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Growing a Strong Financial Future
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2006 Markets The Federal Reserve raised interest rates for the fifteenth consecutive time since June 2004; the stock market immediately moved down. Prices at the pumps are moving upward again. U.S. corporations showed their strongest profit gains in the last four years during the final quarter of 2005. There is widespread discussion of the effects of the Iraq war and global warming. The Federal Reserve believes the economy remains strong. So much conflicting information: how does the average investor sort through all the financial and world events in order to make sensible life planning decisions? Once again we bring out our Wiiken & Gorman crystal ball and discover that reliable predictions are hard to come by. Although Paula and Mike spend a lot of time reading and researching, we are unable to come up with dependable predictions of where markets, oil prices, world events or anything else is headed. We believe that careful planning is the best all-weather protection for your investments and future dreams. As to investments, choose the allocation that fits your goals and risk tolerance and continue to add along this profile. Try to avoid the hot mutual fund or the stock pick from your friend. Do not ignore broad diversification. For example, a recent update to an Ibbotson study found that portfolios holding REITs enjoy better returns with lower risks. If you do not own REITS in your portfolio, we can help you add them. Don’t forget to protect the assets you are working so assiduously to build. A regular consultation with your insurance provider will ensure that your home, cars and family are properly covered. A will or trust will direct those hard earned assets where you want them to go. We leave you with a smile from Ben Stein. A Quote To Bring A Smile To Your Face
Free Credit Reports – Don’t Wait!We want to urge those of you who have not yet checked your credit to do so now. Please go to the site www.annualcreditreport.com. There is a helpful informational box on the right that explains the rules and gives addresses and phone numbers if you prefer to work offline. Once you are ready, select your state from the drop down box and request a report. You will need to fill in a brief form and answer some identifying information, such as questions about your mortgage, credit cards or previous addresses. Just so you know, Paula just did her report again in March and discovered several important inaccuracies which were easily cleared up. The credit bureaus had confused her information with that of someone else. Put your mind at ease and check once a year. Planning For Your Pets if You Are Not AroundWhat about the Dog? Many of our clients are pet owners. They are dedicated dog or cat lovers. They may spend weekends riding their much loved horses. Perhaps they enjoy talking to the parrot or cockatoo. Pet ownership has dramatically increased in the United States in the last decade, both in number and type of pets. The question becomes: who cares for your pet if you cannot? Life Expectancy This is an issue I just discovered. Many exotic pets have very long life spans. Cockatoos can live 70 years, ball pythons 40 years and tarantulas (!) 30 years. Even if your pet’s life expectancy is not that long, there may still be a significant risk that your pet will outlive you. After Your Death Your pet may be treated as tangible personal property under your durable power of attorney. Check with your estate planning attorney to confirm this and be sure that the person with the power is willing to care for your pet. If not, strategize with your attorney about how else to protect your pet. There are many organizations that will provide permanent care for your pet. Pet Trusts Not all states permit pet trusts; some states that allow the trusts do not enforce them. Pet trusts name a trustee for the pet and provide funds for its care. The possibility for abuse is obvious; enforceable pet trusts usually include a third party who can enforce the trust and oversee that the trustee is caring for the pet properly. Experienced legal help is essential if you wish to set up a pet trust!! Emergency Care You could be unable to care for your pet if you are hospitalized, moved into long-term care or in an accident. You might consider naming a caretaker for your pet in such an instance. Some people even carry a pet card that shows a photo and identifies an emergency contact (similar to what you might carry for yourself.) You can prepare a memorandum of instructions that includes careful identification of the pet. There are some stories floating around about the gray cat that lived for thirty years while the caretaker pocketed the compensation (the cat had been replaced at least once!) Write out detailed care instructions about feeding, medicine and behavior issues. If the pet requires some special living accommodation, include that. You may also wish to include instructions for your veterinarian about euthanasia if a pet develops a painful disease. For thoughtful information on this issue and frequently asked questions, please visit www.estateplanningforpets.org. Mission StatementWiiken & Gorman pledges to use our expertise to help clients imagine a better financial future and develop a plan to experience more financial security and happiness in their lives. |
Financial Tips
Exchange Traded Funds (ETFs)ETFs began in 1993, but have recently caught on with consumers. They are essentially index mutual funds that trade all day like stocks. They are very suitable for taxable accounts when the investor is in a high tax bracket. The management fees are generally low. However, there is an important disadvantage in trading costs. These ETFs incur commissions when traded, just like stocks, so they are not appropriate for dollar cost averaging. For one-time purchases with a buy and hold strategy, however, these are a fine choice. Changes in Self-Directed Retirement CoverageBoth the Federal Deposit Insurance Corporation and the National Credit Union Association recently raised the amount of deposit insurance. The current limit rises to $250,000 for self-directed retirement accounts, including IRAs and Roth IRAs. Also covered by the new limits are self-directed Keoghs, 457 plans and employer-sponsored plans like 401(k)s. Apparently all such accounts are added together to reach the $250,000 at each bank or credit union. Non-retirement accounts retain the $100,000 deposit insurance for now. Separate accounts and your portion of a joint account each receive the $100,000 deposit coverage (for a total $200,000.) Adjustable-Rate LoansA study from the Federal Reserve Board economists indicates that many Americans do not understand their adjustable rate mortgages (ARMs.) 35% of those surveyed did not know how much the rate could go up each time and 41% did not know at what point the rate was capped. If you have an ARM, be sure you know how far your payment can rise so you can plan. Mutual Fund NewsVanguard Explorer closed to new accounts February 2; Third Avenue Small Cap Value closed as of March 1. We can still add to existing accounts, but no new investors may buy the funds. As small cap funds get discovered, the money flows in and the manager has trouble finding enough small companies to buy with the new cash. The best way to keep the fund small is to close to new investments. Hold and add. ManagementWiiken & 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  Paula and Howard have sold their home in Petaluma and moved to Rocklin. Paula continues to work remotely from Rocklin Monday and Fridays and will be in the Petaluma office Tuesday, Wednesday and Thursday every week. Mike taught Choosing and Managing Commission-Free Investments in a Difficult Market to an enthusiastic class at the Santa Rosa Junior College on March 4. Paula and Mike are attending the Financial Planning Association Norcal conference in San Francisco April 3-4. There are some excellent sessions with some of the best known authorities in their fields. Fee Schedule 2005We 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. |
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Updated 5 April 2006