Tag Archives: retirement plans

To Lobby, or Not To Lobby, That is the Question

babel 2My Comments: I admit to perverting the title to this article (Lobbyists Pervert Politics And Earn Their Infamy) which appeared in the Financial Times recently. But it points to a problem that may have no solution, at least until the clowns who inhabit our Congress feel enough pain to find a solution. But it most likely won’t happen in my lifetime. But I will use my remaining years to try and inflict some pain along the way. Fascists be damned!

February 24, 2015, by John Kay

A contract to lobby government, like an agreement to sell sex, was unenforceable in the courts.

Even distinguished former foreign secretaries such as Jack Straw and Sir Malcolm Rifkind might be forgiven for having forgotten the treaty of Guadalupe-Hidalgo. It is a notable document, and not only because it determined that California would be part of the US, rather than a province of Mexico. Its signing triggered one of the lobbying industry’s earliest controversies — telling, perhaps, in the week two parliamentarians were caught in an undercover sting offering to help fictitious corporate interests in return for cash.

Nicholas Trist was America’s lead negotiator on the 19th century treaty, and he believed he had not been properly recompensed for his services — which do, in retrospect, seem to have been considerable. After a 20-year campaign, he hired a Boston lawyer, Linus Child, to lobby Congress on his behalf. Child’s efforts bore fruit. His son told Trist: “I find that my father has spoken to . . . members of the House. Every vote tells, and a simple request to a member may secure his vote, he not caring anything about it.” Congress eventually agreed to pay Trist $15,000, then a considerable sum.

Trist, a hard bargainer, refused to pay the contingency fee he had agreed. The case went to the Supreme Court, which dismissed Child’s claim. A contract to lobby government, it said, was contrary to public policy and hence, like an agreement to sell sex, unenforceable in the courts. Paid lobbying, said Mr Justice Swayne, was “pernicious in its character”. But this was only the beginning of his denunciation. “If any of the great corporations of the country were to hire adventurers to procure the passage of a general law with a view to the promotion of their private interests,” he thundered, right-minded men “would instinctively denounce the employer and employed as steeped in corruption and the employment as infamous”.

The 20th century eroded this austere view of the proprieties of political life. But the notion that politicians might themselves become professional lobbyists after leaving office remained unacceptable. When Harry S. Truman ceased to be US president in 1953, he determined, according to biographer David McCulloch, that “his name was not for sale. He would take no fees for commercial endorsements, or for lobbying or writing letters or making phone calls.”

Truman had little personal wealth and had earned only modest public salaries, and the embarrassment of his poverty led Congress to make financial provision for America’s former presidents.

But by the time of Bill Clinton’s retirement, this pension and contribution to office costs was hardly necessary. Prime ministers and presidents could expect to become millionaires on leaving office, and lesser politicians sold access to their contact books for sums far exceeding what they had earned in public service.

The Court of the 1870s had taken the view that free speech and honest speech were two sides of the same coin. “The theory of our government,” ruled Swayne, “is that all public stations are trusts.” There was a corresponding duty on the citizen. “In his intercourse with those in authority, he is bound to exhibit truth, frankness and integrity.”

But in Citizens United in 2010, the same court held that the expression of views you were paid to hold was no longer “an infamous employment, steeped in corruption”, but an activity deserving of the protection awarded to free speech under the First Amendment. That contentious decision probably did not, in the end, seal the outcome of the 2012 election — though the tide of political donations that it unleashed will surely decide a presidential contest before long. Americans may look back on Justice Swayne as the wiser judge. “If the instances (of paid lobbying) were numerous, open, and tolerated,” he predicted, “they would be regarded as measuring the decay of the public morals and the degeneracy of the times.”

Life Insurance and Retirement

rolling-diceMy Comments: This is not an easy idea to talk about. The article came from someone critical of Dave Ramsey and Suze Orman, who argue that premiums for life insurance in retirement are an extravagance.

Some of the assumptions made by the author can be questioned, but the overall theme is essentially correct. Personally, I’ve made a similar choice, as there is absolutely no way I can replicate the benefits to my wife and/or children, regardless of when I die. That’s assuming I die first, which is not a given. But it provides me with huge peace of mind, and the certain knowledge setting aside money today will contribute to the financial freedom of those I leave behind.

by Tom Martin on March 6, 2015

Dave Ramsey, Suze Orman and scores of other financial pundits in the media scorn the idea of having life insurance in retirement. Their rationale seems to make sense on the surface: Life insurance is designed to replace your earnings when you die. Once you retire (and have no earnings) you are living off your investments. When you die, your investments don’t die with you, so what is the purpose of using valuable funds to pay for unneeded coverage?

Life insurance clearly plays an important role for very wealthy clients to efficiently transfer their estate, but are the media pundits correct when they advise that the average family to dump their coverage in retirement? Probably not.

Let’s consider the following statistics:
• The average American approaching retirement has retirement assets to replace only 10 percent of his/her pre-retirement earnings.
• 55 percent of Americans over age 65 rely on Social Security to provide more than half of their income.
• The maximum monthly Social Security retirement benefit for a person reaching full retirement age in 2015 is $2,642.

These statistics clearly show that Social Security is a vital source of retirement income. When we view our Social Security benefits statements, we tend to discount the importance of this benefit, as benefits are expressed in “today’s dollars.” In reality, our actual benefits will be much larger due to inflation. By contrast, when we consider how much savings we will have at retirement, we often fail to consider that the values of those dollars will be similarly reduced due to inflation. Consider the following example.

John and Jane Doe, age 50 and 45 respectively, plan on working to John’s full retirement age of 67. John is making $150,000 per year and Mary earns $70,000 per year. John and Jane both contribute to a 401(k) plan and, based on their investment assumptions, they figure that they will have $1,000,000 in retirement funds by the time John reaches age 67. Assuming a 5 percent withdrawal rate, they will be able to withdraw about $50,000 per year.

John receives his Social Security statement and sees that his retirement benefit will be the maximum, which is $2,642 in today’s dollars. Jane’s benefit is projected to be $1,450 if she claims at age 62 (same year John retires). John and Jane incorrectly assume that Social Security will provide about half of their retirement income, which is $49,000 from Social Security and $50,000 from retirement accounts.

In reality, both will receive much larger Social Security checks, since these amounts will be indexed for inflation. If we assume 3 percent inflation, John’s actual benefit will be about $77,000 per year and Jane’s will be about $40,000 per year. In comparison, assuming a 5 percent withdrawal rate on their retirement assets, they will have $50,000 income from the retirement funds. In reality, despite a respectable retirement account balance, Social Security will actually provide about 70 percent of their income.

Since Social Security benefits continue to increase with inflation, by the time John is age 80, his Social Security benefit will have risen to $113,000, at which point Jane’s benefit will be about $59,000.

Let’s assume that John dies at age 80 and Jane lives to age 85. At John’s death, Jane will assume John’s benefit and lose her own benefit. The total Social Security benefit will drop by $59,000 per year. Since Jane will spend 10 years as a widow, this loss amounts to $590,000!

What’s more, consider if John dies at age 75 and Jane lives to age 90. John’s death would cost Jane well over $1,000,000 in lost Social Security benefits.

Even though they have a sizable retirement account, it only represents about 30 percent of their income. Such a substantial reduction in Social Security benefits is likely to cause a substantial reduction in Jane’s lifestyle.

The financial pundits would be quick to recommend that John purchases a term policy today to cover his “temporary” insurance need. They figure that once John retires, he has no earnings to protect. In reality, his death after retirement will cause a substantial reduction in household income. John should consider some form of permanent insurance for at least part of his insurance portfolio now in order to mitigate the eventual loss of the Social Security benefit. If Jane predeceases John, John would lose Jane’s benefit. Even if the permanent insurance was just on John’s life, he could still utilize his policy to replace the benefit he lost on Jane. He could use the policy to provide a tax-free income stream through withdrawals and loans. He could cash the policy in, replace it with an annuity, or even sell the policy as a life settlement. Either way, a permanent policy on John could create a useful cushion regardless of who dies first.

In summary, life insurance can play a critical role in helping couples meet their retirement goals, whether it is through utilization of the policy’s cash value or in having the death benefit replace the lost Social Security benefit.

Barack Obama’s Gamble on the Future of Iran

Nixon+ChinaMy Comments: I must confess to being tired of all the crap going on in politics, whether its local, state, national or international. Increasingly my opinions, concerns, fears, hopes, expectations, etc., seem irrelevant. The temptation is to walk away and try to ignore it.

That’s an emotional response and there’s a parallel with my universe as a financial planner. I’ve preached that “hope” is not a valid investment strategy. To be successful, you have to be proactive and alert and overcome emotion. And there’s still a chance you’ll fail. The alternative is to roll over and die. Which is not going to happen.

With respect to Iran, I don’t see a reason not to try and work with them. We hated China, and we are now friends. We hated Japan, and we are now friends. We hated Germany, but are now friends. Hell, if you go back far enough, we hated the French. At some point, someone has to reverse course and I see no reason to favor war without first trying to establish a negotiated truce. For that to happen, you have to at least talk with them.

Edward Luce March 15, 2015

At stake is the idea that talking to your worst enemies makes sense

President Barack Obama is poised to take the biggest foreign policy gamble of his presidency. Ignoring opposition at home, and near unanimous dissent in the Middle East, he looks likely to push ahead with an Iran nuclear deal in the coming days. His bet is that the world’s most hardline theocracy can be induced to change for the better. Over time Iran’s silent majority will gain sway over their ayatollahs.

At stake is the idea that talking to your worst enemies makes sense. Mr Obama’s bet on diplomacy could hardly differ more from George W Bush’s world view. Yet they share a weakness — the belief that one inspired move can transform the game. Mr Bush thought he could implant democracy in the Middle East by toppling its most brutal autocracy. Mr Obama hopes to create stability by engaging its most dangerous regime. In American football they call this a ‘Hail Mary’ pass. Will Mr Obama’s fare any better?

The more you listen to Mr Obama’s critics, the more you sympathise with his approach. From Israel’s Benjamin Netanyahu to Saudi Arabia’s rulers and nearly every Republican in the US Senate, Mr Obama’s detractors believe Iran’s word is not worth the paper it is written on. At best, Mr Obama is naive. At worst he is un-American. Making deals with a rogue regime betrays US values.

In fact, such trade-offs are very American. For the greater good, Franklin Roosevelt struck an alliance with Joseph Stalin, one of history’s most prolific mass murderers. Richard Nixon made peace with Mao Tse Tung, who killed even more people than Stalin. Jimmy Carter and Ronald Reagan backed Afghanistan’s mujahideen. By these standards, Iran’s transgressions are small potatoes.

Furthermore, Iran poses no threat to America’s universal values. Communists claimed to speak for all mankind. Iran only appeals to about 2 per cent of it — the world’s Shia population. As Mr Obama was fond of quoting John F Kennedy: “If you want to make peace you don’t talk to your friends, you talk to your enemies.”

Mr Netanyahu says no deal is better than a bad one. Here again, Mr Obama is more grounded in reality than his critics. If the choice is between a bad deal or war, the former is far better. Others glibly talk about bombing Iran. In an ideal world, Mr Obama would have persuaded Iran to dismantle its civil nuclear programme, rather than capping its resources at a low ceiling. The deal would hold indefinitely rather than for 10 to 15 years. Iran’s “nuclear breakout time” would last for ever, rather than just a year. Tehran would end its support for Hizbollah, Syria’s Bashar al-Assad and others, rather than pledging to do nothing. It would also be legally binding, rather than a political document. Alas, no such terms are realistic. Mr Obama is not permitting the perfect to be the enemy of the good.

So what could go wrong? The flaw in Mr Obama’s logic is that Tehran will pay no real price for breaking its word. Compared with five or 10 years ago, it is negotiating from a position of strength. If it implements the deal, Mr Obama will gradually relax economic sanctions. If it breaks its word, they will be reimposed. Iran’s worst case scenario would mean reverting to today’s status quo. What does it have to lose? This is where Mr Obama’s innate reasonableness can count against him. His administration insists that “all options remain on the table” — including military strikes. But Mr Obama makes no secret of the fact that he would never exercise that option.

His hope is that Iran’s moderates, led by Hassan Rouhani will gain popular support as growth picks up with the gradual lifting of sanctions. Domestic backing for the deal would therefore rise. In turn, Iran will dilute its sponsorship of the Shia militias and terrorist groups in the region. Moderate Sunni regimes will also pull back. The logic of economics will replace the lure of sectarianism. Mr Obama would have converted today’s vicious circle into a virtuous one. It is an optimistic vision that is worth pursuing. No one has any better ideas. But it needs a plan B and Mr Obama does not seem to have one.

His approach has two further drawbacks. First, the US-led war on the Islamic State of Iraq and the Levant is largely being fought by Iran and its Shia allies in Iraq and Syria. Mr Obama is relying on an unspoken alliance with Iran to do most of the fighting. Mr Obama’s reluctance to put US boots on the ground has increased Iran’s leverage.

Second, America’s Sunni allies, led by the Saudis, Egypt and Turkey, believe Iran will bide its time before abandoning the deal. It will first pocket the rewards. They have little faith in Mr Obama’s grasp of Iran’s internal dynamics. Ayatollah Khamenei’s declining health adds another imponderable. The danger of a Middle East nuclear arms race has never been greater.

Mr Obama risks sharing another legacy with his predecessor. Mr Bush tried to install democracy at the point of a gun. In practice he created a vacuum that was filled by Iran. Baghdad became a satellite of Tehran, which is what it remains today. Iran was the largest beneficiary of Mr Bush’s blunders in the Middle East. Its power has continued to grow during the Obama years. It would be an irony if the impending deal were only to cement that trend.

A Stand-in For The Fiduciary Standard?

moneyMy Comments: I apologize for continuing to push this issue. But as a fiduciary, I’m bound to give advice that results in what is best for the client, legally, morally and ethically. That Wall Street firms resist this is not in your best interest.

Meanwhile, I received an angry call this week from a group that for now will remain nameless. The caller proceeded to rip me new one as I had borrowed an article that, according to him, belonged exclusively to his organization and I’d used it without specific permission. I was to take it off the web site immediately or face the consequences.

I have neither the time nor inclination to fight a losing battle, so I took it down. Never mind it was posted last October, attributed to the author, a prominent attorney and as coming from the organization in question. I was assailed for using other peoples ideas in my posts, never mind that they arrived unsolicited in my email inbox in the first place. My objective with this blog is to share what I consider good ideas and give credit to whomever is deserving.

I’ve been doing it this way now for four years and this is the first time I’ve been called or contacted in a critical manner. I intend to keep sharing stuff with whomever reads this blog. If you choose not to read any of it, that’s OK. But I still think all of us in this business who interact personally with clients need to be held to a fiduciary standard.

Mar 03, 2015 | By Allen Greenberg

With sincerest apologies to Walt Whitman:

O Fiduciary! My Fiduciary! Our fearful trip is (nearly) done,
The rule has weather’d every attack, the prize we seek is within grasp,
A new standard is near, the lobbying I hear, the people all exulting.

I don’t know about you, but I’m certainly “exulting.” Not just because the regulatory sausage-making may soon be done but because, frankly, I’ve heard enough of the Department of Labor’s wait-for-it, it’s-coming-any-moment-now, soon-to-be-unveiled fiduciary standard to last a good, long while.

This intensified soon after since President Obama announced his endorsement of the DOL’s plans to unveil its newly crafted fiduciary rule last week. But it actually began last summer, as speculation started to build about just when the DOL would move forward.

Of course, most of America couldn’t tell you whether a fiduciary was a noun, verb or something that happens after you eat too much Italian food. According to a recent AB Global survey, even plan sponsors are “confused or misinformed” about the fact that they themselves are, in fact, fiduciaries (30 percent fail to realize this). The sad fact is that investors are confused, too.

A campaign to help investors identify true fiduciaries “committed to objectivity, transparency, and plain English communications.” As reported by Barron’s this week, a survey by Opinion Research Corp. in 2010 of 1,319 investors found that 60 percent wrongly assumed that stockbrokers were already held to a fiduciary standard.

Not surprisingly, 90 percent wanted their brokers held to the fiduciary standard after being told about the difference between the fiduciary standard and the “suitability” standard that brokers are supposed to meet.

The Institute for the Fiduciary Standard understands this very well, which is why it has come up with an 11-point plan for anyone hoping to behave like a fiduciary, instead of, you know, posing as one.

Here’s a link to the IFS’s best-practices proposal. As you’ll see, there are items about acting in good faith, keeping fees under control, avoiding conflicts of interest, steering clear of soft-dollar commissions and third-party payments and more.

If a lot of Wall Street and its allies come off as acquisitive in this debate, Knut Rostad, president of the IFS, is our story’s hero, an even-handed player interested in doing more to protect investors without crippling the brokers.

“We hope brokers look at them seriously,” he said recently in speaking about his group’s best practices. “They were crafted with an explicit objective of being open to having brokers meet the practices … without lowering the standards.”

The institute’s proposal will be open for public comment until Monday. The organization’s board is expected to give final approval over the summer.
By that point, the DOL could be in the midst of multiple hearings on its fiduciary standard. Months later, perhaps many months later, it might have something hammered out.

Somebody in Congress – perhaps someone as powerful at Sen. Orrin Hatch – could then throw the proverbial wrench into the works with legislation that would make the DOL’s efforts moot.

Oh, wait, Hatch’s Secure Annuities for Employee Retirement Act already includes a provision that would do just that.

So, what’s the bottom line? The chances of a broader DOL fiduciary rule any time soon seem slim. The IFS version lacks regulatory bite, but at least we’d be doing something and then can get on with the next voyage in our lives

GOP Lawmaker Hopes To Halt Fiduciary Push

financial freedomMy Comment: This push by the GOP is, in my opinion, more smoke and mirrors from those beholden to the lobbyists from Wall Street. The crux of this issue is that the people who run Wall Street firms do not want their rank and file representatives, the ones who work with people like you and me on a daily basis, to be held to a fiduciary standard.

For those of you who may not understand, a fiduciary standard means that what is said and done by representatives has to be in all respects, in the best interest of those who are clients of those representatives. The push back has been going on for years, and here is another example of how monied interests are more concerned about the welfare of the monied interests than of the general public.

That it “harms thousands of low and middle income Americans’ ability to save and invest for their future” is absolute and utter bullshit. I’m someone who has worked and made a living for the past 40 years, helping low and middle income Americans save and invest for their financial future, not some politician, bought and paid for by Wall Street firms.

Feb 26, 2015 | By Melanie Waddell

Firing back after President Barack Obama endorsed the Department of Labor’s efforts to revise fiduciary rules for retirement plan advice, Rep. Ann Wagner, R-Mo., has reintroduced legislation to require the DOL to wait to repropose its rule until the Securities and Exchange Commission issues its own fiduciary rulemaking.

Wagner’s bill, H.R. 2374, the Retail Investor Protection Act, passed the House last year. But the Senate had “no interest” in taking up the bill and President Obama’s senior advisors threatened that it would be vetoed.

Better Markets and the Consumer Federation of America sent a letter to the full Senate the same day Wagner took action this week, arguing that the DOL rulemaking should be allowed to move forward as the “actual contents” of the DOL rule have not been made public.

Discussion about the DOL rulemaking “has for the most part been based on speculation,” Barbara Roper, director of investor protection for the Consumer Federation, and Dennis Kelleher, president and CEO of Better Markets, said in a letter.

“Much of (the discussion/complaints about the DOL redraft) has been directly contradicted by statements from DOL officials about its expected regulatory approach,” Roper and Kelleher wrote.

In a statement, Wagner said that she is reintroducing her bill because Obama and Sen. Elizabeth Warren, D-Mass., “presented a solution in search of a problem by proposing another massive rulemaking from Washington that will harm thousands of low- and middle-income Americans’ ability to save and invest for their future.”

“This top-down, Washington-centered rulemaking against financial advisors and broker-dealers will harm the very middle-income families that Senator Warren and President Obama claim to protect,” Wagner said. “Americans should be given more freedom to seek sound financial advice without Senator Warren and President Obama’s interference.”

Wagner’s bill says that the SEC would be required to “go first” in issuing its rulemaking under Section 913 of the Dodd Frank Act before the DOL is able to propose a rule that expands the definition of a fiduciary under the Employee Retirement Income Security Act.
But Roper and Kelleher told the Senate that the DOL rule should be “allowed to go forward, so that the public and all stakeholders have an equal opportunity to see the actual content of the rule.” Indeed, they wrote, “as required by law, at the close of the public comment period, DOL will consider all of the comments and input and decide the best course of action consistent with the law.”

By sending the rule to the Office of Management and Budget, DOL is simply starting the process to release the actual proposed rule for public comment, the two wrote.

The OMB review could take several months. Wagner’s bill would also require the SEC to “look into potential issues with a rulemaking establishing a uniform fiduciary standard in regards to investor harm and access to financial products that were not adequately addressed” in the agency’s 2011 study.

The SEC would also be asked under Wagner’s bill to look into “other alternatives outside of a uniform fiduciary standard which could help with issues of investor confusion.”

Wagner’s bill “is an investor protection bill in name only,” according to a statement from the Financial Planning Coalition, which comprises the Certified Financial Planner Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors.

The coalition added that it “helped prevent this legislation from becoming law when it was first introduced and continues to oppose it now and in the future,” arguing that it would leave American investors “vulnerable to potential abuses and would substantially impede or even prevent the SEC from proceeding with congressionally authorized fiduciary rulemaking.”

Wagner’s legislation, the coalition stated, “would require the (Securities and Exchange) Commission to consider less adequate and less effective alternatives,” and would also “slow or effectively prohibit the DOL from proceeding with its proposed fiduciary rulemaking for financial professionals who provide investment advice to retirement savers.”

SEC Chairwoman Mary Jo White said last week that she would speak about her position regarding a rule to put brokers under a fiduciary mandate “in the short term,” noting that it remains her priority “to get the Commission in a position to make that decision” on such a rule.

7 Social Security Mistakes to Avoid

SSA-image-2My Comments: Social Security payments are a critical financial component of many lives these days. When it began in 1935, there was much gnashing of teeth among the political parties since it represented a recognition by the government that some people needed help. This was in a world recovering from the Great Depression and watching the developing threat of Communism in the Soviet Union.

Today, many millions of us pay into the system monthly and many millions of us receive a check every month. Some of us, like a client of mine, has a permanent disability that he was born with and qualifies for help with living expenses. He has never been able to earn a living and few surviving family members to help him get by from day to day.

I readily admit to an element of socialism in this process. But I live in a world of rules imposed on us by society where society has deemed it to be in the best interest of the majority that those rules exist. Like making us all drive on one side of the road instead of at random. Think about that for a minute if you choose to believe that society should have no role to play in our lives or that socialism is inherently evil.

Okay, enough political chatter. Here’s useful information about claiming benefits from the SSA.

by John F. Wasik / FEB 17, 2015

Most clients get lost trying to navigate Social Security on their own. There are about 8,000 strategies available for couples and more than 2,700 separate rules on benefits, according to the Social Security Administration. Yet most couples don’t explore all the possibilities; as a result, they end up leaving an estimated $100,000 in benefits on the table, reports Financial Engines, an online money management firm.

For many advisors, talking to clients about Social Security often means having a brief conversation that ends with the traditional advice of “wait as long as you can until you file.” But Social Security, with its myriad filing-maximization strategies, should play a much larger role in a comprehensive planning discussion.

Consider these basic questions: How do you ensure a nonworking spouse reaps the highest possible payment? Should the higher earner wait until age 70 to receive payments? What’s the advantage of taking benefits at age 62? Should clients take benefits earlier if they are in poor health? How can divorcees claim a benefit based on an ex-spouse’s earnings?

Clearly, there are several right and wrong routes to maximizing Social Security benefits. Here are some of the most common mistakes and how advisors can address them.

1. Not planning for opportunity cost
What’s the cost of waiting to take Social Security? How will withdrawals from retirement funds impact clients’ portfolios?

Advisors need to understand how a Social Security claiming strategy will affect a client’s net worth, notes Ben Hockema, a CFP with Deerfield Financial Advisors in Park Ridge, Ill. “If you wait to take Social Security, that will mean withdrawing more money from a portfolio,” he says. “The Social Security decision involves trade-offs.”

Hockema runs Excel spreadsheets in conjunction with specialized Social Security software to show clients what opportunity costs look like in terms of lower portfolio values, displaying return assumptions with graphs.

Many financial advisors point out that the answer is not always to wait until 70 to take Social Security. You have to take a broader view.

2. Failure to consider family history
What are the client’s family circumstances? What do they expect in terms of life expectancy? Have other relatives been long-lived?

Even if answers are imprecise, the discussions can provide valuable insights into how to plan Social Security claiming, say advisors who are trained in these strategies. But it’s the advisor’s role to tease out that information, notes CFP Barry Kaplan, chief investment officer with Cambridge Wealth Counsel in Atlanta. “People often have no clue” about the best Social Security claiming strategies, Kaplan says. “It’s complicated.”

3. Not integrating tax planning

One key question to consider: What are the tax implications of a particular strategy, given that working clients will be taxed on Social Security payments?

Here’s how Social Security benefits taxation works: If your clients are married and filing jointly, and their income is between $32,000 and $44,000, then they may have to pay tax on half of their benefits. Above $44,000, up to 85% of the benefits can be taxed.

For those filing single returns, the range is from $25,000 to $34,000 for the 50% tax and 85% above $34,000. Be sure you can advise your clients on how to manage their income alongside their Social Security benefits.

4. Failing to ask about ex-spouses
Be sure to ask your clients about their marital history, understand what they qualify for and analyze how it will impact their cash flow. Was the client married long enough to qualify for spousal benefits? How much was the client’s ex making? Be sure to walk through different options with clients.

Kaplan offers the example of a 68-year-old woman who was twice divorced: “She was still working, and it had been 20 years since her last marriage,” Kaplan says. “I then discovered … a former spouse’s income that netted my client an immediate $6,216 — six months in arrears — and would result in an additional $1,036 per month until age 70, for a total [of] $30,000 in additional benefits.”

Kaplan’s divorced client was able to claim benefits based on her first spouse’s earnings, which boosted her monthly payment considerably.

5. Overlooking spousal options
A key question to ask: Does the “file and suspend” strategy make sense in your clients’ situation? In this case, the higher-earning spouse can file for benefits, then immediately suspend them, allowing the monthly benefit to continue to grow even if the other partner receives the spousal benefit.

The result: The lower-earning spouse can collect benefits while the higher-earning spouse waits until 70 to collect the highest possible payment.

6. Not taking advantage of new tools
Although specialized software packages can generate a range of benefit scenarios, only 13% of planners use subscription-based tools designed for Social Security maximization. (Most planners do have some comprehensive planning tools available, but they may not integrate Social Security scenarios.)

Most planners rely upon the free and often confusing calculators from the Social Security Administration, along with online calculators and general planning software, according to a survey by Practical Perspectives and GDC Research.

That’s despite the fact that only a quarter of planners “are comfortable enough to plan and recommend Social Security strategies to clients,” the survey noted.
A detailed conversation about Social Security may be even less likely to occur with high-net-worth clients, according to the survey.

When you approach Social Security with your clients, consider that there are multiple nuances within the system’s rules that few practitioners have studied, and these could result in higher payments. You may need some of the sophisticated tools now available.

7. Dismissing it altogether
There’s another reason clients — and often planners — don’t drill down into Social Security strategies: They don’t think it will be available in coming decades.

But don’t write it off altogether. The truth is that Social Security’s trust fund, the money held in reserve to pay for future retirees, is adequate to pay full benefits until 2033. If Congress does nothing to address the funding shortfall, the government will pay three-quarters of benefits until 2088.

And Social Security is one of the most successful and popular government programs in history, so it’s difficult to bet against its long-term survival.

David Blain, president of BlueSky Wealth Advisors in New Bern, N.C., suggests that, in addition to carefully reviewing benefit statements and earnings records, advisors should explore other aspects of Social Security, including spousal, death and survivor benefits.

“You need to take it seriously,” Blain says about integrating Social Security into a plan. “Clients may not understand it and think it’s not going to be there for them.”

John F. Wasik is the author of 14 books, including Keynes’s Way to Wealth. He is also a contributor to The New York Times and Morningstar.com.

The First Sign of an Impending Crash

080519_USEconomy1My Comments: Another in a littany of warnings about pending doom. It gets a little tiresome,doesn’t it? Especially when there are others who swear the signs are there for continued gains. My gut tells me this guy is probably right.

By Jeff Clark Thursday, February 12, 2015

Investors have plenty of reasons to be afraid right now…

There’s the rapidly falling price of oil… The big decline in the value of global currencies… The Russian military action in the Ukraine… And the possibility of the European Union falling apart.

It’s unsurprising that many investors are looking for the stock market to crash. And – as I’ll show you today – we’ve seen the first big warning sign.

But here’s the thing…

Stock markets don’t usually crash when everyone is looking for it to happen. And right now, there are far too many people calling for a crash…

Once we get through this current period of short-term weakness that I warned about on Tuesday, the market is likely to make another attempt to rally to new all-time highs.

This will suck investors in from the sidelines… And get folks to stop worrying.

Then, later this year, when nobody is looking for it… the market can crash.

But for now, just to be on the safe side… Keep an eye on the 10-year U.S. Treasury note yield…

The 10-year Treasury note yield bottomed on January 30 at 1.65%. Today, it’s at 2%. That’s a 35-basis-point spike – a jump of 21% – in less than two weeks.

And it’s the first sign of an impending stock market crash.

As I explained last September, the 10-year Treasury note yield has ALWAYS spiked higher prior to an important top in the stock market.

For example, the 10-year yield was just 4.5% in January 1999. One year later, it was 6.75% – a spike of 50%. The dot-com bubble popped two months later.

In 2007, rates bottomed in March at 4.5%. By July, they had risen to 5.5% – a 22% increase. The stock market peaked in September.

Let’s be clear… not every spike in Treasury rates leads to an important top in the stock market. But there has always been a sharp spike in rates a few months before the top.

It’s probably still too early to be concerned about a stock market crash… But keep an eye on the 10-year Treasury note yield. If it continues to rise over the next few months, then you can start to worry.

Good investing,

Jeff Clark