Chuck Jones & Associates, Inc.

All Things Financial

Volume 16 No. 4, April 2010
By Charles P. Jones, CFP®

No one wants to give up control of their lives. That’s true for someone who’s 20 or 80. But if you sense an older relative is slowing down, or if a serious illness is threatening the finances of any loved one, it’s time to fashion a battle plan.

A good first stop is a financial planner — a financial expert with the experience to step into a tense situation and help you create a system for locating key information so you can make the necessary critical decisions. Of course, the best way to set up a system is to work with the relative before there’s a problem or in the early stages of illness. Some suggestions:

Understand their condition and strike a cooperative balance: The first step in helping someone in a crisis is not to talk about the money but to understand the crisis. Before talking about money issues, do everything possible to understand how they’re feeling and most important, how they want to handle family, work and money issues at each stage of their illness. It’s not unreasonable for someone to want to keep control until the point when they really have to give up the reins. Get them to talk about what they believe will be triggers for them to give up control, and then find out how they would like to proceed and formulate a transition plan.

Talk about legal documents: Does this parent, relative or friend have a will and necessary health directives in place? Health directives name a single individual to manage all key health decisions if a patient cannot make them; a will depending on their assets and lifestyle situation — if they have kids to raise or a business to run, for example — check to see what detailed legal instructions they have in place to manage their finances or run their business if they are incapacitated. And if those plans have not been made, they need to be made immediately with the help of a CFP® professional, such as Chuck Jones, and necessary tax and legal experts. An individual who is ill needs to designate people whom they trust to handle health and personal finance decisions. But if they have not planned for the future of their business, that is a third and very detailed step that needs to be addressed in collaboration with other family members as well as key co-workers or executives.

Talk about long-term care provisions: According to the American Association of Retired Persons, the average nursing home stay is 2.5 years. Whether an individual chooses long-term care in the home or in a facility, it’s important to understand that while some direct medical expenses will be covered by private insurance, Medicare or Medicaid, most of the cost including daily living expenses, will not.

Get a handle on bills and other key financial events: It’s not the most pleasant dinner table conversation, but if more people planned their affairs with the assumption that they could die or become permanently incapacitated tomorrow, survivors would have a much easier time running or settling matters in their absence. Such planning goes beyond having simple wills and powers of attorney in an easy-to-find location. It makes good sense to establish the following:

• Electronic transactions: Older relatives tend to trust traditional means of paying bills, but automatic bill pay is an extraordinary benefit for caregivers or relatives charged with managing someone else’s finances. By gathering all bills that need to be paid and programming in their payment dates, there’s little or no risk that any regular bills will be paid late. Automatic bill payment should be one of the first decisions made if an elderly relative establishes a joint checking account with a caregiver or whoever holds their financial power of attorney. Also, if a relative wants to continue a regular savings or investment plan while they are incapacitated, those payments can be made as well. Most important — once those automatic transactions are set up, all the security codes and passwords must be kept in a safe place for both to access.
• Set up a home maintenance schedule: If the relative is hoping to return to the home or if it must be sold at a later date to pay bills or to settle the estate, it must be maintained to assure its value at the time it needs to be reoccupied or sold.
• Set up a correspondence system: In addition to the stress of helping someone who’s ill or incapacitated, the sheer amount of paperwork associated with a serious illness can shake the most unflappable person. Again, The Chuck Jones Team, led by Chuck Jones, a CFP® professional with special skills working with elderly clients, can help you set up a system for collecting and sorting that information as well as non-medical financial correspondence. If the house is unoccupied, it’s also important that there is a way to keep mail secure to avoid identity theft — buy a shredder for all mailed materials that don’t need to be filed.
• Pull credit reports: Get permission from your relative to pull the three annual credit reports they are entitled to during the year so you can confirm all accounts are current and that identity thieves haven’t targeted their accounts.

March 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones, CFP®, a local member of FPA.

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Noteworthy

Preparing Heirs
By Roy Williams and Vic Preissier

Williams & Pressier provide some interesting research regarding legacy planning in this excerpt:

The Williams Group, recorded in Roy Williams and Vic Preisser’s book Preparing Heirs provided the following:

3,250 families interviewed.

• 70% of estate transitions fail and 30% succeed. (Williams and Pressier do not define which generation, 2nd or 3rd, fail.)
• Failure is defined as the involuntary loss of control of the assets.
• The origins of the 70% failure rate in estate transitions lie within the family itself.
• 60% of the estate transition failures were caused by a breakdown of communications and trust within the family unit.
• 25% of the estate transition failures were caused by inadequately prepared heirs.
• 15% of the estate transition failures were attributed to all other causes such as tax considerations, legal issues, mission planning, etc.
• Note of this 15%, less than 3% of the failures were due to professional errors in accounting, legal, financial advisory planning, or estate taxes.

Something very interesting in their study of the breakdown of communications was an understanding of the two root words that comprise the word communication — Common and Action. So, the objective of communications within a family is the objective to find consensus or common actions within the family.

Trust does not refer to fraud, dishonesty, purposeful deceit, or illegal activity. Rather, trust refers to whether or not individual members of the family are known to be:

1. reliable — do they do what they say they will do;
2. are they sincere — does their internal story match up with their outer story; And
3. are the family members competent — have the capacity to accomplish the task at hand.

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Chuck’s Comments:

I have just returned from a long weekend skiing with my sons. I personally utilize these semi-annual trips to talk to my adult children about my wishes and the planning I have in place, should something happen to me. It’s an opportunity to speak to them without the distractions that we all have in our busy lives.

Have you discussed your transition plans with members of your family? Or does the prospect of discussing these issues with your adult children or relatives make you uncomfortable? It is frequently less stressful to have these very necessary talks (which are often fraught with emotion), with a concerned third party present. We want your children and/or adult relatives to know that we are here, we care about you and your family, and we are willing to assist them with their needs, as well.

As a client of Chuck Jones, CFP®, this is part of the personal service that we provide and is included at no additional charge. We will be honored to assist you with this very important part of your Financial Life Planning.

Call us today at (503) 291-1313 to set up your own Family Meeting.

All Things Financial

Volume 16 No. 3
By Charles P. Jones, CFP®

Tax deadline is April 15, so if you haven’t begun gathering your annual tax records it’s time to do so. Every year, however, people’s lives change—they buy and sell houses and move, they take new jobs, have kids, buy and sell stock. Those and dozens more reasons might give you cause to hire a tax preparer.

It’s worth going over the primary reasons why some people should get help with their taxes and others can continue going it alone.

Should you do it by yourself? If you meet the following circumstances, you can probably do your taxes by yourself:

• You work for only one employer who gives you a W-2 tax form each year.
• You rent your residence and don’t own a home or vacation property.
• You don’t have kids or other dependents.
• You don’t have any complex investments such as a partnership, a trust or extensive stock holdings.
• You really like numbers, are willing to investigate annual changes to the tax code and double-check your work.
• You’re comfortable doing computations by calculator or by hand, or by using tax software on your computer or online.

For do-it-yourselfers with computers, the Internal Revenue Service’s Free File program is aimed at some 95 million taxpayers with an Adjusted Gross Income (AGI) of $57,000 or less in 2009 to prepare and e-file their federal tax returns for free. E-file, the IRS’s online tax filing service, is available to both tax professionals and individuals with compatible home computer tax software.

Should you seek help? It generally makes more sense to get help with your taxes if:

• You’re buying or selling property.
• You own a business or rental property.
• You get regular income from a trust or partnership.
• You trade investments frequently or have a complex portfolio.
• You’ve undergone a major financial impact during the previous tax year, such as a divorce, death of a spouse, an inheritance or a move of more than 50 miles for a new job.
• You are supporting a child between the ages of 19 and 24 who is a full-time college student.
• You don’t have time to do it yourself.
• You are subject to the Alternate Minimum Tax (AMT).
• Your income has increased by a considerable amount from the previous year.

You’re still legally responsible for your return even though you have professional help, so it’s important to choose a qualified professional to help you. The IRS gives the following suggestions for finding a qualified preparer:

1. Ask how they charge: Avoid preparers who claim they can obtain larger refunds than other preparers. If your returns are prepared correctly, every preparer should derive substantially similar numbers.
2. Don’t believe promises: If a preparer guarantees results or bases fees on a percentage of the amount of the refund, be suspicious. Tax preparers aren’t allowed to charge a contingent fee (percentage of your refund) for preparing an original tax return.
3. Ask what preparers will need: Reputable preparers will expect you to provide receipts and other paperwork if they need it to justify the return they’re preparing for you. You need to keep scrupulous records.
4. Make sure you know exactly who’s preparing your return: It’s OK if your preparer has onsite staff assistance in preparation of your return, but the person you hire needs to be the person who reviews your return and signs off on it.
5. Investigate your preparer’s record: Check with the Better Business Bureau, the state’s board of accountancy for CPAs, the state’s bar association for attorneys or the IRS Office of Professional Responsibility (OPR) for enrolled agents.
6. Check your preparer’s credentials: Find out if the preparer is affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics.
7. Stay aware of tax scams: Newspaper business sections and news programs focus on abusive tax shelters and scams. So does www.IRS.gov. If you have a preparer encouraging you to get involved in tax avoidance strategies that are overly complex, check them out before you agree to jump in.

Concerned about the qualifications of your tax preparer? Call The Chuck Jones Team at The H Group: Chuck, Sheri, Jill, or Susan, to set an appointment to review your situation &/or for referrals to qualified tax specialists. (503) 291-1313

March 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones CFP®, a local member of FPA.

Noteworthy

During the recent recession, many have found themselves back in the job market after age 50 due to layoffs or changing demands at their employers. Yet as life expectancies lengthen, a late career change isn’t always a negative. It may be a welcome chance to renew, re-educate and restart a full life.

It’s possible that in the future, an over-50 career change might become a common event, maybe even a desired event in our society—which means it’s definitely worth planning for.

A visit to a financial planner might be a good first step in planning a move to a second career or dealing with a sudden change in your career prospects. You need to plan for any possible change in income up or down in any opportunity you entertain. You’ll also need to plan how you’ll afford any training you’ll need—college or otherwise—in making that successful transition. To make an over-50 career transition successful, it’s all about preparation. So here are some ideas:

Start with research: One of the best-detailed, up-to-the-minute career resources for the types of jobs that exist in this country and their salary and hiring forecasts is the U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook. This extensive online resource not only lists major career groups, but the leading occupations in it. If you haven’t been in the job market for awhile, this kind of research is a good way to reset your knowledge of your industry and whether its hiring prospects are bright. This database also lays out the need for the necessary training required to reach certain salary and career levels.

Check industries that are friendly to older workers: Healthcare and education are just two industries that are more welcoming to older workers. U.S. News & World Report has come up with its own list of popular over-50 occupations, and it’s a good starting point for people looking for flexible scheduling and other workers their age in the field.

Network: Face-to-face contact with people in your target fields is important. If you can, check out events at professional organizations in that field or attend casual networking functions to learn more. Being someone over 50, you can get an idea of whether there’s true age diversity in a field and how all those groups work together—or if you’re simply the oldest person in the room. Obviously if you feel welcome, networking will give you a better idea of which companies with someone with your maturity and experience might fit in.

Emphasize your up-to-date experience and training, not your birthday: Career experts suggest that older workers should lead with work experience and skills and leave off all but the most essential timeframe information. You’re not there to lie about your work experience, but the reason young workers are so valuable is that they’ve gotten the most recent training and they are generally less costly to employ. That’s why older workers should lead with every strength that makes them attractive to employers and should de-emphasize descriptors that broadcast age.

Make your perspective an asset: If you are already familiar with the industry you’re targeting, you can use your extensive work experience to position yourself as a problem solver. If you know what a company really needs in your chosen job, say so in the cover letter and be clear in stating why you’d be a great solution.

Consider timing issues at your current employer: If you are up for a salary review soon, it might make sense to have a better idea of what you’re worth in the marketplace. Also, as the end of the year is coming, you might want to use up any money in your flexible benefits accounts for medical appointments, glasses or dental work before you leave.

Don’t be shy about approaching managers who aren’t hiring – publicly: The best jobs aren’t always advertised. Instead of limiting your options to companies with posted openings, send letters of introduction to managers at firms where you’d really like to work. And again, make your perspective an asset—if you can see what a great role for you would be in their organization, tell them about it. The worst thing they could do is not respond. The best might be an interview that puts you on their radar screen.

Get in shape: It’s not just a matter of looks. Healthy employees cost less. It makes sense to lose weight if you need to and upgrade hair and wardrobe not to look like a twenty-something, but to fit in comfortably at the organization where you want to work.

Decide what you’ll be doing with your 401(k) and other retirement funds: You may not want to make any moves for awhile, but it’s good to talk with a CFP® professional about whether you’ll be moving that money to private accounts. Also, make sure you know when you can enroll in the company 401(k) and other retirement offerings at your new employer.

Secure your health insurance: You might wait a few months to a year for new health coverage to kick in at a new job. You might need to buy private insurance until then or go onto a spouse’s health plan in the meantime.

March 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones, CFP®, a local member of FPA.

All Things Financial

Volume 16 No. 2
By Charles P. Jones, CFP®

Some companies own large fleets of vehicles with drivers hired specifically to operate them. Many more have employees who operate their own personal vehicles on company business. Most companies have occasion to rent vehicles on a short-term basis. These activities can be as limited as an administrative employee who uses a personal vehicle to go to the post office or bank for the company, or as extensive as a large sales or customer service force that receives a monthly car allowance for using their own vehicles. Many companies forget, or do not realize, that their business has an additional and potentially serious exposure to loss that arises from employees or others using a hired or non-owned vehicle on company business. This is a situation in which what you don’t know may hurt you.

What is the difference between hired and non-owned? Simply put:

• Hired is the rental of a vehicle, in the company’s name, for company business. Because a leased vehicle is rented for a longer duration, it is not typically classified as “hired.”
• Non-Owned is the use of a personal vehicle owned by an employee, volunteer or other person (rather than the insured firm) for company-related business.

In either of the above situations, the employer potentially can be held responsible for any liability associated with operating that vehicle, either directly as a result of the employer’s own negligence or indirectly through a theory of respondeat superior; that is, in general an employer is responsible for the actions of employees performed within the course of their employment. Although the employee may carry personal insurance to cover his or her own liability, such insurance may be inadequate to cover all damages and a claimant may pursue the employer and the employer’s insurance. This could easily happen, for example, if the employee:

• Had allowed any personal automobile insurance to lapse or never carried any such insurance;
• arried limits inadequate to cover a particular claim;
• Did not properly maintain the vehicle; or
• Had a Motor Vehicle Record (MVR) that is below standard.

To illustrate how hired and non-owned auto exposures could involve a business, consider these two examples.

Employee Non-Owned Auto Liability

Sally Jones worked for ABC Company and drove to the bank each week as a requirement of her job. One day, Sally drove to the bank and made a deposit. On her way back to the office, she ran a red light at an intersection, causing a collision with another vehicle. Both vehicles were totaled, and there were serious injuries to the occupants of the other vehicle.

Sally was charged with failure to yield for a red light. Subsequent investigation revealed that Sally carried only $50,000 auto liability limits, and had other driving violations on her motor vehicle record (MVR).

As a result of the collision, the other driver’s insurance company filed for subrogation under Sally’s policy, and that insurer paid the policy limits. However, the total value of the claim was in excess of $1,000,000, and the other driver’s insurance company pursued a claim against ABC Company’s policy for the remaining value. Furthermore, the driver hired an attorney to sue ABC Company and Sally, alleging not only that Sally herself was negligent in failing to stop and driving recklessly, but also ABC Company was negligent for failing to perform due diligence before permitting Sally to operate a motor vehicle on company business, for not reviewing her MVR, and for not properly supervising their employee. In essence, since Sally’s insurer had already paid its limit, ABC Company and its insurer could be held liable for the remaining damages, including any punitive damages.

Hired Auto Liability

Nick Smith worked at HIG Global. At the request of his supervisor, he rented a box truck on behalf of his employer and was driving to a component supplier to pick up some parts. While en route, he accidentally struck a tow truck operator who was assisting a driver of a disabled vehicle on the side of the highway. The tow truck operator died from his injuries, leaving a wife and children.

During the investigation of the accident, Nick admitted that he was uncomfortable driving a truck of this size, and that he had been tired, and may have fallen asleep at the wheel. Additional information revealed that three calls were made to 911 reporting a truck was “swerving all over the road”, prior to striking the tow truck operator. Nick was cited by the police for driving too fast for conditions.

Nick had no insurance, as he did not own a personal automobile. The family of the tow truck operator sued Nick’s employer, HIG Global, alleging wrongful death and negligent supervision. In addition, the state where the accident occurred permits punitive damages. Liability was assessed at 100% adverse to HIG Global, whose insurer has reserved over $1,000,000 for this loss – a sum that goes beyond HIG Global’s primary business auto policy and into its umbrella excess liability policy.

Risk Management Tactics

In both cases, the exposure to loss was likely underestimated by the employer. Companies often face situations very similar to Sally and Nick’s; they need to acknowledge, understand and protect themselves from losses that may occur as a result of their employees’ driving for company business in hired and non-owned liability situations.

Source: Mark Frinell- Insurance Partners, LLC, Oregon

Concerned about your employees exposing you to unintended risk? Call The Chuck Jones Team at The H Group: Chuck, Sheri, Jill, or Susan, to set an appointment to review your coverage and/or what other options are available to you. (503) 291-1313

Noteworthy

Back by popular demand, our updated valuation list provided by the Salvation Army. List reflects their current prices for donated items in good condition and is intended as a guide only when claiming charitable donations. Keep this list handy for donations during the coming year, as well. See link below to view and download this eNewsletter, including the valuation list: Chuck Jones & Associates Feb 2010 eNewsletter (PDF)

All Things Financial

Volume 16 No. 1
By Charles P. Jones, CFP®
Happy New Year!

All investors are not created equal. That’s why financial planners start their first client meetings with a discussion of money attitudes, goals and risk tolerance—the driver at the root of all investment decisions. Some planners do this by general conversation, others by detailed surveys they ask their clients to fill out.

The survey route can be a more valuable tool because it forces clients to face their money issues, perhaps for the first time. Despite the difficulty in facing up to such key issues, individuals get a better idea of where their money strengths and weaknesses really lie. Often, the real difficulties lie in how money is spent.

The real value of answering a lot of questions about your risk tolerance is to tell you what you don’t know—how the sources of your money, the way you made it, your money viewpoints and current methods of handling it will inform every decision you make about it in the future.

The most important thing a questionnaire can reveal is your true money priorities and behaviors. Trained financial advisers, use both conversation and surveys to reach some firm answers that might surprise you.

Are there particular money types? In reality, you’ll find quite a number of surveys out there that define money types in particular ways, but you’ll find personalities that are common on the scale from conservative to liberal. Deborah L. Price, a Financial Planning Association member and founder and CEO of the Money Coaching Institute, offers these scenarios in an article titled, “What’s Your Money Personality?”

The Innocent: Price notes that innocents often live in denial, are easily overwhelmed by financial information and rely heavily on the advice and opinions of others. They tend to be the most trusting because they generally don’t see people or situations clearly—which leaves them open to bad decisions at best and fraud at worst.

The Victim: She notes that victims are people who tend to live in the past and blame their woes on outside factors and situations they claim they can’t control. These people may have been abused, betrayed, or have suffered some great financial loss, but they generally see life as a self-fulfilling prophecy that they can’t change.

The Warrior: Generally seen as a successful person in the business and financial worlds, they will listen to advisors, but they make their own decisions. They tend to be great caretakers.

The Martyr: These people generally put other people before their own financial health. They use their money to rescue others based on their high expectations for themselves and the people they’re rescuing, but these decisions may be costly in the long run.

The Fool: The Fool, explains Price, is a combination of the Innocent and the Warrior because they have no clue about what they’re doing but they’ll act fearlessly. They are financially adventurous and they act on impulse.

The Creator/Artist: These people often have a love/hate relationship with money. They’re constantly struggling to make their finances work, but they often feel that caring about money means something bad.

The Tyrant: Price reports that this type hoards money and uses it to manipulate others. They may have everything they need, but they’re never comfortable with their lives because they fear losing control.

The Magician: Price defines the The Magician as the ideal money type. They’re aware of their circumstances and responsibilities and can see situations very clearly.

A financial planner tries to see through the static to find out what you really need to create a solid financial life. But it might make sense to ask yourself a few questions before you and your planner sit down:

1. How would you describe your financial status right now?
2. What’s important about money to you?
3. What’s your family history with money?
4. What do you do with your money?
5. If money wasn’t an issue, what would you do with your life?
6. Has the way you’ve made your money—through work, marriage or inheritance—affected the way you think about it in a particular way?
7. How much debt do you have and how do you feel about it?
8. Are you more concerned about maintaining the value of your initial investment or making a profit from it?
9. Are you willing to give up that stability for the chance at long-term growth?
10. What are you most likely to enjoy spending money on?
11. How would you feel if the value of your investment dropped for several months?
12. How would you feel if the value of your investment dropped for several years?
13. If you had to list three things you really wanted to do with your money, what would they be?
14. What does retirement mean to you? Does it mean quitting work entirely and doing whatever you want to do or working in a new career full- or part-time?
15. Do you want kids? Do you understand the financial commitment?
16. If you have kids, do you expect them to pay their own way through college or will you pay for all or part of it? What kind of shape are you in to afford their college education?
17. How’s your health and your health insurance coverage?
18. What kind of physical and financial shape are your parents in?

One of the toughest aspects of getting a financial plan going is recognizing how your personal style, mindset, and life situation might affect your investment decisions. A financial professional will understand this challenge and can help you think through your choices. Your resulting portfolio should feel like a perfect fit for you!

January 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones , a local member of FPA.

Noteworthy

Financial Resolutions

Any New Year is an ideal time for recommitting ourselves to things that are important to us. What could be more important than being financially secure? This has become even more of a priority to most folks in light of recent events. And what could be better than starting fresh in a new year? The start of a new year can be used to set your financial goals, not just for that year but for all the years to follow.

We suggest the following resolutions and believe that if you can implement (or reaffirm) these, then you are on track for making your future new years’ more enjoyable and less stressful.

1. If you don’t have a written budget, do one now. If you do have a budget, update it to reflect your current situation (expenses & income) and resolve to stick to it.
2. Resolve to save at least between 15 and 20% of your take home salary. Don’t set money aside only when there’s some left over; pay yourself first. There’s a good reason why you’ve heard this advice over and over. It works. Set aside 15 to 20% of every monthly payday into a regular savings plan or IRA, in conjunction with your savings plan at work.
3. Resolve to take advantage of your employer’s retirement plan, whether it’s non-contributory, contributory or any other type of plan—make the most of company contributions. Not sure what works best with your other investments? Call us, we’ll be happy to coordinate this for you.
4. Resolve to pay off those credit cards. Credit card debt is the number one reason that most people can’t get ahead. Pay the minimum balance due on a $1000 balance with a 16% to 18% interest rate and it may take 20 to 30 years to pay off. Think twice before whipping out the plastic. With credit card rates increasing, so does the length of time needed to pay it off. If you do use credit cards for convenience or to track your spending, become a “deadbeat” to the credit card company… pay them in full each month.
5. Resolve to write or update your will. Wills are not just for the rich. Regardless of how much or how little money you have, a will ensures that whatever personal belongings and assets you do have will go to family or beneficiaries you designate. If you have children, a will allows you to appoint a guardian for them in the event of your death. Have there been changes in your life since you wrote your will? New children or grandchildren? Do you still want the same people as guardians for your children, or has their situation changed?
6. Resolve to write down your financial goals. You wouldn’t start out on a long trip without a road map and/or GPS, would you? Well, the road to financial freedom can be paved, wide and easy to drive on (for those who plan and who follow a road map), or it can be a long, twisting, rutted side road, that leads to nowhere (for those who fail to make a plan for reaching their destination)
7. Resolve to get educated about financial planning issues, such as the Roth Conversion we discussed in the December newsletter. Is it right for your situation? What questions do you have? 2010 offers what may well be a once in a lifetime opportunity to convert some or all of your retirement funds into a Roth IRA. Please call to set up a time and we’ll look into your situation with you, and give you the pros & cons of conversion for your particular situation.
8. Financial planning is not magic. It’s not brain surgery or rocket science. And it doesn’t have to be boring. If you are with the right planner, it is comforting, and reassuring, with flashes of excitement as you reach your goals. Resolve to get started NOW on the road to financial security. This year, resolve to begin. Get “around to it” in 2010.
9. Have you already been doing all of the above? It’s working and you’ve been prepared for the ups and downs that have come your way? Resolve to be a “financial hero”… share your experiences with financial planning with one family member or friend each month in 2010. You can start by sharing this newsletter or joining us on February 11th with our upcoming seminar: Truth & Consequences in Lake Oswego, 6-8 pm Call Susan Tinker @ (503) 445-1913 for more details, or to register.

Protection Parcel

Survey: Widespread Anxiety Among Health Policy Holders

A new survey commissioned by Columbia S.C.-based Colonial Life & Accident Insurance Co. finds a pervasive sense of unease among holders of health insurance policies.

One of the primary sources of this anxiety are changes to employers’ insurance plans in the past year. The survey found 49 % of full-time employed adults who are enrolled in an insurance program provided by their employers and/or their spouses say their employers made changes to their coverage in the past year. Of these respondents, more than eight in 10 expressed concerns over rising premiums, co-pays and deductibles, and concerns over unexpected medical expenses.

“This year’s troubling economy has forced employers to make some tough decisions in regard to their benefits plans,” says Tom Gilligan, SVP of marketing and branding at Colonial Life. “Employees are now justifiably concerned about the effects these changes will have on their paychecks and their financial stability. They’re left to deal with gaps in coverage that leave them feeling vulnerable and exposed.” While most of the changes reported concerned increased premiums, co-pays or deductibles, 13% of respondents reporting a change cited an elimination of one or more types of coverage such as life, health or disability.
“When employers make changes to their benefits plans as so many are being forced to today, it’s important to clearly communicate these changes to employees,” says Gilligan. “Otherwise, employees are left confused and ill-prepared to make smart benefits decisions. Never before has benefits communication been so important.” By Bill Kenealy, Insurance Networking News, June 30, 2009.

Concerned about your health benefits? Call The Chuck Jones Team: Chuck, Sheri, Jill, or Susan, to set an appointment to review your employer-sponsored coverage &/or what other options are available to you. (503) 291-1313

All Things Financial

Volume 15 No. 12
By Charles P. Jones, CFP®
Happy Holidays!

Next year, individuals with a modified adjusted gross income of more than $100,000 will be eligible to convert a traditional IRA to a Roth IRA. The IRS is offering taxpayers a three-year window in 2010 to pay taxes due on a conversion as part of removing the income limits.

Traditional IRAs allow investors to save money tax-deferred with deductible contributions (within certain income limits if either spouse is eligible for a qualified plan at work) until they’re ready to begin withdrawals anytime between age 59 ½ and 70 ½. Roth IRAs don’t allow tax-deductible contributions, but they allow tax-free withdrawal of funds with no mandatory distribution age and allow these assets to pass to heirs tax-free as well. If you leave your savings in the Roth for at least five years and wait until you’re 59 ½ to take withdrawals, you’ll never pay taxes on the gains. You can convert a traditional IRA to a Roth, but you must pay taxes on any pre-tax contributions, plus any gains.
Keep in mind that conversion might be a good idea for people in lower income tax brackets. Talk to your tax professional about doing a full or partial Roth conversion.

Remember that when you do a conversion, you must pay income tax on the amount you are converting. Since you received a tax deduction on your initial contributions to most traditional IRAs, you must pay the taxes due on those initial contributions and any growth in your IRA. But, subject to certain restrictions, you won’t pay tax when you finally need to withdraw your money. That’s where the silver lining comes in for you, or for your heirs if you pass that money on to them.

The conversion issue is a potentially attractive retirement and estate planning idea for all Americans who want to make sure they maximize the assets they have for themselves and for their heirs on a tax-free basis. And the conversion option isn’t available just for traditional IRAs – it can be used for retirement assets held at other employers and 401(k) holdings. But anyone considering such a move – regardless of his or her income status – should first review their current retirement asset strategy with a tax or financial advisor.

Things to consider:

How close is retirement?

If you have more than five years until you plan to withdraw your retirement funds, conversion of traditional IRA assets to a Roth IRA might make sense. The longer the time span where earnings can grow tax deferred, the greater the benefit of being able to withdraw those earnings without paying tax on them.
What will your tax rate at retirement be?

Many people, such as business owners, may be paying taxes now at a fairly low rate. So they might pay higher taxes at retirement. If that’s the case, converting to a Roth might make a lot of sense. Additionally, with Social Security benefits being taxable at certain income levels, Roth IRAs can allow you to limit or eliminate such taxes.
A Roth conversion can be expensive:

You’ll have to pay taxes on contributions that you previously deducted, as well as taxes on the accumulated earnings. Also, you need to be aware that conversion could push you into a higher tax bracket, especially if you’ve accumulated sizeable earnings over the years. This is why a conversion needs to be planned with a tax expert. Why? It may trigger the Alternative Minimum Tax (AMT) due to those high earnings.

Know how the conversion window will work:

Keep in mind that 2010 is the actual year you will be able to convert your retirement assets to a Roth, but you’ll be able to spread out the tax hit. The Internal Revenue Service has granted taxpayers the option to claim 50 percent of conversion amount as income in 2011 and the remaining 50 percent in 2012. Also, you have to understand that if you choose the conversion period, your tax will be based on the bracket you fit that year. That means swings in income will affect what you pay.

November 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones , a local member of FPA.

Noteworthy

The Chuck Jones Team Welcomes Its Newest Member!

Susan Tinker will be joining the Chuck Jones Team in January 2010 as our Insurance Specialist. Susan comes to us with over twenty years in the insurance and investments industry and is extremely well-qualified. Her undergraduate studies were in accounting at the University of Utah. Please join us in welcoming Susan!

We bid a fond farewell to Jackie and wish her all the best.

Building Innovation Capacity in Oregon’s Higher Education Research Institutions: the University Venture Development Fund

A tax credit is available for contributions to Oregon university venture development funds.

Who can claim the credit?
Any taxpayer who makes a qualifying charitable donation to an Oregon university venture development fund is eligible for the credit. If you also claimed the contribution as an itemized deduction, you must add the amount back into your income before you can claim an Oregon tax credit.
S corporations and partnerships may claim a credit for their donations. Part-year residents and nonresidents. Your allowable credit must be prorated by your Oregon percentage.

How much is the credit?
The taxpayer’s credit is 60 percent of the amount stated on the tax credit certificate. The amount allowed for 2008 is the least of:
-20 percent of the amount actually contributed to the fund, $50,000, or
-The tax liability of the taxpayer.

How to claim the credit:
The university that established the fund will issue a tax credit certificate to you. Keep this certificate with your tax records.

The program provides a generous tax credit to donors in return for helping research within Oregon universities move from lab to market in one of Oregon’s research universities. When the state tax credit is combined with the federal charitable deduction, for each dollar contributed the net after-tax cost to the donor is less than 10 cents.

This is a unique way to benefit both the institutions who commercialize inventions and the Oregon innovation economy.

If you are interested in the tax credit and/or know someone who is interested, please call Chuck Jones & Associates at (503) 291-1313 and we will review your situation with your tax professional.

Source:www.Oregon.gov Department of Revenue. Revised 12/31/2008 ORS 315.521 [Credit code 739]

Protection Parcel

The Importance of Having Separate Disability Coverage
If you’ve never taken notice of disability coverage before, it’s time to start.

Disability insurance protects your ability to earn an income. It provides money to pay your rent, mortgage and basic living expenses if you are injured or sick for an extended period. It is called disability insurance or disability income protection but think of it as income replacement when you are sick or hurt and cannot work. At any age, you are about six times more likely to become disabled for some period of time than to die.

Think your employer’s coverage is enough? Think again. You may have whatever sick leave you have coming, and then if an employer offers short-term disability coverage, it generally doesn’t last more than 12 weeks. There are employers that offer long-term disability coverage, but if you’ve never checked the terms of that coverage, you should.

Basic components of long-term disability coverage:

Monthly benefits: Depending on your income, long-term disability insurance is generally structured to pay 50 to 70 percent of your income up to age 67 or your normal retirement age. Research if the policy you’re buying offers you the chance to buy more insurance as your income increases in future years.

Benefit term: For each disabling incident, your policy may pay benefits for a certain period — two or five years, or until retirement. It’s all about how your policy is constructed. Some policies even pay for life if you purchase this benefit and you are disabled prior to age 60.

Buying younger is generally cheaper: Like health and life insurance, the younger you buy, the less you’ll pay. Occupation enters into the picture because high-risk jobs (where disability is a greater work-related factor) tend to draw more claims. Like health insurance, the company will consider your medical history and your lifestyle, including your weight, pre-existing conditions and whether or not you smoke.

Premium cost: The premium will depend on a wide array of factors and can vary dramatically from person to person. Such things as your age and your gender (women pay more for disability insurance because they tend to live longer and may work longer) will be considered.

Non-cancellation provisions: Make sure that once you’re approved, the insurer can’t cut your coverage unless it decides to stop writing coverage for everyone in your job class. It should also state that the insurer can’t raise your rates.

Guaranteed renewable: Like the category above, this means your insurance can’t be canceled,. The insurer can, however, raise the rates for everyone in the category.

Own occupation vs. any occupation: If you have “own occupation” coverage, it is intended to go into effect if you can’t perform the functions of your current job. “Any occupation” coverage pays only if you can’t work at any job where you’ve been reasonably trained to do the tasks. For example, if you’re working a desk job, you could easily be transferred to a receptionist’s job or some other function within the company that you can now do or is your former position. That could significantly interfere with your recovery time, so consider the benefits and specify “own occupation” coverage.

Elimination period: Like a deductible in home, health or car insurance, the elimination period is a big cost determinant in disability coverage. Most policies will start paying after 30 days after you’ve been declared disabled. But if you specify an elimination period of 60, 90 or 120 days, your premium will be lower. An important point about the 30-day elimination period: the benefits don’t start accumulating until you’ve been laid up a month after the ruling date and you won’t get your payment until a month after that. Be very clear with your insurer when you’ll get your first check based on what elimination period you choose, and funnel the money you’ll need in the meantime to your emergency fund.

Partial payments/Residual benefits: Some policies may offer you ‘residual benefits’ or a partial payment if you’re less than 100 percent disabled, but still can’t perform all the duties of your job.

If you’re thinking about self-employment: You’ll likely need disability coverage. But the time to buy is while you’re still in your current job. Why? You won’t be able to prove your income once self-employed, so consider obtaining your desired coverage before you leave.

December 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones , a local member of FPA.

All Things Financial

Volume 15 No. 11
By Charles P. Jones, CFP®

You might think it can never happen to you, and maybe it won’t but — here is my personal example… a tornado in Oregon! Not likely… that is until Nov. 6th, 2009 at 9:39 PM in Lincoln City. I can personally testify that it happened. My Lincoln City property, a vacation rental that sleeps 20, was smack in the middle of the 40 foot wide, 200-yard path of the tornado that only lasted for about 2 minutes. Of the 11 homes damaged, two were total losses, mine was not as bad. Fortunately, it was only “stuff”, no one was hurt and my good business insurance covered the damage inside and out, the replacement of all the furniture, drapes and carpets, my time for inspections and lost rental income. So take that little bit of extra time to PREPARE FOR THE UNEXPECTED! – Chuck

Prepare for the Unexpected

It’s not marked on the calendar, but 2009 hurricane season is officially underway. The season, which runs from June 1 to November 30, typically strikes fear in the hearts and souls of the 35 million Americans who live in regions most threatened by hurricanes. No matter whether it’s a normal season or not, financial planners and others say hurricane season is a time to prepare for the worst and hope for the best. Of course, you can use these tips to prepare for most any disaster as well.

Pack a ‘Grab and Go’ Case

You should have a ‘grab and go’ case. That case should contain key items that will help you rebuild in the event of a disaster. See list below to get an idea of what should be included in your case. The ‘grab and go’ case should also contain a list of prescriptions and some emergency cash. It’s also a good idea to keep some of that stuff with a friend or relative in an unaffected area just in case you’re unable to get out with your case.

The Financial Planning Association suggests that you document and store credit card information (account number, expiration, security code) just in case your cards are lost in a storm. As part of documenting valuables, we also recommend taking photographs or video of valuable items and the home, particularly specific rooms (bathrooms, kitchen, etc.) where you may have made a considerable investment.

Safeguard Tax Records

The Internal Revenue Service (IRS) issued a release outlining what you should do to prepare for the upcoming season. The IRS suggests that you:

• Create a backup set of records electronically
• Update emergency plans
• Check on fiduciary bonds

The IRS noted in its release that if disaster does strike, affected taxpayers can call 866.562.5227 to speak with an IRS specialist trained to handle disaster-related issues. Learn more tips from the IRS on how to prepare for a disaster.

Review Your Insurance Policies and Estate Planning Documents

Hurricane season is also a good time to review and update your beneficiary designations on all accounts and insurance policies. It’s also a good idea to make sure you have all your estate planning documents in order — wills, power of attorney, and living will. The National Association of Insurance Commissioners (NAIC) notes that hurricane season is a good time to make sure your insurance needs are in order, especially your homeowner’s or renter’s policies. According to the NAIC, now is a good time to:

Review and update your property and casualty insurance policies with your financial planner, insurance agent and/or insurance company. For instance, check whether your policy includes coverage for replacement cost or actual cash value in case of a loss. “Actual cash value (ACV) is the amount it would take to repair damage to your home or to replace its contents after allowing for depreciation. Replacement cost is the amount it would take to rebuild or replace your home and its contents with similar quality materials or goods, without deducting for depreciation.”

Store copies of your life, automobile, homeowner’s or renter’s, and other types of insurance policies with your home inventory in a safe location away from your home, so that these records can be easily retrieved in the event of a loss.

Keep a list of contact details for your insurance agent and/or company with your policies. Include office phone numbers, mailing addresses, website addresses and all of your policy numbers for quick reference.

Learn what to do before and after a disaster. For instance, the NAIC suggest that you can mitigate — or lessen — your exposure to some types of disasters. In a hurricane-prone area, this might mean installing storm shutters, covering windows or checking the siding and roof of your home prior to the storm. Learn more tips on how to prepare for a disaster from the NAIC.

Most homeowner policies don’t cover flooding. Check out www.floodsmart.gov to get more information on obtaining that type of coverage if you live in a flood-prone area.

Keep Track of the Weather

The NOAA’s National Weather Service Climate Prediction Center for the 2009 Atlantic hurricane season called for a 50 percent probability of a near-normal season, a 25 percent probability of an above-normal season and a 25 percent probability of a below-normal season. And forecasters said there is a 70 percent chance of having nine to 14 named storms, of which four to seven could become hurricanes, including one to three major hurricanes (Category 3, 4 or 5). Learn more about NOAA’s predictions.

Check Out Other Resources

AARP offers step-by-step guides on how to prepare for hurricanes in both English and Spanish. Learn more tips on how to prepare for a disaster from AARP.

Items to Include in the ‘Grab and Go’ case

Below is a list of items you should include in your ‘grab and go’ case:

Estate Planning Documents
• Wills
• Trust documents
• Durable power of attorney for health care
• Durable power of attorney for finance

Identity Documents
• Social Security cards
• Birth certificates
• Citizenship papers
• Adoption papers
• Military discharge papers
• Marriage certificate
• Divorce/Separation papers
• Passports

Insurance Documents
• Life insurance policies
• Health insurance policies
• Disability insurance policies
• Long-term care insurance policies
• Homeowner’s insurance policies
• Renter’s insurance policies
• Auto insurance policies
• Dental insurance policies
• Umbrella insurance policies

Financial Documents
• Checking/Savings records
• Investment accounts
• Titles and deeds to real estate
• Time share agreements
• Stock/Bond certificates
• Employee benefit documents
• Auto ownership records
• Boat ownership records
• Loan agreements
• Credit card information
• Student loan information
• Personal/Business lines of credit

Miscellaneous
• Employment contracts
• Business agreements
• Tax returns
• Safe combination
• Computer passwords
• Safe-deposit box keys
• Cash (ATM’s & credit cards may not work)

Of course, if you are a client of the Chuck Jones Team at The H Group, you already have been provided with this case! The documents contained in the “Grab and Go Case” should be copies only and all your originals should be stored in a safe place outside the home, such as a safety deposit box.

July 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Chuck Jones, CFP® , a local member of FPA.

Noteworthy

Prepare Now for Moves on the Estate Tax

The nonstop discussion this year of health care reform and the economy crowded out discussion on the estate tax, which was scheduled to expire December 31. But as of this writing it appears that the estate tax will be continued at 2009 levels through 2010, which means that the 2010 top rate will likely be 45 percent and the exemption will be $3.5 million per person.

For now, the Republican dream of killing the estate tax seems to be dead, at least through 2012 as federal spending continues to expand. That means it’s a good time to talk to tax and financial experts about the best ways to pass your holdings to the next generation no matter what happens with the future of the “death tax.”

If you suspect your estate or the estate of relatives you might inherit from may fall prey to the estate tax, it makes sense right now to enlist the help of experts. Assets may be expected to grow over time, and your estate may turn out to be larger than you may think. You should be talking to estate and tax specialists as well as financial advisors such as Chuck Jones, CFP® .

Here are some things to keep in mind as you prepare for those conversations:

Give during your lifetime: You can now give $13,000 per calendar year per recipient without paying gift tax or affecting your 1 million dollar lifetime exemption. You can also pay someone’s tuition or medical bills directly, or give to a charity, without paying gift tax on the amount, thereby reducing the size of your estate and your eventual estate tax bill after you die.

Check whether your state charges an estate tax: Roughly half of all states charge estate tax, and that’s a recent thing. States previously received a slice of the federal estate tax, which no longer happens, so it’s important to consider the state’s impact when making an estate plan.

Think about a life insurance trust: Whether you need it for estate liquidity or for other purposes, an irrevocable life insurance trust can be created to keep the proceeds of the insurance out of your taxable estate. An added benefit is that such trusts may permit spousal access to the cash value of the policy. Yet note the word “irrevocable” – it means a decision that cannot be changed.

Know if your assets are expected to increase: A grantor-retained annuity trust, or GRAT, is an irrevocable trust that is popular among families with assets that are expected to increase, because such appreciation can be passed on to heirs with minimal tax consequences.

November 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Chuck Jones, CFP® , a local member of FPA.

Protection Parcel

Economy Impacts Women’s Ability to Plan for Long-Term Care

The economic downturn has affected women’s ability to plan and prepare for the risk of needing long-term care according to a report from the American Association for Long-Term Care Insurance, the industry’s trade organization.

Various studies compiled by the organization reveal that women have especially been affected by the recent economic conditions and loss of employment.

Most women realize their risk of needing long-term care services, but many are not taking steps to protect themselves. Three out of four women surveyed by America’s Health Insurance Plans said they have at least a 40 percent chance of needing some type of long-term care during their lifetimes, such as care in a nursing home, assisted-living facility, or by a home health care provider. However, only 35 percent of women said they have actively thought about or planned for how they will cover those costs, and just 38 percent of women said they were at least somewhat prepared to cover long-term care expenses should they need it.

In addition, many women have a false sense of protection against the high cost of long-term care. Nearly 20 percent of women participating in a national survey believe they already have long-term care coverage. In reality, only about 5 percent of U.S. adults over the age of 45 have actually purchased long-term care insurance, suggesting that many of the women surveyed incorrectly believe they have long-term care coverage.

For those who said they do not have long-term care insurance, 42 percent said they would rely on government programs, such as Medicaid, to cover long-term care costs. Other said they would sell assets (31 percent), use their retirement savings (31 percent), or rely on family and friends (12 percent) to help with these costs. Twenty-three percent incorrectly believe that other insurance would provide assistance for long-term care costs.

According to the Woman’s Guide To Long-Term Care Insurance Protection, women have both a greater need for long-term care insurance coverage and are far more likely to receive benefit from an insurance policy. The book reports that two-thirds of all long-term care insurance claims are paid to women. Nearly half (41 percent) are paid to single women and some 25 percent to married women.

Contact the Chuck Jones Team at (503) 291-1313 to review your coverage and make sure that you have what you need.

Article written by Jesse Slome from the American Association for Long Term Care Insurance www.aaltci.org

All Things Financial

Vol. 15 No. 10
By Charles P. Jones, CFP®

Any financial planning process begins with a change in financial behavior and expectations. The degree of change varies based on financial priorities, but in the end, it’s about adopting new habits and abandoning others.

Before you take any of the following steps, it makes sense to talk to an expert who can help you see your whole financial picture. A CERTIFIED FINANCIAL PLANNER™ professional can examine all your sources of income and expenses and find the most efficient ways to cut expenses, pay off debt and boost the money you have for saving and investing.

In the meantime, here are some ideas:

Refinance if you can: Mortgage rates are still at historically low levels. You’ll need at least 10 percent equity (20% of equity will save you the PMI insurance cost) in your home and a credit score exceeding 720 to qualify for the best rates, but start negotiating with your current lender first and see how well you do.

Track your spending for a week: Either on paper or on the computer, write down every dollar you spend in the average week (and cut off credit card use during that week). At the end of that week, start marking out non-essential items just to see how much you could live without. Start with coffee and restaurant or carryout meals and work backward from there.

Make a budget: Once you’ve established how your income covers the essential expenses you must plan for, and a few inexpensive treats that should stay in, build a budget that includes specific amounts you can allocate toward debt. Keep a running total of your spending going forward, and revisit how that budget is working on a monthly basis until you start to see some positive results, and then you can review the performance of that budget a little less frequently.

Reset your entertainment expectations: Find ways to save money with friends – cook more meals at home or rent a movie instead of going out to see one. Also, get used to checking entertainment listings for free events that interest you.

If you can do it safely, take over home and auto maintenance yourself: The do-it-yourself movement is in a new phase with the economic downturn. For any home or auto maintenance chores you may have during the year, learn as much as you can about those tasks and estimate the cost of materials and your time before doing them yourself. Previous generations made do-it-yourself a necessity. See if that option is right for you and you might save considerable money doing it. Also, for bigger jobs, pair up with friends and family and you can help each other save money.

Set a new gift policy with your adult friends and family: Does everyone on your gift list over the age of 21 really need a present for birthdays and major holidays? Suggest to family and friends to have a gift drawing, a budget limit, a moratorium on gifts, or some other alternative where you trade off gifts for quality time. Even though the holidays are a few months away, it’s not too early to think about reining in the traditional holiday overspending.

Go debit: Debit cards wearing a bankcard logo are typically welcome at most stores where credit cards are accepted. This way, you pay cash without carrying cash. If you don’t have such a card, you can get one from your bank to replace your traditional ATM card, but remember to tell them to limit your buying power on the card to only what you have in your account. And use the overdraft protection to avoid fees.

Revamp your shopping list: Give this a shot: start a central weekly shopping list on a single piece of paper and add a dollar value for each. Write everything you think you need to buy on that single sheet, from groceries to clothes for the kids. That way, you’ll see all your proposed spending in front of you, and you can get a closer look at what your true priorities are. You’ll be surprised at all the “essentials” that are not really that essential that you can cross off before you spend.

Talk to your family about spending: When you’re talking to kids about budgeting and lowering your expenses, you have to walk a fine line between discipline and fear. But setting money priorities is part of growing up, and it’s essential to discuss and agree upon them as a family.

Buy used for yourself: Make someone else’s poor luck your good luck. If you need clothing, a car or a new watch to replace the old one that’s past fixing, it might be worthwhile to buy second-hand. The best places to find these gems are on the internet on places like Craigslist. Plenty of people have unloaded items in relatively good shape to bring in cash during the recent downturn. You might do very well, and if anyone asks, don’t call it used; call it “vintage.”

October 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. “Chuck” Jones, CFP® , a local member of FPA.

Noteworthy

Financial planner Chuck Jones makes community involvement his creed:

SALEM, OR — Portland small business leader, Chuck Jones, has been named Oregon Small Business Champion of the Year for the second time. The honor was conferred upon him by the Oregon Leadership Council of the National Federation of Independent Business (NFIB). Each year, NFIB singles out a small business owner in all 50 states for special recognition and honors him or her with its prestigious Small Business Champion of the Year award. This is the fifth year the national group has recognized small business owners who go the extra mile for their fellow entrepreneurs.

Chuck’s many years of experience in building and managing his own businesses have benefited his community through his lengthy involvement in many civic and public institutions. It was a Jones-led effort that pushed through Small Business Bill of Rights through the Portland City Council.

For NFIB/Oregon, Chuck serves on its Leadership Council as member of its SAFE Trust political action committee, is a national Leadership Trust member, and testifies, writes letters, and speaks to the media on small business issues. Chuck also received the Eldon Shafer Champion of Small Business Award in 2006 and was included in Outstanding Young Men of America.

Source: www.NFIB.com

Kids These Days!

USDA RELEASES ANNUAL STUDY WHICH NOTES THAT CHILD BORN IN 2008 WILL COST $221,190 TO RAISE. WASHINGTON, Aug. 4, 2009 – The U.S. Department of Agriculture today released a new report*, Expenditures on Children by Families, finding that a middle-income family with a child born in 2008 can expect to spend about $221,190 ($291,570 when adjusted for inflation) for food, shelter, and other necessities to raise that child over the next seventeen years. For the year 2008, annual child-rearing expenses for a middle-income, two-parent family ranges from $11,610 to $13,480, depending on the age of the child.

The report by USDA’s Center for Nutrition Policy and Promotion notes that family income affects child rearing costs. A family earning less than $56,870 per year can expect to spend a total of $159,870 (in 2008 dollars) on a child from birth through high school. Similarly, parents with an income between $56,870 and $98,470 can expect to spend $221,190; and a family earning more than $98,470 can expect to spend $366,660. In 1960, a middle-income family could have expected to spend $25,230 ($183,509 in 2008 dollars) to raise a child through age seventeen.

Housing costs are the single largest expenditure on a child, averaging $69,660 or 32 percent of the total cost over seventeen years. Food and child care/education (for those with the expense) were the next two largest expenses, each averaging 16 percent of the total expenditure. The estimates do not include the cost of childbearing or the cost of a college education. In addition, some current-day costs, such as child care, were negligible in 1960.

The report notes geographic variations in the cost of raising a child, with expenses the highest for families living in the urban Northeast, followed by the urban West and urban Midwest. Families living in the urban South and rural areas have the lowest child-rearing expenses.

Release No. 0365.09

Source: www.cnpp.usda.com

We Made It…Now What?

How business owners need to plan for retirement is changing: Last year’s financial crisis exposed the weakness of the typical “sell the business” fallback idea for retirement funds:

• Unpredictable selling price for the business
• Challenge of finding a ready and qualified buyer
• Uncertainty of a potential buyer being able to meet the financing obligations payable to current owner

If you own a business and have been impacted by last years’ crisis, let Chuck Jones, CFP® review your retirement plan with you and maybe show you some more options. There is no time like the present to prepare for your future!

Source: Pacific Life, In Pursuit of Retirement.

All Things Financial

Vol. 15 No. 9
By Charles P. Jones, CFP®

A May survey by Hewitt Associates noted that despite record losses in their 401(k) savings in 2008, individuals stuck with their 401(k) plans. However, more people dealt with their worry about investment conditions by shifting money into more conservative investments. In addition, a significant number of companies either eliminated or cut back significantly on matching employee 401(k) contributions.

Hewitt’s annual Universe Benchmarks study, which examines the saving and investment behaviors of more than 2.7 million employees eligible for 401(k) plans, showed that the average 401(k) balance dropped from $79,600 in 2007 to $57,200 at the end of 2008. 44 percent of employees lost 30 percent or more of their savings. Only 11 percent of employees were able to break even or see a gain in their 401(k) portfolios. Even still, 74 percent of employees participated in their 401(k) plans in 2008, about the same as in 2007.

However, the Hewitt survey stated that some workers are reacting to the market downfall by moving 401(k) assets into less risky investment funds to try and blunt their losses. In 2008, 19.6 percent of investors made trades in their 401(k) plans versus 18.7 percent in 2007. And the volume of money they transferred in 2008 was much higher. Nine of the 10 most active trading days were the day after a large downturn in the market, or days with an average return of negative 4 percent. Employees’ average equity exposure dropped to just 59 percent in 2008—which is an all-time low since Hewitt began tracking it in 1997. Stable-value funds, which are considered less risky investments, experienced an 11 percent increase in asset allocation in 2008.

That’s why it’s wise for investors to get a fresh start with 401(k) advice as the economy improves. For existing investors or those who have never begun to save or invest for retirement, take the time to consult a Certified Financial Planner to make sure both personal & work-related retirement savings complement each other. (Call Chuck Jones at (503) 291-1313

Some recommendations to keep in mind:

Save even if your company fails to match: This is not the easiest thing to do, but even if your company cuts back on matching, it’s important to try and put additional money into personal retirement investments outside of work. You will still realize the benefit of pre-tax contributions made to your traditional 401(k). And, when you have money automatically taken from your paycheck you are “dollar cost averaging”. That means the fixed dollar amount that comes from your paycheck buys more shares when prices are low, and fewer when prices are high. Thus your average cost per share is lower than the average price per share.

Make sure you contribute to a plan: According to 2006 data from the Profit Sharing/401(k) Council of America, more than 22 percent of eligible workers don’t participate in available 401(k) plans. For the companies that are still matching, that’s like giving up free money.

Continue to save while you wait to join a plan: A significant number of companies don’t let you join the 401(k) until you’ve been working there a year. If that’s the case, get in the habit of putting money away for retirement anyway. Start an individual IRA with the funds you would put in the company plan, or set aside money in a savings account so you can supplement your cash flow and put the maximum amount into your 401(k) once you’re allowed to join.

Contribute the maximum: Not every employee can afford to contribute the maximum allowed by the plan, but try. In 2009, the maximum 401(k) contribution will be $16,500, and those 50 and older can make an additional catch-up contribution of $5,500.

Don’t let your company do all the work: More companies are automatically enrolling their workers in their 401(k) plans, but some workers fail to take charge afterward. They don’t know how much they’re allowed to contribute and they don’t discuss or review the types of investments they have in relation to their age or retirement plans. It might make sense to consult an experienced, knowledgeable investment advisor, to review those choices with you.

Avoid poor diversification over time: It’s necessary to do a yearly checkup on all your retirement savings – 401(k) s, individual IRAs and other investments fueling your retirement goals to make sure you’re on track.

Don’t rely on the 401(k) alone: Particularly if matching lags for awhile, 401(k) plans can’t be relied upon as a single source of retirement dollars. You must invest outside your company plans.

Don’t over-invest in company stock: Most financial planners advise that you put no more than 15 to 20 percent of your whole 401(k) portfolio in company stock.

Don’t borrow from the 401(k): The Employee Benefit Research Institute® reports that employees contribute more to plans that let them borrow. Don’t be fooled. A 401(k) shouldn’t be a house fund or a source of emergency cash. You’re taking money out of the account that otherwise would grow tax-deferred, and if you fail to pay back the money, you could face income taxes and penalties. Instead, build an outside emergency fund of three to six months of living expenses you can draw from.

Don’t cash out: Some workers think it’s a great idea to treat a 401(k) as a windfall for when they quit a job. Don’t do it. You’ll pay huge penalties and lose your retirement savings momentum.

Don’t “lose” your old 401(k) accounts: Maybe you’ve changed jobs several times and never got around to moving older, smaller 401(k) accounts from past employers to current ones or into a self-directed retirement account. Always get advice about 401(k) funds when you leave an employer.

September 2009 — This article is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P Jones®, a local member of FPA.

Noteworthy

Be careful!

If you convert your regular IRA to a Roth, watch for this payout quirk: You can be hit with a 10% penalty on withdrawals in the first 5 years after the conversion, even if you take out funds you converted from the IRA tax-free. Normally, the penalty only applies to taxable withdrawals, but IRS regulations say the entire payout is hit with the 10% penalty unless you’ve turned 59 ½, are disabled, or have elected to take a series of substantially equal distributions from the Roth.

And if you plan to switch a regular IRA to a Roth in 2010 and put the funds into several different types of investments; such as stocks, bonds, and real estate…consider using multiple Roths, one for each type of asset chosen. Doing so gives you the maximum flexibility if any of the investments decline later in the year. You have until October 15, 2011 to undo a 2010 conversion that has gone down in value and avoid having to pay tax on that portion of the conversion. As we noted in our August 21st Tax Letter, next year will be a very big year for Roth conversions because the $100,000 income cap on converting will be eliminated. And any tax due on the conversion will be deferred and spread evenly over the following two tax years.

Learn while you workout

Looking for something besides the same old music & videos for your iPod? How about tax updates? The Internal Revenue Service has launched an iTunes podcast site and a YouTube video site to make individuals aware of recently-enacted tax breaks, such as the first-time home buyer credit & the sales tax write-offs for new vehicles.

Big Brother is watching you

Meanwhile, states are using social networking sites as a tax enforcement tool by having their revenue agents track down tax evaders on Facebook and MySpace. The IRS won’t say whether it plans to try the same approach, but you can assume that if the states have success with this tactic, the IRS will follow suit.

Noteworthy source: The Kiplinger Tax Letter, Vol. 84, No. 18

THE COUNTRY’S DEFICIT IS NOW EXPECTED TO GROW TO ABOVE $11 TRILLION

HOW MUCH IS THAT? Well, let’s look at how long it would take to save $1 million, $1 billion, and $1 trillion, at the rate of ONE DOLLAR PER SECOND (Feel free to check my math!)
$1/second is $60/minute.
$3,600/hour
$86,400/day
$2,592,000/month (30 days)

Actually, you would have been at a million dollars in just under 12 days, so in one year you would have $31,104,000.

Now, to get to the billion dollars, you would divide $1,000,000,000 by the annual $31,104,000 and you will see that it will take almost 32 years to save a billion dollars ($1,000,000,000).

SO WHAT ABOUT A TRILLION DOLLARS?

One trillion dollars ($1,000,000,000,000) divided by $31,104,000…
would take 31,104 YEARS to save!

Now multiply by eleven.

Math provided by Chuck Jones, CFP®. As of 09/25/09 at 9:00amET, the US Debt Clock registered $11,820,867,349.00 and continues to grow. Debt Clock

All Things Financial

Vol. 15 No. 8
By Charles P. Jones, CFP®

It was Benjamin Franklin who once said, “The man who achieves makes many mistakes, but he never makes the biggest mistake of all — doing nothing.”

As the nation continues to work its way out of recession and investors begin to take stock of what looks like a lost decade in their portfolios, it might make sense to execute some simple ideas now that will give better preparation for possible tough times in the future. After all, disaster can’t be predicted, but it can be blunted by preparation. Here are a few ideas to implement as the economy recovers.

Start with expert advice: A fresh financial start should begin with some solid, up-to-the-minute advice. Consider making a trip to talk over your current finances and retirement picture – no matter what state they’re in – with your tax advisor and a financial advisor such as a Certified Financial Planner™ professional. Many people feel they’ve made mistakes that they’ll never be able to repair with their money, and the only way that might be certain is if they don’t properly assess what they’ve done and should do in the future. Getting trained, experienced advice is one way to change that.

Pay down your debt: There was once a time when mortgage debt was referred to as “good debt,” but even that perception has changed for many families in recent years. While mortgage debt has tax advantages, the relatively recent tendency for homeowners to look at their property as a piggy bank looks headed for permanent change. And with new credit card lending rules on the horizon, Americans’ relationship with plastic is bound for big changes as well. Resolve to get a better handle on existing debt and above all things, resolve to pay it off in sensible fashion, attacking the highest-rate and less tax-advantaged balances first.

Reevaluate your career plan: It’s true that many Americans will have to work longer than they planned to assure a healthy retirement given the events of the last decade. But you shouldn’t stop there in making that assessment. As the country comes out of this economic slump, you should also be considering whether your current career meets your personal as well as your financial needs. A chance to earn extra money would certainly be great, but if you’re unhappy doing what you’re doing or you see your industry going nowhere, then it might be time to retrain or research a change.

Get serious about an emergency fund: If you suddenly lost your home, your job, or were disabled with limited health or disability benefits, how would you afford a hotel, transportation or medical bills? How would you pay for all that? Credit cards? Okay, but how would you pay off those cards? An emergency fund needs to be three to six months worth of cash at a minimum kept in an easily accessible place—not as accessible as a mattress, but not in a stock fund or some other investment that might fluctuate in value and then be tough to access for a week or more. You need to treat that cash as money that isn’t there unless a disaster occurs. And try to open it with a high enough balance so you’ll keep it from being eaten away by any account maintenance fees. Write down a list of things that are potential emergencies and sign it as a personal contract with yourself. That agreement should state that you will not touch the funds except in case of some of the following:

• Loss of employment
• Medical bills that exceed your insurance payments (if you have insurance)
• Emergency home or car repairs in excess of insurance that are required to make the home livable or the car drivable

Watch carefully the “Health Care Bill HR 3200, Sect.163 page 59”. If this passes in its current form the Feds will have right to “enable electronic funds transfers in order to allow automated reconciliation with the related health care payment and remittance advice.” In other words, they will be able to take money from your accounts without your ok. If that passes I feel many will, (or should), move their emergency reserve funds to somewhere the Feds can’t get to them.

Insure yourself properly: Insurance exists to prevent financial devastation. You owe it to yourself to buy whatever coverage you can afford for risks that affect you directly. Not everyone needs life insurance or particular forms of liability insurance, for example. But most of us need help knowing what coverage to buy, and that’s where the help of a financial adviser might come in handy—there is no one-size-fits all insurance solution. It’s a good time to evaluate whether your coverage in any of the following types of insurance is adequate:

• Health insurance
• Life insurance
• Home or Rental insurance
• Disability insurance
• Auto insurance
• Liability insurance related to a particular business or work activity

Create a worst possible scenario: It’s not the easiest thing in the world to do, but based on your own personal circumstances, what would be the biggest potential risks you might face financially? Some examples:

• If there was hereditary evidence cancer or heart disease among your closest relatives, how would you pay for treatment if your insurance didn’t fully cover the costs?
• If you live in a flood plain, do you have adequate federal flood insurance?
• If your company has been losing money for the last year, how likely is it you might be laid off?
• Will you need additional training or education to stay in your job going forward?
• If you were disabled, how would you make up your lost salary?

August 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Charles P. Jones, CFP®, a local member of FPA.

SO WHO PAYS THE TAXES? (ACCORDING TO IRS 2007):

• Top 1% of those filing pay 40.4% while only earning 22.8% of income
• Top 5% pay 60.6% while only earning 37.4% of income
• Top 10% pay 71.2% while only earning 48.0% of income
• The bottom 50% of those filing only pay 2.9% of total Federal taxes

SHOULD YOU MOVE DOLLARS FROM TRADITIONAL IRA TO A ROTH?

Not an easy question to answer especially this year. This year it depends on your income, not the case in 2010. And, obviously, a lot depends on what assumptions you use for future tax rates. I believe future rates will be higher than current rates so it may make sense to have us run some calculations for you.