored by the New York Stock Exchange and the Association of Stock Exchange Firms. Later, the law was broadened to include gifts of money. Giving gifts to children through UGMAs can have multiple benefits. The child can see their assets grow, which is a good thing, and some, but not all, of the taxes are paid at the child's (usually lower) tax bracket. However, there are drawbacks as well. Once you make a gift, it belongs to the child-- you can't take it back. Additionally, at the age of majority (which is 18 in New Jersey), the word that starts with a C, college can change to another word that starts with a C, Corvette. There are estate planning issues with UGMAs as well. If you are the custodian of the trust, at your death, the value of the UGMA becomes part of your estate because you retain the power to determine how your gift will be applied for the benefit of the child. An easy fix for this is to name someone else as custodian. Another potential problem is income tax. It is your legal obligation to support your child (assuming you claim them as a dependent). If you use the income from the UGMA to satisfy this obligation, the IRS can make a case that the income is taxable to you and not your child. Also, if the child dies before receiving the account, the asset will pass according to state law which may not be what you would want, especially if the child has siblings. The way to solve this problem is to pay a few bucks and have a lawyer draw a trust with more flexibility than what is provided by UGMAs. Lastly, if you are using an UGMA to fund a college education, don't. There are a myriad of reasons why 529 plans are better for funding college education than UGMAs and UTMAs. Let's begin with student aid. Most student owned investments e.g., UGMAs and UTMAs must be reported on the federal aid application, the FAFSA, and are factored into the expected family contribution at the relatively high rate of 35 percent. However, under recent changes in the financial aid laws, student owned 529 plans are not reportable and have no impact on the child's eligibility for federal aid. And parent owned assets, including 529 plans, are factored in for financial aid purposes on a sliding scale with a maximum of 5.64 percent. The next consideration is tax benefits. I ran some numbers comparing a $10,000 investment in a 529 plan to that of an UGMA for a one-year-old who would begin college at age 18. The difference came out to be several thousand dollars. Why the big difference? That's easy - taxes. The money in the UGMA is taxable annually and the money in the 529, if used for higher education, is not. So, if you want to trade in your clunker, UGMA, for a new model, a 529 plan, you will have to cash in the UGMA account because 529 plans cannot accept securities. But take heart because, as Yogi Berra in his AFLAC commercial said, "Cash is just as good as money." Here are a few other housekeeping details you should know about. The 529 will keep some of the attributes of the UGMA account. The money still belongs to the child, not the custodian, and will be available to the child at the age of 18. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The challenge of college cost while saving for retirement

September 17, 2010 The demographics have spoken. In our society, many couples have chosen to delay having children; therefore, many of us face the double barrel of paying for college while saving for retirement. If you are in that situation, here are some ideas that may be of benefit to you. The first concept is to get your priorities in order. Since there is no such thing as “retirement loans” or “retirement aid,” I guess you can figure which should come first. Yes, retirement is “numero uno.” Your son or daughter might qualify for student loans or financial aid. By the time they are 30 or 35, they will have the earnings potential to pay those loans back. In most cases, it is much harder to earn money at age 65 than at age 35. Because of this, many parents choose to allow the younger generation to assume the debt. The following are some short-term and long-term ideas you may want to consider if you are facing college costs: While dollar-cost averaging (saving or investing a fixed amount periodically) is a useful way to build retirement savings, its value often goes unrecognized, when it comes to saving for higher education. If you are able to put even $40 a month in a basic savings account with a tiny interest rate, over 10 years you will have saved approximately $5,000. That’s nothing to sneeze at, and it will certainly help out. It’s as simple as moving money from a checking account each month into a savings or investment account. Another consideration is a tax-advantaged college savings plan. You might want to consider establishing a 529 plan. These government created programs provide tax-advantaged growth and tax-free withdrawals when the withdrawn funds are used to pay qualified education costs. Not all 529 plans are the same. In fact, some of them will even provide a small cash “match” or “sign-up” bonus when you start your plan. Some 529 plans are even “prepaid,” meaning you may be able to secure future tuition rates at current prices, usually at in-state public colleges. Another advantage of the prepaid plans is that they are often guaranteed by the state. So, do your homework. Another possibility is to use your credit card (s). No, don’t pay for college with it … well, at least not directly. Some credit cards offer you a cash-back rewards option. You may as well put the rewards toward college. Also, some of the major banks allow you to do this and so do online shopping websites such as Upromise. Keep your income as low as possible in the base income year--the calendar year that starts as your child is in the middle of his or her junior year in high school. That is the year when college financial aid departments start to look at a family’s earned and received income. If you can avoid taking capital gains or a distribution from a 401(k) or 403(b) in that year, you will be able to keep your taxable income lower. Will Roth IRA conversions raise eyebrows? Yes, they will. However, don’t stop contributing to your own retirement savings accounts, and feel free to pay off consumer debts with the money from your savings and checking accounts. The assets in these accounts aren’t used in financial aid formulas. Let the school know if your financial situation has changed. With the economy the way it is, chances are the value of your home has decreased. Is your business netting you far less than it once did? Financial aid departments should be willing to consider these developments and may be able to adjust aid for your student accordingly. Make this a family affair. In some cultures, it is common for all members of a family to pitch in on the down payment or mortgage payments for a home. Consider this strategy as your family saves for college. Close friends and family members may be happy to make ongoing contributions to a college savings plan for your child, and/or an annual “birthday” contribution. They may find giving such a gift to be much more meaningful and fulfilling than a toy or article of clothing. In short, hunting for every scholarship available, making every alumni connection possible, and finding a great school at a reasonable price is what’s important. However, it may be just as useful (if not more) to be both creative and consistent as you save for college. While it has always been a challenge, by putting some thought into it, most families and students can find ways to fund a college education. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Some financial tips for married life

September 10, 2010 Are you marrying soon? Have you recently married? As you begin your life together, it's important for you to combine your finances and begin planning for your financial future. Here are some ideas you might want to consider. Let's begin with retirement planning. There's a chance that decades from now, many of us who are currently saving and investing for the future might end up millionaires. Actually, we may all need to become millionaires to successfully retire. According to Social Security Administration projections, the average 63-year-old in 2010 is expected to live until the age of 84. So, today's typical retiree is looking at a retirement lasting, approximately, 20 years. Furthermore, some of these retirees (many more than in previous generations) may very well live past 100. So, sit down and put a pen or pencil to your retirement savings plans: 401(k), 403 (b), 457, etc. Remember, when contributing to a qualified (one approved by the IRS) retirement plan, you receive three benefits. 1. You get an income tax deduction for your contribution. 2. You get a tax deferral until you make withdrawals. 3. You pay tax on withdrawals: however, in most cases, your tax rate will be lower than when you made the contributions. Given ongoing advances in healthcare, how long might you live? Living to be 90 or 100 might become commonplace for members of Gen X and Gen Y. Factor in inflation's effect on the cost of goods and services and you can see a possible scenario ahead where you might need, say, $100,000 or more a year for 30 years to have a comfortable retirement during which you don't outlive your assets. This (strong) possibility means you may want to make savings for retirement now a high priority. Given a typical couple, because one spouse might be more risk-averse than the other (sometimes dramatically), you need to agree on the investment approach you take. Often, a financial advisor can act as an arbiter to help you in setting your level of investment risk. The level of risk you accept will be tied to the financial outcomes t you achieve. The next topic is debt management. Many people go through life shouldering five-figure or even six-figure debts. When couples marry, the danger is that one spouse’s debt will be seen as "his debt" or "her debt." Arguments often erupt because "your debt" is hurting "us." Debt management should be a priority for any newly married couple. There are good debts, such as a mortgage, and there are bad debts, such as credit cards and other channels. It is important for new couples to live within their means. An established, mutually agreed-upon budget can be very helpful in this regard. Different people have different levels of thrift, and a different perception of what a "bargain" looks like. This perception gap can result in some interesting financial moments in your life when your spouse picks up a "bargain" that you call an “extravagance.” Insurance coverage is an important area when you consider what can happen in your life. You can become ill, disabled, you can die, your property can become damaged, you can be sued or you can find yourself in a long-term care facility that costs over $100,000 per year. To protect yourself against these risks, make sure you purchase adequate insurance. Communicate well to avoid surprises. No matter how much of a "we" a couple becomes, there is always a need for some private space -- some individual pursuits and "me time." That's great, but it’s probably not the best approach when it comes to your shared financial life. When a spouse starts to hide a money related matter or omits it from conversations, it may open the door to troubles. Open, frank conversations about money are the best way to avoid problems in your finances (as well as your relationship). Build an emergency fund. Many couples, nice, once-affluent people, who were hit hard by the downturn suddenly found themselves living in their car or a motel. When things got rough, many had no emergency fund to sustain them and ended up homeless. Consider building up a cash reserve (gradually, if necessary) that you can tap into should something go wrong. You won't regret having it around. Lastly, if you plan to raise children, it's never too late to start saving for college. You can save a little at a time; a little each month. You can open a Section 529 college savings plan using different investment vehicles. In addition to offering some significant tax advantages, gifts from family and friends can be added to the plan. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

How to help a charity

August 27, 2010 The recent economic turmoil has forced many of our favorite charities to cut back on the valuable services they provide. In many cases, they receive subsidies from the state or federal government and, if you don’t live under a rock, you know what’s happening there. Simply stated, they need our help. Now! Fortunately, private donations can make up the difference. Donors are coming to the rescue of these organizations with life income gifts and gifts of life insurance – financial moves that have perks for the giver as well as the receiver Let’s begin with gift annuities. A life income gift, also known as a gift annuity, offers the charitable donor some substantial benefits. A gift annuity is a simple agreement with a charitable organization by which you make an irrevocable gift of cash, appreciated securities or real estate. In return, you and/or one other person you select, receive a fixed annual income the charitable organization is obligated to pay you. Usually, some of this income is tax-free. If you make a cash gift, part of the fixed income payments will be taxed as ordinary income and the remainder will be untaxed. If you contribute securities or real estate you have owned for a year or more, percentages of the income you receive may be taxed as ordinary income or capital gains, while some of it may not be taxed. You may also claim an income tax deduction in the year you establish the gift annuity, and if you fund your gift with an appreciated asset, you may eliminate a portion of your capital gains tax. As a gift annuity can be immediate or deferred (i.e., income payments to you can start this year or in a future year), you have potential for enhanced annual income later in life if it is funded today with low-yielding assets. Life insurance is another way of gifting to a charity. Many people have insurance policies that they took out in the past for which there is no longer a need. A gift of life insurance will be welcomed by a charity, as it is self-completing – the funding objective linked to the gift is fulfilled when the donor passes away. If you make yearly planned gifts to a non-profit, you can assign a percentage of your annual donation to a life insurance policy, therefore guaranteeing the perpetuation of your gift. Actually, life insurance gifts can be given in several different ways. Here are just a few of the options: You can gift a life insurance policy you now own to a charity. You can donate a new policy you buy, or have the charitable organization purchase a policy on your life and pay the annual premiums. You may claim an income tax deduction in the year you do this. You can name a charity as the primary beneficiary of your policy. While that move won’t bring you an income tax deduction this year, it will bring you a federal estate tax deduction for the full amount of the proceeds payable to the 501(c)(3) – the IRS’s name for a charitable organization. You can assign policy dividends to a charity. This creates a deduction as dividends are paid. You can also amplify the magnitude of your contribution: the dividends can be used to purchase a new policy, with the charity as irrevocable owner and beneficiary. Have you accumulated a great deal of assets in a deferred compensation plan or a supplemental retirement plan (SERP)? If so, you face the chance that your heirs might only receive about a quarter of that wealth after income and estate taxes. Some executives and business owners in this situation have exchanged a SERP, or deferred comp plan for a split-dollar life insurance policy, which allows them legally to avoid the above-mentioned income and estate taxes while directing substantial wealth to charities. (split dollar means that there are multiple beneficiaries). There are four things to remember with life insurance gifts: 1) If you want to receive an income tax deduction in the year you make the gift, the gift has to be irrevocable – you must surrender ownership of the policy. 2) If you make an irrevocable life insurance gift within three years of your death, the amount of the gift will be included in your gross estate. 3) T here is a ceiling on the annual charitable deduction you can take. It is 30 percent of your adjusted gross income (AGI) for gifts to private non-profit organizations and 50 percent if the non-profit is a public organization. 4) Remember, you can carry excess deductions on charitable gifts forward for up to five tax years. With summer and fall being ideal times to revisit your tax strategy, you might want to look into these useful ways of gifting to your favorite charity(ies). The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual. .

World of finance may be facing new regulations

August 13, 2010 On July 15, the U.S. Senate passed the biggest financial industry regulation since the Great Depression by a vote of 60-39. The bill will be sent to President Obama for signature. Senator Chris Dodd , D-Conn., the architect of the legislation, said, “Never again, ever again should we have to go through what we did in the fall of 2008 to ask the American taxpayer to write a check for $700 billion to bail out a handful of financial institutions that frankly, in many cases, helped create the mess we were in.” Senator Richard Shelby of Alabama, the banking committee’s top Republican, called the bill a “2,300-page legislative monster.” It creates vast new bureaucracies with little accountability and seriously, I believe, undermines the competitiveness of the American economy.” The size of the bill makes it similar to the recently passed health-care bill of which Speaker of the House, Nancy Pelosi, remarked, "But we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.” Well, before the fog rises, here are some of the issues addressed in the bill. It creates the Bureau of Consumer Financial Protection (BCFP). This new consumer agency, answering to the Federal Reserve, would supervise mortgages, credit cards, student loans, and the banks, credit unions and private lenders that issue them. Although institutions holding less than $10 million in assets wouldn’t be regulated by the BCFP, they will have to follow its rules. The BCFP will aim to make these products easier to comprehend for consumers and crack down on any possible deceptive practices. You may be able to see your credit score for free. If you are turned down for a mortgage or a loan, the new reforms would give you the power to see the credit score supplied to your lender. Right now, you can request three free credit reports each year, but you can’t see your actual score. That’s pretty funny. The bill provides tougher rules for mortgage lenders. Of course, these rules should have come into play years ago, but better late than never. Mortgage lenders would need to verify the assets and income of borrowers, thwarting any surreptitious comeback for “liar loans.” Loan officers and mortgage brokers would not be able to receive bonuses for guiding you into this or that loan. Borrowers with adjustable rate mortgages (ARMs) and other types of complex home loans cannot be hit with prepayment penalties should they pay off a mortgage before the end of its term. Under the new legislation, stores can set minimums for credit card use. Score one for retailers, who are unhappy when consumers make $2 credit card purchases because the swipe fee alone cancels out the revenue. The minimum transaction level could be as high as $10 if a store chooses; furthermore, the Federal Reserve could raise that $10 minimum limit with time. Alternatively, stores could offer consumers discounts if they pay for items with cash or debit cards. (However, they wouldn’t be able to vary the discounts for different debit cards.) Additionally, the proposed reforms could allow colleges and universities and the U.S. government to set maximums for credit card transactions. Stock brokers could be held to a fiduciary standard. Under the new reforms, the Securities and Exchange Commission now has the chance to hold brokers to the same fiduciary standard common to financial advisers – that is, investment brokers would have to put a client’s best interest first and not simply recommend a “suitable” investment to a client. That new standard may or may not come into play; however, the SEC is undertaking a six-month study to see if such a rule would amount to regulatory overlap or not. The big banks got a key concession from Congress: they don’t have to get rid of their swaps-trading desks (some legislators had contended that this decision would drive such trading to foreign markets). They can continue to be involved in foreign-exchange and interest-rate swaps dealing. An Office of Credit Ratings will be created to oversee the actions of Moody's, Standard and Poor's and others. One of its objectives would be to flag potential conflicts of interest. The SEC would no longer regulate equity-indexed annuities. The promotion and sale of these annuity contracts has generated much flak in recent years. Interestingly, they would be overseen by state insurance regulators if the reform bill passes, and treated strictly as insurance products. Interestingly, there is no mention in the 2,300-page bill of housing giants Fannie Mae and Freddie Mac, the longtime "government-sponsored enterprises" (GSE). Last summer, the Congressional Budget Office estimated that the cost of subsidizing the GSEs would amount to $389 billion through 2019. Oh well, better luck next time. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Taxing the rich

August 6, 2010 “Tax the rich, feed the poor till there are no rich no more. I'd love to change the world, but I don't know what to do, so I'll leave it up to you.” Lyrics from “I'd Love To Change The World” Ten Years After This song was sung by a blues/rock band from Nottingham, England where Robin Hood allegedly stole from the rich to give to the poor. They took their name because it was 10 years after what lead singer, Alvin Lee, considered the birth of rock 'n roll due to the great year that Elvis Presley had in 1956. They played at Woodstock and “I'd Love To Change The World" made it to the Top 40 chart here in the USA. On October 14, 2008, candidate Barack Obama met Joe Wurzelbacher, a big, bald man with a goatee, a.k.a., Joe the plumber. Joe said to candidate Obama, "I'm getting ready to buy a company that makes 250 to 280 thousand dollars a year. Your new tax plan is going to cost me more, isn't it?" Candidate Obama’s answer, which lasted five minutes 46 seconds, mentioned a 50 percent tax credit that will entitle the taxpayer to a tax cut for health care costs. Taxes would go from 36 percent to 39 percent, which is what it was during Bill Clinton’s administration, along with many other things. He ended with, "When you spread the wealth around, it's good for everybody." In 2013, “wealthy” Americans will pay extra Medicare taxes. Congress, President Obama, and the IRS are putting a surcharge on the wealthy to help fund the health care reforms. 1. Beginning in 2013, joint filers with adjusted gross incomes of $250,000 or greater and single filers with AGI of $200,000 or greater will have to pay 0.9 percent extra in FICA taxes (that is, Social Security and Medicare taxes). The employers of these taxpayers do not face an increase. 2. Joint filers with modified adjusted gross income (MAGI) of $250,000 or more and single filers with MAGI of $200,000 or more will be docked with a 3.8 percent tax on investment income. (Even estates and trusts will be subject to this new 3.8 percent levy.) What might the dollar impact be? The Tax Foundation thinks that the richest 1 percent of American families will pay an average of $52,000 more in federal taxes by 2016. What are the chances of these tax hikes being repealed? Think slim and none. Basically, you’d have to repeal the health care reforms to make it happen. How can you avoid the 3.8 percent tax on dividends, capital gains & interest? It won’t be easy. Real estate investors may luck out the most because federal law characterizes rental income as “active” rather than “passive.” On the other hand, if you sell a home you’ve owned for decades and see a taxable gain above the home sale exclusion ($250,000 single/ $500,000 married), you’ll face the 3.8 percent tax. Some forms of unearned income won’t be slapped with the tax. IRA distributions and income distributions from 401(k), 403(b) and 457(b) plans will be exempt. The same goes for pension income and Social Security income. Annuities that are part of a pension plan will be exempt. Business income won’t be hit with the 3.8 percent tax either. Veterans’ benefits, life insurance payouts, and interest earned by municipal bonds will also be spared. As a result of this tax, you might start to see subtle shifts in financial strategy. You might see more muni bond purchases, more interest in life insurance, and more installment sales. As qualified Roth IRA distributions don’t boost AGI, you might be looking at another factor promoting Roth IRA conversions. Also, everyone might think about taking some capital gains prior to 2013. (Restrictions, penalties, and taxes may apply. Unless certain criteria is met, Roth IRA owners must be 59 ½ or older and have the IRA for 5 years before tax-free withdrawals are permitted.) According to Wealth for the Common Good, the wealthiest Americans have paid less tax in recent decades. A recent press release from the group notes that “America’s highest earners — the top 400 — have seen their share of income paid in federal income tax plummet from 51.2 percent in 1955 to 16.6 percent in 2007, the most recent year with top 400 statistics available." So, how can you reduce your taxes in 2013? It is not too early to think about it. You might want to meet with a financial planner to discuss this topic, or read up on your options. “World pollution, there's no solution. Institution, electrocution. Just black and white, rich and poor. Them and us, stop the war.” More lyrics from "I'd Love To Change The World" Ten Years After Please consult your tax advisor prior to taking any action. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Downsize house in retirement?

July 16, 2010 You're near retirement. Your large home is nearly or fully paid off. The kids are gone but the high upkeep costs are not. Should you retire and keep your home or should you retire, sell your home, and buy a smaller, less expensive, place, a.k.a., downsize? This is a common quandary that many folks find themselves in today, based on financial and lifestyle trade-offs. There is no right or wrong answer; instead, there are many possibilities. So, the way to begin your study of, "should I downsize my home?” begins with cash flow projections. Most medical examinations begin with blood pressure and heart rate tests. Similarly, since cash flow is the heart and circulatory system of financial planning, we begin a plan with a study of cash flow. In scenario one, you have the big house in an “expensive” town with a good school system. The kids are gone so you no longer need a great school system. Property taxes are lower in nearby towns so, why not downsize and put the savings in your pocket? Another consideration is your mortgage. If you have been in your current house for a long time, you could be at the "back end" of your mortgage. Mortgages are designed to be mostly interest payments at the front end and mostly principal payments at the backend. So, if you have a mature mortgage, you are paying mostly principal and little interest. If you were to buy a new, less expensive home and finance part of it with a mortgage, (not a bad idea with rates below 5%) you would reverse the trend and have the bulk of the payment applied to interest. Many people in retirement find tax write-offs hard to come by, so a mortgage deduction can be a welcome event. Conversely, with the lack of prepayment penalties in today's mortgages, if your mortgage payments become challenging, you can always pay off the mortgage without any penalties. Another consideration is the cost of living. Here in the Garden State, we are among the highest cost of living states in the country. That’s fine when you are working and earning some of the best incomes in the country, but when you retire; it's like being on a seesaw when your partner hops off. So, moving out of the area can really cut down the nut. However, this decision (as many others in financial planning) is not just about money. Other considerations are about lifestyle. Maybe you can't keep up with your present home i.e., you have trouble with the stairs. Perhaps a 55 and over community appeals to you, or, you want to escape the snow. On the other hand, if friends and family here mean a lot to you, moving is out of the question. Well, you could have the best of both worlds. If you don't like the snow, buy another property in sunnier climes and go there in the winter but be sure and do your homework. I have had clients who had a place in Florida and loved it in the wintertime, which was the only season that they stayed while they were working. When they retired, they pulled up the stakes and headed south. To their chagrin, they found that they loved it in the winter but hated it in the summer, when the humidity climbed up the walls and the Palmetto bugs aka, flying roaches cruised the air. Instead, be more like another client I have who set out on a mission to find a lakefront house in a warm climate for $750,000. Where did that number come from? We ran several cash flows with different mortgage amounts, tax burdens, living expenses and other key factors until we got what was right for him. He began his search in the Carolinas where he found prices to be over $1,500,000. He headed south and hunted until he found his dream house on a beautiful lake in the great state of Tennessee for the price that was right for him and his wife. The moral of the story - a lot of planning goes a long way. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

How to sell a business

May 14, 2010 If you own shares of a business that is publicly traded on a major exchange, selling them is pretty simple. You can look up the share price in a newspaper, which is difficult these days as stock listings in newspapers have become rather limited, or you can go online while calling your broker on a landline, and instruct him or her to sell the stock. You can also look up the stock on your portable phone, and send online instructions to sell within your electronic stock account. And, if you're deceased? No problem had you done proper estate planning i.e., you have a will, a durable power of attorney and a living will. This allows the agent you appointed to use your durable power of attorney to make the trade. But, what if you own the company and you're not Warren Buffet? Warren Buffet's heirs can easily sell their shares of Berkshire Hathaway because it is a publicly traded company. The heirs of small business owners do not have this luxury, as the shares are not publicly traded. So who's going to buy them? Perhaps a competitor will offer pennies on the dollar to the heirs during the terrible grieving time and maybe they'll take the offer because they don't believe others will be forthcoming. To add salt to the wound, the government could demand millions of dollars nine months from the date of death because of the estate tax (it's gone, for now, but not forgotten). Are you in this situation? You could be if you are the owner of part or all of a small business, with no buy-sell agreement. Okay, we've outlined the problem, now for the solution. The first step in establishing a buy-sell agreement is to find a buyer. It could be a partner, an employee, a group of employees, a family member, another business or even a competitor. Who said this would be easy? Step number two is to establish a price at which the business is sold based on disability, retirement or death. In most cases, the retirement section will yield the highest price because the business seller will usually stay on board for a period of time to provide a steady transition. Obviously, this would not be the case in disability or death. The third step is to provide funding for the agreement. The retirement portion of a buy-sell agreement can usually be taken care of from cash flow within the business or from bank loans. The disability and death provisions of the buy-sell can usually be covered by insurance policies. There are disability insurance buyout programs available that will provide a periodic payment to the disabled owner so that the new owners can “earn while they learn” without putting too much strain (paying out the disabled owner) on the business. In most cases, the best way to fund a buy-sell agreement is with life insurance. Unlike a sinking fund, where time is a problem, life insurance provides the solution from day one. It also removes the questions of whether or not the company can secure a bank loan at the time of the death of an owner, and whether or not it can afford the note payments. With an insured buy-sell agreement, the company can survive the death of an owner. Life insurance proceeds are paid, income tax free, to the company. The insurance company gives the money to the estate of the decedent and gets his stock (or partnership interest) in return. The company now has the stock and no inexperienced relatives. Furthermore, the estate has cash, which it can use to pay estate taxes or any other need. If a permanent type policy is used, values built up over time can be used to fund disability or retirement buy-out provisions. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

A review of the rules for taking money out of a Roth IRA

April 16, 2010 The rules for withdrawing money from a Roth Individual Retirement Account are different than they are for a traditional IRA; therefore, let's begin with a description and comparison of each. The traditional IRA was created by the first federal pension law - The Employee Retirement Income Security Act a.k.a. ERISA - in 1974. This was a good piece of legislation because in addition to creating the IRA, it stopped companies from stiffing former employees by moving to another state and ceasing pension payments. Prior to the law, employers could escape pension liabilities by crossing state lines just like the fabled bank robbers, Bonnie and Clyde. The Roth IRA, which was created by the Taxpayer Relief Act of 1997 (don't you love these names), was named for its advocate Sen. William Roth of Delaware. Roth may have been a good legislator, but he was an angry loser. When his constituent, Dave Tiberi, lost a split decision to middleweight champion James Toney in Atlantic City in 1992, Roth launched a federal investigation into the sport of boxing in New Jersey. Anyway, here is how a Roth differs from a traditional IRA. In a traditional IRA, you get an income tax deduction on your contribution, the money grows tax deferred until you take it out, at which time you pay tax on the amount withdrawn. With a Roth, you do not get an income tax deduction on your contribution; however, if you leave the money in the plan for five years and take it out after age 59 ½, you do not pay tax on any gains in the plan. Some other pros and cons of the two IRAs are as follows. You can roll other qualified plans into a traditional IRA; for example, at retirement, you can rollover your company 401(k), profit sharing, etc. into a traditional IRA without any tax consequences. You cannot "rollover" these plans into a Roth IRA. For wealthy people, a traditional IRA is not such a wonderful asset to own because the income, inheritance and estate tax (assuming Congress addresses the estate tax this year) can consume 88 cents of every dollar in an IRA before an heir receives it. However, there is a new quirk in the law that allows taxpayers to convert traditional IRAs to Roth IRAs regardless of income. The only problem is you've got to pay the tax now. Sometimes people want to access Roth IRA funds for early retirement or other purposes. Maybe you are one of them? You can withdraw regular contributions tax-free, but not your earnings. This is a critical distinction that many Roth IRA owners don’t seem to know about. When you withdraw assets from a Roth, there is a set order in which contributions and earnings must be distributed. The IRS regards the first layer of withdrawals from a Roth as regular contributions instead of earnings, thus this layer is treated as coming from your annual after-tax contributions. When withdrawing this layer of money, there are no taxes or penalties involved. (You can do this at any time, whether you have held your Roth for 5 years or not.) Basically, the IRS is permitting you to remove a percentage of your account before the alarm sounds on the five-year clock. The next assets to be removed from the account, according to IRS rules, are theconversion and rollover contributions to your Roth. These are removed on a so-called “first in, first out” basis. Contributions to your Roth resulting from a conversion in 2002 would have to be withdrawn before those made in 2008.The taxable portion of the conversion/rollover contribution comes out first (the amount claimed as income), and then the non-taxable portion. Lastly, earnings accrued by the Roth IRA are distributed;in other words, merely withdrawing your regular contribution will not trigger a tax. But if your Roth has realized earnings from contributions, the earnings will be subject to income tax if they are withdrawn. Is your withdrawal a qualified distribution? If so, take this into consideration: If you have owned your Roth IRA for less than 5 years and/or are younger than age 59½, you risk taking a nonqualified distribution if you withdraw money from it. You know what that means, right? You will incur a10 percent penalty for early withdrawal in addition to taxes. There are some exceptions to this outlined in IRS Publication 590. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Planning ahead with a 401(k)

February 19, 2010 Unfortunately, defined benefit plans are pretty much a thing of the past. Why do you think that is? Because they are expensive and companies no longer want to pay for them. Defined benefit plans were your father’s and grandfather’s pension plans. They worked all of their careers for “the company” and retired with a pension. In this "new age," instead of defined benefit plans, we have defined contribution plans with funny names like 401(k) and 403(b). These plans derive their name from the Internal Revenue Code, and are funded by guess who? For the most part, the employee. Love it or hate it, it is the new way, so let's learn how to make lemonade out of lemons. Although it can vary from plan to plan, generally, an employee of a company that sponsors a 401(k) plan is eligible to participate in the plan if they are 21 years old and have been with the company for a year. Employees may contribute (by deferring salary) into the plan “before tax” every payday subject to the maximum annual contribution limits of $16,500 up to age 49 and $22,000 for those age 50 and older. These plans have “before tax” contributions, which means if you put $100 into the plan, it doesn’t really cost you $100. Here’s why. The $100 contribution is not subject to income tax withholding. So, by deferring $100, your out of pocket cost is $72 (assuming a 28 percent tax bracket). Additionally, the company may “match” some portion of your contribution, e.g., for every dollar you put into the plan, the company will contribute 25 cents (which is also not taxable to you). Employee deferrals are immediately vested. Vested contributions are those that are “yours,” the ones that you can take with you should you leave the company. Vesting also applies to company matching contributions. Company contributions are subject to vesting schedules that vary from company to company, but can be no longer than 7 years. Another reality of employment is that people no longer spend their entire career with one company. The old defined benefit plans were not portable, the new 401(k) is. Anything you put into a 401(k) is yours. Should you leave company A and go to company B, you can take your vested account with you and put your money in the new company’s plan (as long as the new company’s plan allows this). If company B does not have a 401(k), you can park your money in an Individual Retirement Account (IRA) and maintain the tax deferral. Should you contribute to your company’s 401(k) plan? I will answer that question with a question. Would you, at age 65, like to receive your current salary in retirement? This seems a lofty goal because most people require less income during retirement than they did while working. Mortgages are paid, kids are educated and empires have been built! What the heck, let’s go for it! Assume that you are 36 years old and earn $80,000 per year. Further assume an annual inflation rate of 3 percent, salary increases of 3 percent, and a hypothetical earnings rate of 7 percent on your money. Take your Social Security earnings and benefit statement out of your file. Uncle Sam sends them out annually, however, if you cannot find yours, you can get your benefits online. This will give you a basis for your retirement income calculation. Subtract the number that you can expect from Social Security from an $80,000 salary. The balance can be made up from withdrawals from your 401(k) plan. However, before you can calculate withdrawals, you'll have to calculate the balance necessary to support the withdrawals. This is heavy lifting, so you'll need the services of an advisor or, if you're a do-it-yourselfer, there are online programs that can help you make the calculations. Another way to view a 401(k) contribution is to compare it to an “after tax” savings plan. If you want to put $100 into your bank account each paycheck, you would have to earn $128. After paying the government $28, you would be left with $100 to invest. Have you looked at bank savings rates lately? With 3 percent inflation, you have to get a rate of 3 percent or better just to break even. Additionally, the earnings on the money you put into the bank would be taxable versus a 401(k) contribution, which is tax deferred. This means that you will not pay any tax, until you take the money out. Do not let the lofty goal of retiring on your salary scare you. Anything you put into a 401(k) should help at retirement. Let’s say you want to dip your toe into the water and you commit to a weekly $10 deferral at age 36. Well, that will cost you about $7 after taxes. Assuming you are able to get a 7% return on your money*, when you retire at age 66, the amount in your account would be $49,119 (before taxes)! What are you waiting for? *This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of returns used do not reflect the deduction of fees and charges inherent to investing. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

Saving money using the DRIP method

September 18, 2009 I love English grammar. I attended a Catholic grammar school where the nuns taught us, among other things, how to diagram sentences and the difference between transitive and intransitive verbs. I recently looked up the word “drip” in my Random House Webster's dictionary and read the following: • Intransitive verb (v.i.) - (a verb indicating complete action) 1. to let drops fall; shed drops: This faucet drips. 2. to fall in drops, as a liquid; dribble. • Transitive verb (v.t.) - (a verb accompanied by a direct object that forms a passive) 3. to let fall in drops. • Noun (n.) - (a word used to name a person, place, or thing) 4. an act of dripping. 5. liquid that drips. 6. the sound made by falling drops: the irritating drip of a faucet. 7. Slang - a boring or colorless person. I know you're thinking, “I thought this was a financial column?” It is. Now, we can add an additional meaning of the word drip. A DRIP is an acronym for a “dividend reinvestment plan”. According to Wikipedia, “A dividend reinvestment program or dividend reinvestment plan (DRIP) is an equity investment option offered directly from the underlying company. The investor does not receive quarterly dividends directly as cash; instead, the investor's dividends are directly reinvested in the underlying equity. The investor must still pay tax annually on his or her dividend income, whether it is received or reinvested.” This allows the investment return from dividends to be immediately invested for the purpose of price appreciation and compounding, without incurring brokerage fees or waiting to accumulate enough cash for a full share of stock. Since stock dividends average a little below 2% of the share price, you cannot buy even one share with a quarterly dividend, unless you hold a lot of shares. Not to worry, most companies let you buy “fractional” shares. The dividends purchase small “pieces” of a stock until you have enough to own another share of the stock. One benefit is that you save any brokerage fees on the transactions. Instead of going through a broker to buy the stocks, you buy directly from the company through the DRIP method. The benefit to the company is that they receive a steady cash flow from existing shareholders. Most companies charge a nominal registration or enrollment fee to get into the program. Another advantage to the investor is that you get the benefit of dollar cost averaging (DCA). DCA is one of the wonders of the world because as the price of a stock goes up and down, you buy more shares when the price is low and fewer shares when the price is high. At the end of a time period, you have purchased your shares at less than the average cost of the shares. This is a good thing. (Such a plan does not assure a profit and does not protect against loss in declining markets.) As we all know, there is no such thing as a free lunch. DRIPs have their drawbacks as well. First, they create a record-keeping nightmare. Reinvesting small dividend amounts over a number of years may complicate the process of determining your cost basis, capital gains, and taxes due whenever it comes time to sell those shares. Additionally, as the fruit of a rotten tree is rather unappetizing, shares of stock in a lousy company are equally unenticing. You must stay on top of what is going on with the company from whom you are DRIPping. Another drawback is that although you are reinvesting the dividends, Uncle Sam deems you to be in receipt of them as income, so you will have to pay tax on the dividends even though you did not receive the cash. But this is not a major drawback. One strategy for safely investing comes from diversification. A properly diversified stock portfolio should have a minimum of 30 stocks representing a broad perspective of the market. No, you don’t have to be a millionaire to have a broadly diversified portfolio of DRIPping stocks because most companies require you to own only one share, although some companies may require that you have a certain number of shares as a minimum. To start DRIPping, you’ll need to enroll in the company’s program. Contact the company's shareholder relations department for a DRIP application and prospectus, which will give you all the information you need about the plan. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

When was your last financial checkup?

August 3, 2007 You hear it from your doctor and your dentist, “You need to have routine checkups!” You usually don’t, but you should hear from your lawyer to review your estate planning documents – wills, durable powers of attorney, and living wills. Every three years is a good benchmark because of changes in the law and in your personal situation. Your general insurance agent mails you renewals on your homeowners, automobile and other insurance coverage's, but rarely provides a “check up.” But that’s okay because you should be doing all of the above yourself or, better yet, find somebody who will do it for you and get it done. Everyone should have a comprehensive written financial plan (CWFP). You can either do it yourself or hire someone to do it for you. The CWFP should be reviewed annually because things change. Do you have financial goals? If you do, are they in writing, and do they include deadlines? Here’s another question. Is your debt under control? How would you know that? A CWFP will include a section on cash flow. Cash flow can be explained simply. How much do you earn? How much do you spend? The difference between the two is cash flow. If it is positive, how are you investing it? If it is negative, what adjustments can you make in your expenditures? What about tax planning? This begins with an income tax projection. How can you save on taxes? The easiest way is to have part of your salary set aside and invest it in a qualified retirement plan e.g., an IRA, your company’s 401(k), etc. This is the least painless way to save for retirement. You never see the money because it comes out of your salary via payroll deduction. This reduces your taxable income and your taxes. The money in the plan grows tax-deferred which means that you don’t pay any taxes until you withdraw the money. If you’re like most people, your taxes will be lower in retirement because you will not have a salary. The problem is you probably wouldn’t know this unless you have a financial plan. Okay, you’re convinced that salary deferral is the way to go. But how do you invest your money in your qualified and non-qualified plan(s). A CWFP addresses investments. It will match the risk of your investment portfolio with the return necessary to achieve your goals. Some of your goals may be competing. A CWFP will give an idea of how much money you will need to retire, and how much you will need for college education(s). You may not have enough for both; therefore, you might have to alter your course. Obviously, this is a problem that needs to be resolved; however, if you are unaware of it, the ticking you hear may be a time bomb. As mentioned above, your insurance agent may not provide a full review with your annual premium notice. If you have a CWFP and you review it annually, the problem is solved. Risk management is addressed in a CWFP. What are the risks of life? They are as follows: you can become ill, disabled, you can die, your property can get damaged, somebody can sue you, and you may wind up in a nursing home. These risks of life are generally insured, but you want to make sure that your coverage is adequate and up to date. The last area to be addressed in a CWFP is estate planning. Most people think of estate planning as dealing with the confiscatory estate tax rates that go up to 55%; however, they only apply to a small percentage of the population. Everyone needs the three basic documents of estate planning. They are a will, durable power of attorney, and living will. Everyone has a will. If you die without one, you are intestate, meaning the state in which you reside has one ready for you. You probably won't like this will, so you should have your own drawn up. A will tells your executor how to settle your debts and distribute your worldly goods. However, before you die, you may need the other two documents. A durable power of attorney appoints someone to handle your affairs if you become incapacitated through accident or injury. If you don't have this document someone, who you might not select, could be named your guardian through the legal system and would take control of your affairs. The last document is a living will. It tells caregivers e.g., doctors what your desires are for resuscitators, feeding tubes, etc. Your wishes may not be honored by the institution in which you find yourself, therefore, it’s a good idea to have them spelled out in a living will. So, now you see the importance of having a comprehensive written financial plan and having it reviewed annually. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

The stock market, the media, CDs, and the legal system

July 25, 2008 Let me tell you the story of a man in his mid-70’s, who you could call a “conservative” investor. Like many people, he had lost money in the stock market in the past and was concerned about that happening again. On the other hand, he wanted some growth in the account, as it would probably be left to his heirs. So, he opened an account, which held 60% in bonds and 40% in stocks. Despite the fact that the account was up 12% since inception, he wanted to sell the account. Why? Because what he was hearing in the media regarding the economic situation was deeply disturbing and it was causing him to lose sleep at night. Okay, if you've read this column over the last eight years, you know that historically the market always comes back. You know that stocks have had an average return of 11% over the past 80 years and CDs have had a historic return of a little over 4%. But if you can't sleep at night, what do historical returns mean? Nothing. So, what is this man hearing that drove him to such a decision? Bad news! Think of what you hear from the media. Oil prices are up. Do we need them to tell us that? The economy is down. This is arguable as unemployment is still benign. Home prices are still dropping. Yes, but that also happened in the late 80s and many times previously. So what! The credit crisis will never be over. Rubbish, of course it will! What I found very interesting while listening to the talking heads last week was that because things in Iraq are going pretty well, you don't see much of it on television. In fact, as of late, it only represents 2% of news time. They went on to say that the media is focusing on other "bad news" which is guess what - the economy. One of the benefits of working with an advisor is that you have someone in your corner. There are studies that show that the performance of certain mutual funds over a period of time to be X. Interestingly, the performance experienced by shareholders of the same fund is usually one half of X. Why is that? Because they don't hold the funds when the market goes down. My advice to clients regarding the bumps in the stock market, and there have been many over the years, is to stay in it. However, if you cannot sleep at night, you have to fix the problem. Back to our example. The man liquidated the account and bought a two-year CD. However, this was only done after he signed a statement that said the account was sold against the advice of his financial planner. The planner sold a 12% position and bought one for 4%. Now why did he do this? Lawsuits. The planner was not worried that the client would sue him, after all, it was the client who made the decision. But what about his heirs? After a client passes, their heirs can have a very different view of things. Here's an example. I read of a case in one of the financial industry publications of how a planner received a phone call and a threat. The call was from a child of a client who had passed away. Before the client died, she had spent a barrel of money in a nursing home for which she had no insurance. The child told the planner that he had 48 hours to produce a long-term care insurance proposal that was declined and signed by her mother. The child of the client told the planner that it was his job to recommend long-term care insurance to her mother and, if he did not produce the document within 48 hours he could expect a lawsuit. We live in a litigious society. Recently, while sitting in a sauna with my best friend after playing tennis - we attended first grade together, I mentioned a front-page New York Times story about the overuse of CT scans in the medical profession. My friend is a doctor and his retort was, "When we no longer have to practice defensive medicine we can get rid of a lot of useless tests.” Meanwhile, back to the markets. The reason it doesn't pay to bail out of the stock market on the way down, is that you never know when it will bounce back. Here are a few recent examples. 2001-2002. After the four-day closure of the stock market following 9/11, the Dow fell 685 points (the biggest single-day drop ever) to 8920 on September 17. It kept falling, losing 14.26% in a week to close at 8,235 on September 21. But what happened next? A huge gain! The Dow closed 2001 at 10,021 – a 21% rebound in less than three months.1 On October 9, 2002, the Dow had fallen to 7,286. But on Halloween, the Dow sat at 8,397 – a 10.6% gain in 22 days.1 Citations.1 the-privateer.com/chart/dow-long.html [6/30/08] The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. You can not invest directly in an index. Past performance does not guarantee future results. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.

A guide to using disclaimers in your estate planning

September 19, 2003 If they name a street for me after I’m dead, it won’t help my DNA. -Woody Allen Estate planning falls into two major categories: above the grass and below the grass. Above the grass planning consists of things that you can do before your death. This would include writing a will, creating a trust, etc. Below the grass planning is that which is done by others after you’re gone. One example of below the grass planning is using a disclaimer. A disclaimer is a tool that can save taxes by "playing possum." The clever possum can avoid predators by pretending to be dead. Through the use of a "qualified disclaimer", you or a family member can keep the predatory Internal Revenue Service from feasting on your family's wealth. A qualified disclaimer is a tool used in postmortem estate planning. Although it sounds like an oxymoron, postmortem estate planning is not only possible; it is often quite beneficial. A disclaimer is a device, under state law, which allows the recipient of a gift, whether it is the heir to an estate or the beneficiary of a trust, to renounce his/her gift, inheritance or share of the trust. The state statute provides a mechanism for individuals (called disclaimants) to avoid receiving an unwanted benefit. Typically, the statute provides that the person making the disclaimer is considered to have predeceased the transferor (you died before they did). The property disclaimed then goes to whoever would receive the property given the prior "death" of the disclaimant. Why in the world would anyone refuse a gift or bequest? Well, generally because they don't need it, and the person who would receive the gift if they were deceased does! Let's look at an example; John and Mary have three adult children. They also have all the money they will ever need. In fact, they have "too much", i.e., they will owe estate taxes upon their death. Two of their children live comfortable, though modest, middle-class lifestyles. Their third child, Harry, is a highly successful entrepreneur who has accumulated a large estate of his own. Harry, who was single, passed away in an offshore power boat race. Under state law, John and Mary are to receive the estate. They elect to "play possum" and disclaim their interest knowing that Harry’s estate will automatically be shared by their other two children. So, how do you set up a disclaimer? Well, you really don’t have to “set up” a disclaimer because anyone can use it at any time. What you have to set up are the pre-conditions of using a disclaimer. As mentioned above, the disclaimant cannot direct where the money or property goes when they disclaim; therefore, in disclaimer planning, the route of the money or property has to be properly set up as in the above example. Also, there are some requirements for a “qualified disclaimer” under federal tax rules. They are: 1) it must be irrevocable and unqualified, 2) it must be in writing, 3) the writing must be received by the transferor or his/her legal representative, 4) this receipt must come no more than 9 months after the transfer is made (or, if later, 9 months after the disclaimant turns 21), 5) the disclaimer must be made before any benefits of the gift are accepted, and 6) the interest must pass to another without any direction by the disclaimant. Additionally, the disclaimant may refuse all or a fractional interest in the items transferred. So, how can a disclaimer be useful in minimizing estate taxes? For example, assume Harry and Wanda have a combined estate of $3 million and two children, Sam and Diane. Of this amount, $1,500,000 is owned by Harry individually. Harry had a simple "I love you" will that left everything to Wanda upon his death in 2004 (poor above the grass planning). Wanda can use the disclaimer rules to renounce $1,500,000 of the assets left to her under the will (below the grass planning). These assets will then go to Sam and Diane, thus saving about $705,000 in estate taxes at her death. It is important to know that a disclaimer generally cannot be used to renounce property received as a surviving joint owner. However, the disclaimed property may be transferred into a trust in which the disclaimant has an income interest as long as the disclaimant did not create the income interest (above the grass planning). The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.