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Editor's View
By the Numbers:
The 2012 Indexed Pension and Social Security Numbers
Kenn Beam Tacchino, JD, LLM
David A. Littell, JD, ChFC, CFP
We present the 2012 indexed pension and Social Security numbers in an easy-to-read table. Feel free to photocopy this table and keep it handy.
Accounting & Taxation
Personal Budgeting:
What Are We Trying to Do?
Joel Wagoner, CPA, CMA, CFM
We might agree that we do our clientele a great service when we explain to them the specific benefits of budgeting. Yet, do we agree on just what these benefits are? Do we agree on what our clientele must do to realize these benefits? To put the questions in basic terms: Why and how should people budget their money?
Economics & Investment Management
The New Nemesis:
Market Volatility
Somnath Basu, PhD
As a professional, you have faced your clients with competency so far, helping them with your education, experience, and expertise. Now, it seems this foundation on which our profession is based is itself crumbling, and to continue as professionals implies that we seek more insights in this very difficult business of ours. Now, more than ever, is the time to begin a whole new journey, a way of moving forward with only the lessons from the past and without any of its shortcomings or regrets.
Estate Planning
Nontax Fundamentals in Trust Planning
Dennis C. Reardon, JD, LLM, CLU, ChFC
We look at the selection of a trustee, a trustee's exercise of discretion, and designation of a successor trustee for maximum flexibility. Whether large or small, relatively complex or relatively simple, a trust arrangement that has a sound selection process, clear standards for distribution decisions, and procedures to ensure its continuation can work very well for its beneficiaries.
Executive Compensation
IRS Brings the Tax Treatment of Cell Phone Use into the 21st Century
Paul Schneider, JD, LLM
Recent guidance issued by the Internal Revenue Service (IRS) provides the opportunity for this column to review the taxation of nonstatutory fringe benefits in general and to clarify the tax treatment of cell phone use in particular. This new IRS guidance is the culmination of a series of legislative and administrative developments that demonstrates how the tax law adjusts, albeit somewhat slowly, to changes in the real world.
Financial Gerontology
To "Age in Place" or Not…That Is the Question
Sandra Timmermann, EdD
The vast majority of us say that we want to "age in place," to stay in our homes as long as possible as we get older. However, there are instances when aging in place doesn't make sense—when some form of shared or communal living would be the best alternative. We take a closer look at the choice to move or age in place.
Health Insurance
Create a Retirement Savings Strategy Using a Health Savings Account
Brittany Rhea Luebke, MA, CHES
Health savings accounts, or HSAs, can be a powerful retirement savings tool for the middle class. Though overlooked because of relative newness, the tax advantages of HSAs cannot be ignored. A retirement savings strategy using traditional vehicles like 401(k) plans and IRAs can be coupled with an HSA for maximum benefit.
Insurance & Risk Management
Uncertain Estate Liquidity Needs
George B. Kozol, JD, LLM, CLU
Estate liquidity solutions that will work best for those clients facing uncertain estate liquidity needs are those that provide the client with flexibility. These include disclaimer testamentary trusts, family limited partnerships (for business owners), irrevocable life insurance trusts that allow distributions to the spouse of the insured, whole life insurance with term riders that allow conversions to whole life with a new term rider, and term insurance that includes guaranteed purchase options.
Qualified Plans & Retirement Counseling
Life Insurance's Role in Retirement Planning
Bruce A. Tannahill, JD, CPA/PFS, CLU, ChFC, AEP
Permanent life insurance can help individuals and families who are attempting to achieve multiple goals with limited resources provide life insurance and accumulate retirement savings. If clients anticipate using life insurance to help supplement retirement income, it should be considered in the policy design and funding.
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Estate Planning for the Middle Market
Vickie L. Bajtelsmit, JD, PhD
John D. Hopkins, PhD, CFP, CPA
Thomas H. Shanley, JD
Although middle-market clients generally have insufficient wealth to trigger estate tax liability, there are a variety of nontax issues that should be included in the estate planning component of their comprehensive financial plan. Key planning documents include wills, trusts, durable general power of attorney, durable medical power of attorney, living will, and HIPAA authorization and waiver form. Special issues may apply for married couples, nontraditional couples, families with dependent children or parents, clients who own real estate in multiple states, and business owners. In addition to advance planning, they may need counseling in the wake of disability, incapacity, or death of a family member.
Retirement Risks and Solutions in the Middle Market
Anna M. Rappaport, FSA, MAAA
This article discusses Society of Actuaries research focusing on the challenges of middle Americans as they reach retirement, discusses the key issues facing middle Americans, and looks at directions for the best solutions. It focuses on market segmentation, planning issues and strategies, risk identification, and risk management, including solutions for addressing various risks. It also discusses key decisions and relates them to the middle market.
Income, Estate, and Gift Tax Planning until 2013:
Helping Middle-Income Clients Cope with Uncertainty
James John Jurinski, JD, CPA
Middle-income estate planning clients—those with net assets between $1 million and $10 million—face a great deal of uncertainty due to unresolved tax law. Although Congress helped by passing estate and gift tax rules for 2011 and 2012, future tax law is anything but certain. The murky financial and real estate markets only add to the uncertainty. This article addresses how planners can help their middle-income clients cope with planning under uncertainty. Planners need to convince middle-income clients that the worst course is to fail to plan at all.
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Reaching the Summit and Returning Safely in Retirement
Caleb J. Callahan, CFP
Christopher J. Finefrock, MBA
Karen Eilers Lahey, PhD
The purpose of this paper is to address specific strategies and supporting tactics for successfully navigating the spending phase of retirement by making sure that a client's income lasts as long as the individual does. The period of time just prior to the client making the decision to retire and moving from saving for retirement to drawing down the nest egg is the time to examine the sources of retirement income and expected expenses. A case study illustrates a process for developing and implementing a retirement income plan that includes detailed and custom distribution strategies designed to provide lifetime income and reduce the risks.
Roth IRA Distributions:
HOF Accounting and the Three-Layer Gravy
Jordan P. Gates, MSFS, CFP, CLU, ChFC, CFS, LUTCF
Since its creation in 1997, many articles have been written on the tax-favored benefits of a Roth IRA. However, little has been written that thoroughly explains when Roth IRA distributions are subject to taxation or the 10% penalty. Now, as the first wave of baby boomers are reaching retirement age, it is important for financial service professionals to understand these complex rules.
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