Although employment trends have improved recently, there remain millions of people who work part time, are employed in temporary jobs, or are self-employed, frequently without employer-sponsored benefits.¹ This situation presents a challenge when planning for retirement, health insurance, and other areas. But with careful planning, you may be able to continue investing for your later years, paying for medical expenses, and making progress in other areas of your financial life.

Medical Matters

If you find yourself without employer-sponsored insurance, consider whether you may be able to explore the following options. Keep in mind that your health status and your age will influence whether certain plans are available to you and how much you will pay. Regardless of where you obtain insurance, you are likely to pay more when compared with an employer-sponsored plan and your coverage may be less comprehensive.

• Arrange to go on a partner’s plan if you are in a long-term relationship. Increasingly, coverage is made available to unmarried partners as well as to spouses.
• Explore whether your state makes a plan available to individuals who meet certain qualifications, such as income thresholds.
• If you are a union member, contact your union to find out about medical insurance options.
• www.aarp.com/healthinsurance presents insurance options and potential discounts on medical services for members aged 50 and older. Note that the insurance products are not available in all states.
• If you are self-employed, consider joining a chamber of commerce or other business organization that offers a group plan to members.

Retirement

You can continue investing for retirement even if you do not have access to an employer-sponsored plan.

• Maintain an IRA. The maximum annual contribution is $5,000, plus an additional $1,000 for those aged 50 and older. Anyone with earned income can contribute to a traditional IRA. But you must begin taking required minimum distributions (RMDs), which are taxable, after age 70½. To contribute to a Roth IRA, you are required to meet income thresholds established by the IRS, but RMDs are not mandatory.²
• When launching a small business, such as yourself and one other employee, consider contacting a financial advisor who markets independent 401(k) plans. This strategy may help you stay on track when building a retirement nest egg.
• Review assets in retirement plans you may have with former employers. When deciding how to manage these assets, be sure you understand the rules associated with the plan. By law, you are able to roll over assets from a 401(k) plan to a rollover IRA. A direct rollover, in which the money goes directly to the firm managing the rollover IRA, preserves the tax-deferred status of your assets. Try to avoid a nonqualified withdrawal, which is taxable and may impact your ability to save for retirement. Rules associated with a defined benefit plan, such as a pension, may differ.

You may have to do a bit of research to find medical and retirement benefits that are suitable for your situation. With some legwork, you may encounter success.

¹Source: The Wall Street Journal, “Benefits Without the Boss,” January 14, 2012.

²Restrictions, penalties, and taxes may apply. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

If the U.S. economy is on the mend, as published reports have indicated, this improvement has yet to show up in the finances of U.S. households. The results of PwC’s Financial Wellness Survey reveal a nation of consumers struggling with cash management and debt.

Never Enough

Competing financial concerns are forcing many households to focus on immediate-term crises and put longer-term goals on the back burner. For instance:

• 66% of individuals polled now choose to do without items they previously had purchased.
• 56% reported higher financial stress compared with one year ago.
• 54% had concerns about inadequate emergency savings for unexpected expenses.
• 53% carried credit card balances because of tight cash flow.
• 53% expected to delay retirement, with 60% of this group indicating they had not saved enough.

Short-Term vs. Long-Term Focus

The unfortunate takeaway from the survey is the continued erosion of long-term planning. If you find yourself in this situation, consider whether the following steps could help you get back on track:

• Track your monthly expenses. Add in “non-fixed” items like auto and home repairs, vacations, etc. Once you have a record of your spending, compare your monthly outlay with your income. If you have a surplus, you can use the extra money to pay debt and build savings. With a shortfall, you’ll need to cut expenses.
• Pay off credit card debt, avoiding the minimum balance trap. In most instances, monthly minimum payments are so low that it would take years to pay off a sizeable balance. For example, assume a hypothetical $5,000 balance, an interest rate of 15%, and a minimum monthly payment of $25. Making just the minimum payment would require 183 months to pay off the debt and cost $4,395 in interest. Paying an extra $150 each month would limit the interest payment to $845 and the payoff period to 27 months. This is a hypothetical example for illustrative purposes only.
• Cancel old credit cards. Most consumers need just a couple of credit cards.
• Set up three savings accounts with goals attached to each. One may be labeled “cushion” for emergency cash, a second “expenses” for unexpected bills, and a third for “investments.” Gradually add to each account over time. You will see your savings grow and reduce your need to turn to credit cards to fund life’s necessities.

With credit card debt under control and savings on the rise, you will be in a better position to focus on retirement, funding a college education, and other long-term goals.

Often I find my clients focusing on only one aspect of money. Usually this focus is on their dissatisfaction of their salary and the continued struggle to make more. One of my clients, a successful couple, Joe and Mary, making $100,000 a year (a significant amount to most), felt like this was not enough.

One of the reasons they were feeling this way was one of their two children, the oldest, had just started college last year and next year their second child was starting.  They were in a bit of shock over all the unexpected costs.

On top of the financial pressure they felt from the college expenses, Joe had not seen any raises for several years because of the downturn in the economy. They were feeling a lot of financial stress and they could think of only one way out and that was to make more money. Joe had applied for a new higher paying position at work and they both thought this would ease all of their worries.

When Joe and Mary came to me for their regular financial review, I asked them what they thought this new job was going to cost them. They paused for a moment and Joe said, “Just a few more hours a week; Not a big deal.” I then asked if they had ever gone through an exercise of figuring out just how much life energy it cost them to earn Joe’s wage.

I further explained that it is not just the time spent at work, but that working actually costs them money and it’s a lot more than just life energy. So, it’s important to know your REAL hourly wage, not just what your paycheck says, not the one you think you’re worth, but your REAL hourly wage.

They both agreed they had never really looked at their money this way and were willing to run through the exercise. The formula we used was the following:

[Your Real Hourly Wage] = [Your Adjusted Income] ÷ [Your Adjusted Job Hours]

What You Need to Calculate your REAL Hourly Wage

Work Related Expenses: Jobs also have costs to you. Some of these are obvious, such as commuting to work. Others are not so obvious (gas or transit fares, income taxes, work clothes, etc.). We’re not dealing here with the intangibles of wrecked relationships or neglected house maintenance; we’re only counting what is measurable.

Work Related Time: Your time is valuable and the time you spend outside of normal working hours should be included. How much time are you spending on job related activities? For example, time spent commuting, shopping for work clothes, time working in off hours at home, time thinking about work and doing research. You can calculate this on a weekly, monthly, or annual basis.

Your Adjusted Income: Calculated by taking your current wages or salary and subtracting your work related expenses [Wages] – [Expenses].

Your Adjusted Job Hours: Calculated by the actual amount of time you spend “on the job”, then adding the time you spend on work-related activities outside of normal business hours [On The Job Time] + [Work Related Time].

Your REAL Hourly Wage

Here’s what my clients came up; Joe’ current annual wage was $90,000 a year and in the position his annual wage would be $104,000.  He figured he worked about 45 hours a week and in his new position he estimated he would need to work about 50 hour a weeks.  We started by calculating Joe’s weekly wage by taking his annual salary and dividing it by 52 weeks.  Then we adjusted his weekly income by subtracting taxes and other costs associated with his job.  We did the same for the new position and compared the two.

At this point things looked pretty good. Then we adjusted his hours to include all the other job-related activities beyond his regular hours.

The REAL Hourly Wage

We finally arrived at Joe’s REAL Hourly Wage of $19.11/hour by taking his adjusted wage and dividing his adjusted hours for both the current and new salary.  Both Joe and Mary were very surprised to learn that the new job was ONLY .48 cents more an hour than what Joe was making now!

Now things were not looking as good.  Joe and Mary needed to reconsider if the extra stress and life energy was really worth it. This exercise helped them put into perspective just how much a job cost.

Mary and Joe needed this new definition of money to help them focus on more than just how much money they made. This new definition was also much more meaningful and relevant, and they now had a newfound understanding of just how much it really cost to make a life change.

WHAT is the nature of the exchange YOU are making?  Consider these ideas …

• You spend life energy in hours on the job in exchange for money.
• If you support someone else (who earns money), you are allowing money to come into your life by trading your life energy.
• We spend our life energy managing our investments, in exchange for increased dividends or value.
• No matter how we acquire money, we spend some amount of time (life energy) to get it.
• The amount of life energy is different in every instance, but it is universally true that we traded life energy for money.
• Every dollar you spend is equal to the amount of your life energy it took to get it.
• An hour of your life is precious, because it’s limited. Once it’s gone you can never get it back.
• When you spend money, you are spending your life energy, your time.

So… Just how much of your life energy are YOU trading for your REAL hourly wage?

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When reviewing the impact of taxes on your investments, it is important to understand that many items currently in the federal tax code are scheduled to expire after December 31, 2012. Although future actions to amend tax rules are anyone’s guess, keeping abreast of developments in this area may be to your advantage. Consider the following when making decisions about your investments during 2012.

• When taking capital gains, make them long term. Legislation passed by Congress in 2010 continues the 15% tax rate on long-term investment gains, those generated on investments held for more than one year, through December 31, 2012. In contrast, short-term capital gains on investments held for one year or less are taxed as ordinary income, where marginal tax rates currently can be as high as 35%, depending on how much you earn.

• Tax rates on qualified dividends are subject to change. Current tax rules maintain the favorable 15% tax rate on qualified dividends through December 31, 2012. Although dividends are not guaranteed, an allocation to dividend-paying investments may provide an ongoing source of income that can cushion the ups and downs of capital gains and losses. The opportunities are plentiful: As of February 2012, 395 of the 500 companies within the S&P 500 paid a dividend.¹

• Accelerate activities that generate higher taxes. The top four federal income tax rates will be maintained at 25%, 28%, 33%, and 35% through December 31, 2012. If you are considering an activity that is likely to result in a bump in your income or a federal tax payment, you may want to complete it while the lower rates remain in effect. Examples could include converting a traditional IRA to a Roth IRA and selling real estate or a business that has appreciated significantly in value.²

• Escalate gifting strategies. Through December 31, 2012, estates valued at more than $5.12 million are subject to a federal estate tax rate of 35%. In addition, the tax code “unified” the estate tax and the gift tax, permitting an individual to gift $5.12 million between now and December 31, 2012, without triggering the federal gift tax. Rules relating to estate planning are complex, so be sure to seek counsel from a qualified attorney before taking action.

• Capitalize on tax-advantaged accounts. By contributing regularly to an IRA, and keeping the money invested until qualified withdrawals are made, you can benefit from tax-free compounding. With a traditional IRA, qualified withdrawals after age 70½ are taxed as income. In certain instances, if investors adhere to income thresholds established by the Internal Revenue Service, contributions may be tax deductible. With a Roth IRA, contributions are never tax deductible but qualified withdrawals after age 59½ are tax free. Maximum contributions for either the 2011 tax year (must be made by April 15, 2012) or the 2012 tax year (must be made by April 15, 2013) are $5,000 per taxpayer, plus an additional $1,000 catch-up contribution for those aged 50 and older.

There may be additional items unique to your situation, but these tax moves can help you make the most of your hard-earned dollars during 2012.

¹Source: Standard & Poor’s.

²Restrictions, penalties, and taxes may apply. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

At first glance, the latest effort to stimulate the nation’s ailing housing market seems like a cure for the millions of beleaguered homeowners who owe more on their mortgage than their home is worth.

The bulk of the $26 billion settlement will go to two groups: people who are behind in their payments and under threat of foreclosure, and people who have kept up with their payments but whose homes are worth less than they owe. Those behind in their payments will be eligible to have the principal reduced. Those current on their payments will be eligible to refinance their loans even though they might not be able to meet the usual loan-to-value ratios required by banks.

But like so many government programs, the devil is in the details.

To begin with, the settlement covers only a fraction of the 10.7 million mortgages estimated to be underwater.¹ About half of all mortgages in the country are not covered under the plan — those owned by Fannie Mae and Freddie Mac. Nor are those owned by the Federal Housing Administration, private investors, or any mortgage company not involved in the settlement. In fact, the plan only covers loans owned and serviced by Ally/GMAC, Bank of America, Citigroup, J.P. Morgan Chase, and Wells Fargo, although this list is likely to grow as other institutions opt in.

The settlement money will also be doled out under a complicated formula that gives banks varying degrees of credit for different kinds of help. As a result, harder-hit borrowers with homes worth far less than what they owe are likely to receive the highest priority.

What’s more, the exact rules governing the process have yet to be determined. They will be hammered out over the next six to nine months as the settlement is implemented. So it remains uncertain what sort of restrictions — income, net worth, debt level, or other factors — might apply.

The best way to find out if you might qualify is first to determine who owns your loan. Although you may pay your monthly mortgage check to one of the servicers listed above, that does not mean they own your loan. Many mortgages are resold shortly after they are written.

Freddie Mac offers an online form where you can inquire if your loan is owned by them. Likewise, Fannie Mae has a phone number (1-800-7FANNIE) you can call to see if they own your loan.

You can also contact your mortgage servicer who should be able to tell you who owns your loan and if you might qualify for relief under the plan. Keep in mind that the mechanics of settlement are not fully in place and that it will likely take time before any modifications can be implemented. But since funds under the settlement are limited, the sooner you act the better.

There’s no escaping the hype surrounding the initial public offering (IPO) of Facebook. The $5 billion public offering is expected to value the whole company at $75 billion to $100 billion, making it one of the largest IPOs ever, and everybody seems to be asking: “How do I get a piece?”

For the average investor, it’s not that easy. For one thing, you’ll need to have an account with a broker that has access to that deal, meaning one of the banks that is part of the selling syndicate. Morgan Stanley is the lead underwriter of the Facebook IPO. Other underwriters include J.P. Morgan, Goldman Sachs, BofA Merrill Lynch, Barclays Capital, and Allen & Company. Discount brokers such as E-Trade or Schwab may also be allocated shares of the IPO through distribution alliances. Check with your broker to find out if it’s involved.

If you have an account with one of the banks involved in the offering, you’ll need to contact them to see if shares are “available.” This is where a solid relationship with your broker comes in very handy. Whether or not he or she can oblige will depend upon the size of the deal, how large an allocation your brokerage is getting, how big your account is, how long you’ve been a client, and how much trading you do. And not all brokers get access to a piece of the pie. Shares of hot issues like Facebook are usually reserved for the best reps. So you’ll not only need to have high standing, you’ll also need to know the right broker.

Once shares begin trading, keep in mind that “flipping” IPO shares — selling them shortly following initial trading — is frowned upon, and you’ll probably never get an allocation in an IPO again if you do so, certainly not from the same broker.

Another option to getting a piece of the Facebook IPO is to purchase shares of a mutual fund that owns it. More than 50 mutual funds offered by Fidelity Investments, T. Rowe Price, and others say they own shares of the closely held social-media giant Facebook, according to Morningstar.¹ But keep in mind that such funds — typically growth-oriented funds that invest heavily in new issues — also invest in other securities. You’ll want to know what else you’re investing in, and how big a piece the Facebook IPO shares represent.

If you’re a novice in the world of IPOs, be wary. Contrary to popular belief, not all IPOs skyrocket in price after their debut. In fact, study after study has shown that following an out-of-the-gate surge, IPOs historically underperform the broader market over longer periods. This should come as no surprise considering that IPOs are generally high-risk, high-reward investments. So think before you invest, consult with a professional — and don’t get too caught up in the hype.

¹Source: The Wall Street Journal, “What Is Facebook Worth?” February 1, 2012

If you are like many investors out there, you may be watching key financial markets from a distance, still unsettled by the downturn of several years ago and left wondering about your investment strategy.

This is not the moment to be passive—now is a great time to assess your situation, explore the current landscape, and make sure you’re capitalizing on available opportunities so they don’t pass you by.

I invite you to watch this brief video, which illustrates today’s investment environment.

Then contact me to discuss your situation, adjust your financial strategy, and put a plan into action that is right for you.

As a couple, your combined retirement assets are not just limited to what you may have accumulated in your current employers’ retirement plans. You also need to consider any older accounts that are still sitting in former employers’ plans, or assets that have been moved to rollover IRAs. After inventorying your various retirement assets, consider some areas where a joint planning effort may help enhance your investment outcome.

Setting a Mutual Goal

Pursuing the goal of retiring together requires a long-term approach. Start by determining how large a combined nest egg you will need. This will depend on how much you have already saved and when you hope to retire, as well as your retirement lifestyle choices – where you plan to live, whether you plan to maintain more than one residence and what you plan to do with your time. All of these factors will affect your retirement income needs.

Keep in mind that Americans are living longer and that one or both of you could spend 20 or more years in retirement. Also carefully review the potential financial benefits of delaying retirement. Working for an extra few years could enable you to continue making contributions to your IRA or employer-sponsored retirement plan and delay taking withdrawals.

Asset Allocation

As with any investment portfolio, your retirement accounts should work in unison to pursue a single accumulation goal. Ask yourselves whether your overall asset allocation is appropriate for your combined objectives and risk tolerance. Are the portfolios adequately diversified? Are they over weighted in any one asset class or individual security? Also consider how your retirement portfolios complement your other assets, such as taxable investment accounts and real estate.

Distributions

For couples in or near retirement, an equally important part of the planning process is determining when and how to withdraw money from retirement accounts. Consider which accounts (i.e., taxable vs. tax-deferred) to tap first. It may be better to liquidate assets in taxable accounts, allowing assets in IRAs and qualified retirement plans to continue growing tax-deferred. Remember, however, that with few exceptions, the IRS requires individuals to begin withdrawing money from tax-deferred accounts no later than age 70^1/2, at which point you may want to rethink your distribution strategy. For instance, might it make sense to convert a Traditional IRA to a Roth IRA to avoid taking distributions altogether? Your tax advisor can help you consider the tax consequences of conversion, as well as the potential benefits of a Roth IRA.

These are just a few of the issues dual-earner couples need to consider when managing their individual retirement plan accounts. Since no two couples’ financial situations are alike, the best course of action is to make an appointment today so that we can begin devising a coordinated plan for meeting your future financial needs.

Contact Me

Take control of your finances. You’re busy and likely appreciate smart time-saving strategies. Rather than spending hours poring over bills and financial statements, why not automate some of your financial life?

It’s a move that can help make it easier and painless for you to save regularly and pay your bills on time. It also can cut down on the risk of identity theft because you’ll have fewer paper statements that could end up in the trash.

Here’s where you can let technology take over:

• Paycheck deferrals. You can arrange for a portion of each paycheck to be contributed to your employer-sponsored retirement plan. The plan may even allow you to increase the deferral percentage over time — helping you to potentially save more. In addition to funding a primary retirement plan, you also may want to consider a paycheck deferral to an Individual Retirement Account (IRA) to help build additional savings for your future.
• Direct paycheck deposit. Using direct deposit can make it simpler for you to build an emergency fund. Route the bulk of your paycheck into an account for bills and expenses, and dedicate the rest to a separate account for emergencies. Paperless billing. Many businesses will now send their invoices via email, which lets you keep all your bills in one place and cuts down on desktop clutter. Some companies will even shave a bit off your bill or offer a lower interest rate if you choose electronic billing.
• Online bill payment. Setting up automatic payments through your bank is typically a fast and easy process. It’s rewarding too: You’ll avoid late fees, save on postage and cut down on the number of checks you write.

Making these moves won’t entirely liberate you from the task of staying on top of your finances. But they will help make that job a whole lot easier.

A new study conducted by the Pew Research Center indicates that many of the themes raised by the Occupy Wall Street movement over the past several months resonate with the American public.¹ Yet despite our economic challenges, we continue to reject the idea that America is a nation of “haves” and “have-nots.”

Wall Street on Trial

While more Americans support than oppose the Occupy Wall Street movement overall (44% to 35%), and significantly more say they agree than disagree with the group’s key concerns (48% to 30%), the public strongly opposes the means by which Occupy Wall Street protests have been carried out, with 49% of those polled voicing disapproval versus 29% who approve.

Despite opposition to the movement’s tactics, many of their themes are embraced by the American public. For instance, a small majority of those polled (51%) feel that Wall Street hurts the American economy more than it helps it, and 61% believe the U.S. economic system unfairly favors the wealthy. More than three-quarters (77%) said that a small minority of wealthy individuals and corporations hold too much power. Although still a minority view, 40% of those polled stated that hard work and determination are no guarantees of success — the highest percentage than in any other survey conducted by the Pew Research Center in the past 17 years.

Economic Outlook: Fair to Poor

The study found that 91% of Americans still have a negative view of the economy; with 53% saying the outlook is “poor” and 38% rating it as “fair.” In addition, most people believe the economy will worsen or remain sluggish for the next 12 months. These sentiments remain unchanged from August 2011.

When asked to name the biggest threat to the nation’s economic well-being, respondents cited the following in rank order:

• Size of the national debt (76%)
• Economic competition from China (59%)
• Power of financial institutions and banks (56%)
• Economic problems in Europe (46%)
• Government regulation of business (44%)

While economic issues continue to dominate the nation’s worry list, an increasing number of citizens (15%) are pointing to problems with government, including political partisanship and a lack of leadership. That figure is up from 4% in May 2011.

Interestingly, despite the ongoing focus on economic issues, the majority of Americans (58%) still balk at the notion that America is a nation divided into two groups, the “haves” and the “have-nots.” When pressed to describe themselves, 46% consider themselves part of the haves, 39% the have-nots.