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Growing a Strong Financial Future
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2005 Markets October was once again a difficult month for the markets, although there has been some recovery since. The Dow is flat year to date, but the S&P 500 is up 4% and the Morgan Stanley EAFE up 7.7%. We are feeling a bit cautious about the markets in 2006 and want to familiarize you with some words of wisdom from Jonathan Clements of The Wall Street Journal. On October 12 Mr. Clements discussed three key investment pitfalls: inflation, recession and sudden crises. How does the average investor deal with these situations in his or her portfolio and still have gains over the long haul? First, in your bond allocation, spread your holdings broadly into corporation and government, inflation indexed, high-yield and foreign. Only some of these sectors will perform well at any time. For example, Treasuries usually suffer from resurgent inflation, but inflation indexed bonds should be more stable. High-yield bonds drop in recessions because investors are wary of defaults, but high quality bonds would do well as interest rates dropped. Foreign bonds are a "wild card" because currency moves are unpredictable, but that uncertainty is part of the appeal. Stock categories are subject to the same kind of analysis, although the volatility is greater. Inflation hurts stocks in the short run, but as corporate earnings climb the stocks recover. Of special note is a sudden crisis, like terrorist attacks, currency devaluations or political turmoil. It is impossible to gauge how stocks will react. This is the reason to diversify further into foreign stock, real estate and natural resources. In fact, Mr. Clements' final phrase echoes one of our favorite refrains: "…broad diversification is your best defense." IRS AUDIT NEWS FOR 2006The Internal Revenue Service has announced that audits will increase again in 2006. The focus will be on taxpayers earning more than $100,000 per year, tax shelters with no purpose other than avoiding taxes (with particular attention to abusive transactions offshore) and self employed workers who deal largely in cash. Keep good financial records if these targets describe you. IRA DistributionsIf you turned 70 in 2005, you need to have a plan for taking your required minimum distributions (RMDs) from your IRAs and qualified plans (403bs, 401ks…) The deadline is April 1st of 2006; however, we suggest taking your first distribution before 12/31 of this year. Please call us if you have not yet arranged for your RMD. We will help you complete the forms and set the distribution up automatically if your custodian allows this. The penalty for failing to take the RMD is stiff: 50% of the amount by which the distribution falls short!! This is also the time to check that your contribution to your IRA was within the allowed maximum for 2005: $4,000 if you are under age 50 and $4,500 if over that age. If you have over-contributed for any reason, you will want to pull out the excess to avoid the 6% penalty. Let us know if you need any help with this rule. 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. Coping With A Disaster Before It HappensThe Lessons of Katrina Most of us will never forget the pictures of the panicked residents of New Orleans fleeing the floodwaters with a few possessions. Although many of us do not live in hurricane areas, most of us are vulnerable to natural disasters or unexpected events like home fires. Making a plan in advance may help you avoid some of the pain many of the Katrina victims suffered. Household Inventory Compile an inventory of your household possessions, preferably by video walk-through. A written list with photographs is a good second choice. Be sure to store this off the premises. Asset Protection Review your insurance: homeowners, flood, earthquake and any other disaster coverage that might apply. Discuss filling in the gaps with your property casualty agent. Backup for your Papers It is important to keep your papers secure. If you are primarily using your computer for storage, keep the firewall and anti-virus protection up to date. However, if you are ever in a hurry to leave the premises, grabbing a computer is logistically challenging. Instead store your date on a CD, external hard drive or at one of the online storage sites. Consider keeping an updated copy of these records in a safe-deposit box or fireproof safe in case of fire when you are not at home. Remember, however, that they are not rated to withstand indefinite heat, as we learned from the disintegrated papers in World Trade Center safe-deposit boxes. Contact List Make a contact list of friends and relatives to contact for help or to reassure them you are safe. Include the names, addresses and phone numbers. Also add the same information for Wiiken & Gorman, your attorney, accountant, insurance professional and personal physician. This list may help you pick up the pieces in the event of a disaster. Grab and Go Case Make copies of your most important papers and put them in one case that you can grab quickly. Put in your estate planning documents, birth certificates, insurance policy declarations pages, a list of prescription drugs, your driver’s license, Social Security cards and some cash. Keep it in a secure but easily accessible place. Annual Review Nothing stays the same for long. Remember to update your plans and records for any important life changes: remarriage, health status, new job, inheritance, birth of a child…Good planning is a process that embraces the changes that may occur in your lives, good and bad. |
Financial Tips
Conforming Mortgage Limit RisesIn 2006 the confirming limit rises to $417,000 for single-family homes in the continental United States. This is almost 16% higher than the 2005 limit. Loans larger than $417,000 will be jumbos and have rates 1/8 to 1/4 point higher than those that conform. Freezing Credit in CaliforniaCalifornia citizens can freeze their credit. A freeze prevents identity thieves from getting new loans or credit in your name. You must contract each credit bureau and there is a nominal fee. For specific information on the process, please go to: http://www.fightidentitytheft.com/legislation_california_sb168.html ADV and privacy policyWhen you became a client of Wiiken & Gorman you signed a contract and received a document known as the ADV form. The ADV is the form that we file regularly with the SEC. We revise this document whenever there is a material change in our business and continue to give it out to all new clients. If you are interested in seeing the current Wiiken & Gorman ADV, ask for it the next time you are in for a review or send us a SASE and we will return the most recent version to you by mail. In order to meet the requirements of the Gramm-Leach-Bliley Act of 1999, Wiiken & Gorman is writing this notice to ensure that you are aware of the privacy policy of our firm. We collect nonpublic personal information about you from the following sources:
We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as permitted by law. We restrict access to nonpublic personal information about you to members of our firm who need to know that information to provide services to you. We maintain physical, electronic and procedural safeguards that comply with federal regulations to guard your nonpublic personal information. Mutual Fund NewsCapital Gains Distributions. This is the time of the year when mutual funds distribute capital gains to their shareholders as required by law. There is no tax issue if these distributions occur in your retirement accounts: 401k, IRA, 403b…However, if you receive long-term capital gains distributions in a taxable account, you will pay tax in 2005 and the price per share will drop to reflect the distribution. For this reason be careful about making any large mutual fund purchases in regular accounts this month. 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 is taking the last two weeks of December off for vacation. She and Howard climbed Mt. St. Helena for Thanksgiving and enjoyed turkey sandwiches with cranberry on the summit. Mike and his wife Pat spent a week on Maui in November, snorkeling and enjoying the sights. They came home to celebrate the holidays with both their sons and a large group of family and friends. Paula and Mike have completed their 60 units each of continuing education to continue as members in NAPFA, the highly respected Fee-Only Financial Planning Organization. This requirement sets a high standard in the industry and must be repeated every two years. 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 11 December 2005