 |
|||
Growing a Strong Financial Future
|
|||
|
2005 Markets This week the Dow finished above 10500 for the first time in six weeks. The Nasdaq Composite reached a two month high as tech stocks continued to rebound. Investors seem more optimistic, possibly hoping that inflation will remain under control. However, we know better than to try to predict investor behavior, since it can rocket from bargain hunting to risk aversion in very short time periods. We are aware that the housing market is unpredictable. Last week Federal Reserve Chair Alan Greenspan said, "At a minimum there is a little froth in the market. We don’t perceive that there is a national bubble, but it’s hard not to see that there are a lot of local bubbles." Many of our clients live in the San Francisco Bay Area, where real estate speculation is rife and everyone wants to get rich in rental real estate. This is reminiscent of the chatter about tech and the "sky’s the limit" mentality of the late 1990’s. Wiiken & Gorman is a big fan of real estate as an excellent long-term diversification to stocks, bonds and cash. However, we warn our clients to be cautious in this time and look closely at cash flow. If the "froth" were to be skimmed from the housing market, could you still handle the debt service on your property? We are emphasizing good diversification in our client meetings this year. We suggest you own a meaningful stake in many different areas: stocks and bonds both domestic and international, various forms of cash and real estate either directly or through funds. This will smooth your portfolio returns in all market conditions. NEW LOCATIONWe have moved to our new location at the Petaluma Marina. The address is 775 Baywood Drive Suite 306 Petaluma CA 94954. Our phones and e-mail addresses will remain the same. Please call us for directions before you come or consult the website. Choose the Contact Us button on the left menu for maps and written directions. New IRA ProtectionOn April 4th the US Supreme Court ruled that creditors may not seize individual retirement accounts (IRAs) in bankruptcy proceedings. Along with IRAs, protected retirement assets include Social Security benefits, 401ks and pensions. This decision makes IRA rollovers more attractive. When employees leave their jobs, they can roll their 401k to an IRA and find broader investment and estate planning options. However, fear of creditors had made this choice less attractive before the recent Supreme Court decision. There is some doubt about full protection for very large IRAs due to the decision’s wording, although the recent bankruptcy bill did effectively extend protection to most IRA accounts. This is an issue to explore with IRAs over $1,000,000. Many states also have broad protection for IRAs, so the federal protection may carry less weight in those states. Safety Issues for Retirement Accounts—Protect YourselvesFraud in 401k Accounts There is not much fraud protection for employees contributing to their 401ks, especially for those in smaller plans. Fraud is on the rise and participants should be aware of some of the warning signs. Watch out for:
Do not assume anyone else will catch the fraud. Try to develop a new habit: reconciling all your account statements as they arrive. If you become suspicious, contact the Employee Benefits Security Administration at 866-444-3272. When you leave the company, consider rolling your assets to an IRA where you will have complete control. Failure to Diversify According to a study by Greenwich Associates, many participants in company retirement plans do not diversify well. In spite of the lessons of Enron and Worldcom, many investors hold too much company stock (more than 10%), don’t allocate enough into international investments and do not change their asset mix. One solution would be for the corporations to offer more support to their investors. Education and outreach about diversification can help change habits and combat inertia. Failure to Save A new study by the Employee Benefit Research Institute suggests that workers are in denial about their preparations for retirement. Although 2/3 of surveyed workers stated they would reach their savings goal by retirement, less than half are likely to do so. Workers are reducing contributions to retirement plans because of increasing health care costs, everyday bills and child rearing expenses. More than two-thirds are also not contributing enough to receive the full company match on their 401k contributions. There is an assumption that the gap can be filled by working longer. However, 2/3 of workers retire before age 65, including those who leave for health problems, layoffs and company closings. The lesson here is what we stress continually: save as much as you can in your retirement accounts and then try to stretch for more. Keep your assets diversified for a smoother ride. Stay on top of what you own. Reaching a secure retirement is a laudable goal and a real achievement. |
Financial Tips
Charitable Deductions for Car DonationsThe law on tax deductions for cars donated to charity has changed. As of January 1, if the donated car is valued at more than $500, what the charity does with it determines the deduction. If the charity sells the car without significantly using or materially improving it, the deduction is limited to what the charity received in sale proceeds. Paperwork from the charity is also necessary to substantiate the deduction. Health Benefit Cuts for RetireesA recent study by Kaiser Family Foundation and Hewitt Associates stated 79% of surveyed large employers increased retirees’ insurance premiums in the past year. Many companies are also cutting coverage for retirees’ dependents and excluding anyone who becomes a dependent after an employee’s retirement date. The overall trend indicates that companies are managing costs by cutting back on care for retired employees’ dependants. For planning purposes you may wish to include dependant health insurance premiums in retirement expenses. Identity Theft ProtectionThis seems to be a topic that will recur with frequency. Pharming is a new web scam. No matter what web address you use, scammers can redirect you to false pages where they try to capture your sensitive financial information. Beware because these pages look as if you are still at the correct web address. Never give any sensitive information unless you are sure the site is secure. One sign of security to look for is a web address beginning https:, not just http:. Also look for the small padlock icon on the bottom edge of the screen. There were recent identity thefts at several large banks and corporations, including Time Warner. When Time Warner announced May 2 that a contractor had lost a backup tape containing personal data of employees, the company offered a free year of credit monitoring. This is a good line of defense if your information is stolen, because you get an alert each time something changes in your credit files. Plan to request this if your data is stolen or lost and a company is at fault. Change in Financial SituationPlease contact Wiiken & Gorman if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Financial planning is a process and we are here to help you transition through important life changes. Mutual Fund NewsTweedy Browne Global Value and Julius Baer International Equity closed in early May. If you already own the funds, you can still make subsequent purchases. At this point as advisors we are able to add new clients to these closed funds. We expect that may change later in the year. Baron Small Cap closed April 22, but like the two funds above, we can still add new clients to the fund. All three of these funds are still very fine performers. 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 Mike attended the Northern California Financial Planning Association Conference in San Francisco April 26-27. There were many challenging seminars in which to participate. The one that has provoked the most discussion outlined new safe withdrawal rate guidelines to ensure that our clients do not run out of money in retirement. We plan to put together a position paper on this cutting edge research. Other fine presentations included a three-hour session on caring for the elderly and the role of commodities in investment portfolios. Mike is on vacation with his wife and friends from May 22-May 30. They are touring the South. Mike is particularly looking forward to a visit to the Okefenokee Swamp 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. |
Home | Mission Statement | About Us | Services | Newsletter | Clients Only | Contact Us
Copyright 2004-2005 Wiiken & Gorman
Updated 8 June 2005