IMPLEMENTATION / Part One

To help you implement many of our financial planning strategies and investment management concepts, we select from a broad spectrum of financial products and services, as no one investment choice, insurance contract, or service alternative can resolve all problems or meet all objectives. Some of our more common solutions are discussed below. These, however, should not be construed as final or the extent of our options.

CAPITAL PRESERVATION / CASH RESERVES
For those individuals with short-term cash needs or whose primary concern is to preserve their capital, treasury bills, certificates of deposit and money market funds are valid options. Treasury bills are short-term IOUs issued and guaranteed by the U.S. government, usually for less than one year. Certificates of deposit are notes issued by banks and guaranteed by the FDIC. You can purchase them for terms of one to five years with a specified rate of interest for that term. Money market funds are mutual funds that purchase short-term money market instruments. The funds trade at their net asset value, usually $1.00. Interest rates fluctuate daily and there is no guarantee of your principal. For long-term “just in case” cash, some of our most satisfied clients are those who have purchased fixed annuities. Offered by insurance companies, these provide guarantee of principal and tax deferred interest accumulation for specified terms, ranging from one to ten years. Many contracts allow penalty-free withdrawals, typically up to 10% a year. Although liquid with no “market risk,” tax penalties apply for withdrawals under the age of 59-1/2 and taxes may be due on any withdrawals on a last-in-first-out basis (LIFO).

RISK MANAGEMENT / INSURANCE
Although Life Insurance provides the solution to many problems, two of its primary uses are to replace income in the event of an untimely death of the wage earner(s) and to pay estate taxes. There are a variety of policies from which to choose, but there are four basic types: Term, Whole Life, Universal and Variable Life. Your specific financial situation will determine which one is right for you.Term Insurance has a lower premium for a limited term, while Whole Life has a higher guaranteed premium with coverage for life. Universal Life earns a higher rate or lower rate of interest than Whole Life and therefore, neither premiums nor cash values are guaranteed. Variable Life introduces an element of risk by offering you a choice of pooled, managed funds that fluctuate with various securities’ markets. According to industry statistics, before the age of 65, the odds of suffering a disability which lasts more than 90 days are one in seven. Therefore, Disability Income Insurance, the most overlooked form of coverage, should be a part of everyone’s financial plan. Many employers either self-insure or provide short-term coverage, but for long-term protection, private insurance is often the best solution. Premiums and coverage are based on many factors, so guidance is paramount in policy selection.The U.S. Department of Health indicates that people age 65 face at least a 40% lifetime risk of entering a nursing home. Long Term Care goes beyond medical and nursing home care. Home care agencies, senior centers, adult day care, traditional nursing homes, and retirement communities are a few such facilities whose monthly costs can be paid for by private insurance. Again many factors go into the cost of coverage. Proper advice is suggested to ensure the appropriate issuance of these contracts.

RETIREMENT ACCUMULATION / QUALIFIED PLANS
Although most agree that Social Security will never be eliminated, many believe it will be modified in the years to come. One of the most common questions we are asked is “Will I have enough money to live on, and when can I retire?” The answer to this question varies greatly, but one thing is definite: there are several government approved qualified plans to help you achieve your retirement goals. Contributions to most of these plans are tax deductible within certain limits and accumulate on a tax-deferred basis. For self-employed individuals or those without corporate plans, the traditional IRA, SEP-IRA, Simple IRA, or profit sharing plans are available. For those working for larger companies, 401K plans, pension plans, defined benefit or defined contribution plans may be offered. Employees of public schools, and certain other non-profit organizations can set up 403b plans or Tax Sheltered Annuities (TSAs) through payroll deduction. There exists a large difference in monies accumulated on a tax deductible/tax deferred basis verses an after tax basis. Monies are not taxed until withdrawn, and tax penalties may apply to withdrawals before age 59-1/2. Finally, the Roth IRA allows anyone with earned income (subject to certain limitations) regardless of age; to contribute funds to an account that will accumulate tax deferred. While contributions are not tax deductible, earnings may be withdrawn tax free, again within limitations. We endorse these plans as an integral tool in the scope of your retirement planning and can help you determine which plan is right for you.

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