Do You Know the Story of Lemmings?

Posted on May 31, 2011 by admin

The fiscal crisis facing many states is about to go from bad to worse. While the unrest in states like Wisconsin and Illinois (and California too) are spiraling out of control; the mayhem is just a symptom of a much larger problem. The debt crisis in America is spreading. It’s becoming insurmountable. At last count, 43 states are staring at monster budget deficits. Hit the “pause” button on the $15.3 trillion National Debt and drill down into the individual states dilemma.

Last month New-York Governor Cuomo released a statement saying the state is “functionally bankrupt.” The projected budget shortfall? A mere $9 billion for fiscal year 2010. It’s no better across the Hudson. The state of New Jersey recently revealed that its unfunded pension liability for state government employees reached a record $54 billion. An 18% increase from the prior year. At this rate, the liability will double in just 4 years!

Reportedly state and local governments have more than $2.8 trillion of outstanding debt. In addition they are carrying approximately $3 trillion of unfunded public pension and health care liabilities. Up until this year they solved the problem by borrowing more, refinancing their debt, and then incurring new debt to cover out of control pension and health care benefits for public employees.

But it looks like the party is about to end. The well has dried up. Even Social Security funds will be depleted in less than 30 years, without change immediately.

Governors in states like Wisconsin, Ohio, Florida, Illinois, and California (the list goes on…) and even in many other “Republican party” held states, are slashing budgets like never before. What’s happening in our country today is unprecedented.

You have to go all the way back to the civil war to find a time when this many states could potentially default on their debt obligations.

And even during the Great Depression in the early thirties, only the state of Arkansas defaulted on its debt!

So it appears the day of reckoning has finally arrived for states that may consider bankruptcy as a way to wiggle out of their mess. Will the Fed will bail them out as they are “too big to fail?” Just like the banks, AIG, GM, Fannie and Freddie.

But where is the money going to come from? (Now hit “play” and leave pause) Today our national debt is more than $14.3 trillion. The Fed already holds more than $1 trillion dollars of U.S. treasuries—that’s more than 70% of all outstanding debt—making it the largest lender to the U.S. in the world.

For every dollar the government spends about 50 cents of it is borrowed! Our debt is about 500 times larger than the size of our economy. That’s the real story. And this is the alarm that needs to be sounded to your clients! You have the solution for your friends, family and client book. If you aren’t certain of the solution, contact us, we will tell and show you how to prepare and ready yourself for this potential disaster.

Mainstream media seem to be missing the warning signs. They’re fascinated with the rallies, protests, political strategies and party rhetoric; more interested in extra marital affairs and philandering than our national economy. You can see how seriously this will affect all Americans. Not only today, but generations down the road.

Continuing turmoil in the Middle East could lead to oil prices hitting $200 a barrel. That means paying as much as $10 a gallon at the pump. While that may sound far-fetched, so did the prediction of gold prices hitting $1,000 and now surging past $1,400; when just a short time ago it gold was trading at $350. If the Middle East falls we could see $200 oil. You need to have an evacuation plan in place now. Just tell a friend, a neighbor, a family member and your clients.

It’s no wonder gold is at an all time high, people are starting to stock pile food in their homes, and the dollar has lost most of its value since 2001. Will the Fed once again ignore the will of the American people and bailout the states? National monster deficits and states teetering on the edge of bankruptcy are just the tip of the iceberg. Keep your life vest handy and keep dancing until the fat lady sings… but be financially prepared.

Put Me In Coach

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Posted on May 23, 2011 by admin

Nearly half of all Baby Boomers say they could not cut personal spending by 10% or more without a “dramatic” change in lifestyle. Really? This is sad but highlights where our generation has gotten itself over the past 25 years. By sacrificing our retirement planning to the needs of our children and aging parents, the “chickens” have come home to roost, so to speak. More than 1 in 4 Boomers keep “extra” cash in low interest earning accounts in case a family member may need financial help. This can destroy or at least severely cripple a retirement plan.

But with the uncertain economy and shaky employment landscape, one misstep financially and your retirement years could be delayed or wiped out altogether. This fear of potential disaster has also kept almost 60% of Baby Boomer’s investments in way too conservative of a mix for any hope of significant growth. Many still use CD’s, savings and checking accounts for a large portion of their investment mix.

CD’s and similar types of liquid investments are great for a rainy day but earn less than the inflation rate. Factoring in income taxes too and one is left with a true loss; long term in the buying power of the Boomer’s retirement dollars. With the crazy volatility in the stock and real estate markets, Boomers perceive them as too risky to invest. Check out safe alternatives such as index or equity index annuities. Suzy Orman raves about them in one of he most popular and best selling fnancial advice books. And a fixed annuity may often provide you much more interest without more risk.

But, if one has more than 10 years left until retirement, real estate and stocks are the single best performing investments available. Thus, the conundrum. There are higher earning alternatives to CD’s and savings accounts, that offer liquidity for emergencies (such as health and accident issues) while still racking up healthy long term gains. In fact, using alternative investments geared for such emergencies in today’s environment makes great sense.

So much sense in fact, that almost 6 in 10 Boomers are dissatisfied with their CD’s and savings accounts and “their” paltry returns. Another dilemma and added conundrum! But if Boomers could take the time to understand the alternatives and figure out exactly how much risk they can live with, life gets much better. This is where My Money Track can help.

Information and education along with real-time, real-life success stories of planning and investing. Not that anyone needs to be a do-it-yourself personality… seek out advice and help from local professional financial advisors and then you’ll be comfortable investing in a better diversified mix of assets. And over the long term you will likely double or even triple your long term growth and earnings over CD’s. Many Boomers don’t realize that they can invest in anything other than CD’s in their IRA’s. But you can, and the IRA is a great place to own growth type investments, especially in a ROTH IRA. That is because longer term investments match up with the longer term nature of an IRA, in general.

But Boomers are vulnerable to the unknown; the past 10 years have been a lost generation of sorts, in both the stock and real estate markets.

While it would’ve been a good idea to stay “on the sidelines” it is now becoming more evident that it’s “time to get into the game” with your retirement planning. Contact us today to help you get on the field and score points for yourself and your golden years.

Mixed Thoughts on the End of QE2

Posted on May 17, 2011 by admin

The end of QE2 – the Federal Reserve’s second wave of quantitative easing – is scheduled for this June. So what does that mean for our economy and financial future? For those unsure of what QE2 actually is, we’ll go over a short explanation and then talk about the consequences of its conclusion this June and how it will affect our economy. What is QE2? Last November, the nation’s central bank, the Federal Reserve, announced that it would buy $600 billion in long-term U.S. Treasury bonds to hopefully push down long-term interest rates, spur lending and economic growth. While the jury is still out on whether or not QE2 actually helped our economy, experts say the following basics on quantitative easing have been agreed upon:

Turning government bonds into circulating money is called monetizing the national debt.
Quantitative easing is a euphemism for creating money out of thin air. In the vernacular, we call it “printing money,” even though it really has nothing to do with the U.S. Bureau of Engraving and Printing.
The way it’s supposed to work is that the Fed buys securities in the open market, paying with a government “check.” (That’s how the money is created.) The sellers deposit those checks into their banks. The banks redeploy those deposits as loans to consumers and business. The money supply expands and, in turn, so does the economy.
The money supply hasn’t increased over the last two years from the first round of quantitative easing. The trillion-plus the Fed paid for mortgage-backed securities is still sitting in vaults as bank reserves.
Loan demand from creditworthy borrowers remains weak. Banks are still smarting from previous bad loans. And they are leery of lending money so cheaply when higher rates may be in the offing.
Almost no one thinks QE2 will send folks scurrying to the banks to borrow.
The likely – and intended – effect is inflation.

How Will QE2 Affect the Economy? If so many experts are on the fence about QE2, why then are so many cautioning us about the end of QE2 and how it will affect us?

And now in 2012, get ready for QE 3… The speculation lies mostly in the markets – stock, bond and commodities – and how the economy will stand on its own without any stimulus. Experts caution that the markets are in for a roller coaster-like ride after the federal program dies down, and draws out a few possible scenarios:

Bond yields will continue to rise. Even with QE2 in place, treasury yields have been rising at a snail’s pace. At QE2’s inception, the 10-year treasury yield stood at 2.5%. Today, it yields 3.4%. Some believe that removing the QE2 artificial foundation that bond yields and stock prices have been resting on will surrender to a spike in treasury yields. Other experts are less concerned about a run-up in treasury rates because the Fed still has the option to reinvest, and may not exit the markets completely.
Stocks may take a hit. Financial assets are much more valuable when interest rates are so low. If interest rates increase after the quantitative easing, they might not be so valuable. However, other experts contend that the market has already priced in the effect of the end of QE2 and stocks are bound for higher gains.
Rally in commodities will slow. We’ve all seen gold and silver hit historic highs, but if interest rates increase post-QE2, the streaks could end. And while some critics believe that QE2 has been a factor in the higher food prices, they’re worried that the end of QE2 may not be enough to stem rising inflation abroad.

You can find local financial advice and help with your retirment nest egg and tips for your IRA, 401k rollover and personal budget. Just call today and get started.

LTC Costs Slowly Rising

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Posted on May 10, 2011 by admin

The costs of long-term care continue to rise, although slower than before the economic crisis of late. The Centers for Medicare and Medicaid Services estimates that by 2020, 12 million older Americans will need long-term care. And a study by the U.S. Department of Health and Human Services says that four out of every ten people who reach age 65 will enter a nursing home at some point in their lives. With the growing numbers of elderly individuals in need of long-term care, coupled with the increase in life expectancies, as well as the rising cost of healthcare and insurance, more and more individuals will be faced with the difficult question of how they will be able to afford to care for themselves.
Check out the statistics gathered from a report by the Prudential Financial, Inc.:

2004 – 2006

The cost of daily care in a nursing home with a private room climbed 21% to an average daily rate of $203.
The cost of daily care in a nursing home with a semi-private room rose 23% to an average of $180 per day.
Home health care expenses rose 11% to $160.

2006 – 2008

The cost of daily care in a nursing home with a private room rose 7% to an average of $217 per day.
The cost of daily care in a nursing home with a semi-private room increased 8% to $194.
Home health care expenses increased 5% to $168.

2008 – 2010

The cost of daily care in a nursing home with a private room rose 14% to an average daily rate of $247.
The cost of daily care in a nursing home with a semi-private room jumped 11% to an average of $215 per day.
Home health care expenses increased 13% to $190 a day.

2004 – 2010

Long-term care costs grew at a compound annual growth rate average of 6%.
The consumer price index — the key inflation indicator — rose at a rate of 2.5%.

As you can see, costs for long-term care are steadily moving upwards. Still, the poll by Prudential found that of the 1,000 consumers 35 to 65, only 35% of the consumers felt they either “know a lot or know a moderate amount” about long-term-care insurance. The scary part about that statistic is the age range of the polled consumers that are out of the loop – prime age real estate for retirement planning. How can you combat the rising long-term care costs? Contact a financial advisor and map out a plan for you and your family. They can take your financial situation and estimate costs that will help you in knowing how much you must save and plan for. Education is key – and just knowing about long-term care and how can it affect you will aid you in being a much smarter planner.

The “Sandwich Generation” and the Changing Family Dynamic

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Posted on May 3, 2011 by admin

The “Sandwich Generation” is becoming a more commonly used term as more and more individuals begin caring for not only their aging parents, but their children as well, all the while planning for their own personal retirement. According to an April 2010 Merrill Lynch Affluent Insights Quarterly survey, more than one-third of affluent Americans financially support their children and parents while trying to maintain and build upon what they have set aside for retirement. According to the Pew Research Center, 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance. The US Census Bureau statistics indicate that the number of older Americans aged 65 or older will double by the year 2030, to over 70 million.

With the complex equation of most individuals within the sandwich generation being baby boomers, added to the intricate family dynamics, financial advisors are finding themselves advising over three generations. What is the family dynamic like? Many boomers work full time jobs while raising a family or supporting children in college, in addition to serving as the primary caregiver to one or both parents. How do these families cope with the changing dynamic? Most consider trade-offs, such as significantly cutting back on personal luxuries, making lifestyle sacrifices to support their family’s needs, and even cutting back on their own personal retirement.

So, what kind of help can advisors give to those facing the pending or already existent sandwich generation? First and foremost, ease the stress of competing demands by identifying core values and priorities to find balance in life. Always keep open lines of communication – of course it’s difficult to discuss the financial impact of diminishing health and the eventual loss of a loved one, but putting off that conversation can leave you unprepared for the consequences. Implementing a plan of affairs for aging parents can off-set the negative consequences of a life-changing event. Be sure to know where your family members keep important financial and medical documents, as well as the contact information of doctors, lawyers and advisors. Always know the type of long term care, and how much it will cost.

When it comes to financing children’s education, only 12% of the sandwich generation said they were cutting back on contributions. What’s the biggest tip for parents? Start saving early. Teach your children early on the skills necessary to embrace financial independence, budgeting, and the importance of credit and planning for retirement. You can even bring your kids with you to an advisor meeting to discuss all these great education finance tips.

I’m sure you’re thinking: but what about me? Get with an advisor and review your investment strategy, as well as home financing, asset allocation, insurance, securities, your portfolio, and your general retirement strategy in general. This way, advisors can help shift financial securities based on the family’s specific dynamic. According to the survey, 54% of the members of the sandwich generation work with an adviser, and among them, 32% wish that they had started working with one sooner. Among the remaining 46% who don’t work with an adviser, 83% think that they would benefit from such a relationship.

When you need the best local financial advice or budget help available, contact My Money Track to help you get your life back on track. Your IRA or rollover is just too important of an investment to ignore. Local professional advisors are willing and able to help. Help is near and affordable… just make a call to my money track today.

Monthly Archives: May 2011

Do You Know the Story of Lemmings?

Mixed Thoughts on the End of QE2

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