There are many points to argue about what is right and wrong when it comes to Social Security and other age based entitled programs. But one point I think we can all agree on without beating the point to death is that Social Security is in serious trouble as we currently use it.

I am not interested in placing blame or running through all the statistical data why it won’t last. Simply put, we borrow from the future to pay for the present but sooner or later the future shows up. Anyone that borrowed against their homes in the last few years knows all to well how that statement rings true.

But what will Obama, McCain or other politicians going to do about it?  How about get real!

According to the American Academy of Actuaries, raising the retirement age to 70 will cut the projected Social Security deficit in half. The statistics back up this age as a base age to use to start benefits with incremental increases built in. The current system increases the social security age one month at a time to age 67 but that is not enough.

The fact of the matter is that people are living longer. In 1935 the retirement age was 65 and you could expect to collect for 12 years. Now that number is closer to 19 years. That’s the type of inflation we can live with, “age inflation”. But that puts pressure on the social programs geared to help seniors with their expenses including Medicare.

According to the National Bureau of Economics the retirement age that is more realistic is closer to 73-74. That might be pushing it a bit and probably impossible to get through politically. The American Academy of Actuaries concludes that long after all the baby boomers are gone the demographics tell us that social security will only cover 75% of its costs. Women will be affected even more since they live longer than men.

But will this be a blow to current generations regarding their expectations for retirement? The answer is no, at least not for those that have given it any thought. Many baby boomers have simply not saved enough for retirement and a large percentage of them do expect to earn some type of income through work during their retirement years.

Financial advisors are also not optimistic about their client’s chances of retiring at the current young age of 65 and having their money last. Inflation and modest investment returns over the last decade have pushed an even greater number of workers into that work longer, save more demographic that will come to dominate those tapping age based social programs.

Raise the retirement age and acknowledge the simple fact that were living longer and we need to make some adjustments to age based entitlement programs.

To the North American Securities Administrators Association (NASAA), there are plenty of modern-day Willie Suttons eager to go “where the money is.” Today, “the money” is largely held by seniors. Hence, regulators say, seniors are the targets of unscrupulous salespeople armed not with pistols, but with professional designations that exaggerate their competence or their concern for seniors’ well-being.

Now some of these individuals are being sought out not by potential clients, but by federal regulators, including the SEC and FINRA. These regulators are making it clear that advisors who use the word “senior” or various synonyms to transact business unethically are squarely in their sights. These individuals are “among [regulators'] top targets,” says Tracy DeWald, general counsel at Securities America, a broker-dealer based in Omaha, Neb. “People age 60 and over are the biggest source of regulatory complaints.”

Targets

Indeed, seniors are targets for all types of unscrupulous vendors. In the financial world, many of those engaged in unethical practices—or merely failing to make adequate disclosures—hold designations that include the words “senior,” “elderly” or “retirement.” contrary to the unethical practices, the designations indicate that the holders are experts in serving the financial needs of senior citizens.

The burgeoning controversy has prompted some reputable firms to take action to avoid being tarred by the same brush. These firms have been limiting the ways their people may use some “senior” designations when doing business. According to NASAA, some product salespeople using “senior” designations typically invite senior citizens to seminars where a free lunch is served along with a presentation on investments. Either at the seminar or through follow-up contacts, some advisors ultimately sell unsuitable investments to some of the attendees.

In April, NASAA introduced a model rule on the use of senior- specific certifications and professional designations. This rule, which prohibits the misleading use of designations that include words like “senior” and “retiree,” has already been adopted by the state of Washington. At press time, New Hampshire was set to adopt the rule and other states are likely to follow suit. A report issued last year by NASAA, FINRA and the SEC lists the popular Certified Senior Advisor (CSA) designation among those it considers misleading or confusing.

That’s not to say that the mere use of the word “senior” will automatically spur regulatory scrutiny. In its model rule, NASAA leaves room for certain designations to be recognized. “Regulators are drawing a distinction between designations that are earned and those that are bought like prizes in a Cracker Jack box,” DeWald says.

What distinguishes a real designation from a specious one? “An authentic designation requires you to pass a difficult test,” DeWald explains.

In addition, DeWald adds, “there are continuing education requirements and you can be kicked out if you violate the rules. On the other hand, there are some designations that you can get by writing a check and spending a couple of hours online. Some are just made up by the person using it.”

NASAA, FINRA and the SEC are by no means the first to recognize the potential abuses of professional designations, especially when it comes to seniors. Some states, including Massachusetts and Missouri, have filed complaints or cease-and-desist orders against people for giving inappropriate investment advice to the elderly while using the “senior specialist” title. Underlying these charges is the idea that certain designations imply specialized knowledge or training, lending credibility to salespeople.

Forbidden Credentials

Some broker-dealers have effectively banned reps from publishing senior-related credentials. Genworth Financial, for example, prohibits its employees and agents from using the CSA designation (the most common senior designation) on their business cards or in their marketing materials.

“We have a similar policy,” says DeWald of Securities America. “In fact, we have lists of which designations are acceptable in published materials and which aren’t. None of the ’senior’ or ‘elder’ designations are on the accepted list. Some of our reps have these designations, which they can mention to clients in conversation. They can’t put the letters behind their names to promote themselves.”

Comparable cautions are in effect at major brokerage firms, says Sean Walters, deputy executive director at the Investment Management Consultants Association (IMCA), which confers the Certified Investment Management Analyst (CIMA) designation. “We work mainly with full-service wirehouses,” he says. “They’re paying a lot of attention to designations, including those aimed at seniors, and deciding which ones should be approved for use.”

Designations are also under scrutiny in the fee-only universe. “At NAPFA, we looked at senior specialist designations,” says Tom Orecchio of Greenbaum and Orecchio, a wealth management firm in Old Tappan, N.J., and chair of NAPFA’s board of directors. “The vast majority were not worth anything, we felt. They don’t require much studying or continuing education. There are too many credentials around; the last thing we need is more clutter,” he says. The one exception, Orecchio notes, is the Chartered Advisor for Senior Living (CASL). “It’s offered by the American College and [courses for it are] taught like courses for the CLU and ChFC.”

9,500 Strong

Of all the senior-oriented designations, the CSA is the only one mentioned specifically by states, including Nebraska, when warning seniors to check the credentials of so-called senior specialists. Several of the individuals identified in state regulatory actions hold a CSA.

The CSA designation is conferred by the Society of Certified Senior Advisors (SCSA), which bills itself as the world’s largest membership organization for professionals seeking to improve their skills in working with seniors. More than 9,500 advisors now hold a CSA designation.

SCSA executives are quick to defend their organization. “We’re aware of regulators’ concerns that certain professional designations may be misperceived by the public,” compliance specialist Bill Kaluza says. “That’s why SCSA requires each CSA to provide a written disclaimer to clients and potential clients.” This statement, while asserting that designees have taken steps to bolster their knowledge of seniors’ financial needs, includes notification that “the CSA designation alone does not imply any expertise in financial, health or social matters.”

Of course, whether all 9,500-plus CSA designees are actually making this disclaimer to every potential client they approach is difficult to determine. Kaluza says SCSA makes an effort to police its designees. “CSAs themselves are often our most reliable reporters about CSAs who do not comply with these rules,” he says.

What’s more, Kaluza claims that when a member of the public contacts the SCSA to inquire about a particular CSA, the organization investigates to see whether the CSA in question actually provided the disclaimer. “To date, we’ve had very little indication that CSAs are not using the statement,” Kaluza says.

By Donald Jay Korn
August 1, 2008

WASHINGTON — U.S. inflation soared to a 17-year-high annual rate in July, a government report showed, led by gains in food, energy, airline fares and apparel.
With energy and commodity prices on the retreat this month and the U.S. dollar strengthening, the report is unlikely to spook Federal Reserve policymakers into raising rates anytime soon as the economy struggles with rising unemployment and soft consumer spending.
Still, a surprising rise in core inflation that excludes food and energy last month will keep officials on edge about the possibility that food and energy prices will become more firmly entrenched in the economy.
The consumer price index rose 0.8% in July, the Labor Department said Thursday. That came on the heels of June’s 1.1% rise, which was the second largest June 1982.
Excluding food and energy, the CPI advanced 0.3% for a second-straight month.
Wall Street economists had expected only a 0.4% rise in the headline and 0.2% core increase, according to a Dow Jones Newswires survey.
Unrounded, the CPI rose 0.818% last month. The core CPI advanced 0.327% unrounded.
Consumer prices jumped 5.6% on a year-over-year basis, the highest rate since January 1991. The core CPI grew a more modest 2.5% compared to July 2007, though that’s still well above the Fed’s long-term goal of 1.5% to 2%. Over the past three months, core inflation rose at a 3.5% annual rate.
Though Fed officials said in a policy statement last week that inflation remains a “significant” concern, they are likely to look past the July data. The Fed is generally expected to keep official interest rates steady into next year, though the rise in core inflation, if repeated in coming months, could put rate hikes later this year back into play.
Many of the forces boosting prices in recent months — particularly high energy and commodity prices and the weaker U.S. dollar — have reversed since mid-July.
In a Dow Jones Newswires interview Wednesday, Minneapolis Fed President Gary Stern said even though the U.S. is “probably…in for a few more sizable increases” in overall prices measures, “assuming we don’t get a resurgence of energy prices, we will see over time a diminution of headline inflation, for sure.”
“As that occurs, I think we’ll also see some diminution of the core,” said Stern, who is considered one of the most vigilant inflation fighters on the Fed.
Energy prices swelled 4% last month, according to Thursday’s report. Gasoline prices spiked 4.1%, and natural gas prices rose 7.4%. Food and beverage prices rose 0.9%.
Medical care prices, meanwhile, increased a modest 0.1%.
But other core items posted sharp gains, a sign that higher headline inflation may have started seeping through the rest of the economy.
Clothing prices, for instance, rose 1.2% compared to June, a 10-year high. Transportation prices soared 1.7% on the month as airline fares swelled 1.3%, reflecting the rise in fuel prices. New vehicle prices advanced a modest 0.2%, reflecting falling demand.
Housing, which accounts for 40% of the CPI index, was up 0.6%. Rent increased 0.3%. Owners’ equivalent rent advanced 0.1%. However lodging away from home rose 0.7%, while home fuel and utilities posted sharp gains.
Services prices rose 0.5%.
In a separate report, the Labor Department said the average weekly earnings of U.S. workers, adjusted for inflation, fell 0.8% in July, suggesting incomes aren’t keeping pace with prices.
That, in turn, could further damp consumer spending which appeared weak in July, according to a retail sales report released Wednesday.
-By Brian Blackstone; Dow Jones Newswires;

WASHINGTON — The prospect of higher taxes on long-term capital gains and dividends may spur a selloff of stocks and other assets by the end of this year, according to wealth-management advisors.

Investors and business owners are on high alert because of a proposal by Sen. Barack Obama, D-Ill., the presumed Democratic presidential nominee, to hike capital gains and dividend tax rates for many investors by between five and 13 percentage points.

Some advisors are telling clients to consider taking gains soon, because tax rates could change next year, particularly if Democrats win the White House and hold on to their congressional majorities.

“For the foreseeable future, you’re not going to get a better chance to move out of appreciated positions, from a tax perspective,” said Hank Alden, an advisor at Everest International Group.

Investment advisors caution that taxes alone should not be the overriding factor in investment decisions and decisions to buy or sell should be made as part of an overall strategy related to one’s portfolio.

But for many investors who have stocks or other holdings that they would otherwise sell in the next several years, the window for doing so at preferential tax rates may be closing.

Obama wants to bump the long-term capital gains and dividend rates up from their current level of 15% to at least 20%, and possibly as high as 28%.

The higher rates would apply only to individuals with income in excess of $200,000 or more, or couples earning more than $250,000.

Jason Furman, economic director for the Obama campaign, said that even for those making more than that amount, “we believe a rate much closer to 20% would be feasible.” That is based on campaign projections that assume that other Obama proposals would also be enacted.

Obama’s opponent, GOP nominee-designate Sen. John McCain, R-Ariz., favors keeping the capital gains and dividend rates at 15% for all investors, regardless of income level.

Screening for “Insiders” Business owners in particular may accelerate plans to sell their firms because of a looming capital gains increase, wealth advisors said.

“A number of family businesses have asked us the question, if we sold later than 2008, how much would my business have to appreciate just to break even,” or to realize as much profit as they would if they sold in 2008, said Jeff Paravano, a partner at the law firm of Baker Hostetler.

“When they see the spreadsheet, and the additional tax, a number of them have decided to sell this year,” Paravano said.

Some investors are even trying to turn a looming tax increase to their advantage by betting that business owners will sell before the tax hike. Investment advisor Robert Willens said some investors are “screening” for companies where founders or their descendants own a large share of the company stock.

Since those “insiders” are likely to have a low basis, they will be more motivated to avoid the tax hit by selling the business before the higher rate kicks in, he said.

“If investors believe a company will be sold at a premium, they may buy in the hope of reaping gains,” said Willens.

Dividend Rate Hike

Companies that pay dividends and their shareholders also are feeling pressure to act ahead of any tax hike.

Some companies may accelerate their fourth-quarter dividend payment from December 2008 from January 2009, according to Paravano.

In anticipation of a higher tax rate on dividends, investors who hold income-producing stock may want to shift to stock that doesn’t pay dividends and roll that into a tax-preferred savings vehicle such as an individual retirement account. That way the entire investment could appreciate without being taxed until the IRA is cashed out.

But they will be limited by annual contribution limits to IRAs, set at $5,000 for 2008, with an additional $1,000 for individuals over 50.

Uncertainty about how quickly Congress might move to raise taxes, and when higher rates will actually take effect, adds to the urgency. While recent GOP-led Congresses have typically made tax changes prospective from the date a bill is signed into law, that has not always been the practice, according to wealth advisors and economists.

Under current law, the 15% rate on capital gains and dividends is in effect until the end of 2010. But many observers expect Congress to act next year to fix the estate tax. Facing budgetary pressures, lawmakers may move at the same time to hike capital gains, dividend and other tax rates that were cut during President George W. Bush’s first term.

Economic Impacts

Rep. Richard Neal, D-Mass., said lawmakers will weigh carefully the effect of tax increases on an economy already burdened by high energy prices and credit woes. “We don’t want to do anything that would slow a recovery. But the deficit is a very stubborn fact,” Neal said in an interview.

Economists disagree over the broad economic impacts of an increase in the capital gains and dividend rates. Stephen Entin, president and executive director of the Institute for Research on the Economics of Taxation, has argued that a hike in the capital gains rate to 25% could damp the gross domestic product by as much as 6% over the long term.

But Furman of the Obama campaign said there is evidence that measured increases in tax rates that help reduce the deficit, as Obama is proposing, will not have a sustained negative effect on the economy.

Furman also said other Obama proposals will encourage savings and investment, such as an enhanced saver’s credit for lower-income earners.

“What investors should look at is what’s going to happen to overall economic policy. This is a change in economic strategy to emphasize fiscal responsibility in a way that we haven’t seen,” said Furman.

By Martin Vaughan
Of DOW JONES NEWSWIRES

Don’t scoff. Oprah Winfrey just left $30 million to her dogs. Like many people who didn’t have children she considers her pets her “babies” and heirs. And pet trusts are not just for the likes of Leona Helmsley, who left $12 million to her beloved white Maltese named Trouble. (The dog’s security, grooming and chef-prepared meals—served on a silver tray—cost $300,000 a year alone.) On the contrary, estate planning for pets is part of the lucrative and growing pet-care industry, and can be a valuable addition to the range of services offered to an increasing number of totally sane clients.

Consider the statistics: Two-thirds of American households have a pet, while only one-third has a child. According to the American Pet Products Manufacturers Association, pet industry expenditures have doubled since 1998, to $43 billion a year. The Mercanti Group, a financial advisory firm, expects this to remain the fastest-growing retail sector after electronics. And that growth will be driven by high-wage earners.

Well-heeled animal lovers increasingly spend on doggie day care and posh pet hotels. What’s more, all that doctors can do for humans these days, vets can do for pets. Does your dachshund need disc surgery? At Red Bank Veterinary Hospital in Tinton Falls, N.J., that costs $10,000, plus $90 a session for physical therapy. Should little Weiner need a kidney transplant, you’re talking $20,000, plus $2,000 a month in anti-rejection drugs. No wonder, The Mercanti Group reports, households with incomes over $100,000 accounted for 35% of all spending on veterinary care in 2006, up from 27% in 2003. “You can’t expect a caregiver to pay for all that,” says Annie Brody, who runs Camp Unleashed, where dogs and their owners romp in Becket, Mass. “You have to set aside the resources.”

The Pet and the Plan

Of course, not many people will leave more to their animals than to their human heirs. But even a modest pet trust can significantly benefit both client and advisor. To Dave Ness, president of Raymond James Trust, planning for a pet helps strengthen an existing fiduciary relationship. “These are frequently elderly people, and their animal is their confidante, the one who is there for them in the dark of the night,” he says. “They want that animal properly cared for, and rightly so. If you can help them solve that problem, you have helped them in an extremely important way.” To Gina Barry, a lawyer with Bacon Wilson in Springfield, Mass., such planning can start a relationship. “People don’t like to think about dying, but they will begin by thinking of their animal,” she says. “That is the start to getting their whole plan done.”

Most people still do it the old-fashioned way, says Ness. They leave all their worldly possessions, including the cat, to their grown children. (Yes, Kitty is considered property, with all the legal standing of a dust mop.) But what if they have no children? Or the children work long hours? Or, as Ness says, it’s, “Great Dane, small apartment—bad fit.” Then clients need to select a responsible caregiver, make the level of care they expect clear and specific, and fund it with a trust.

There are two main types of pet trusts. The simplest, a “statutory pet trust,” is authorized in almost 40 states. This is a basic document, naming a trustee and making an animal the beneficiary; it requires nothing more than a provision in a client’s will stating, “I leave $15,000 in trust for the care of my dog, Fifi.” The second, a “traditional pet trust,” is effective in all states. In this, the client also names a trustee to manage his funds, but appoints a caretaker as the beneficiary, with the money earmarked for the pet’s expenses. A traditional trust provides much greater control. The pet owner can direct what kind of care the pet will receive, what to do if the beneficiary dies, even where the pet will be buried.

A trust can be created while the client is still alive (an “inter vivos” or “living” trust) or when the client dies (a “testamentary” trust which is included in a will). The living trust has the advantage of providing for a pet if an owner becomes incapacitated, and can take effect immediately, if he dies, before the will passes probate. Those with a testamentary trust would have to make sure their power-of-attorney and healthcare proxy provide for their animal should they become disabled.

An advisor can help clients calculate how much money pets will need. Consider, say the experts, the animal’s life expectancy: A beagle, 15 years; a cat, 18 years; a tarantula 30 years; and a macaw 80 years. In addition to providing for inflation, calculate the cost of potentially expensive medical care, the cost of professional boarding when the caretaker is away, and whether the caretaker will be paid for his services.

Animal Assets

The money may be invested in a bond mutual fund, for instance, with income for expenses and the principal for emergencies. Or the trustee can be made the beneficiary of a pet owner’s life insurance policy; the policy may be taken out simply to fund the pet trust, or a portion of an existing policy may be made payable to the trust. Similarly, an annuity or retirement plan can be used to fund both inter vivos and testamentary trusts by making the trustee the recipient of some of the assets.

Problems, however, can arise. Ness cautions his clients not to leave a lump sum to a caregiver for a pet’s well-being. “Accidents happen all the time,” he says darkly. “You may have created an incentive for the caregiver to plot the early demise of Fluffy.” Better, he says, to make sure any money for the caregiver is separate from the money for the animal, and earmark the funds that remain after the animal dies to charity.

Animal lover Barry, who runs a horse sanctuary, advises that the pet be clearly identified, preferably with a microchip. She tells of the black cat that literally had close to nine lives: The caretaker replaced the cat several times to keep her payments coming.

Advisors should also warn clients not to leave too much to their pets. “A 12-year-old Pekingese can only eat so much,” says Ness. If a client leaves more than her animal reasonably needs, “the other heirs can use that to say that grandma was goofy,” and contest the trust. After all, says Ness, some “some people care the way they do for their animals because they feel abandoned by their families.”

Generally, an advisor can broach the issue of a pet trust merely by asking, “What are you going to do with your cats?” and referring the client to a competent lawyer. In Ness’s experience, $100,000 invested at a 4% annual return “should be more than enough.” In some cases, however, the bank becomes the trustee, and in rare cases, that can cause complications.

Joseph Macri, vice president and market manager for M&T Bank in Harrisburg, Pa., had such a case. A widow left $600,000 for the lifetime care of her beneficiaries—three dogs—named a dear friend as caretaker, and directed the remainder of the money (once the animals died) to charity. The bank, which had served as trustee during her lifetime, continued in that role. Macri determined the salary of the caretaker and made periodic, unannounced visits to check on the animals’ care.

In a twist, however, the pet owner had also left her house to the animals, making it “the most expensive doghouse in the world.” Macri had to see that the lawn was mowed, the snow shoveled, the bills paid, including cable “so the dogs could feel someone was talking to them.” Fortunately, Macri’s staff, and the bank’s tax and real-estate departments, shouldered the load. And he never found the caretaker negligent, abusive or extravagant.

Macri’s preferred solution is much simpler: “Just give a friend a bequest and ask him to care for your animal.”

Estate Planning
By Joanmarie Kalter
Joanmarie Kalter is a writer who lives in Montclair, N.J. with her cockapoo, Harry.

WASHINGTON, DC- U.S. Senators Bob Casey (D-PA), a member of the Senate Special Committee on Aging, and Herb Kohl (D-WI), Chairman of the Senate Special Committee on Aging, today introduced a bill to help protect seniors from investment fraud.  The Senior Investor Protections Enhancement Act would increase penalties for those who commit securities violations against people who are at least 62 years old.

“Everyday, older Americans are targeted for investment scams and they see their life savings go down the drain” said Senator Casey “Pennsylvania has the second highest number of residents over the age of 65 and we must take care of them.  This legislation will help better protect our older citizens from being targeted from fraud.”

“Many seniors are discovering that their life savings may not be enough to last them throughout their retirement.  As they turn to investments to bridge the gap, seniors need to know that they can trust the people who handle their money,” said Senator Kohl.  “This bill will ramp up the punishment for those who advantage of older Americans’ well-earned retirement savings.”

Americans over the age of 65 control an estimated $15 trillion in assets, a large portion of which are investable.  Seniors have difficult and complicated decisions to make on how to stretch their savings throughout their retirement.  Their assets remain at risk from traditional fraud and Ponzi schemes.  Recently, seniors are increasingly offered many new but complicated investment tools such as reverse mortgages and various annuity products.  While these products can be very valuable to Americans generally and seniors specifically, they can also be abused by unscrupulous actors.    

Additionally, many older Americans are targeted by con artists who seek to exploit them through manipulation and fraud.  Seniors already account for more than half of all investor complaints received by state securities regulators.   The U.S. Securities and Exchange Commission (SEC) has reported that they are working to improve their ability to prevent fraud and abuse where possible and prosecute it where necessary.   

Under the Senior Investor Protections Enhancement Act, penalties for existing securities violations could include an additional $50,000 civil fine for each violation that is primarily directed toward, specifically targets, or is committed against a senior.  Under the legislation, seniors are defined as persons age 62 or older, the age at which most retirement savings become available for use and investment.  

The bill would increase penalties for those who commit securities violations against seniors - violations could include selling them products that are unsuitable for their age, failing to disclose fees, lock-ups of cash or large penalty charges, switching investments sold with the one marketed or other material aspects of the investment.  The bill would not interfere with legitimate investment advisors who recommend products and investments appropriate for their customers.

Last September, the Aging Committee held a hearing to examine some of the questionable practices used by so-called senior financial investment specialists in order to gain access to the retirement savings of older Americans.  An investigation conducted by the Committee revealed that many seniors targeted by such unscrupulous salesmen have lost their life savings because they were steered toward investment instruments that were unsuitable for them, given their retirement needs and life expectancy.

For more information on retirement income and investing for income visit www.livelongliverich.com and don’t forget to sign up for the free newsletter!

I know that over the years many couples can anticipate what the other feels and thinks about a variety of situations and these successful unions are often the result of a meeting of the minds on many of these issues. But if you are like me, and I suspect many of you are, from time to time, (I am trying to be delicate here as my wife reads this column) caught completely of guard by your spouses reaction to situations you assumed you agreed upon. Since I am a relatively young man, 44 years old, these issues revolve around social issues and not being as sensitive to my wife’s feeling as maybe I should have been. That being said, we do agree on most things.

But when it comes to money and what spouses feel, understand and anticipate, what you expect, well, is probably not what you’ll get.

In a survey conducted with 502 couples that have been married for at least 24 years, with an average age of 54 for men and 53 for women, and nine years from retirement, they had some major disagreements on what to expect and how to get there. 

 61% disagreed on which income source (workplace savings, pensions, Social Security, etc.) would be their primary income source of funds in retirement.
 58% disagreed about whom their spouse would turn to for financial guidance in the event of the other spouse’s death.
 41% disagreed about whether at least one partner would work in retirement.
 39 % differed on the amount of their life insurance coverage.

One way to resolve some of these issues is to sit down and go over some of the more important financial and social issues that will play a major role in your retirement and in your spending habits and expectations. Some questions that each of you should answer separately are:

 How much income can you expect to have?
 Where do you expect to live? Perhaps, where do you want to live?
 What is your vision of retirement? Make sure your goals are in line.
 What is your plan for your estate? Charity? Children? Grandchildren?
 What will we do if one or both of us become ill? Do we want to go to an assisted living center? Nursing home?
 Do you have a living will?

Find the issues that are important to you and write your answers down, once again, I suggest doing it separately, and get back together and compare the results. I also suggest a pot of coffee for this part as I anticipate there to be some answers each of you did not expect from the other.

Another issue is how much of this should you share with your children. I am sure your children are wonderful and would never make a decision that may benefit themselves (i.e. their inheritance) over your good time, but be sure there are those from the “ME” generation that will do just that.

Once you start along this process it is sure to bring up some issues you both will not agree upon. It is best however to identify the issues early and reach a compromise rather that allow your lives to progress towards retirement and collide when it may be too late to adjust.

Communication can be the lifeblood of a successful relationship. Use this process to heighten the level of communication and intellectual debate with your spouse. It will lead to good things and show you care about the others feelings and desires. No amount of disagreement will overshadow that significant benefit to your relationship. 

For more information on retirement planning visit www.livelongliverich.com and sign up for the free newsletter.

After the stock market crash of 1929, thousands of banks failed. In 1933, Congress and then President Roosevelt created the Federal Deposit Insurance Corporation, better known to all of us as the FDIC. A federal government guarantee of deposits. Its effect was to maintain stability and public confidence in the nations banking system.

The failure of Indy Mac Bank has the FDIC stepping in to meet its obligations to payback account holders the value of their insured assets. It is not pretty and as the largest bank failure to date, it is testing the system in a trial by fire way.

But if you believe Senator Barack Obama, that there is “little doubt that the US is likely in a recession” and that swift steps to shore up the housing market are a huge part of that recovery then the FMIC is the obvious answer.

Another stimulus packages and pumping money into Fannie Mae and Freddie Mac are not the answer. The government keeps treating the symptoms and not the disease.

The majority of analysts and economists that look at the problem conclude that stopping home prices from declining is the first step in any recovery. But how are prices to stabilize when lending institutions are pulling back their lending?

As the desire to lend has decreased coupled with higher lending standards and higher levels housing supply, due to a poor economy and foreclosures in some markets, prices can only continue to drop. Actual credit losses and Fannie and Freddie are small compared with their overall portfolio. What they are suffering from is a crisis in confidence.

According to mortgage industry veteran Robert Kofsky, The creation of the FMIC to co-insure FNMA, FHLMC and the Mortgage Insurance Companies against further losses would create new confidence in the mortgage markets, create higher values for mortgage bonds, create additional liquidity for the banks and create additional capital for lending since risk would be reduced by the backing by the FMIC. Using minimum standard qualifying lending requirements, losses would be limited up to a specific dollar amount per property similar to the way the FDIC insurance works now. 

This would provide buyers financing to enter the market with confidence causing home prices to stabilize. Put a halt to or at least reduce write-downs on quality mortgages, create better balance sheets and enable in some cases financial institutions to write-up some exiting investments.

This would further reduce the foreclosures and the cost to the federal government would stay low saving taxpayers money. As it stands now, we are footing the bill for all of it. Rather than pump money into the system to treat the symptoms, let’s cure the disease which is a crisis of confidence. Our history tells us that the creation of the FMIC would have the same desired effect.

Using taxpayer dollars to bail out financial institution or throwing money at the problem like the Treasury and the Federal Reserve seem to do to in their keystone cop response to these situations, finding a viable long-term solution is the only way to cure what ails the financial markets and the economy.

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The prevailing sentiment among financial planners for several decades now has been that inflation will run at normal levels over time and that investment returns will outpace the erosion of buying power caused by inflation.

But for those at or near retirement, what was supposed to occur has not. Investment returns over the last decade for the S&P have been just over 3 percent. Inflation for real people is 6 percent year over year. Even those that have planned and saved diligently over that period did not plan for such low returns or such high inflation. To be sure the issues facing seniors today are decidedly more complex.

The commonly accepted norms may play out from generation to generation, but today’s retirees unfortunately have to deal with the reality that many will not have enough income generation to last through their investment lives.

This generation can count on Social Security but for 2008, social security payments rose 2.3 percent. Let’s see how far that goes when your air conditioning bill arrives. That sinking feeling many will feel is the realization that they are woefuly under prepared even though they saved and invested like they were supposed to do.

Fact: Americans 65 and older represent the fastest growing group seeking bankruptcy protection.

Fact: In the last 15 years, among households 65 and older, the average amount of credit card debt more than doubled.

Fact: Median amount of mortgage debt for households 55 and older rose 63% in the last 15 years.

Fact: Debt is at an all time high and savings is at an all time low.

Unfortunately, in some cases, hard decisions will have to be made. Will I eat? or sleep well.  Outliving your money is not an option.

So what can you do to help extend the income producing life of your assets? There are several things you can do, basic things that can help. Together, they will add up in your favor.

1) Instead of building debt for fear of liquidating assets, begin a systematic withdrawal from your non-income producing mutual funds. I would rather see you keep the high interest off the books which will eat you alive over time. Your returns through investments may not offset the high cost of that debt.

2) If you have individual stock investments, make sure they pay a dividend so you can receive some type of return and income stream while you wait out a bear market.

3) Use tax-efficient withdrawal strategies from your accounts. Make sure you think of the tax consequenses of your trading activitity. Should that be purchased in my IRA or personal account? Since my tax bracket is low this year, would it be wise to take a larger withdrawal from my IRA instead of the minumum?

4) Ladder your fixed income investments. Invest some in short-term and some in longer-term and some in between. Spreading your investment maturities may increase your income stream.

5) Look into guaranteed lifetime income producing annuities. The annuities of today are not as restrictive or as expensive as those in the past and it may help you sleep at night. Don’t listen to what others say, examine the benefits and costs for yourself and decide if it is right for you and your family.

Every retiree needs to take a hard look at their assets and understand the risks their asset allocation may have on their ncome stream later in life. This is not the time to put your head in the sand. Educate yourself and seek help if you need it. If you examine your options now instead of waitng, it could be the difference between living the retirement you dreamed of, or living in your son-in-laws basement.

For more information about how to create retirement income and easy to use strategies and links to useful information please visit www.livelongliverich.com.