Advice Only Musings

Hybrids help solve problems

2012-02-11T18:30:00.000-08:00

I just spent two days locked up in a room (sorta) in Tampa, Florida, (in the middle ofwinter!), talking about life, disability and long term care insurance. Hey, don’t tune out just yet!

Every couple of years, some of us old dogs have to learnsome new tricks. The world is changing pretty fast.

The operative word this year at our Low Load InsuranceAcademy was ”hybrid”, but not the car kind. Both annuities and life insurance policies are sprouting wings that includecoverage for long term care needs – and at a tax advantage in most cases.

If you've heard the pitch lately, you probably knowthat 70% of people age 65 today will need long term care services at some pointin their lives. Wow, the number has goneup. I remembered when it was 60%. We’re living longer and that is theresult. The second fact presented was that the national average cost of nursinghome care is up to $87,000 a year. Another wow. I was thinking maybe$80,000.

Now we financial planners love it when clients are predicted to “selffund” for long term care needs. That means they’ve saved or inherited enoughmoney or property to see them through many years of high cost care. Remember that 70% figure?

Some people can self fund and hedge their savings bypurchasing long term care insurance with a long elimination period or self fundand buy a short term policy to cover their needs until they can sell propertythat will provide a source of funding.

If people can’t self fund for all or most of their risk ofneeding long term care services, then you can buy insurance to cover that need,but guess what? Most people people we meet don’t buy LTCi (code for Long Term Care insurance). Why? “Because,” they tell me,“what if I don’t need it?” The insuranceindustry has heard that excuse and come up with other options.

These days, both life insurance and annuities from several highly ratedinsurance companies offer long term care riders or supplements that turn theminto a multi use product. Being able todraw out assets from a life insurance death benefit or an annuity with noincome tax implication is an attractive alternative.

So the next time you’re visiting with your financial plannerask about hybrids. As usual, yourmileage may vary.

Last Minute Tax Planning: Low Taxable Income

2011-12-14T05:20:00.001-08:00

If your 2011 taxable income (line 43 IRS 1040) is going tobe below $69,000 married or $34,500 single then you need to look at yourtaxable investment accounts and maybe sell and buy back (if prudent) to enable youto “recognize” long term gains this year. (This is not about short term, lessthan one year, gains.)

Why? No long term capital gains tax is due if your taxableincome puts you in the 10 or 15 percent tax bracket. The law changed in 2008and expires at the end of 2012 when long term gains tax rates go back to 20%. This will increase your “basis” in theholding and allow for fewer taxes on future gains than if you just continuedholding these securities (assets). Thisdoes suppose they continue to go up in value.

At this time of year we advisers are looking to “harvest”long term gains and offsetting losses to increase the “basis” of holdings. Thisis good tax planning in most years. Itmay not be that good this year, but for reasons not germane to this missive.Call or write to ask about this.

For the past couple of years and for the next year (2012),those taxpayers finding themselves in lower brackets should take advantage ofthis incentive to sell long term holdings that have increased in value. If prudent, they can buy them back immediatelywithout a waiting period which involves selling long term capital losses(wash-sale rule).

Your tax advisor or financial planner should always beconsulted before implementing this kind of strategy. Why? Just selling for taxreasons, may not be the best strategic move for your portfolio. That’s why thisdiscussion is for education and not actual advice. “Your mileage may vary” YMMVas they say in the text world.

A special thank you to Michael Kitces, author of the KitcesReport, www.kitces.com for reminding usplanners to highlight this issue again this year.

Our Predictions for 2012

2011-12-07T19:42:00.001-08:00

It’s that time of year again - prediction time.

What’s going to happen next year? As usual, I don’t know. How about you? I just finished reading Forbes Magazine’s endof year Investment Issue and it didn’t help me come to any new conclusions.Rats.

Now for some breaking news. For the first time this year, I’llbe sending out a separate survey to those that frequently open my emails to seewhat you (they) say to some speculative questions I intend to offer for their response. Of course, I’ll publish the results.

As we finish up this year going over many of our clientsinvestment portfolios for the second or more frequent times, we have come tothe conclusion, as we often do, that less is better - less changes, less explanation, lessunderstanding, and less acknowledgement that we can predict the future. Less isbetter. How unique?

So how are our clients, collectively doing? Not bad. Our clients are putting away more money since the two great dips of2001-2 and 2008-early 2009. They arealso lamenting the continued softness of the stock and bond markets and thecontinued sinking of housing values. I feel the same emotions.

By the way, our current favorite economic guru, Anirban Basuof the Sage Group, says that housing deleveraging will take a decade, until2017. (Sigh)

On the other hand, as a group our clients remain optimisticfor the long run. They are optimisticthat we can do it – whatever “it” might be. (Mr. Minick, my 8^thgrade English teacher, please forgive the dangling participle.)

This is the point that I should now report that our clientswho retired during 2008-2010 have stated that they are doing “OK”. That surpassed our expectations. But the way, we can’t recall one clienthaving told us it was mistake to retire when they did these past three years.(However, we acknowledge if they do regret it they may not have told us.)

It’s an election year coming up – surprise! You think 2011was an up and down year? You justwait. The media loves a horse race andwe will be having lots of them. We havesome international horse races going on too. We predict the markets will over react in both directions. Don’t paymuch attention.

What can a long term saver and investor do? As I said in my first ever (August 2011)urgent email, “turn off the TV”. Youmight recall this was the first time in 9 years I felt compelled to send out an“all hands on deck” email.

If you do want to ponder some thoughtful ideas and researchon the subject of why we do what we do and why we make so many mistakes, I’drecommend Jason Zwieg’s “Your Money and Your Brain”, and Meir Statman’s “WhatInvestors Really Want”. Both of thesebooks have to do with our behavior as investors.

Many of you will recall, I’ve beenrecommending Charles Ellis’ “Winning the Loser’s Game” 5^th edition,for the past year or so. If you buy, borrow or beg one of these books and don’tthink it’s of value after reading it, I’ll reimburse you whatever it cost. Notime limit on this offer to regular readers of this blog.

So that brings me to my list of concepts I’d like you toconsider exploring as we enter 2012:

· The illusion of control

· Confirmation

· Hind sightedness

· Patterns

· Availability

You’ll find these concepts and more in the three books we’vejust recommended.

So for 2012, we suggest you follow Warren Buffet’s advice tojust invest in index funds as much as you can. I think John Bogle, founder of Vanguard, said that too. If you must invest in a limited number ofactive funds in your work retirement plan, then try to find low cost anddiversity.

My wish for this holiday season is for both you and me tohave more family time and count our blessings each day. Thanksgiving was a goodstart. Keep it up. I predict it will improve our year 2012.

Time to introduce a little change, for the better

2011-10-30T15:58:00.000-07:00

Helping people make informed financial decisions can betough. Now don’t fret, this isn’t a pityparty kind of blog coming up. These arejust some thoughts on how to get people to act in their own best interest. I think my doctor might have the same kind ofthoughts sometimes, but not about me.

Being a financial advisor that only gives advice and doesn’tsell or manage stuff, has its advantages. We don’t get a lot of phone calls or emails asking why we screwedup. Now, both my partner Anna and Iscrew up plenty, but we try to catch each other’s mistakes before we foist themon the public. However, when we do giveadvice whether in person, on the phone, on Skype or via email, we are neverreally sure what’s going to happen. Weusually find out later.

In our business model, we also don’t have to do quarterlyreports or publish newsletters to explain what’s going right or wrong. Who reads those? I’m sure some folks do, but in past lives wehoped 5% took a look. Only engineers,who found every addition error or typo, seemed willing to communicate about ourofferings.

How late we hear from someone usually relates directly whetherthey are following our advice. If we getphone or email soon after the delivery, then we know the client is doingsomething with our recommendations – thinking about them and, or trying toimplement them and needs our assistance or further explanation.

It’s not unusual to see clients a year later and find thatmost of the work we recommended is yet to be completed. How were we to know?That’s where my doctor comes in. Hemakes a follow on appointment right then when I’m sitting there. Funny how the prescription runs out just aboutthe time our next meeting is to take place.

OK, so Doctor of Financial Advice Ludwick is going to changehis ways and book follow up appointments right away and also have the officestaff follow up a week later to see how things are going. Yes nurse, I’m takingmy pills and exercising. I get the sensetheir interested in my welfare. I cantake a hint.

So after nine years of operating in a certain way, DoctorsLudwick and Sergunina will alter their practice and help their clients moveforward in their financial lives. Yes it means more phone calls for us, but weexpect to see more accomplishments because of our efforts. Yes, it might mean we have to switch moreappointments that need to be altered, but I think we can handle it.

So if you’re a client of ours, what do you think? If you’re a colleague, what do you think? Andif you’re a prospective client, what do you think?

10 things not to do on your overseas vacation

2011-09-17T13:22:00.000-07:00

10 thingsnot to do on your vacation overseas

1. Don’t fret about leaving something at home. If it’s important enough, they’ll have onefor you to buy at the airport. If it’s clothes, then all the better reason forshopping. (Does not count for passport or driver’s license)

2. Don’t take work folders with you. Electronicmight work if you need something, but these days you can get someone totransmit it to you.

3. Don’t expect everything to work on schedule. Planfor alternative transportation in case your plans are disrupted. Think strikeor reservation failure.

4. Don’t forget to turn off your smartphone dataplan. By the time to realize it’s on in a foreign country your bill makealready be in the stratosphere.

5. Don’t expect your bank or credit card companiesto approve all your withdrawals and purchases. Call your bank and credit cardcompanies and let them know your departure and return dates.

6. Don’t think you won’t lose your wallet or purse.Make a scan of all your credit cards, passports, driver’s license and email itto yourself. That way you can bring them up at the hotel or police station incase of loss or other emergency.

7. Don’t think there’s no risk getting money out ofany ATM you find. Get your money out of ATMs located in or next to a bankbranch or in the airport secure area. Less opportunity for someone altering themachine and grabbing your information.

8. Don’t think your US phone will work in anothercountry without planning ahead. Get a local sim card for an internationalcapable phone so you can make and receive local country calls.

9. Don’t just use the hotel telephone system tocall home. Use a Skype account to talk to others around the world at no cost,or very little cost if they don’t have a Skype account.

10. Don’t help others and assume it’s every man orwoman for themselves. Pass these suggestions onward to others and add your ownrecommendations. Send me a copy. Jim at AdviceOnly Dot Net

Important Message to Clients and Other Correspondents

2011-08-20T05:57:00.000-07:00

Saturday morning August 20, 2011

Starbucks, Monroeville, PA

I don’t want to be sending out “Important Messages” very often. However, our 24/7 media, which most of us access to some extent or other, leaves me no choice. Volatility in the markets (stock, bond and housing) leads to angst. I feel your pain and my pain.

Thursday was another bad day in the stock market. What did yours truly do? Most of you know the answer. I was a buyer. Sold nothing and bought more index funds. Put excess cash to work. If it was a good by at X, then it’s a better buy at X minus 9 percent.

Remember the three buckets of money? (If you don’t, email me for my chart and explanation)

I have more than three years cash in bucket one. How about you? I have another 2-3 years of expenses in bond index funds and a balanced index fund for mid-range bucket two. The asset allocation for my wife and I is 75/25 in bucket three. This is long term money, at least five years away from need.

Am I concerned about our economy and our country? You bet. Rumors in Washington are forecasting draconian budget cuts beginning Oct. 1^st. Could a recession in the DC metro area be in the offing for the first time since the end of the Vietnam War? One missive I got yesterday played up that outcome.

For those of you in CA, NV, and FL, it looks like housing and affiliated industries will keep economies there in a longer recession that I ever figured.

So what can we do? 1. Live beneath your means and prepare for cuts in social security, medicare, and other federal and state government services. 2. Don’t take on more debt. 3. Pay down current debt. 4. Understand the big picture from several viewpoints (not just your favorite outlet) 5. Communicate with your elected representatives and/or help new ones get elected.

Thanks for listening. Jim at advice only dot net.

Important Message from Jim Ludwick

2011-07-27T17:16:00.000-07:00

Wednesday evening, July 27, 2011

Dear clients, prospective clients, colleagues, friends and relatives:

My friend and fellow advisor Rob Oliver said I could pass along his advice to his clients today since it mirrors our feelings and recommendations:

"You may be wondering what all the debt ceiling hubbub is all about. I've heard from some of you with questions about its implications for your planning and investments.

I hate to sound like broken record, but I encourage you to keep your sights set on the long-term and ignore the short-term buzz. In my opinion, the debt ceiling issue will get resolved and any fluctuations in the market due to the debate surrounding it will be short-lived. My advice is to stand pat with your portfolio and turn off your television.

Having said that, I believe that the debt ceiling debate represents deeper rooted budget issues that the US needs to resolve. Some form of higher taxes and lower spending is coming. What should you do about it? Continue down the prudent path:

- Rebalance your portfolio at least semi-annually.
- Pay yourself first through automatic savings.
- Avoid unnecessary debt.
- Mitigate risk with insurance and estate planning.

If you would like to learn about the debt ceiling, I suggest you check out
the US Dept of Treasury's description and Vanguard's analysis:

http://www.treasury.gov/initiatives/Pages/debtlimit.aspx

https://personal.vanguard.com/us/insights/article/debt-ceiling-07192011

-- Jim Ludwick jim@adviceonly dot net (740) LUDWICK

Keep close eye on credit card charges

2011-07-23T06:35:00.000-07:00

Woke up this morning and was viewing my personal emails via iPhone. Noticed a 1am email from a "former" anti virus vendor charging my credit card on a renewal. Been over a year since I've used that service. Made a mental note to object to the vendor which uses a third party to sell its goods.

After sending a form objecting to this charge I went online to my chase.com account where both my business and personal credit cards reside. I did note that the third party vendor customer service was only open Monday through Friday. Am I too cynical that the charge was rendered at 1am Saturday morning?

My online session included looking over the pending charges on my business card where this soon to be disputed charge resided to see what else was going on. I picked up the phone to call Chase and complain about the charge when I got the fast beeps that alerted me to a call on voice mail.

Guess who? Chase fraud department wants to talk to me. I call. It's about my personal credit card. Some charges in Georgia. One was approved and one was declined. We go over my transactions and there is one a few days prior for 9.95 for something called Publications Development. Seems that's how it got started.

The bad guys put through a small charge after duplicating your credit card number on a fake card. No objection after a few days? Then they move on to bigger charges. The first for $229 when through. Then they tried $319 several hours later. Bells went off at Chase. The call was made. The purchase declined.

Two results and two thank yous.

Got an email back within an hour from the third party that they had received my disputed virus monitoring renewal charge. Moments later the vendor sent an email asking to confirm my request for a refund which I did and they acknowledged immediately. Thank you.

Chase cancelled my personal credit card. OK. No big deal. I have to notify three businesses that automatically charge my card monthly that there is a new number. It is Saturday and Chase said my new card would be here on Monday via UPS. After I get my new cards, I will notify my three business partners of the change. Thank you.

What did I learn? Both my wife and I have agreed to check online at least once a week to review our charges. We charge almost everything for airline points so we must be more vigilant about checking for bogus charges, even little ones.

Will it become a habit? I'm making it a weekly task on my automated to do list. We'll see.

If readers have one more ideas for us, we're open. Email Jim at advice only dot net and forget about the open spaces. Just trying to keep those bad guys away too.

JFL

Why are you so smart, or are you just lucky?

2011-07-07T16:17:00.000-07:00

The headline on this article is a nice question to ponder. Although no client or prospect has outright asked me this question in my nine years of private practice, I suspect it was on their mind.

In reflecting on my own implementation of my personal financial decisions over this same time period, I have mixed results. In many cases, our clients have outperformed my own portfolios. In fact, my wife takes great pride in the fact that her investment performance exceeds mine by several percentage points, and I manage her investments!

This piece seems to be taking on a confessional direction, but my purpose is to let readers know how I prepare to help them make better financial decisions. I would like to answer the question about being smart. Answer: I have lots of smart help.

Having a mentor or mentors is very important. In our industry of personal financial advice, it’s relatively easy to have one since we tend to be a very giving profession. I found mine in Kansas via the internet. She wrote a book, formed a group and offered people like me the opportunity to put our experience and desire to work in a new delivery mechanism of personal financial advice by the hour, on an as-needed basis. Then she added consultants to our group to help us on a periodic basis via conference calls, and now webinars, along with an annual in-person retreat.

Consultants help me in marketing, compliance, and business planning. No man is an island. I’m wise to the ways of others though these experienced and focused experts who see the best of the best and pass it along to those of us who want to improve. I owe them a lot.

Money managers help me help our clients. Over the years we have helped clients select several top notch money managers since investment management is not a service we deliver directly. We watch what they do, read what they write, and pay attention to their advice, their decisions and their rationale. It helps us develop a more dynamic perspective of active or passive investment management by seeing it happen in real time. Real time to us is usually quarterly or annually, by the way.

Clients have ideas for us too. Over the years we have used several clients as sounding boards for new ideas and tools to deliver or expand our service. They have been invaluable. In many cases, clients helped us avoid a mistake since we were enamored with an idea that had no place to go in our world. They told us that in no uncertain terms. Thank you. You know you who are.

Colleagues have added to our tool chest in many different ways. We participate in two national discussion groups as part of our association memberships. Here no man is an island pops up again. We can’t possibly know it all, but a simple posting usually brings several suggestions in hours, if not minutes. Only yesterday, as I write this, I posted the referral need for a specialized business appraiser in the mid-Atlantic region. Within two hours, I had three potential providers as a solution to a client request. I was in communication with two of the three referred providers before the end of the day.

Colleagues also write a lot of articles on the myriad of topics, close to a hundred, that certified financial planner practioners are expected to know and understand. They write magazine articles, blogs, and tweets. I pass along a lot of their ideas and suggestions by re-tweeting them to colleagues, clients, prospects and others who follow me on this social media platform called Twitter.

The financial news media is also a good source of information and ideas for me since they frequently report on what other advisors and consumers are doing and saying on all sorts of financial topics. I always seem to be looking at a stack of magazines on the bookshelf and emails in my inbox. I’m guilty of information overload and look forward to airplane and train rides to try and catch up.

Lastly, but by no means least, is my long time associate Anna Sergunina, and our relatively new assistant Holly, who lovingly bombard me with error correction suggestions, along with articles and tools they found to help our clients and our practice.

So now you know the answer. I’m smart because I associate with a lot of smart people who are willing to help me deliver the very best recommendations to our clients so they can make the best possible decisions about their financial lives, and sometimes just about their lives in general.

I’m also lucky to have the best wife, Carol, family, friends, clients and colleagues imaginable. Thanks for being in my life.

(Now, if you have an interest in what I read on a daily or periodic basis, I’ve posted an non-exhaustive list. Many can be viewed without a subscription. View the list by clicking here: http://goo.gl/voLkN )

Jim Ludwick's Reading List 7.7.2011

2011-07-07T16:06:00.000-07:00

1. Google
2. Yahoo Finance
3. Morningstar.com (free and premium subscription)
4. MoneyGuidePro.com (subscription)
5. Standardandpoors.com (subscription)
6. Vanguard.com, Fidelity,com, Troweprice.com, TDAmeritrade.com, Schwab.com, iShares.com, statestreet.com
7. Fairmark.com
8. Investopedia.com
9. Themortgageprofessor.com
10. Elderlaw.com
11. Horsesmouth.com (subscription)
12. Twitter (follow a number of financial advisors and consultants which leads to their blogs)
13. The Simple Dollar (blog)
14. Seeking Alpha (blog)
15. AdvisorOne.com (subscription)
16. RickFerri.com
17. Aaii.com
18. Investment News (subscription email and weekly periodical)
19. Investment Advisor magazine
20. Financial Planning magazine
21. Journal of Financial Planning magazine
22. Kiplinger Personal Finance magazine
23. Money magazine
24. CNNmoney.com
25. SmartMoney.com (online and magazine)
26. CBSmoneywatch.com
27. MarketWatch.com
28. WSJ.com (subscription for computer, iPhone app and paper version)
29. Journal of Indexes
30. Research magazine
31. Registered Rep. (subscription)
32. Life Insurance Selling (subscription)
33. Forbes magazine (subscription)
34. Bloomberg BusinessWeek magazine (subscription)
35. NewYorkTimes iPhone app and daily email summary
36. Time Magazine iPhone app
37. WashingtonPost.com (subscription online and paper)
38. Vanguard Independent Advisor newsletter (Dan Weiner by subscription)
39. Fidelity Independent Advisor newsletter (Don Dion, by subscription)
40. ETF Report (Don Dion, by subscription)
41. ETFconnect, now something else, look it up!!! For closed end funds
42. LAtimes.com (business)
43. BaltimoreSun.com (business)
44. DallasMorningNews.com (business)
45. Institutional Investor ETF Daily by email
46. Advisor Perspectives by email
47. Financial Planning (online and magazine)
48. Accountants World News by email
49. FedSmith.com
50. LinkedIn special interest groups (5)
This list is not all inclusive. 7.7.2011

As Compared To What?

2011-04-17T06:26:00.000-07:00

Many times we financial planners are approached for advice, with the “one quick question” routine.

The question usually goes like this: “I just have a quick question on whether I should rollover my old 401k into an IRA.” Sometimes it sounds like: “I’ve lost my job and need money. Should I cash in my 401k?” Other times it could be: “I have too many accounts and just want to consolidate them.” All these conversations come with the underlying unspoken question, “I just want to pay little or nothing for what I think is a simple question.”

They might be thinking that in the past, teachers, parents, and 401k sales people have answered these kind of questions for no charge. Why should it be any different now?

Expectations are funny things. We all have them and in different roles we act just a silly as the folks that are calling financial planners. For example, why does my dentist have to come in and check my mouth each time I get my teeth cleaned? I see a boat payment each time. Not the annual visit mind you, it’s every time. What are my expectations? The dentist checks once, hygienist three times, and I pay less. That’s my expectation. Now, I’m not going to let my dentist make a defense of this practice here, but I continue to rely on her professional judgment to look around in spite of how I feel. We go to a professional for advice, and we need to let them practice in our best interest in spite of our expectations based on previous experience or wishful thinking.

So, how do I as a Certified Financial Planner practitioner, get the question out in the open. Well, my primary care doctor is a good example and I use her method too. “How long have you had this cold (401k)? Let me listen to your lungs and your heart. I see the RN has taken your blood pressure and temperature. Let me look at your history here.”

So it goes in the doctor’s office, and so it goes at MainStreet Financial Planning. “We might expect our doctor to give us a quick prescription for antibiotics for our cold, but it just doesn’t happen and if it did it might be classified as malpractice. It’s the same issue here at MainStreet Financial Planning. Just giving you a quick and low cost prescription (since we charge by the hour) might do more damage than good in the long run, even if it meets your immediate need (expectation). Maybe you should keep your 401k with your former employer until you get your next position. Maybe we need to explore several other options and for that we will need more information and understanding of what you are trying to achieve in the long run. That takes time and will cost more in the short run, but could make a major difference in the long run.

Here’s where I usually tell a story about someone who makes a quick decision not knowing all the ramifications because it was expedient and cheap (allegedly) and paid for it in the long run. Stories help people understand complex issues. The bible is full of stories (parables) for good reason.

Invariably, the question will be asked, “What will this cost?” The answer is usually much higher than they thought (The same with my last dentist bill). Here’s where my previous questioning about the cost of losses or mistakes in their past now pays off. “Wow, that’s more than I thought”, they exclaim. “As compared to what?” I ask immediately. Pause.

I hope they are reflecting on the dollar value of past mistakes and see the light. (My dentist has to tell me about surgery or teeth extraction.) The value of not making a big mistake is worth something, isn’t it?

The moral of this tale, is to be prepared to answer the underlying cost question frequently tossed at financial planners. When the prospective client understands the need and value of more detailed analysis and alternative treatment consideration before coming to an optimal recommendation for their situation now, and in the future, they will be more inclined to pay your fee. If not, well then that’s a constitutional right.

2010-01-11T21:17:00.000-08:00

As I write this blog I’m somewhere over the Midwest at 35,000 feet. Flying gives me a chance to read and think. That’s what I’ve been doing. “The Only Way to Fly” (Western Airlines, where are you?)

It’s a new year. and in our business we have to update our disclosures, pay fees to various governments, adjust our websites, our letters, our forms, and basically look at exactly how we deliver our services to clients and explain how we do this to prospective clients.

Our mission statement from day one (Sept. 27, 2002) has been: “We empower our clients to make good financial decisions”. That is the value proposition that Anna and I strive to deliver in every engagement and client interaction.

So this year, as in most years, we are evolving as our clients and prospective clients express the need for variations of the services we provide. In the past, we broke down our follow-on services to continuous, annual, periodic and hourly. Because of demand, we’ve added semi-annually, re-balance only, and emergency (I would rather call it urgency, but that’s another issue). This month we’re planning to specifically add “Any Friday Email Q&A”, “Webinars (Google it) on client requested or Our Choice Topics” and “Home Organization Visits”. Also, we’re using Skype more often to stay in touch.

I know that sounds like a lot, but Anna and I have been offering these “new” services on an ad-hoc basis for the past couple of years. We sometimes forget to tell folks what we can do, even though we say we deliver both comprehensive and a la carte financial planning services. The best way to do that is update our website and add these, along with prices or price ranges, to the “Services” section of our website. We have always prided ourselves on a “no surprises” Golden Rule philosophy which is why we have so much detailed information on our websites.

Did you just notice I said websites? This week, our mobile smart phone sensing website has gone live thanks to our webmaster Justin at Scheef Designs (also a client – full disclosure). This blog got a Justin makeover as you can see.

So now 2010 is in full swing. Stay tuned to us on Twitter and our personal finance reading alert service delivered via tweets. Ask any teenager how you can follow us at “jfludwick”. Still avoiding Twitter? Then look for our monthly summary of articles, websites, tool, and ideas summary sent to you via email. Many of you have had friends and co-workers contact us for this free email service. Please continue to recommend us and thank you. By the way, there is a link to click on and register at the top right corner on every page of our main website. No cost or obligation, and no other contact unless requested.

Both Anna and I are glad 2009 is over. We are looking ahead. Lots of challenges and opportunities for you, and us. Stay in touch.

Jim

PS: Dial 740-LUDWICK and find me anywhere in the world. That’s my Google Voice provided phone number. I tried to get 410, 443, 202 or 805 LUDWICK, but younger and smarter sons and relatives beat me to it.

Be a Diligent Online Consumer

2010-01-02T14:58:00.000-08:00

In the past few weeks I’ve been online making purchases. No big deal these days. Most of us like the convenience, sometimes avoidance of sales tax (this may not last much longer), and competition that we can observe in real time.

So why am I blogging on this issue? Well, there’s lots of dollars at stake and in all three cases I’m going to detail, each amounted to over one hundred dollars that stayed with me only because I was diligent.

Encounter Number One. I booked online our family vacation cabin at the beach for two weeks, instead of one, for the first time. This was a much larger amount than I’m used to paying so when the total came back it looked OK to me. I have used this company’s site one time before so I was comfortable booking online, but opted to pay by check since their credit card “fee” seemed excessive. My first red flag. As I was making out the check I observed they had added a $117 insurance fee I had declined to check off on the online form while making my reservation. Hmm… I thought. Not a good practice and something I’m sure the North Carolina Board of Realtors might be interested in if this is a pattern. I got a quick email apology in response to my email questioning this charge so I decided not to turn them in, but I’m still suspicious and won’t use them again. If one of the owners is present when we check in, I may speak to them about this issue. As a business owner, I like to know when customers are dissatisfied, or worse yet, deciding not to come back and use our services.

Encounter Number Two. I got the bright idea of buying my wife a new laptop computer for Christmas. Now this bright idea came to me after two embarrassing public conversations where my wife pointed out she always got my hand-me-down laptop. But I might be straying a little, so back on topic. Off to the internet and reading reviews of the latest laptops and features I wanted to make sure she enjoyed with her new computer. I narrowed it down to two models and then went price shopping. Price comparison is pretty easy these days. Thank you internet.

Bingo. The most popular shopping site had it on sale and a rebate to boot. I emailed both of our sons to make sure dad was making a good decision. They are both techno-geniuses, in my humble opinion (yes, I know that I’m prejudiced). Less than an hour later, and I’ve been OK’d to make my purchase. I go back to number one and BANG. Price is up $100 and no rebate. Ouch. Now I had already been to the manufacturer’s website and saw the rebate there, so I wasn’t too worried about that, but how can the price change in less than an hour? Off to search and I’m not happy. Then I get bright idea number two, my browsing history. I click on the oldest link for that site and wowee I’m back at the sale price, but no rebate. No biggee, I buy immediately and the price is confirmed. Off to the manufacturer’s website, download the rebate. Two weeks later an email tells me the rebate is accepted. Final conclusion, I get the price I want and the rebate I deserve, but only because I was very diligent. Savings: $150.

Lastly, I need to buy an airline ticket. I’m reminded of that fact when Yapta.com sends me an email that the price has dropped on the date and flights they’ve been tracking on my behalf. Off to the airline website and the price is $160 higher. Rats. Well, the email is over an hour old, and I know prices change fast in this industry based on seats sold.

Just to be sure I go to Orbitz.com and whammo there is the original price. I call the airline because I can’t get their online site to give me the price Orbitz is quoting. The CSR says she can’t help and sends me to web support that tells me they can’t replicate the price either and that I should go ahead and buy at the higher figure and then put in for the price match plus $100 if you can find the same ticket price within 24 hours of purchase. So I buy it and go right back to Orbitz to document the lower price. Screen print for documentation and then complete the application. Ten minutes later I go back to Orbitz to see about the price and wouldn’t-you-know-it, the price is now $160 more not only for my airline, but the five other airlines that were also at that lower price. Coincidence? I don’t know, but after two weeks I was awarded a $260 certificate for future purchases on that airline.

Moral of this story. 1. Learn how to do a PRINT SCREEN (Google this if you don’t know how) 2. Remember you have a browsing history and might need to make use of it. 3. Look over invoices to make sure only what you intended to pay for is included. 4. Capture rebate forms as soon as you see them. Don’t forget to read their terms and conditions. In my case, it excluded stores like Best Buy, and Target, but not number one online shopping. Lastly, remember that even though in my case all three online companies are well known and mostly dominant in their area of commerce, you have to watch them very closely. Buyer Beware.

Happy New Year. Some things never change, but we can be hopeful, or lacking that, be diligent.

Most of September Tweets

2009-09-26T07:48:00.000-07:00

Jim Ludwick's tweets are for education and information. They are not meant as tax, legal or financial planning advice in any particular case.

1. SmartMoney's Jack Hough says don't be in a hurry to buy life insurance before they raise rates: http://budurl.com/zput

2. WSJ's Jason Zweig is also on the bond alert bandwagon. Don't chase yield he says: http://budurl.com/37uf

3. Mark Hulbert more worried about bond rally than big stock rise in past six months: http://budrul.com/nem6

4. MaketWatch reports on Moody's study that it will take 10 years for home prices to come back to previous highs: http://budurl.com/8f2u

5. Military or Fed. Civ.? Here's the website I check every morning to see what TSP is doing. Look at top of page: http://www.fedsmith.com/

6. How did mint.com, one of our favorites, make it to the big time? Now to be owned by Quicken's Intuit: http://budurl.com/5q3a

7. IRS looks for unreported income using mortgage interest deduction according to MarketWatch report: http://budurl.com/ubcd

8. US longevity poor versus other develp. countries. Our health care to blame? No, says new study reported by CNNMoney: http://budurl.com/kmgs

9. 58 and no ret. savings? Money Mag's Walter Updegrave has an answer: http://budurl.com/r7rh

10. Mutual Funds make up 90% of what they lost in last collapse according to Morningstar report in Investment News: http://budurl.com/zryf

11. Dr. Mark answers the question, "Why did smart people get out and back in and I didn't?" in his blog: http://budurl.com/g988

12. WSJ's Leslie Scism notes that variable annuities with guarantees assured many during the latest stock market collapse: http://budurl.com/u9b3

13. WSJ's Jason Zweig argues for 'buy and hold' investing strategy: http://budurl.com/p7tc

14. Kiplinger via Yahoo Finance reports on 20 things you can get for free: http://budurl.com/edgx

15. New rules for 1st time home buyers in article by Ron Lieber in NYTimes: http://budurl.com/vpjn

16. Will Baby Boomers cashing in pull down the stock market? CBO doesn't think so. Here's a MarketWatch report: http://budurl.com/yh36

17. Advice from Trent at The Simple Dollar, saving money on things is easy. Here are 12 ideas: http://budurl.com/askh

18. Colleague Phil Dyer points out July 24th Fortune Mag story on what you might lose in Healthcare Reform: http://budurl.com/dkj6

19. Is 30 the new 20 when it comes to money skills? Smart Money's Sarah Morgan has this view: http://budurl.com/kvp5

20. Schwab's Liz Ann Sonders says W recovery is out, V much more likely: http://budurl.com/l98m

21. RT @jaketapper: I follow Descartian twitter rules: Urlito Ergo Sum. I link therefore I am.

22. Balt Sun's Eileen Ambrose tells us how to check up on our bank: http://budurl.com/sz87

23. Deleted since it was a private message to my son posted by mistake.

24. Enron named Amer. Most Innovative Co. for 6yrs by Fortune accord. to Ariley in book "Predictably Irrational"

25. Kiplinger offers the retiree tax heavens and hells map for this year and next: http://budurl.com/lueq

26. Kiplinger's Steven Goldberg offers tips on where to put your "safe money" since MM's, CD's are so low: http://budurl.com/qlek

27. Pearlstein in WashPost says Paulson and Bernanke did the right thing in letting Lehman fail one year ago: http://budurl.com/pvms

28. Bankrate.com reports mortgage rates lowest since May: http://budurl.com/s2q2

29. James Stewart of SmartMoney reports housing prices hit low in 2nd qtr and are on their way up: http://budurl.com/egyf

30. Boeing moving to China? Here's a report to read and think about: http://budurl.com/ctfg

31. Market light turns yellow says WSJ's Jason Zweig, also author of Your Money and Your Brain, a fav book, : http://budurl.com/9b39

32. Men's underwear Index predicts end of recession? RT @ylanmui WashPost story: http://budurl.com/2fk7

33. Can you go after your broker for bad advice or products? Things might be improving according to CNNMoney: http://budurl.com/vehj

34. Withdrawing from your savings in retirement. How much? NYTimes story relates the latest research. Maybe take more? http://budurl.com/tqh9

35. www.Brightscope.com Client Dan likes this site. See if your 401k is rated by this firm.

36. Housing price declines not all bad in latest report from MarketWatch featuring Case-Shiller index: http://budurl.com/3w25

37. Haven't owned a home in the last 3 yrs? Get a big tax credit: Must close by Dec. 1st: CNNMoney has details: http://budurl.com/3jjv

38. Freebies Galore. RT @KiplingerMedia details all those things we can get for free including financial advice: http://budurl.com/s7c4

39. Don't be greedy says David Luskin of SmartMoney. The latest rally is the best in 75 years off a bottom: http://budurl.com/nkb9

40. Peer to peer college loans. Forbes' David Randall writes on recent trend since trad. loans are down: http://budurl.com/sfgn

41. Anna discovers the budget system that Yuri will use: http://budurl.com/usa5

42. Periodic Warning: Jim Ludwick posts tweets for the education of recipients, they are not intended as specific advice.

43. Always great ideas from Trent at his blog The Simple Dollar. Here's one of my favorites: http://budurl.com/urk6

44. @Kiplingermedia: Kimberly Lankford comes up with great ways to save on property and casualty insurance: http://budurl.com/wkhv

45. @Kiplingermedia Report on pot. stamp increase to 50 cents and P.O. going to email for letters: http://budurl.com/r2dw

46. MW's Lew Sichelman details what you should expect when your mortgage is paid off: Paperwork alert. http://budurl.com/suf4

47. MarketWatch (MW) issues warning. Get your holiday tickets early. Bargains may soon disappear: http://budurl.com/xedy

48. SmartMoney reports on tricks that credit card issuers are up to now and what you can do: http://budurl.com/49na

49. Breaking News: RT @KiplingerMedia: Saturday Mail Getting the Sack http://su.pr/1Xev8r

50. Link to blogcast next Tuesday September 29th at noon Eastern: www.baltimoresun.com/consuminginterests

51. Balt. Sun's live personal finance blog has Jim Ludwick answering ?s live next Tuesday, noon, Eastern. Email ?s to eileen.ambrose@baltsun.com

52. Term vs. Permanent Life Insurance: Here's how CNNMoney's Walter Updegrave answer the question: http://budurl.com/6xd3

53. RT @KiplingerMedia: RT @blackgirlgrown: Big barrier to becoming rich is living like you're rich before you are. http://su.pr/2ejuC7

54. R T @CherylKrueger: It's time to review your ret. plan and adjust. Focus on what you can control. Newsweek article: http://bit.ly/CIt7D

55. Get your free CLUE report on your reported property and casualty activity for the past seven years: http://budurl.com/g4zg

56. RT @KiplingerMedia See what Ins. Cos. are doing with your prop. and casualty claim info: Could haunt you: http://su.pr/1mvCLu

57. What will it take to become a millionaire? Use Kiplinger tool to find out: http://budurl.com/xr4m

58. Cal ranked #21 in USNews list. Could it be their great athletic programs pushed it ahead of UCLA et al.: http://budurl.com/lyp

59. Think your portfolio shrunk? Look what's happened at the big unversity endowment funds in a NYTimes story: http://budurl.com/g75u

60. Many people tell me they are not relying on Social Security, but don't see them saving enough. Here's a MW take on it: http://budrul.com/xjzt

61. Rich going on a budget? Yes, says NYTimes via Yahoo Finance: http://budurl.com/xah6

62. Social Security primer on Yahoo Finance from CNNMoney's Walter Updegrave: http://budurl.com/qkvj

63. Richard Ferri author of newly published:The ETF Book to speak at my DC office, Nov. 13th, 6pm. Free. Res. a must. Email Jim@adviceonly.net

64. Bankrate.com advice on using your IRA/Roth IRA for college expenses: http://budurl.com/pemg

65. WSJ warns higher income taxes coming and link to several personal finance stories worth reading: http://budurl.com/gbva

66. Investors missing rally as they head to bond funds says John Spence in MW: http://budurl.com/yhhz

67. Rob. Powell in MW(MarketWatch) report on 5 Ways To Make Nest Egg Last including link to AARP helpful calcs. http://budurl.com/l3g2

Roth Segregation Strategy

2009-08-22T06:29:00.000-07:00

A recent article on Roth IRA strategies in a financial industry publication authored by David Marotta reminded me of how many opportunities are available to save or pay income taxes now since rates are expected to rise in the future.

The most intriguing idea in Marotta’s article is labeled “Roth Segregation Strategy”. That caught my attention. Basically, Marotta suggests converting traditional IRA money into multiple Roth IRAs, each in a different asset class, (one class might be large cap growth) to capture a dramatic increase in a particular asset class resulting in a cash flow advantage over the tax cost of conversion.

Marotta suggests that the owner see how each Roth IRA performs over the time period allowed to “recharacterize” or return them to a traditional IRA where they originated and not pay the tax that would have been incurred. This technique is available to all taxpayers in 2010 and 2011 when income limits are eliminated for traditional IRA conversions to Roth IRA.

Can you have your cake and eat it too? Marotta reminds us that you only have to pay taxes on the conversions not “recharacterized” at the end of the allowable time period which can be lengthened by tax deadline extensions. That could be 21 months if you converted in January and made the “recharacterization” decision by mid-October of the next year which is the ultimate filing deadline. He suggests only paying taxes (on the original conversion value) on those that have had significant gains. Otherwise return those with less than stellar increases to the traditional IRA with no tax due.

How does that work? Here’s my simple calculation (this is not tax advice, only education): You create five different Roth IRAs funding each with $10,000 in January of 2010. During the next 21 months (you may make a decision sooner) you end up with a 10% gain in one, minus 5%, in the second one; 10% gain in the third one; 15% gain in the fourth Roth IRA and a 25% gain in the fifth Roth IRA.

Now if your effective tax rate (combined state and federal) is 25% , then you could hold onto Roth IRA number five paying $2,500 tax for conversion and end up with $12,500 in your Roth IRA experiencing a net zero cash flow and no future income taxes on that Roth IRA. All other converted Roth IRAs could be returned to the traditional IRA if you only wanted to have a zero or less than zero tax consequence. That less than zero tax consequence would happen if Roth IRA number five gained more than 25%, a happy prospect.

I can imagine lots of folks keeping conversions that saw reduced tax consequences rather than just none or less than zero as I explained in the last paragraph. For example I could pay $2,500 tax on Roth IRA number four, and end up with a $11,500 Roth IRA at a net cash flow cost of only $1,000. Not a bad price to pay for no further taxes.

Warning: In practice, custodians usually withhold 20% of the converted amount and you have to gain it back (or balance things out) upon filing of your tax return. So beware of the cash flow consequences of conversion and recharacterization. This is not a simple exercise and does take planning. However, it provides our firm and our colleagues’ firms with another opportunity to benefit our clients.

(David John Marotta is president of Marotta Wealth Management, Inc. of Charlottesville, VA)

So now its time to start a blog

2009-07-28T11:40:00.000-07:00

Twitter, Facebook, YouTube and now it's time to begin a blog.

First order of business is to define the purpose, scope, intent and audience for this communication medium.

Purpose: Periodically spend some time composing and transmitting some idea, concept, facts or other useful information for my readers. Explain what I see as the impact of the topic under discussion or its ramifications.

Scope: Financial planning topics should provide enough freedom and constrain my enthusiasm for pontificating too far afield.

Intent: Provide useful information and calls to action when appropriate.

Audience: Those who might be searching for some new idea, or rehash of an old idea with a new twist when it comes to personal finance. Might be interested in my story telling about how others have achieved their goals, or have been twarted and want to discover how so they can avoid the same mistake(s).

So let's see how we can go from here. It will be interesting how we integrate Facebook business page, twitter, YouTube blogs and now this: Advice Only Musings.

Your faithful writer and editor, Jim