Personalized Financial Services

Is Greece The Next Lehman? Comments by Teeka Tiwari, ETF Master Trader

2010-04-28T10:59:00.000-07:00

Is Greece The Next Lehman?
By Teeka Tiwari

Wednesday, April 28, 2010

I've been a broken record for the last week on my morning GPS reports when it comes to the European markets.

Every morning I've said that the rally in Europe is the equivalent of those markets drinking and celebrating at their own funeral.

I just could not understand how European equity markets could rally so hard in the face of the imminent default by Greece. How could the systemic default risk that Greece represents be in any way shape or form good for European equities?

By now you must have read that S&P has down graded Greece's debt to junk status. This has far reaching implications within the European banking system. Any loans that were secured by Greek bonds will immediately be open to collateral calls. Greek banks could be starved of cash just when they need it the most.

Now you would hope that the bankers at risk have been hedging their bond exposure via the Credit Default Swap market. But that may be too big an assumption to make.

As I've gone through this process as an investor, watching first the accounting scandals of the dot com era, the book cooking of the financial sector, and now the book cooking of entire sovereign nations, it impresses upon me once more just how dishonest many big businesses and governments really are.

We truly cannot rely on published financial statements to drive our investment decisions. We must have a series of empirical rules that at the very least take a measure of price analysis into consideration. In plain speak that means that we must have a working knowledge of technical analysis.

From 1982 until 1999 it was easy for Wall Street to manage your money, because we were in a bull market. But when the rubber met the road in 2000 and then again in 2008 we saw exactly what Wall Street's strategy was: Buy and hope!

You've got to become a more tactically oriented investor if you want to survive the next 7-10 years. It's going to be at least that long before we have another 1982-1999 type of brainless bull market.

The fact is that things are going to become more volatile, not less volatile. You can either profit from that volatility or get consumed by it.

The events in Europe are just a taste of what's to come. If the broad global economy does not start roaring back soon, what's happening in Greece will seem like a walk in the park compared to what could happen over here.

We are making many of the same mistakes that Greece is. Our economy is large, diverse and complex, but no matter how strong we think our economy is, no economy can last long when its deficit spending outstrips its ability to repay.

Without a sharp and sudden swelling of national tax receipts, we are headed for many of the austerity measures that are now sweeping through Greece.

Ben Bernanke spoke yesterday to the National Commission on Fiscal Responsibility and Reform. The commission's mandate is to come up with strategies to cut our annual budget deficit by about $250bn. This is a commission created for the express purpose of giving both sides political cover. Some tough decisions are going to have to be made, and no one party wants to take the rap for it, which is why they've been told to hold off on any ideas until after the November mid-term elections.

The one line from Chairman Bernanke's speech that caught my attention was "No credible forecast suggests that future rates of growth of the U.S. economy will be sufficient to close these deficits without significant changes to our fiscal policies."

Think about that!

He is telling us in plain English (eat your heart out Mr. Greenspan!) that we are going to see either service cuts, massive tax hikes, or a combination of the two. This is an unavoidable future for all Americans who pay taxes and use government services.

You will have less money in your pay check this year, next year, and for many more years ahead.

The cumulative effect of these policy shifts have not yet been reflected in stock and bond prices.

I urge you to start thinking about these issues, and to start game planning your responses.

The last thing you want to do is be left standing there like a sheep waiting to be slaughtered.

Teeka Tiwari
Chief Investment Officer
ETF Master Trader

Health Care Costs Climb for Retiring Couples

2010-03-31T09:52:00.000-07:00

Health Care Costs Climb for Retiring Couples

A 65-year-old couple retiring in 2010 without employer-provided retiree health insurance will need about $250,000 to pay future medical-related expenses, Fidelity Investments said in an analysis released Thursday, March 25.

This amount, up from $240,000 last year, includes expenses such as Medicare premiums, co-payments and deductibles. The higher tab for retiree health expenses comes as the number of employers offering such coverage shrinks, increasing the number of retirees who must pay a major portion of their health care expenses.

Significant drivers of increases in retiree health care costs include higher provider charges and increased expenses associated with new technology, Fidelity said in the analysis.

Of the $250,000 needed to cover a retired couple’s health care expenses, Fidelity estimates 30 percent will go toward paying Medicare Part B and Part D premiums; 40 percent will be consumed by expenses not covered by Medicare, such as co-insurance and deductibles imposed by Medicare; and 30 percent for out-of-pocket prescription drug expenses.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

How big is the bill really?

2010-03-22T09:59:00.000-07:00

This article really does explain the numbers. Click this link.

Medicare Fact Sheet Final

2010-03-22T09:49:00.000-07:00

Paying for Health Care Reform $313 Billion in Additional Savings to Create a Deficit Neutral Plan

We have the most expensive health care system in the world, but do not get the best results. The rising costs of health care are a burden on our families and a drain on our long-term economic growth. If we continue on the course we are on, health care expenditures will reach 20 percent of GDP within a decade. Rapidly rising health care costs are leading our nation down a fiscally unsustainable path.

For the health of the American people and the health of our economy, we must act now to bring down health care costs and reform the health care system. It is central to the long-term prosperity of the United States. That is why the President is committed to passing health care reform this year. Guided by the principle that we should fix what’s broken and build on what already works, the President wants to pass health care reform that allows one to keep their health insurance and choose their health care providers, expands coverage to the millions without, and brings down the cost of coverage.

The President is committed to undertaking reform that is completely paid for and deficit neutral over the next decade. That is why he put forward in his FY 2010 Budget an historic $635 billion down payment on reform. Roughly half of this amount comes from revenue proposals, including limiting the value of itemized deductions for families making over a quarter-million dollars a year to the rates they were during the Reagan years, and about half comes from savings from Medicare and Medicaid.

Since making this proposal, the Administration has worked with Congress on other ways to offset fully the cost of health care reform through additional savings and revenues. To that end, the Administration is detailing today savings proposals that will contribute another $313 billion over 10 years to paying for health care reform, bringing the total scoreable offsets put forward by the Administration to nearly $950 billion over 10 years. Together, this would extend the solvency of Medicare’s Hospital Insurance Trust Fund by seven years to about 2024, and reduce beneficiary premiums for physician and outpatient services by about $43 billion over the next 10 years. The Administration hopes these suggestions will help Congress as it continues to draft legislation, and remains open to any other proposals to pay for reform that Congress may put forward.

Reforming the health care system does not end at expanding coverage and making sure that it is paid for; we also must address the underlying problems in our health care system that impede quality improvements and raise costs. The President therefore believes that in addition to scoreable offsets, we must take steps to transform the health care system, such as investing in health care information technology, patient-centered quality research, prevention and wellness, and in creating a system that pays providers for providing better care not just more care. Over time, these steps will help to produce a health care system that works better and costs less.

Paying for Health Care Reform: New Savings

As was emphasized when the President’s Budget was initially released, the reserve fund represents a substantial down payment but is not by itself sufficient to fully fund comprehensive reform. The President has insisted that reform must be deficit-neutral based on real savings and revenue estimates as determined by impartial scorers. Thus, in addition to the proposals included in the FY 2010 Budget, the Administration is putting forward policy options to further rein in federal health spending, make the system more efficient, and deliver better quality of care. When combined with the Budget proposals, these new options would extend the solvency of Medicare’s Hospital Insurance Trust Fund by seven years to about 2024. These new savings include:

•Incorporate productivity adjustments into Medicare payment updates. Productivity in the U.S. economy has been improving over time. However, most Medicare payments have not been systematically adjusted to reflect these system-wide improvements. We should permanently adjust most annual Medicare payment updates by half of the economy-wide productivity factor estimated by the Bureau of Labor Statistics. This adjustment will encourage greater efficiency in health care provision, while more accurately aligning Medicare payments with provider costs.

•Reduce subsidies to hospitals for treating the uninsured as coverage increases. Instead of paying hospitals to treat patients without health insurance, we should give people coverage so that they have insurance to begin with. As health reform phases in, the number of uninsured will go down, and we would be able to reduce payments to hospitals for treating those previously uncovered. This would be done by establishing a new mandatory mechanism to better target payments to hospitals for unreimbursed care remaining after coverage increases. Beginning in FY 2013, payments would be gradually phased down so that by 2019, funding would equal 25 percent of Medicare/Medicaid Disproportionate Share Hospitals (DSH) funding in 2013, and updated by inflation.

•Pay better prices for Medicare Part D drugs. In its meeting with the President and subsequent communication, the pharmaceutical industry has committed itself to helping to control the rate of growth in health care spending. There are a variety of ways to achieve this goal. For example, drug reimbursement could be reduced for beneficiaries dually eligible for Medicare and Medicaid. The Administration is working with the Congress to develop the most appropriate policy to achieve these savings.

Other Savings

•Adjust payment rates for physician imaging services to better reflect actual usage. To provide more accurate payment for physician imaging services, the Department of Health and Human Services would increase the equipment utilization factor for advanced imaging (such as magnetic resonance imaging (MRI) and computed tomography (CT) machines) from 50 percent to 95 percent. This proposal – which is closely aligned with a Medicare Payment Advisory Commission (MedPAC) recommendation – would better reflect how these technologies are actually used.

•Adopt MedPAC’s recommendations for 2010 payments to skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals. To bring down costs and maintain quality, we shouldupdate payments based on MedPAC’s consideration of multiple variables, such as quality, access to care, and adequacy of payment. Doing so would implement MedPAC’s 2010 payment recommendations for skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals.

•Cut waste, fraud, and abuse. It is important that patients get the best care, not just more care. Unnecessary treatments are not only expensive, but also can harm the health of the patient. To discourage physicians from ordering unnecessary or excessive treatment, we should increase the scrutiny of physicians in high-risk areas or those that order a high volume of high-risk services (such as home health, durable medical equipment, and certain infusion drugs) through additional pre-payment review.

Paying for Health Care Reform: 2010 Budget Proposals

The above savings would be in addition to the down payment for comprehensive health care reform of $635 billion over 10 years detailed in the FY 2010 Budget. The reserve fund is financed roughly half through proposals to generate more revenue, and half through efficiencies and savings from Medicare and Medicaid. Based on our projections, the Medicare proposals contained in the reserve fund would extend the solvency date of the Hospital Insurance (HI) Trust Fund by two years and reduce beneficiary premiums for physician and outpatient services by about $33 billion over the next 10 years. As a result of these proposals, Medicare beneficiaries will also see an improvement in the quality of their services. The reserve fund includes a broad array of savings proposals including:

•Reducing Medicare overpayments to private insurers. The establishment of a competitive system where payments are based upon an average of plans’ bids submitted to Medicare would save taxpayers close to $177 billion over 10 years, as well as reduce Part B premiums.

•Improving Medicare and Medicaid payment accuracy. By strengthening program integrity efforts, the Centers for Medicare and Medicaid Services (CMS) will address vulnerabilities that have led to billions of dollars in overpayments and fraud each year.

•Improving care after hospitalizations and reducing readmission rates. A combination of incentive payments and penalties should lead to better care and result in fewer readmissions – saving roughly $25 billion over 10 years.

Expanding the Hospital Quality Improvement Program

: By linking a portion of Medicare payments for acute in-patient hospital services to hospitals’ performance on specific quality measures, quality of care for beneficiaries will improve, and Medicare will save approximately $12 billion over 10 years.

*** This fact sheet has been corrected.
Source: http://www.whitehouse.gov/medicarefactsheetfinal/

What the health-care bill means for you?

2010-03-22T09:38:00.000-07:00

Mar 22 2010, 9:14 AM ET
Last night the House of Representatives passed the Senate health care bill, and the Democrats' year of living flirtatiously with failure ended with what I would call the greatest progressive achievement of the last two generations. We -- that is you, me, and everyone we know -- have spent months wrangling over the implications of health care on the deficit and the cost curve and the tenor of DC politics. But now that the bill has become a law, the most useful approach to health care is to servicey rather than debatey: so what does it mean for you, anyway?

Ultimately health care reform is about expanding insurance coverage to 32 million new Americans by growing Medicaid, mandating that all Americans buy health care and offering subsidies to those living under 400% of the poverty line. For the tens of millions of Americans who already get health care through their employer, this law does not change very much. For Americans without insurance, it changes quite a bit. Starting at the end of the year, new college graduates can stay on their parents' insurance until age 26. For less fortunate Americans without coverage, the law will offer tax credits to help them buy insurance through new regulated "exchanges." For Americans enrolled in Medicare, the law should not dramatically change coverage even though it calls for billions in cuts, primarily in the Advantage program. It will, however, close the prescription drug "doughnut hole" to help seniors buy medicine below the catastrophic coverage threshold.

On the revenue side, the bill delays its taxes until at least 2013. For richer families, the law will add additional Medicare payroll and investment taxes in three years. In eight years, it will add an excise tax on high-cost insurance plans that is indexed to creep into more insurance plans in the second decade of the law. On regulatory reform, the law bars insurers from rescinding coverage to the sick; discriminating based on pre-existing conditions; and capping lifetime coverage.

Now let's make this personal. The Washington Post has put together this useful interactive tool that asks users to enter their source of health care (employer, Medicare, etc), household members, marital status and income, which it uses to calculate how the new health care law will affect you. For example:

-- An entry-level 22-year old employee making between $30,000 and $40,000 a year will get to stay on his employer's plan with the option to switch insurance to the exchange market with the help of government subsidies.

-- A married, employed breadwinner with one child making $100,000 will see no change to his or her coverage through the law.

-- A family making more than $250,000 with two children will see Medicare payroll taxes increase by 0.9% to 2.35% and they will have to pay a 3.8% tax on investment income.

Derek Thompson is a staff editor at Atlantic Business, where he writes about economics, business and technology. Derek has also written for BusinessWeek and Slate.

Five reasons to roll a 401(k) to an IRA

2010-03-15T12:00:00.000-07:00

Why would a 401(k) participant want to move his money out of a 401(k) and roll it into an IRA?

Here are reasons why:

Most 401(k) s and other company plans have limited investment options.
They may offer 50 different mutual funds and other investments options, but most of the options are subject to market fluctuations. If we learned anything in 2008 and early 2009, it’s that what the market gives can be taken away with little to no warning. Many of these accounts lost as much as 40 percent in 2008 alone. Those who chose to play it safe and moved their 401(k) money into bond funds or funds invested in CDs and other short-term investments were rewarded with little or no growth while inflation and management fees ate away at their principal. IRAs have almost unlimited investment options including annuities that guarantee the principal and offer a competitive rate of return.

Plan guidelines can restrict the owner’s access to his money.
The plan document is essentially the 401(k) rulebook. If it’s not in the book, you can’t do it! With savings down and unemployment up, you never know when you may need access to your retirement accounts. IRAs offer greater flexibility, allowing the owners to make their own rules if they are willing to pay the tax on the distributions.

Direct rollovers avoid the 20 percent mandatory withholding.
It’s critical that the funds are moved as a trustee-to-trustee transfer. If a check is written to the 401(k) owner, you can count on the custodian withholding 20 percent for the IRS. I have worked with several advisors who have encountered this problem, and they are still battling with the IRS to get the 20 percent withholding back where it belongs.

401(k) s have limited distribution flexibility for the children and grandchildren who are likely to inherit when both the owner and spouse are gone.
In 2002 when the multi-generational/“stretch” IRA was born, the children and grandchildren were given new valuable distribution options. They now have the right to spread the inherited IRA distributions over their individual life expectancies, according to Appendix C, Table 1 of IRS Publication 590. This means they are no longer forced into rapid distribution, causing rapid taxation. The 401(k) plan administrators didn’t get on board with this valuable income planning tool and are, in many cases, forcing these non-spousal beneficiaries to take full taxable distribution in just five years. Under the “Worker, Retiree and Employer Recovery Act” of 2008 (HR 7327), all employer plans will be required to allow non-spousal beneficiaries to do direct rollovers to properly titled inherited IRAs beginning Jan. 1, 2010. IRAs allow these beneficiaries to take control and choose between cashing out and receiving a lifetime of income.

Most 401(k) plans do not allow the Roth IRA conversion.
Beginning this year IRA owners with adjusted gross incomes over $100,000 can for the first time convert their traditional IRAs to Roth IRAs. After the conversion tax is paid, the new Roth will grow tax-free and distributions after the five-year holding will also be income tax free. The Pension Protection Act simplified Roth conversions from 401(k) s and other company sponsored plans. Beginning in 2008, owners can convert company sponsored plan funds directly to a Roth IRA. They no longer need to convert to a traditional IRA first then convert the traditional IRA to a Roth IRA.

BY David F. Royer

Published 3/15/2010

The Real Problem with Public Employee Pensions

2009-10-22T10:25:00.000-07:00

October 11, 2009, 3:52 pm The Washington Post reports today (”Steep Losses Pose Crisis for Pensions”) on the sorry state of funding in state and local employee pensions, focusing on the impact of recent poor stock returns. While a poor investment climate certainly hasn’t helped, it’s not the biggest reason public employee funds are in bad shape. A bigger reason the plans are underfunded is that, in effect, we told them they can be. State and local pension plans use different and far less demanding accounting rules than do corporate pensions, even though public employee benefits are guaranteed by law while corporate pension benefits are not.

The key issue is how to “discount” future benefit obligations to the present, which tells us how much plans must have on hand today to fund their future liabilities. A high discount rate lowers the present value of a future obligation, while a low discount rate implies a higher present value.

Corporate pension plans must discount their future benefit liabilities at the low interest rates earned by high-quality corporate bonds, while public pension plans are allowed to use the much higher expected return on their assets, which include a high proportion of stocks and, more recently, hedge funds and private equity. The effects can be startling.

For simplicity, imagine a pension plan that owed a lump sum of $1 million 15 years from now. Discounting at a 6.25 percent interest rate—which is typical for corporate bonds today, although higher than several years ago—the present value of that obligation would be approximately $403,000. That is, the pension would require current assets worth at least $403,000 to consider itself “fully funded.”

Using an 8 percent return, which is not uncommon for public pension funds, the present value of that $1 million future obligation would be only $315,000. Plans that have investments worth at least $315,000 would consider themselves fully funded and, in some cases, use this status to justify increasing benefits.

Defenders of current actuarial practice argue that public pension funds are different, since governments can’t go bankrupt—a proposition that may well be tested soon—and because they can always raise taxes to fund deficits. The latter may be true, but surely the point of pension accounting is to give taxpayers some idea of the contingent liabilities hanging over them—which current methods do not.

Moreover, there is a good case that public pension funds should use lower discount rates than corporate pensions because public pension benefits are a safer asset for the beneficiary and thus a more binding obligation on the pension plan. Corporate pension benefits are not fully guaranteed if the sponsor goes bankrupt, while in most states accrued public pension benefits are treated as a binding obligation. In many states these benefits are guaranteed in state constitutions.

If these pension obligations are as binding as state government bonds, it makes sense to discount them at the same rates. Nationally, the yield on a state government bond with a maturity of 15 years averages around 3 percent. Discounted at that rate, a $1 million future obligation requires $642,000 in assets today—over twice as much as the funds themselves would consider necessary.

Moreover, while public pensions discount their future obligations at the “expected return” on their investments, this doesn’t mean we can actually expect those assets to meet their goals. The reason is that funds take as the expected return the average return on the asset classes they hold, and the average return is always higher than the median or typical return. Imagine that a public pension fund invested $315,000 in assets with an expected return of 8 percent and a standard deviation of returns of 13 percent. Using a Monte Carlo simulation we can check how often this portfolio is likely to exceed $1,000,000 in 15 years time. The answer is a little over 40 percent, meaning that there’s an almost 60 percent likelihood that even a “fully funded” public pension plan won’t be able to meet its obligations.

Allowing public pension funds to discount their benefit obligations at the expected return on their investments doesn’t just lower the amount of funding they must undertake, it also encourages them to take more risk with their investments. Were a fund to hold only safe investments like Treasury bonds it could discount its benefits only at a low interest rate. But the riskier the investments they make the higher discount rate they can use. It’s easy to see where this leads. For instance, the expected return on the Profunds “Ultrabull,” which doubles the returns on the S&P 500 would be, well, double the expected return on the S&P 500—or around 20 percent per year. This would solve plans’ funding problems on paper, but it’s hard to believe this is the most sensible investment strategy to take.

Accounting is a boring subject and so it’s not surprising that it doesn’t get much attention in the press or by lawmakers. But it’s hugely important.

Article by Andrew Biggs

Welcome to "Life Cycle Planning" 101

2009-10-20T10:56:00.000-07:00

Financial planning means something different to everyone. For some, it's about getting by month to month on their paycheck, for others it's about watching how their stock portfolio performs each day.

Unfortunately, few of us feel completely prepared to meet our ongoing financial obligations and objectives. Worries about money have become one of the greatest anxieties of our day - witness the dramatic rise in financial-related publications, radio and television shows, and websites.

Because each person's situation, lifestyle, and goals are so different, there is no single turnkey solution for successful money management. However, we can identify several steps that successful people take in pursuing their financial goals. We call these steps "Life Cycle Planning" because each step can be tied to the attainment of certain life-defining events that almost everyone goes through.

Development of Human Capital

Human capital refers a person's ability to turn their skills and abilities into a livelihood. The development of these skills and abilities helps us maximize our income potential in a competitive marketplace.

In our early years, usually between age 18 and 25, we set ourselves on a course that largely defines our human capital potential. Each of us makes an investment in human capital, whether we realize it or not. For some this is an investment of time, gaining experience and skills on the job. For others it is an investment in trade school or college.

It should also be noted that, although our greatest focus on human capital development generally takes place in our early years, this is an investment we should continue to make and assess throughout our working careers. Your ability to earn income, now and in the future, is the most valuable asset you own.

Expense Management and Budgeting

Once your "human capital" investment begins to pay dividends in the way of regular income, you must begin to develop and apply management skills to your newfound earnings.

Without managing your expenses, your wants and needs will invariably outpace your ability to earn. By implementing some form of budgeting, you can begin to set your sights on saving and meeting your longer-term financial objectives.

A beginning budget can be as simple as setting aside a predetermined percentage of your earnings each month for saving, spending what is left until it is gone, then spending nothing more until next month. A more sophisticated budget takes into account irregular and flexible expenses, emergency expenditures, establishment of a "rainy day" fund, as well as saving and investing.

Ensuring Adequate Liquidity

As your budget begins to pay off in a healthy savings account, you might begin to wonder how best to apply your limited savings to your unlimited needs and wants.

Without exception, the first financial need you should meet is to have an emergency fund. An emergency fund allows us to cover unexpected short-term needs using cash instead of leveraging your future earnings through costly loans. As a general rule of thumb, your emergency fund should be adequate to maintain your standard of living for six months.

Ample Insurance Protection

A major disability, the loss of a family breadwinner, a fire in your home, a family member's major medical problem or need for skilled nursing care ... the most dramatic emergencies can seldom be paid for completely using personal savings.

Although such tragedies can create devastating individual financial hardship, the financial risk of such events can be shared by very large groups of families and individuals through insurance.

Life insurance, disability income insurance, property and casualty (P&C) insurance, long-term-care insurance, and major medical insurance all have a place in your "Life Cycle Planning."

Long-Term Funding Objectives

Once you've accumulated sufficient funds to cover your emergency needs and purchased protection against financial risks, you can begin saving for your long-term goals in earnest. We can help you design a plan to pursue your retirement objectives that fits with your personal financial goals, risk tolerance, and time horizon.

For information on how PFS helps their clients achieve their objectives-Dana Schulz can be reached at 1-888-640-4770.

Insurance Is Too Important For A Last-minute Decision

2009-09-29T10:53:00.000-07:00

Health care insurance and other benefits cost employees thousands of dollars a year -- on average about 30% of their total compensation.

But many employees wait until the last minute to make selections, do precious little research and make big mistakes that cost them in multiple ways. Two examples: paying more upfront for benefits they may not need; and making poor decisions that show up when a health or other emergency arises.

The 2010 open enrollment season at workplaces nationwide is ramping up as fall arrives.

Given what's at stake, experts say workers should pledge this time around to make better selections. There's a lot of ground to make up: Only 6% of consumers feel completely prepared to deal with health care costs, according to the Deloitte Center for Health Solutions. And most employees spend 30 minutes or less choosing their health plans, according to Cigna.

"People don't put a lot of thought into enrolling in their plans," Cigna spokesman Joseph Mondy says. "Typically, people spend like half an hour deciding. Compare that to how many hours you agonize before you buy a TV."

Some tips to get the most out of your employee plan:
Don't wait until the last minute
Enroll, and do so on time. Don't assume that you'll be automatically enrolled in the plan you chose last year.
"We have this whole month to review things, and we wait until the night before we have to make the decision to open the booklet," says Lenny Sanicola, an employee benefit specialist with WorldatWork, an association of human resources professionals.
His recommendations: Sift through materials early; discuss plans with family members; make a list of questions; and attend your company's face-to-face meetings. If you don't get the answers you need, go to your human relations officer or supervisor. Understand what you're signing up for and what your out-of-pocket expenses are going to be.

"As you get into the 2010 decision-making, there are fewer simple decisions," says Cigna's chief learning officer Karen Kocher.
Include others in decisions. Family members may think that taking advantage of legal coverage, a pet insurance option or flexible-spending account make sense, even if you don't. Those opinions should matter.
Check eligibility requirements

Before you make a decision to jump to your spouse's plan in this rocky economy, make sure you'll be able to return to your employer's plan if you waive enrollment now and your spouse loses his or her job later.

Also, determine whether your adult children are still eligible or newly eligible for your family plan.

"Eligibility is where people can really get tripped up," says Michelle Connor, a senior benefit consultant at CBIZ Employee Services.

Employees should also realize that companies are auditing to ensure former spouses or unqualified adult children are not lingering on family plans. Don't be surprised if your human resources office suddenly requests your offspring's college schedule.

Think about health coverage costs
The single most important question when choosing any health insurance plan is, "What is my annual liability?" Connor says.

Add likely out-of-pocket costs to the premiums being deducted from your paycheck. When you determine likely out-of-pocket costs, put that amount in a pretax flexible-spending account.
Kocher says employees must understand their needs and the available options: "The absolute best fit will not only get you the best coverage, it will also assure your out-of-pocket costs are minimized."

Mondy says websites can often be go-to places for prescription-price comparisons and, increasingly, for cost-and-quality comparisons of medical professionals.

"Find out all the programs your company offers. You may be pleasantly surprised," he says.

One program many people don't take advantage of: flexible-spending accounts.

"One of the things that scares people about an FSA is the use-it-or-lose-it provision, but you can always run out and buy a whole season's supply of cold and flu medication or a new pair of eyeglasses" at the end of the year to use money in the account, says Ken McDonnell, program director for the Employee Benefit Research Institute.

Consider life, disability insurance

If your age or health make it expensive to get private life insurance, your employer can be a good place for that because it's usually less expensive and requires little or no medical underwriting, says Barry Petruzzi, vice president of group benefits for Guardian Life Insurance Company of America. He says employees can use an online calculator to determine whether they should buy more insurance than an employer already provides for free.

Connor also recommends buying short-term disability insurance "every day and twice on Sunday" because it ensures your paycheck.

She says six out of 10 employees will be on disability at some time during their careers, and most will be on short-term disability.

Pregnancy, for example, falls under short-term disability. She says even the group she calls "the young infallibles" are exposed to plenty of risk of short-term injury from sports and auto accidents.

Educate yourself about investments

Jane White, president of Retirement Solutions of Madison, N.J., says employees need 10 times their final year's salary for a retirement nest egg, so save accordingly.

To do that in the best way, says WorldatWork's Sanicola, employees should take advantage of financial seminars and online tools offered by companies, and keep an eye on investing fees.

If you can afford to contribute enough to your 401(k) or other such plan that's eligible for a company match, do it.

"Your net pay won't go down 6% if you contribute 6%, because you're using pretax money," Sanicola says.
Also, if your company provides its match in company stock, divest out of it as quickly as possible, White says. A diversified portfolio is insurance against losses if your company stumbles and the stock price plummets.

Get and stay healthy

Some employers and insurance companies offer financial incentives to employees who use gyms or attend smoking-cessation programs.
Ask if your employer provides any reimbursements. If they do, make lifestyle changes to take advantage.

Copyright 2009 Gannett Company, Inc.All Rights Reserved USA TODAY
September 25, 2009 Friday FIRST EDITION
SECTION: MONEY; Pg. 3B
BYLINE: Kathryn Canavan Special for USA TODAY

American Airlines cutting retiree health benefits for 65+

2009-09-24T09:48:00.000-07:00

Since the recent news about American Airlines eliminating their medicare benefits for their retirees who are over 65, I have been very concerned for those who are caught in this ugly mess. But I am reminded of the numerous clients who went through this very same experience last year with several large companies right here in the Dallas area. Not to mention names, but several companies felt that it was necessary to lower some costs by lowering some benefits for people that had devoted their entire lives to working for that company, only to find out that you really don't matter that much after all.

Here's the silver lining that most of these AA retirees don't understand. When you lose your group coverage, it's a "qualifying event". That means that you can sign up for another Medicare Supplement without having to qualify based on your medical history. If you are undergoing treatment for a current illness or a chronic condition does not matter, they have to accept you into a new plan that is authorized in your zip code.

In the Dallas/Ft. Worth area, most of out clients find that the premiums are more affordable than they thought and more often than not, they have better coverage because they no longer have deductibles or co-pays that they have to pay. You decide which doctors you want to see, not a HMO network, and your care continues on uninterrupted.

So the moral of the story is...you have options! Don't fret! Just make sure you apply for your new plan within 60 days to take advantage of guaranteed enrollment.

Call for information specific to your age and location!
214-608-8933

What is Income Planning anyway?

2009-09-23T12:42:00.000-07:00

You hear buzz words used over and over again and everyone assumes that everyone else knows what it means. In the world of financial strategies, income planning means understanding how much your paycheck will be when you actually retire. You work your whole life and you know how you are going to be compensated..well for the most part.

The same goes with retirement. Would you take a job without knowing what your compensation was going to be? Would you quit your current job without having another one lined up? Depends on the day I guess, but you get my point.

Don't get too close to retirement without knowing your exit strategy.
If you are going to retire on January 1st of 2010, then you should know what your January 15th income will be. If you don't then you don't have a plan!!

It's easy, you just have to make the effort. You'll spend hours and hours planning a vacation or a party, but people don't make their financial planning a priority until it's too late to have a real impact on their retirement.

More planning now means less stress later!