• 20Oct

  Q. Prudential has an annuity called Highest Daily Lifetime 6 Plus. It is a variable annuity. Is it a good annuity product? Is the fee too high? Someone suggested the product to me

  Uncategorized No Comments

  Annuity debate is still out on Prudential’s Highest Daily Lifetime 6 Plus

  By Karin Price Mueller/The Star-Ledger

  October 13, 2009, 7:30AM

  Q. Prudential has an annuity called Highest Daily Lifetime 6 Plus. It is a variable annuity. Is it a good annuity product? Is the fee too high? Someone suggested the product to me
  — Ryan

  A. You’re right to question whether or not an annuity is the right investment product for you. The answer: maybe.

  ‘‘I know of a lot of ‘one trick ponies’ in the financial services industry who only sell annuities and no matter what your objection, they have a great answer why you need their product,’’ said Jerry Lynch, a certified financial planner with JFL Consulting in Fairfield.

  In simplest terms, Lynch said an annuity is a promise from an insurance company to pay you an income stream for a specific period of time. It will grow your money in a variable annuity based on how the underlying investments that you select perform or based upon a formula guarantying a minimum rate of return. The minimum guaranteed amount (which is like a phantom account) can only be taken out based upon the contract provisions (usually four to six percent annually for life) and can not be taken out as a lump sum, he said.

  Annuity fees are higher than mutual fund fees because you are putting an insurance wrapper on your money, guaranteeing you a certain rate of return.
  Does this product make sense for you? Only if it fits with the rest of the things that you are doing, he said.

  ‘‘All your money should not be in an annuity as you have limited liquidity,’’ he said, noting that no more than 30 to 50 percent of your liquid assets should be in an annuity, if you decide to go there.

  The Prudential HD Lifetime 6 Plus program offers to provide guaranteed lifetime income based on six percent compounded growth of the variable annuity’s highest daily value, said Jim Marchesi, a certified financial planner with Mill Ridge Wealth Management in Chester. This guaranteed growth rate is offered by Prudential, for a period of time(s) identified in the contract, or until the first lifetime withdrawal is taken.
  Without knowing the rest of your financials, it’s impossible to say if this product, or any product, is right for you.

  ‘‘Variable annuities can add a combination of growth and predictability to a portfolio, for an increased operational cost,’’ Marchesi said. ‘‘Investors need to go through a discovery process to determine if the added costs are validated by the offer.’’
• 13Oct

  How much is a Trillion Dollars

  Financial Tips No Comments

  My Next New Job

   

  This is the next job I want to have.  I want to sell paper to only one client…the US Treasury!  Whoever is the person selling paper to the UST is having a banner year.  In fact, if I can not get the paper job, I want he or she as my new BEST client (sorry friends).

   

  Over the past few months, their has been a tremendous amount of talk about what is necessary to get us though this current financial mess.  We are currently looking at about $4 trillion in spending so far and that number seems to continue to grow every day.  It is estimated that that can grow to $8-10 trillion just to “get us out”.

   

  I think one of the major problems we all have is that million, billion and trillion sound so much alike so how far apart can they really be.  I want to give everyone a realistic understanding of how much money this is and what is the impact of this on our economy in the US.

  ü      A million seconds is 11.2 days

  ü      A billion seconds is 32 years

  ü      A trillion seconds is 32,000 years!

  These numbers do not seem that different when you say them; however, as you can see from this very simple example, the differences are huge!  Understand these numbers!

   

  The US total budget in 2008 was $3 trillion.  Our current national debt is about $10.5 trillion and that took hundreds of years to get that large.  The interest on this debt is about $300 billion annually which is about 10% of the US national budget.  Assuming that our national debt doubles under this current situation, it will bring our interest payments to $600 billion annually or about 20% our current national budget and this causes issues for a few reasons.

  ü      Most Americans will not have to pay capital gains tax for years due to the carry forward losses that they have, which will reduce tax revenues.

  ü      Income taxes will be down- we have unemployment at 8.1% (11.6 million people) and a good portion of govt. revenues come from income taxes which will reduce revenues

  ü      Social Security is scheduled to be running at a deficit in 2018, only 9 years from now.  This will require additional funding

   

  In July 2008, the US population was about 304 million, doing simple math and assuming a debt of $22 trillion.  This come out to about $70,000 per person (man, woman, child) currently in the US!  If you only count the people who can work, and assume 100% employment (which is not possible) that number will double to $140,000 per working person in the US.  We are creating a system similar to what happened with the financial industry with our national govt!

   

  No this is not a political note.  I am personally an Independent and take pride in the fact that I can call any person an idiot if it is deserved.  I support both parties when them make sense, and speak out against them when they do not.  My point is simple.  I have serious concerns about spending this amount of money.  I do not think that spending “unfocused” dollars decided in a few weeks will get us out of this.

   

  My main concern is that nobody really knows what this money will do, and addressing the symptoms of the problems does not solve the problem.  We need to develop good paying jobs in the US.  We need to cut the fat in industries that have fat.  We need to stimulate small businesses in the US that are the backbone of jobs in the US economy. I am not sure how these proposed programs will do that.

   

  To get through this, I am convinced that it is not just about spending money, but more importantly, it is about tough decisions.  Unfortunately I do not see anyone doing this.  I do not feel that just because you work for the government, you should have guaranteed income for life while we do not.  I do think that Governors and Senators should have the same retirement plan that we have…Social Security. Executive compensation, govt. employees, Unions, tax shelters, everything should be suspect. Lets all take a look at the cost of all these programs and make some smart long term decisions!

   

  For the past 2 weeks everyone is enjoying this next stock market rally.  It makes everyone feel good short term but are the real issues really being addressed…I do not think so.  If we are not addressing the issues, then the market will continue to be volatile.  My dad taught me something a long time ago.  When you have to buy a tool, buy the best tool you can so that you have it forever and it makes your life easier.  My question is are we buying the right tool?

   

  I do not have the answers.  I’m confident that just spending money where we are just printing money is not the answer.  My points come from a variety of different sources and I take pride in stealing good ideas that I make into my own.  Use this information to develop your own opinion, challenge yourself, and develop your own ideas, even if they disagree with me!

   

  Take a look at everything that is happening and send out notes to your legislator saying yes I agree or I do not. You need to do this not for me buy for your kids.   You should have your legislators on your speed dial….especially now.  You do not have to agree with me, but we all need to get vocal to get our thoughts across. GET LOUD!
• 13Oct

  Special Client Report: Identity Theft Identity Theft is a serious crime!

  Special Reports No Comments

  What is Identity Theft?

  Identity theft occurs when a criminal takes your personal information (such as your social security number, address, birth date, bank account number, credit card number, etc.) and uses it to steal money or obtain services under your name. With every advance in technology, it seems there are those who will quickly find a way to put it to use for their own unlawful gain. For example, some thieves access your information by hacking into personal or business computer systems or stealing laptops that contain personal data. But even more often, they use good old-fashioned techniques like stealing your purse or wallet. Copies of bank or credit card statements, bills or other personal papers can be stolen out of your home, your trash, the trash of businesses you’ve patronized, or your incoming or outgoing mail. Some thieves simply talk people into giving them information by posing as someone who would have a right to know it or claiming they need you to verify your account information.

   

  Once thieves have this information, they can wreck havoc with your good financial name. They can run up charges on your credit card, changing the billing address so it will be awhile before you realize what has happened. They can open new accounts in your name, including bank, phone and utility accounts; write counterfeit checks; drain your bank account; pay taxes or file for bankruptcy in your name; or get official ID issued in your name. It has even been known to happen that an identity thief will give the victim’s name if they get arrested, and when they don’t show up for court, the police come after you! In addition to the expense of resolving the problem, identity theft victims can also be harassed by collections agents, have their utilities cut off, or have trouble obtaining loans, credit or new bank accounts. They may also be unable to access their existing bank accounts or use their existing credit cards. The bottom line is identity theft can have a serious negative impact on the victim so you need to be informed.

   

  How bad is the problem? 

   

  Identity theft remains the top category of fraud affecting consumers. In 2008 the statistics jumped considerably, according to the Federal Trade Commission’s annual consumer complaint report released in February 2009.  In the Federal Trade Commission’s “Consumer Sentinel Network Complaint Data Book” report for 2008, it shows the number of identity theft complaints up around 20% from 2007, from 259,266 in 2007 to 313,982 in 2008. Identity theft represents 26% of all consumer fraud complaints, followed by third-party and creditor debt collection (9%), shop-at-home and catalog sales (4%), and Internet services and other forms of fraud (4%). And while contemplating this enormous number, keep in mind that it doesn’t include those victims who chose not to file a claim, or filed under other categories, such as theft or mail or internet fraud.

  With numbers on the rise again, it is even more important that you refresh your memory on the signs of identity theft and the simple precautions you can take to lessen your chance of becoming one of the statistics! Still don’t think it’s all that important? Read on.

   

  The average cost to the consumer rose from $2,664 to $3,403 in 2008. Luckily, a full 53% paid nothing at all, because in most cases, victims are not legally responsible for unauthorized charges or accounts. Looking only at victims who did have to pay out-of-pocket expenses, the median amount paid was $440.

   

  As of April 2009, the 2008 numbers were not yet available, but historically the total value of goods and services obtained by identity thieves ranged from $350 to $30,000, with the median falling at $500. The amount of time each victim spent resolving the problems caused by identity theft started at 2 hours and reached an extreme high of 1200 hours! The median here, fortunately, is only 4 hours. The high numbers in all these statistics represent a minority of cases.

   

  The list below is a nationwide ranking of states by number of identity theft complaints for January 1 – December 31, 2008.

   

  Age-wise, people under 40 bear the brunt of identity theft fraud. The graph below shows that nationwide, people are less likely to be victimized the older they get. Of all 2008 victims, 56% of victims were under 40, 19% were in their 40s, 13% were in their 50s and 10% were over 60.

   

   

  Credit card fraud was the most common form of reported identity theft (23%). Phone or utilities fraud was second (18%) followed by employment fraud (14%) and bank fraud (14%). Other significant types of identity theft reported by victims were government documents/benefits (11%) and loan fraud (5%).

   

  It’s no wonder so many people across the nation are becoming slightly paranoid about their personal information and who has access to it. Almost everyone has heard at least one person’s horror story of the long and difficult path to clearing their name (and credit rating!) after identity theft has occurred, and after hearing it, my guess is that everyone shared the same thought—“I hope that never happens to me!”

   

  A new method for identity thieves – Stimulus Scams 

   

  Stimulus scams are a new way identity thieves are acquiring your personal information and stealing your money. The Federal Trade Commission sent out an FTC Consumer Alert informing us that the promise of stimulus money in return for a fee or financial information is always a scam. These scams occur primarily via email, an online ad or website saying you are eligible to get an economic stimulus payment. The FTC urges you to ignore it, delete it and throw it out! They strongly suggest you do not even click onto any links or open any emails or attachments.  This may cause the installation of spyware, a harmful program which could send your personal information to an identity thief. The IRS does not send emails like this asking for personal information and these emails or websites should not be trusted, regardless of how legitimate it sounds.

   

  What can I do to protect myself? 

   

  We understand your concerns on this issue and we wanted you to know that there are things you can do to help protect yourself from identity theft. The following steps are very simple and could save you a huge headache down the road!

  
  Don’t give out personal information.

   

  Don’t ever provide personal information over the phone, by mail or on the internet unless you have initiated the contact and know exactly how the information will be used and whether it will be shared with others. If someone contacts you and you think it might be legitimate, break the contact and use a listed phone number or web address that you know to be valid to reestablish contact. Never use a number or email link that they provide, as these may be traps set up to look or sound like the real website or automated phone system.

   

  Protect your social security number.

   

  Never have it printed on your checks or driver’s license, and never carry your card in your wallet. Only give out your number when necessary, such as applying for store credit, where it is used to perform a credit check. Even then, ask if you may give your number verbally without putting it in writing.

   

      Don’t leave personal or financial information out in the open.

   

  The latest data in the FTC’s most recent Identity Theft Survey Report shows a shocking 16% of identity theft victims personally knew the thief—family members, friends, neighbors, in-home employees and coworkers were all implicated in these cases. With that in mind, it is always best to keep all personal or financial information in a safe place in your home. Don’t leave it lying around, especially if you are having work done on your home or hire outside help.

    

  Don’t carry unnecessary personal information.

   

  We just discussed not carrying your social security card in your wallet, but there are other documents people sometimes carry with them that identity thieves would just love to get their hands on. Bank account numbers, PIN numbers, passports, birth certificates and blank checks can all provide a huge amount of information to a thief. Don’t carry them unless absolutely necessary.

  Destroy personal documents before disposal.

   

  Before throwing anything in the trash, shred or otherwise destroy documents such as credit card receipts, old credit cards, credit offers, or bank, medical or insurance statements. You don’t want these documents lying around on the curb waiting for trash collection.

   

  Protect your mail.

   

  Collect your mail promptly, and use a post office collection box for outgoing bills. Whenever you go on vacation, ask the post office to hold your mail or get a post office box.

   

  You can reduce the amount of unsolicited credit offers arriving in your mailbox (which an identity thief could snatch and use as their own). Call 1-888-5-OPTOUT (1-888-567-8688) and ask them to stop any pre-screened offers from being sent to you. Or, on the Direct Marketing Association’s website (www.the-dma.org, in the section “For Consumers”) you can opt out of direct mail marketing, email marketing or telephone marketing conducted by many companies. You can also write to them at PO Box 643, Carmel, NY 10512.

   

  Pay close attention to your bills. 

   

  Know your billing cycles. If your bills are even a couple days late, contact your creditor. Late or missing bills could mean that an identity thief has changed the mailing address on an account to avoid detection.

   

  Review your credit card bills and checking account statements as soon as they arrive, and look into any suspicious checks or charges right away.

   

  Have any cards you don’t need or use? Consider canceling them. A thief could get access to that dormant account, and you would only find out about it once bills started arriving in your mailbox. For those of you worried about possibly hurting your credit score by closing dormant accounts, Liz Pulliam Weston from MSN Money suggests not closing your oldest account (as credit scores are based partly on length of credit history) and not closing several accounts at once. Credit scores are also partly based on your debt as a percentage of your available credit, so closing several accounts would greatly reduce your available credit without changing the size of your debt.

   

   

  Make a backup list.

   

  If you ever do have a wallet stolen or lose other personal information, you’ll need to act quickly to minimize any damages. Some people suggest making a photocopy of the front and back of your credit cards and debit cards. A simple list is also sufficient, as long as you record account numbers and the phone numbers to call if the card is lost or stolen. However, as you can imagine, it is absolutely necessary to keep this list in a safe but accessible place. If you need to report your cards lost or stolen, you don’t want to risk having it locked up in a safe deposit box, as the bank may not be open when you need to get your list! If you’re going on vacation, take only a list of the toll-free numbers you would need to call to report all your cards lost or stolen, and keep that list in a safe place other than your purse or wallet.

   

  Use creative passwords.

   

  Creative passwords better protect your information. Select intricate passwords on your credit cards, debit/bank cards, phone accounts and internet accounts. Stay away from obvious choices such as your mother’s maiden name, a pet’s name, your birth date, or anything else that might be easily available.

   

   

  Use caution when using the internet.

   

  The internet provides a wealth of information, financial offers, shopping and other services. However, at the same time, it opens consumers to an array of online scammers and identity thieves. A few ways online scammers commit identity theft is through phising. Phising is when a pop-up or email claims they are from a business that you may deal with, such as your bank, and they ask you to update, validate of confirm account information. These are bogus and can be costly. Make it a policy to never respond to emails or pop-ups that ask for personal or financial information. You should also protect yourself from spam. Many internet providers offer filtering software to help limit the amount of spam that gets through to email users. Some tactics to help prevent identity theft through the internet are:

   

  • Use creative passwords. 
  • Protect your personal information. Share your information only with companies you know and trust. 
  • Know who you are dealing with.  
  • Take your time. Resist the urge to “act now” despite tempting offers. 
  • Read the small print.
  • Never pay for a “free” gift.

   

   

   

        Access free annual copies of your credit report.

   

  You can access free annual copies of your credit reports from all three national consumer reporting companies at www.annualcreditreport.com or by calling 877-322-8228. You are legally entitled to one free copy per year, so make use of that. (Note that if you choose to go through the reporting companies individually they can charge you up to $8 for a copy of your report.)

   

  FTC statistics from their February 2009 report show that people over 65 are the least likely to make use of this important method of protecting your identity. Don’t follow the crowd! These reports are free and easy to obtain. Most importantly, they can help you detect suspicious activity on your existing accounts or find any new accounts opened in your name, allowing you to stop identity thieves and minimize losses.

   

  These ten steps do not require much time or effort on your part, but they will make things more difficult for anyone who wants to illegally access your personal information.

   

   

  Should I pay for an identity theft protection service?

   

  The answer to this is in many cases is you may not have to. Many companies now exist that offer to lock, flag or freeze your credit reports; track your credit report and alert you of suspicious activity; help you rebuild your credit if you do become a victim; remove your name from mailing lists or pre-screened offers; limit your liability, etc. However, as you may have already guessed, you can do most of these things yourself for free!

   

  You can put your own fraud alert on your credit report, and this is free if you have reason to believe you have been or will become a victim of identity theft. You can also check your own credit reports for free once a year. The companies that offer to help you rebuild your name typically do so by obtaining a limited power of attorney, which enables them to deal with creditors and others on your behalf. We have already told you how easy it is to remove your own name from mailing offers. And under the law, unauthorized credit card charges can be disputed and unauthorized debit or ATM charges are limited to a $50 liability if you report the fraudulent charges within 2 days of discovery. So if you are considering one of these services, be sure to read the fine print and understand exactly what it is you’re paying for.

   

  Also, remember that criminals love to take advantage of our paranoia! Beware of offers of credit protection which might be scams, charging you money for protection you are legally entitled to for free.

   

  How will I know if someone is using my personal information?

   

  How and when you find out you are a victim of identity theft depends on several factors. According to the most recent statistics on the FTC website, 40% of victims discover the misuse of their information within one week. However, in cases where the thieves used existing credit cards or withdrew from existing accounts, the victims were twice as likely to find out the very day it started than in cases where the thieves used the information to open new accounts or commit other types of fraud. This is because, as the FTC explains, “the most common way victims discovered the misuse of their personal information was by monitoring the activity in their accounts.” 24% of victims whose information was used to open new accounts did not discover the problem for six months or more (as opposed to only 3% of those having issues with existing cards or accounts).

   

  If your purse, wallet or other personal information has been lost or stolen, that does not necessarily mean you are a victim of identity theft. However, it does mean that your personal information has been compromised. Even a regular “old-fashioned” thief may choose to use this information once he or she has it, or sell it to others who will.

   

  According to the FTC, the good news is that the quicker the identity theft was discovered, the less money the thieves got and the lower the victims’ out-of-pocket expenses. The sobering news is that over half of identity theft victims have no idea how the thieves got their information. What this means is that you need to be on the lookout for signs of identity theft even when you have no reason to suspect your information has been stolen!

   

  So, what should you look for? Some of the more common red flags are bills that are late or do not arrive, unexpected credit cards or account statements, being denied credit or offered very poor credit terms, or calls or letters about unknown purchases.

   

  5 Common Ways ID Theft Happens Skilled identity thieves use a variety of methods to  steal your personal information, including:

  1. Dumpster Diving. Someone rummages through your trash looking for bills or other paper with your personal information on it.

  2. Skimming. Someone steals credit/debit card numbers by using a special storage device when your card is processed.

  3. Phishing. Someone pretends to be a financial institution or company and sends you spam or pop-up messages to get you to reveal your personal information.

  4. Changing of Address. Someone diverts your billing statements to another location by completing a “change of address” form.

  5. “Old-Fashioned” Stealing. Someone steals your wallet or purse; mail; bank and/or credit card statements; pre-approved credit offers; and/or new checks or tax information. Someone can also steal personnel records from your employers or bribe employees who have access to this information.

   

  I am a victim of identity theft. What now?

   

  If you do determine that you have become a victim of identity theft, it can feel overwhelming. You may not have much idea of what damage they have done, or what steps you need to take to stop them and start regaining your good financial standing. Of course, you can always turn to our office as a resource. I hope you will also choose to file this letter so that you can pull it out if you ever need it (although I hope you never do!). The FTC website (www.ftc.gov/idtheft) has comprehensive information as well.

   

  The key is to take action as fast as possible. Below, we have provided you with a step-by-step action list that will help you (or someone you know) resolve issues relating to identity theft in an efficient and hopefully less costly manner.

   

  Get organized.

   

  Make a list of who you need to contact. Start a file where you can keep all your paperwork together in one easily accessible place, and keep this file even after you believe all your disputes have been settled. Whenever you make phone calls, write down the date and time and the name of the person you talked to, along with any notes from the call, and keep these notes in your file.

   

   

  Place an initial fraud alert on your credit reports.

   

  This alert, which will stay active for 90 days, will ensure that creditors must verify your identity before making any changes to your accounts or opening new accounts. It is only necessary to call one of the three consumer reporting companies. Their toll-free numbers are: 

   

  Equifax           1-800-525-6285

  Experian         1-888-397-3742 (1-888-EXPERIAN)

  TransUnion     1-800-680-7289.

   

  When you place a fraud alert, you can get a free copy of your credit report regardless of how long it’s been since you last requested a free report. Check it carefully for any companies you don’t recognize, accounts you didn’t open or unknown charges on your accounts. Remember to check your own name, SSN, and employer also, as thieves will sometimes change basic information to suit their own purposes.

   

  After you’ve completed the rest of the steps, you can go back and get an extended alert on your credit report. An extended alert stays active for seven years. To get this, you will need to provide a copy of an identity theft report. You will also receive two free credit reports during the first year after placing the extended alert, and the consumer reporting companies will automatically remove your name from all marketing lists for pre-screened credit offers for five years (unless you ask for your name to be put back on before then).

   

  Close any account that may have been tampered with.

   

  Close any account that may have been tampered with or opened without your knowledge. Ask to speak with someone in the security or fraud department at each company or institution. Ask for fraud dispute forms to dispute any charges made by an identity thief. If they don’t have special forms, send a letter to the address given for “billing inquiries.” If new accounts have been opened in your name, ask if the company accepts the ID Theft Affidavit. (Instructions for completing an ID Theft Affidavit can be found at www.ftc.gov/idtheft.) If not, use their fraud dispute forms or send a letter. Be aggressive and persistent. If someone is not giving you the help or the answers you need, ask to speak to a supervisor.

   

  Follow up any phone calls in writing, especially to banks and credit card companies, and use certified mail, return receipt requested, to keep a record of what the company received from you and when. Keep copies of all correspondence in your file.

   

  Once you have resolved any disputed charges or accounts with a company, ask them to put it in writing for you to confirm that the disputes have been settled. This letter may prove very helpful if any errors crop up later on down the road relating to the fraudulent debt or accounts.

   

  Take precautions with new accounts.

   

  When opening new accounts, use a password that is not obvious. Avoid using your mother’s maiden name, your birth date, a pet’s name or other information that is easily available.

   

  File appropriate reports and complaints.

   

  Whenever you have a problem with identity theft, please file a police report (in person, if possible) and provide as much information as you can. Get a copy of it for your file.

   

  File a complaint with the Federal Trade Commission (www.ftc.gov/idtheft or call 1-877-438-4338) to give law enforcement more information to help fight identity theft nationwide.

   

  To file an identity theft report with the consumer credit reporting agencies in order to get an extended fraud alert put on your credit report, you will need to submit a copy of your police report or report to the FTC, along with any other requested proof of your identity.

   

  Where can I get more information?

   

  If you need additional information about specific problems related to identity theft, such as dealing with stolen ATM cards, credit cards, fraudulent checks, etc., the Federal Trade Commission website has an enormous amount of detailed information. To learn more about Identity Theft and how to deter, detect and defend against it, visit their site at www.ftc.gov/idtheft or write to:

   

  Consumer Response Center 

  Federal Trade Commission

  600 Pennsylvania Ave., NW, H-130

  Washington, D.C. 20580 

   

  Again, we hope that you never need to use the action list for identity theft victims, but we do encourage you to take the simple precautionary actions listed earlier in this letter to help make it more difficult for identity thieves to access your personal information.

   

  If you have any questions about the safety of your financial information, I am happy to discuss that with you, along with any other aspect of identity theft. I hope this report has helped you. I look forward to talking with you at our next meeting. Our goal is to continuously keep you as our client aware of all important financial issues and topics that can help you.

   

  We appreciate the confidence you have shown in our firm. As always, we thank you for the opportunity to work with you.

   

   

  Sources:   “Consumer Sentinel Network Data Book for January – December 2008 – Federal Trade Commission February 2009”on the website (http://www.ftc.gov/opa/2008/02/fraud.pdf); and “FTC Consumer Alert: Seeing Through Stimulus Scams”; OnGuard Online, Your Safety net (www.onguardonline.gov); “2006 Identity Theft Survey Report” as posted on the Federal Trade Commission website (www.ftc.gov/idtheft);

   

  Source for graphs: www.ftc.gov/idtheft     

   

  Disclaimer: These materials are intended to review identity theft issues.

   

  This report is intended to be helpful for informational purposes only. The author, or any other individual or companies affiliated, will not be liable with respect to any direct, indirect, or consequential loss or damage cause, or alleged to be caused by the use of these materials.

   

  Jerry Lynch is a Certified Financial Planner with JFL Innovative Investments, LLC a registered investment advisor not affiliated with Comprehensive Asset Management & Servicing Inc.  He also offers securities as a Registered Representative of Comprehensive Asset Management & Servicing Inc., member FINRA/SIPC.
  

  
  

  If you would like a copy of this report for a friend or family member, please call Pam in our office at (973) 439-1190 and we would be happy to mail one to them. 
• 13Oct

  The Worker Retiree and Employer Recovery Act of 2008: Bright Spot in a Dismal Financial Landscape

  Financial Tips No Comments

  Most financial experts and economists agree with what the rest of us knew intuitively—during 2008, we experienced one of the most trying financial crises in history. And it’s not over. However, amid the doom and gloom of the past several months, there are a few pieces of good news to be found, and one of them is the Worker, Retiree and Employer Recovery Act (WRERA) that was passed in December 2008.

   

  In essence, WRERA suspends all required minimum distributions (RMDs) from defined contribution plans for the year 2009 only. This includes 401(k)s, IRAs, 403(a) or 403(b) plans and 457 plans. (Defined benefit plans will continue with distributions as normal.) It also does not discriminate based on age or income, but applies to all plan participants and IRA owners, as well as beneficiaries of deceased participants and IRA owners.

   

  This is certainly not bad news for anyone; however, those who need their yearly distribution for living expenses will simply ignore this one-year suspension of the RMD rule and take out their money as usual. The opportunity is greatest for those individuals who can afford to leave their money where it is. With most retirement account values down, it will be a relief to many retirees and inherited IRA beneficiaries to allow the money they normally would have been required to withdraw to accumulate tax-deferred.

   

  Keep in mind that not everyone who can afford to take advantage of this opportunity should do so. For example, industry expert Natalie Choate suggests that clients who are overweighted in retirement plans or who may be facing higher tax brackets in
  future years may want to go ahead and take a distribution anyway.

   

  Please check with your financial advisor to review your situation and the tax consequences of not taking a distribution this year to determine if you will truly benefit from taking advantage of this Act. Your advisor can also review some of the more confusing details of WRERA, especially for those who turned 70 ½ in 2008 or who will do so in 2009, or those with annuitized IRAs.

   

  While we can all be thankful for this one piece of good financial news, here’s hoping that such measures are no longer necessary by the time next year rolls around!

   

  About Jerry Lynch:

  Jerry Lynch is President of JFL Consulting and has over 23 years in insurance and financial planning, working with individuals in a variety of different planning areas.  He is one of the few advisors to be listed in the 2004-2009, “America’s Top Financial Planners” by Consumer Research Council of America and listed as a 5 Star Advisor in the Paladin Registry.  In addition, Jerry is a regular contributor to the Star Ledger, WABC Talk Radio and CNBC.  He can be seen on CNBC’s, “On the Money” as well as “The Big Idea with Donny Deutsch”.

   

  If you’d like a copy of this article sent to someone else who would benefit from this information,
  please contact Pam Karkenny at JFL Consulting, Inc. at (973) 439-1190

   

  This article is for informational purposes only. For specific advice about your situation, please consult with a financial professional.
• 13Oct

  The Top 10 Mistakes People Make When They Inherit an IRA – and How to Avoid Them

  Financial Tips No Comments

  According to the Federal Reserve, it is estimated that there are now over $13 trillion in retirement accounts. Retirement accounts make up the majority of many people’s estates and, unfortunately, many owners of IRAs and their financial advisors are not aware of all of the complicated tax laws regarding distributions from these retirement accounts.

  Why is this? Because retirement accounts are different! People often forget that retirement accounts have to be in the name of an individual and the beneficiary designations of retirement accounts will override the beneficiaries of any of the other estate planning documents, such as your trust, will, etc. Therefore, you must separate the retirement accounts from the rest of your estate and establish a proper plan for distribution of these assets.

  Although many individuals have established complex estate planning strategies, such as revocable living trusts, irrevocable life insurance trusts, etc., many individuals have not addressed the complex estate planning issues of inheriting an IRA.

  I have often heard IRAs referred to as “Individual Riddle Accounts” because the rules can be very complex and cause many mistakes. IRA accounts are significantly different from most of the other assets in your estate because they:

  v      Do not pass through the will (unless payable to an estate)

  v      Are not subject to probate (unless payable to an estate)

  v      Receive no capital gains treatment

  v      Receive no step-up in cost basis upon death

  v      Cannot be gifted (in most cases)

  v      Title cannot be transferred to a trust

  v      Are subject to Required Minimum Distributions

  Let us review these issues in detail:

  First of all, your IRA account has a beneficiary, which will override everything that you have in your will or living trust. For example, you might have changed your will or trust to reflect new beneficiaries of your estate. However, if you do not change the actual beneficiaries on your IRA account, then that won’t make any difference! Your IRA accounts do not pass through your will or your living trust in most cases, and therefore this must also be taken into consideration when revising any estate plan.

  IRA accounts also are not usually subject to probate. For example, if you have an ordinary will, most of the assets inside your estate will pass through probate, unless you have a living trust or your accounts are held as joint tenants with someone else.

  Most of your other assets are subject to reduced capital gains tax rates if you sell them after one year. However, any distributions from an IRA are taxed as ordinary income and not at lower capital gains tax rates.

  In addition to this, there is no step-up in cost basis upon the death of the IRA owner. Most other assets owned by an individual receive a step-up in cost basis upon the death of the person, eliminating all capital gains on those assets up to that point in time.

  Another major issue is that IRA accounts cannot be gifted in their current form. For example, if you want to give an appreciated stock that is held outside of an IRA directly to another individual, you can do that at any time. However, if you want to give some of your IRA to someone else, you must first take a distribution, pay the income tax on this, and applicable penalties, if any, and then make the gift.

  Please remember that you should not place the title of an IRA into a trust! If you do so, this may cause immediate taxation!

  The beneficiary can be in the name of a trust, but the title of any IRA accounts must be in the name of an individual. It is extremely important to review your IRA accounts to make sure that the titles and beneficiaries are held properly.

  While there has been some recent talk that an individual can transfer title of their IRA to a trust, this area is currently uncertain and we do not recommend doing so without first obtaining the approval of the IRS through a private letter ruling.

  And, last but not least, IRA accounts are the only assets in your estate that require you to take out a minimum distribution.

  Many people are faced with very important decisions when they inherit an IRA. To top it all off, if their decision is not the best choice, it is usually irrevocable!

  Unfortunately, IRA accounts are subject to many different types of taxes and penalties upon death, which is often referred to as the “triple tax syndrome.” This is comprised of estate and inheritance taxes, federal and state income taxes and possibly even additional penalties, which can lead to tax erosion of 65% or more!

  There are many taxes that can apply to retirement accounts:

  v      Estate Taxes (up to 45%)v      State Inheritance Taxes (up to 13%)v      Federal Income Taxes (up to 35%) v      State Income Taxes (up to 9.3%) v      Generation Skipping Tax (45%) v      59 ½ Penalty Tax (10%) v      Minimum Distribution Tax (50% post age 70 ½)

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  Since the individual who accumulated them owns these retirement accounts, they are included in that person’s taxable estate and therefore are subject to federal estate and state inheritance taxes. Additionally, you must remember that retirement accounts accumulate on a tax-deferred basis, which means you have not paid income taxes on these assets. Thus, upon death, these assets are subject to federal and state income taxes. In addition to this, there may also be penalties, as we will soon see, that are often referred to as excise taxes by the government.

  People often like to leave assets to their grandchildren upon their death. The first $2,000,000 transferred (this amount increases in future years) is considered the Generation Skipping Tax (GST) exemption. Anything beyond that is subject to the 45% GST.

  Additionally, there is a 10% penalty for premature distributions from most IRAs prior to age 59 ½.

  Finally, we have the minimum distribution penalty tax that is equal to 50% of the required minimum distribution that should have been taken from the retirement account, but was not, in a given year.

  Important Note:

  The information herein takes into consideration the numerous tax law changes in the “Final Regulations” issued by the IRS on April 16, 2002, and in the Pension and Protection Act of 2006 (PPA). However, these rules and laws may be subject to significant changes in the event of any amendment, correction, or interpretation of the current tax law. Please make sure that any advice you receive is current with respect to existing tax laws.

  Improper decisions can be financially devastating. Therefore, it is extremely important that you seek qualified, competent financial counseling before you make your final decision with regard to what action you will take.

  These tax laws pertain to most retirement accounts, including, but not limited to, Individual Retirement Accounts (IRAs), Profit Sharing Plans, 401(k) Plans, Employee Stock Ownership Plans (ESOPs), and most other defined contribution plans. However, many of these rules do not apply to non-qualified plans, such as Section 457 Plans, non-qualified deferred compensation plans, Roth IRAs, and many other plans. In addition to this, some of these rules do not apply to 403(b) Plans, also known as Tax Sheltered Annuities (TSAs). These types of plans have additional specific rules with respect to their minimum distributions.

  Sometimes advisors, banks and brokerage firms are not familiar with these complicated tax laws. One of the most important concerns of these distribution rules is, of course, the tax law. Whatever you do, make sure you deal with someone who is very familiar with the tax laws governing these retirement distribution rules.

  NOTE: It is extremely important to remember that there are usually two sets of rules:

  1. The IRS rules
  2. The IRA Custodian or Retirement Plan Administrator Rules

  You must use the stricter of these two sets of rules! Many people are not aware that the custodian is not always current with respect to new tax laws. In fact, the IRS, on many occasions, states that although their particular rules are allowed, the specific contract of the IRA custodian or retirement plan must also reflect these rules in order for the IRS tax laws to be used. If the current retirement plans are not amended to reflect new IRS law changes, the existing retirement plan rules take precedent! Therefore, it is extremely important not only to know what the IRS allows, but what your custodian allows! Please make sure that you review your agreement carefully.

  The purpose of this book is to review not just what to do, but what not to do. You have heard of the expression, “Learn by your mistakes.” Well, I am a big believer that it is cheaper to learn by other people’s mistakes!

  I’ve assisted hundreds of people with their IRA rollovers and inheritances and I have personally seen over millions of dollars worth of mistakes in retirement distributions. My goal in writing this, is to explain some of the most common mistakes so that hopefully you can avoid them in your own situation!   These areas include

  v     The information necessary to identify potential problem areas when dealing with an “Inherited IRA”;

  v     A summary of the various tax laws, regulations, rules and private letter rulings that may affect your inherited IRA decisions;

  v     A discussion of the importance of choosing the right beneficiary or beneficiaries for your retirement accounts;

  v     Information and guidance that will help you have an informed discussion with your financial advisor about the topics raised in this booklet, taking into account your own specific situation.

  We highly encourage you to make an appointment if you are:

  1. Concerned about choosing the right beneficiary for your existing IRA;
  2. Ready to retire soon and concerned about understanding your options;
  3. Interested in obtaining more information about Roth IRAs. Required minimum distributions from Roth IRAs are significantly different than traditional IRAs, and with the proper planning you can use them to avoid many of the minimum distribution rules applicable to traditional IRAs.

  In order to help avoid some of the common mistakes that people make, it is important for you to understand some of the basics of the tax laws. We would be happy to assist you in that area as well.

   

   

   

   

  About Jerry Lynch:

  Jerry Lynch is President of JFL Consulting and has over 23 years in insurance and financial planning, working with individuals in a variety of different planning areas.  He is one of the few advisors to be listed in the 2004-2009, “America’s Top Financial Planners” by Consumer Research Council of America and listed as a 5 Star Advisor in the Paladin Registry.  In addition, Jerry is a regular contributor to the Star Ledger, WABC’s Talk Radio, and CNBC.  He can be seen regularly on CNBC’s, “On the Money” as well as “The Big Idea with Donny Deutsch”.

   

   

   

   

  If you’d like a copy of this article sent to someone else who would benefit from this information, please contact Pam Karkenny at JFL Consulting, Inc.  (973) 439-1190.

   

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