Financial Answers "IN SIMPLE LANGUAGE"

I just came across some interesting research about women and their financial advisors.  Whether you are a women reading this or not or a financial advisor, female or male, you better take note of what is happening in the investment advisory world around you.

 

You’re Fired!

 

This recent research conducted by Allianz Life Insurance Company stated that within one year of a women becoming widowed, 70% of these widows fired their financial advisor.  We have talked about this issue before in some of my “Women & Finance” posts.  For some reason financial advisors are still missing the boat.

 

Let’s take a look why this may be happening.  It seems many financial advisors are not contacting their women clients during this severe market downturn we all are experiencing.  21% of women clients as compared to 6% of men clients said they have not heard from their financial advisors.  That’s one out of every five female clients is being ignored.

 

Another problem that has developed during this financial meltdown is that 14% of female clients stated that they are hearing from their financial advisor less and less.  Whereas, only 4% of men had the same complaint.  Does anyone see a communications problem here?

 

Who really controls the money?

 

Maybe some of us of us have been asleep for awhile but it has been my experience that women really control the money in the family.  If you don’t believe that have a talk with your wife and then call your divorce attorney.  All kidding aside, women do control most of the money and will continue to control most of the money because men don’t live as long or usually get sick and have to be taken care of by women.  This is the way it works so get used to it.

 

We cannot look at women like our fathers did in the 1950s, 1960s, 1970s.  Those days are gone and women are more important than ever in today’s modern financial society.  Even in those bygone years my mother handled the money in my family.  My father came home from the shoe factory and handed my mother an envelope with his paycheck in cash in it and she handed him his allowance.  Then my mother would figure out what bills needed to be paid and when and would usually drag me along on the bus to go and pay the bills.

 

It is estimated that somewhere between 80% to 90% of women will be solely responsible for their finances somewhere in their lives.  Yet many financial advisors are not picking up on this reality. 

 

How many women are business owners?  Or received an inheritance? Or are the breadwinners in the household?  It is a different world and if you still don’t believe that women control the finances in this country than you need to look around and do some research.

 

More attention needs to be paid to women

 

Financial advisors, both male and female,  need to be providing more seminars, workshops, and forums for women so they can better educate these women and develop a long term financial relationship…which is what most women want.

 

Surveys have shown that women, more than men, were more responsive to financial advisor’s suggestions and didn’t bailout of these suggested investments as easily as the financial advisor’s male clients.

 

Many of the female clients also said they were more satisfied with the results of the financial advisor’s suggestions.  This to me makes for a better client to work with.  Financial advisors need to start rethinking their marketing plans.

 

Female investors were also more risk adverse than their male counterparts.  And also female investors are more apt to consult with their friends and family where men usually don’t.

 

So if you are a women reading this talk with your current financial advisor and express your investment concerns and tell your financial advisor what you expect out of this business relationship.  If you are a financial advisor than listen, really listen to what your women clients are saying.

 

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

 

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Thank you for taking the time to visit In Simple Language.  J 

  

Copyright © 2008-2009  “All Rights Reserved”

 

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

 

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Member One Southern Indiana Chamber of Commerce

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My last post of June 23, 2009, talks about the government requiring employers to setup up mandatory IRAs for their employees. If the employer does not provide a retirement or pension program such as a 401(k) plan than they will be required to set up this IRA program.  So what!

 

Where am I supposed to put my money?

 

So the government is going to require my employer to set up an IRA account for me if my employer doesn’t offer any other type of retirement/pension chose.  Even if that were the case I don’t have any idea what to invest my money in.  So what am I supposed to do?

 

Drum roll here!  The United States Government to the rescue.  Can you picture Tim “Mr. Personality” Geithner, our treasury secretary, sitting down with your employer and explaining what the employees should do with their retirement investments?  Yea right! 

 

Well you won’t be that lucky, if that is being lucky.  Instead the government is thinking about creating something new.  Something that will help protect you from yourself and all the Madoffs out there that are going to try and take your hard earned money.

 

And what is this miracle investment that is going to protect you from yourself and all the other dirtbags in the world that are figuring out how to rip you off.  Let’s have another drum roll here.  The government is talking about creating the “R” bond.  Are you excited yet?

 

Yes the government in its infinite wisdom is talking about using a new form of bond called the “R” bond.  Will this be the new savior of the common man?  Now I have not seen anything up to this point to explain what the “R” means.  I am assuming that it stands for retirement.  I think we all know how good the government is when it comes to using acronyms.  TARP is a perfect example. So I would guess that the “R” stands for retirement.

 

So what’s an “R” Bond going to do for you?

 

This new bond is supposed to be designed to provide you with a source of secure and steady returns.  It is supposed to work for you by protecting your original investments.  Remember bonds are a lot less volatile than stocks.  And it sounds like there may be some government guarantees that go along with these “R” bonds.  We will have to wait and see.

 

I will be tracking information regarding these proposed “R” bonds.  As soon as I know more information about them I will be doing another more specific article post to let you know what’s going on.

 

Update on 401(k) programs

 

I wanted to bring you up to date on what is going on in the 401(k) arena.  It seems that almost one quarter-23%-of employer’s have eliminated their 401(k) employee matches.  This is not good news for you the employee.  These employer matches, if you remember, were free money and gave you an immediate 100% return on your 401(k) contributions up to a certain percentage usually 3%.  A really good deal for the employee.

 

Sorry folks, but it looks like those days are over and probably forever.  Several recent surveys are showing that employers are going to continue to eliminate the matching contributions and many may not go back to them even if the economy turns around and gets better.  You’ll have to wait and see and hope your company will have the sense to reward you for your hard work and loyalty by providing this tremendous benefit.

 

This is tough to swallow but you may as well get used to it.  We are in a different world from this day forward so what you were used to is probably gone for good or at least for quite some time.

 

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

 

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Thank you for taking the time to visit In Simple Language.  J 

  

Copyright © 2008-2009  “All Rights Reserved”

 

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

 

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Member One Southern Indiana Chamber of Commerce

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I think anyone reading In Simple Language for any period of time will understand that I am totally in favor of keeping 401(k) plans around with a few minor tweaks.  I still feel the 401(k) if properly used like it was intended is the best pension plan idea anyone has yet to come up with.

 

If You Can’t Have a 401(k) than How About This

 

In previous posts on the subject of retirement planning, I stated that I was in favor of having automatic enrollment in an employer sponsored 401(k) plan.  And I still am with one condition.  The employee needs ready access to information on where they should be putting their money. There’s not enough “understandable” information for the average 401(k) participant for them to make good investing choices in their 401(k) plan.

 

Most of these automatic enrollment plans put your money into a cash money market mutual fund which will never grow enough to give you the retirement dollars you are going to need.  This is the real issue about any retirement program.  Educating the participants is as important as setting up the plan.  Hello corporate America.  Is anyone listening?

 

So if you can’t have a 401(k) than what else is there?  The Obama administration is proposing that employers that do not offer any type of retirement plan to their employees should then be required to enroll their employees into a direct deposit IRA account automatically.  The employee would have the option to refuse or drop out of the IRA.

 

Critics Don’t Like This Idea

 

Let’s face it folks, all of us, including me, are inherently lazy by nature.  So by forcing someone to invest in their own future is, to me, not such a bad idea.  Plus you do have the option of canceling your automatic enrollment in the IRA program.  So where’s the problem?

 

Well the problem seems to be with the U. S. Chamber of Commerce in Washington, D. C.

The chamber is upset because a mandatory enrollment of all employees into an IRA program, or any pension program for that matter, would impose new requirements and costs on small businesses.  I have to agree with the U. S. Chamber of Commerce.  There would be some additional costs.

 

However, if we let things go on the way they are, we are going to have a very serious and severe retirement issue in the forthcoming years.  This lack of saving and investing for retirement is not going to go away.  The sooner we bite the bullet and do something about this the sooner we can all move on to the next problem that needs to be fixed. 

 

You are certainly aware of the mess the social security system is in.  Unfortunately many people in this country are depending heavily on social security as their one and only source of retirement money.  Do you see why we need to do something now?

 

The part of this mandatory enrollment into IRAs that scares me is the government may make this even more burdensome on small businesses.  When the first IRA programs appeared in the 1970s, there was one type of IRA and it was simple to fund and keep track of.  Today the IRA is a complex multipage confusion of tax laws and exceptions and exemptions and legalese that confuses all but experts specializing in the IRA area.  Will the same happen with this new proposed mandatory IRA program?  You can bet on it.  That is why we need to do something now before the government and the lawyers and tax people make it even more difficult and costly to understand and administer.

 

Employers Don’t Have to Contribute

 

This new IRA proposal is not requiring employers to have to contribute any employer money into the employee’s account which is good for the employer.  I just hope that employers don’t get the idea that this is a better way to go for the employer and do away with their 401(k) programs.  Probably not because it would bring the wraith of the government down on them and also the adverse publicity would beat up those companies that decided to do that.

 

Let’s see what happens with all of this.  We need to do something with retirement and this new IRA program may be a part of the solution.

 

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

 

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Thank you for taking the time to visit In Simple Language.  J 

  

Copyright © 2008-2009  “All Rights Reserved”

 

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

 

Check out the “SERVICES” tab above the beginning of the post for all available services.

 

Member One Southern Indiana Chamber of Commerce

 

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This is a really important post for all of us.  I came across this while doing some research on another topic and decided that this was too important to pass up.

 

Retirement Security Needs Lifetime Pay Act

 

HR 2748, the Retirement Security Needs Lifetime Pay Act, submitted to the House of Representatives June 8, 2009 could be the most important piece of legislation to go through congress this year or maybe any year.

 

You already know what a beating everyone took on their 401(k)-for profit and 403b-not for profit-retirement accounts.  And you also know that many people, maybe even you, are not depending on Social Security to be much of a retirement factor in the years ahead.

 

Well it looks like someone is trying to do something about the mess all of us Americans are in with our depleted retirement accounts.

 

Congress to the Rescue?

 

It seems that two members of the House of Representatives in Washington, D.C. are earning the money you pay them to represent you.  Representatives Earl Pomeroy, D-N.D. and Ginny Brown-Waite, R-Fla., have joined forces and have submitted house bill HR 2748, the Retirement Security Needs Lifetime Pay Act, to try and save all of us from ourselves.

 

This bill is designed to give you the opportunity to save your hard earned dollars in what they are calling “lifetime income annuities” through tax breaks.

 

The meat of this HR 2748 bill states that half the taxes on income from a non-qualified annuity, up to $10,000 per year, would be excluded.  This means that you could draw up to $10,000 from your non-qualified annuity and only pay taxes on $5,000.

 

Let me explain that a non-qualified annuity is an insurance contract that is funded with your after tax dollars and earns interest on a tax deferred basis.  So if I put $100,000 into a non-qualified annuity I would only pay taxes on the interest of the annuity and not on the original money I put in.  And also I would only pay taxes on $5,000 of the interest of the annuity out of the first $10,000 in interest the annuity generated.  This is a good deal.

 

HR 2748 also states that it would also exclude taxes on 25% of the income payments from IRAs (Individual Retirement Accounts) and qualified retirement plans-401(k) and 403b plans-but not from regular pension accounts (defined benefit plans).

 

Confused?

 

I know! I know! This can get very confusing.  Remember it is coming out of Washington so it is never easy to understand.  I will be keeping an eye on this bill and reporting back to you as I get more information.  If you want to read this bill-maybe you have insomnia or just like to torment yourself-you can Google the bill by putting in Retirement Security Needs Lifetime Pay Act in your browser and follow the information displayed by Google.  I tried to get an easier way to do this but nothing seemed to work. 

 

The info is listed on a web site called www.washingtonwatch.com along with a lot of other bills.  I had a difficult time trying to find HR 2748.  I’ve been told that I am computer challenged so maybe you will be more successful in finding the bill.  Hey, what do you want from a financial writer/speaker who is Internet challenged?

 

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

 

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

 

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Thank you for taking the time to visit In Simple Language.  J 

  

Copyright © 2008-2009  “All Rights Reserved”

 

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

 

Check out the “SERVICES” tab above the beginning of the post for all available services.

 

Member One Southern Indiana Chamber of Commerce

 

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Just when you thought you understood the old standby, plain vanilla bank certificate of deposit you get thrown a curveball.  Not to worry!  In Simple Language is on the case.

 

Invented Twenty Years Ago

 

About twenty years or two decades ago, the then called Chase Manhattan Bank of New York, developed a new version of the plain ole certificate of deposit. This new hybrid CD is called a “Market-Linked CD”.  This new CD was said to provide both upside exposure to the market so you could get a better rate…making you more money.  And it was also designed to offer you downside protection limiting your losses.

 

Now wait a minute!  Isn’t a CD all about protecting your principle with FDIC (Federal Deposit Insurance Corporation) protection so you don’t have to worry about losing any of your money?  A normal CD yes, but not necessarily this “hybrid” CD.

 

Between January of 2009 and May of 2009, these “Market-Linked CD’s”, or more commonly called “Indexed CDs” sold to the tune of approximately $2 billion.  Down from previous years, but nevertheless a significant number.

 

So What Are These Indexed CD’s?

 

First of all, an Indexed CD is like a regular CD with the full guarantee of $250,000-the $250,000 guarantee is only good until December 31, 2009 unless Congress makes it permanent otherwise it falls back to $100,000-from the FDIC (Federal Deposit Insurance Corporation).

 

However, with this “Indexed CD”, the principal is only guaranteed if the Indexed CD is held to maturity.  So if you need to cash in your CD for some reason you could lose a significant, whatever that may mean at the time, portion of your principle.  So you can see that these CD’s may not be for everyone.

 

The principal is guaranteed by the FDIC but the accumulating (accrued) interest is not.  So you have to look at the underlying strength of the bank that is issuing the Indexed CD.  That is a difficult thing to do in today’s tumultuous economy.

 

Another potential drawback of an Indexed CD is the earned interest-which may be tax exempt in some states-would be taxed as ordinary income.

 

Caveat Emptor (Buyer Beware)

 

This Indexed CD is not for everyone.  Make sure you totally understand what you are getting yourself into.  If a certificate of deposit is part of your overall savings and retirement program, then you should ask yourself whether the long term gains of fooling around with this type of “hybrid” certificate of deposit is worth the potential short term risks?

 

If you answered yes then this Indexed CD could very well be a part, albeit a small part, of your overall retirement and/or savings strategy.  And that is all right.

 

Like traditional CD’s there is no fee charged to you for purchasing an Indexed CD.  However, there are financial advisors out there that do charge a commission.  Ask your financial advisor, before you sign anything, whether you are going to pay any fee, upfront or otherwise, if you decide to purchase an Indexed CD as part of your financial strategy.

 

The bottom line to this type of financial purchase or any financial purchase for that matter is- drum roll please-“Can you sleep at night with the investment decision you have just made”?

 

If you read this far there may be something about this post that you are relating to.  There may be some financial related pain In Simple Language is talking about.  Tell us your story.  We really do want to know.

 

·         Please ask your questions of In Simple Language and we will answer you as soon as possible in the comments section of the blog article you asked about.

 

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·         Like what you read?  Send it to a friend.  Click on “share this post” right above leave a comment below.

 

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Thank you for taking the time to visit In Simple Language.  J 

  

Copyright © 2008-2009  “All Rights Reserved”

 

Looking for a financial speaker or financial writer?  Contact Rich today at rsowa@insimplelanguage.com or call Sowa Financial Media now at (502) 569-1714.

 

Check out the “SERVICES” tab above the beginning of the post for all available services.

 

Member One Southern Indiana Chamber of Commerce

 

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