Chuck Jones & Associates, Inc.

Chuck Jones, CFP® & Jill Smart, Financial Advisor, along with Estate & Tax Attorneys Jonathan Mishkin, LL.M & Sara Yen, LL.M will share true-life examples about the “what ifs” that really do happen when people decide to plan “someday”… and never quite get around to it.

Attendees will receive both a complimentary (FREE) workbook & a copy of the book Splitting Heirs (a $40 value). Cost is $15/person or $20/couple. Invitees who bring an adult guest or guests will receive complimentary admission for their entire party to this event (cash or check only @ the door). Light refreshments will be served. Free parking on site — 6pm to 8 pm.

Host: The H Group
Location: The West End Building-Santiam Room, 4101 Kruse Way, Lake Oswego, OR 97035
When: Thursday, February 11, 6:00PM to 8:00PM
Phone: (503) 445-1913
Cost: $15.00 per person, $20.00 per couple

Each person bringing a guest to the event will receive complimentary admission (must RSVP prior to event w/ guest(s) names). RSVP to: susantinker@thehgroup.com

Alternate date available: March 4th, 2010 @ same location/time. If you have questions, prefer the alternate date or wish to RSVP to this event via phone, please contact Susan Tinker at (503) 445-1913.

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

Passage of Small Business Bill of Rights made Portland civic leader the clear choice

FOR IMMEDIATE RELEASE
Contact: Daniel Markels (650) 394-4091, or Tony Malandra (415) 664-9685

SALEM, Ore., Nov. 19, 2009 – Oregon now has something a wide majority of states don’t: A Small Business Bill of Rights. No one is more responsible for that than Chuck Jones, and for this reason he has captured his second Solveras/NFIB Oregon Small Business Champion of the Year award, it was announced today.

Jones is a Certified Financial Planner as an Advisor Affiliate with The H Group, Inc., an investment management and financial planning company. Chuck is the owner of Portland based Chuck Jones & Associates, Inc. and CEO of abcInvesting.com. He can be reached at (503) 291-1313 or visit his website at www.chuckjonescfp.com. Chuck and his well-qualified staff specialize in small business consulting, financial planning, investment management and life and health insurance.

The honor was conferred upon Jones by the Oregon Leadership Council of the National Federation of Independent Business and Solveras Payment Solutions, one of the nation’s leading payment processing companies for small business. Each year, NFIB and Solveras single out a small business owner in all 50 states for special recognition and honor him or her with the prestigious Small Business Champion of the Year award. This is the sixth year America’s leading small business association has recognized small business owners who go the extra mile for their fellow entrepreneurs.

“This is not a pass-around award,” said NFIB Regional State Public Policy Director Daniel Markels, “to win it twice, a recipient had to have done something extraordinary. To win it twice in a row, he or she would have had to do something stellar. Chuck Jones’ tireless and successful advocacy for a Small Business Bill of Rights is an accomplishment that is stratospheric.”

Because of Jones’ help in passing House Joint Resolution 43, Oregon’s Small Business Bill of Rights now requires policymakers to consider the potential impact to small businesses when making laws, rules, and regulations. It also recognizes in statute small business as the backbone of Oregon’s economy and distinguishes small business as an important part of our economy. Now, small business owners have access to:

• clear, stable and predictable regulatory and record-keeping requirements
• economic development tools, including critical infrastructure services
• education and technical assistance in starting and operating a business
• and an economic culture that encourages and sustains to growth of small business

In 2007, the Oregon Small Business Champion of the Year was Charlie Tragesser of Lake Oswego; in 2006, it went to Dave Easton of Forest Grove. Eric Blackledge of Corvallis won it in 2005 and Jon Egge of Clackamas in 2004.

###

NFIB is the nation’s leading small-business advocacy association, with offices in Washington, D.C. and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB gives small- and independent-business owners a voice in shaping the public policy issues that affect their business. NFIB’s powerful network of grassroots activists send their views directly to state and federal lawmakers through our unique member-only ballot, thus playing a critical role in supporting America’s free enterprise system. NFIB’s mission is to promote and protect the right of our members to own, operate and grow their businesses. More information about NFIB is available online at www.NFIB.com/newsroom.

To read the full article on NFIB’s website, click here.

To see or download the original NFIB Press Release, click here (PDF format).

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.