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Autumn 2004

Winter 2004

Growing a Strong Financial Future
Published Quarterly • Spring 2005

2005 Markets

After a dismal January, stocks rebounded in February. The Dow Jones showed the strongest percentage gain for February in seven years. As of 2/28 the Dow is basically even for the year, down .16%. The S&P 500 is down .69 year to date. The technology slump continues amid worries of slowing demand for products. The NASDAQ is down 5.69% for the year. Foreign stocks (MSCI EAFE up 2.19%) provide some stronger returns. Bond indices are mostly flat.

We have been asked by many of you about our predictions for 2005. We are mindful that the bull market is now quite long in the tooth and that cycles of bull and bear are a constant. However, we are not in the business of fortune telling, as much as we would like to claim such talents. Re-examine your own tolerance for risk and your goals and stick to your investing plan. We look forward to reviewing these issues with all of you this year.

CHANGES

We will be moving our office this spring to a different location in Petaluma. As soon as we have found the new site, we will contact you with our new data. We expect our phone and e-mails to remain the same.

Mike will be working one Saturday per quarter for those who have difficulty making appointments during the week. The next scheduled Saturday is April 23. Please call Mike at 769-0200 for an appointment.

Financing College

In a College Funding Services survey, 43% of middle-income parents and 29% of higher-income parents said they had little or no understanding of how to fund college. The most expensive college in the country, Landmark College, now costs $36,750 per year without room and board!

A 2002 survey by Nellie Mae found that the average student loan balance from a bachelor’s degree was $18,999. This is 66% more than five years earlier!!

Clearly the issue of paying for college is complicated today, especially with college costs rising faster than inflation and grant money not keeping pace.

We suggest careful planning from the time your children are born. There are many excellent vehicles available including Coverdell and 529 plans. Saving early is the key to avoiding these heavy student loan burdens. Remember that the average lifetime earnings of college graduates far surpass those with high school diplomas ($1.3 million more for a bachelor’s degree.)

Getting Copies of Your Credit and Medical Reports

Why Get A Credit Report

Many of you read about the mass identity theft of close to 150,000 people that occurred at ChoicePoint, a personal information clearinghouse. An estimated 9.3 millions Americans suffered identity theft last year. We have chronicled many ways to avoid being a victim in past newsletters. One more great defense is checking your credit report.

Credit reports show loan balances, payment histories and a wealth of personal and financial data used by landlords, employers, insurers and lenders. If you see something you do not recognize or mistakes in your payment history, you will want to get the mistakes corrected.

How To Get Your Report

The Fair and Accurate Credit Transactions Act (FACTA) gives each of you the right to get one free copy of your credit report from each of the three credit bureaus yearly. You can get reports from all three bureaus at once or spread your requests out over the year.

To get your free reports, go to www.annualcreditreport.com. This site has dates for when your state is making the service available. You can also call 1-877-322-8228.

You must provide your name, Social Security number, date of birth and address to get the reports.

Beware of providing information to anyone who offers to get free reports for you. The authorized site never offers free reports by solicitation.

FICO score

The higher your FICO score, the less you will pay for credit. If you have been the victim of credit card fraud, you may have a low FICO score. Below 620 can mean you pay more for loans. Go to www.MyFICO.com to learn about how these scores are calculated.

Make It A Habit

We hope every one of you will go to the site and get your reports. Beth Givens, director of the Privacy Rights Clearinghouse, suggests checking your credit report before refinancing your home or financing a car. Otherwise she recommends checking three times a year with the free report from each bureau in rotation.

Medical History Report

If you have applied for individually underwritten life, disability or health insurance within the last seven years, MIB Group has a record on you. You can get a free report once per year by calling 866-692-6901. The type of information that appears in these reports is chronic health conditions, cancer treatments, a history of reckless driving or risky activities like scuba diving. Of the 9,000 people who applied for their reports last year, 300 to 400 found errors, according to MIB Group. We suggest getting this report at the same time you get a free credit report. We believe the small effort to be proactive will bring peace of mind.

Financial Tips

Protecting Your Assets On Death

According to a study by PNC Advisors in Pittsburgh, 43% of Americans with investable assets of $10 million or more do not have wills! Martindale-Hubbell found that 58% of 1000 adults ages 18 and older did not have a will in 2004. Procrastination, reluctance to discuss the transfer of wealth and confusion over the choices are all to blame.

Wiiken & Gorman strongly urges all our clients to practice open intergenerational communication. It encourages good estate planning and allows you to pass on your sense of values to your children. If you have not put a will and/or trust in place, please make 2005 the year to do so. Contact us if you have questions.

Proliferating Mortgage Options

A payment-option mortgage allows you to decide how to make your monthly payment. These mortgages are fixed for the first year and then shift to an adjustable loan at the prevailing rate. You can choose from making a fully amortized payment, an interest only payment or a minimum payment. Watch out for these minimum payments; you are not even paying off all the interest and are adding to your principal owed. This flexibility is wonderful for a short-term financial crisis, but not a sound policy for regular payments.

Coverdell Education Savings Accounts

These college savings vehicles are less popular and well known than 529 savings plans. However, for qualifying investors, Coverdells offer very different features. There are some negatives. If you make more than $110K (single) or $220K (married filing jointly), you are not eligible to contribute. If you are eligible, the limit is only $2,000 per child per year and contributions are not tax deductible.

On the positive side, investors can use these accounts for all levels of education, not just college. The investment choices are not restricted to a set menu like the 529 plans. Finally the annual expense structure tends to be lower since there is no state middleman.

Eligible investors can contribute to these accounts up until April 15 for 2004.

Mutual Fund News

Some of the funds we use at Schwab have elected to become transaction fee with little advance warning.

This means that you pay a Schwab commission each time you buy; these funds are no longer appropriate for dollar cost averaging. We will continue to use these funds for one-time purchases. Funds that have made this change include Third Avenue Real Estate and some of the Royce funds.

Management

Wiiken & Gorman manages money in pension plans, IRAs, personal accounts, and trusts. We charge a retainer fee for portfolio development, monitoring and reporting. We also help with financial life planning issues that arise. Please call us if you would like to work with us in this capacity. The minimum portfolio size is $500,000 and we welcome your business.

About Your Planners

Mike will be teaching Choosing and Managing Commission Free Investments in a Difficult Market at the Petaluma Campus of SRJC on Saturday May 7, 9am-1 pm. Call 527-4372 for more information. On February 2 Mike attended a training seminar in San Diego about our database management software.

Paula will be putting the Howard Street home and office on the market this spring. We have enjoyed our office in the trees for many years and hope to develop a nice space elsewhere. Paula will work in the new Petaluma office with regular office hours and remotely at her home in Rocklin.

Fee Schedule 2005

We feel privileged to serve our clients and try to respond to phone calls, letters and e-mails in a timely manner. Wiiken & Gorman thinks that each client deserves a carefully reasoned response to every question and we bill accordingly. If you would like a copy of our most recent fee sheet, please let us know and we will be happy to provide one.

Growing a Strong Financial Future

Growing a Strong Financial Future Published Quarterly • Spring 2005