February / March 2014 Volume 3, Issue 1
“Retirement Financial Needs”
You might remember a great comedian who said, “If I would have known how long I was going to live, I would have taken better care of myself!” I am also sure than many current retirees are saying ... By Raymond J. Ohlson, CLU, CRC
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Playing it Safe “Observations”
INCOME SURVIVING SPOUSE
It is my sincere hope that you too have taken or will take the time to fill your memory vault with similar observations that will not only last but also will enrich your lifetime. By Norm Wilkens Continue Page 3
Safe Retirement “Networks”
he members of the current sixty-five and older generation now have a life expectancy they probably never imagined. The baby boomers are pushing life expectancy numbers way beyond those of previous generations. You might remember a great comedian who said, “If I would have known how long I was going to live, I would have taken better care of myself!” I am also sure than many current retirees are saying, “If I would have known how long I was going to live, I would have saved more money!” Well, the baby boomers still have time to shore things up financially and put more money away. But they, along with current retirees, need to maximize and preserve their financial nest eggs. And that’s where the Safe Money Places® Agent Network and the Safe Money Places® website come in. Our goal is to help you meet and even exceed your retirement financial needs with efficiency and safety. Research scientist Dr. Christopher M. Callahan (Regenstrief Institute, Indianapolis, Indiana)) writes that the “graying o f America raises red flags.” He notes that “at the beginning of
The problem with all this interconnectivity is it can be close to impossible to see a threat coming or to anticipate how an action in one network will affect a variable in another. This is why it can make sense to insure against the unknown. By Dr. Jack Marrion
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Personal Finance “Basis Is An Important Tax Term” An important tax term that everyone should know is “basis.” The odds are very high that you will encounter the term sometime during your lifetime, and it can have a profound impact on your tax liability. Continue Page 10 By Thompson Myers & Associates, P.C.
Safe for Life “Safe Movie Watching” The safe way to figure out if a film suits your demeanor is to check out several reviews whenever possible. The MPAA review is obviously the most widely used and understood guide, but not the only. By Steve Dinnen
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Safety Pins ... “Retirement Financial Needs” - Continued the 20th Century there were approximately 16,000 Indiana residents age 65 and older and they made up less than 5% of our state’s population.” (I am confident that there are similar statistics for your state.) In the early 1900s, these people could expect to live another 12 years, but look how the numbers have changed! Dr. Callahan goes on to say that “at the beginning of the 21st Century, Indiana had 800,000 people aged 65 and older (12% of the state’s population) and there’s a good bet that they will live to 85.” Well this is great news! People are living longer, and this trend, thanks in large part to medical breakthroughs, will continue – people will continue to live even longer. The problem is that they will require more health care. It’s like a great car with 100,000 miles on it. The car will continue to run, but it needs more check-ups and assistance. The same holds true for today’s retirees. They run a great risk of needing more medical assistance (older Americans already account for 1 out of every 3 health care dollars spent). This is problematic.
long term care insurance with home health added; however, most don’t. Many retirees are investigating what is called a “hybrid” type of plan – an annuity or life plan with a long term care rider or an accelerated benefit that they can use for nursing home AND home health care needs. Most of these hybrids are “single premium plans” – you pay only one payment to buy the plan. Also, many of these hybrid plans will make the “death benefit” available to you if you are not able to perform just two (2) of what are known as “Activities of Daily Living” (ADLs), such as bathing, taking medicines on time, cooking, etc., but do not need to be in a nursing home or have home health care. Once your doctor confirms that you cannot perform two (2) ADLs, you begin to receive your money. And, on some of these policies, a lifetime “Return of Premium Guarantee” is available.
Our goal at Safe Money Places® is to help you accumulate your nest egg, but also to help you preserve, protect, and defend your money. To learn more about this type of hybrid product – I served on the Board of Trustees of one of along with income planning – to help you achieve Indiana’s major hospitals, so this information is your Retirement Financial Needs, contact your not new to me. Craig Wilson, M.D., Geriatrician, Safe Money Places® Agent or just give us a call Residency Program Director and Hospice Service at 877-844-0900. Director at St. Vincent Hospital in Indianapolis acknowledges that modern medicine has brought Living longer can mean living better by preparing for your retirement years now! many people into advance age, but says, “This has also produced a growing population prone to chronic disease and disability. Many will About the Author: Raymond J. need medical assistance at many times during Ohlson CLU, CRC, CEO & President retirement.” Like that car with 100,000 miles that of The Ohlson Group, Inc. and SMP still runs and needs help – not the junkyard – International, LLC many seniors will also need help – not a nursing Mr. Ohlson entered the insurance business while home – but that help can still be quite expensive! completing his Bachelor of Science Degree at Ball State So, what should you do? What is the answer? First of all, let’s look at Medicaid to clarify a couple of misconceptions: Medicaid only pays for nursing home stays not for home health care in most cases. And, you must be destitute – totally out of money and assets – to qualify for Medicaid in most cases. Now obviously, a retiree could have purchased Back to Table of Contents
University. He quickly qualified for the Million Dollar Round Table (MDRT) of which he is a Life Member. He also received his Chartered Life Underwriter (CLU) designation from the American College in Bryn Mawr, Pennsylvania. Mr. Ohlson, a former life insurance company president, currently sits on college and hospital boards and is a published author. Raymond J. Ohlson can be reached at: Email: email@example.com.
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Playing it Safe
Observations by Norm Wilkens The old saying, “Stop and smell the roses,” takes on new meaning when you actually pause in your daily activities to notice the world around you. As we start another new year, I’d like share a few of the events in our family’s history that may trigger your own “observations.” Very early one morning, I noticed a small herd of deer Back to Table of Contents
– about eight – gliding across our back yard. A few of the neighbor dogs were barking, but since these pets were fenced, the deer sensed there was no danger. A magnificent buck led the herd in single file through the early morning dew making nary a sound as they disappeared onto the adjacent golf course. The only noise punctuating the serene quiet was the morning doves’ mournful cooing.
Similarly, during a rainstorm, I enjoy a feeling of quiet reverence as I pull the covers up around my neck and listen as the rain hits our roof and meanders down the drainpipe. The darkness of night increases my awareness of these familiar sounds, encouraging peaceful sleep. As a small boy growing up in a rural setting, I gauged my time to fall asleep by the mournful sound of a train whistle in the distance, about a mile from our home. It was a comfortable reminder that my day had ended and it was time to fall asleep. Even though train rails run about a mile from our urban home today, a whistle ( Page 3 )
Playing it Safe ... “Observations” - Continued doesn’t blow on a regular basis. But when it does occasionally sound, I always feel that strong sense of peace and serenity as in those days of my youth so long ago. Today’s music renditions and performers seem to lack the sincerity and purpose of the soloists and orchestras in the past. The music of Broadway and Basin Street made memorable impressions in our young lives. The melodies linger and are still fresh in our minds – the lyrics echo repeatedly and tug on our memories, never seeming to grow old. It’s difficult for those of my generation to describe contemporary music, which I refer to as “noise,” the same way. I wonder if and how today’s songs will last a lifetime. Memories of friendships of the past are often fleeting. We move away from those we knew in our youth and create alliances with
new business associates and neighbors. It ‘s certainly true that we are fortunate if we have a handful of close friends in a lifetime. Outside of our families, it’s often difficult to really know, intimately, others around us. Even though it has been years since I’ve seen them, I measure those whom I consider true friends by my longing not to forget them. Today, we are able to correspond instantly with these “friends” through Facebook, Twitter, and email; however, nothing can ever take the place of an in-person relationship. In essence, that is what a true friendship is all about. I have always had a vivid imagination. Listening to radio programs and attending an occasional movie energized my early images and fantasies. I looked forward to the nightly radio adventures delivered through the airwaves, and I can
remember accurately the times I spent with my family at local movie houses. My grandmother introduced me to the antics of Laurel and Hardy, Bud Abbot and Lou Costello, and many other early 20th Century actors. During the war years of the l940’s, movies at the air base provided our weekly entertainment. My allowance of twenty-five cents per week allowed two ten-cent movie tickets in one week. Saving the extra nickel, I then was able to view three movies in the second week. Here is one last memory from my youth. Mr. Longere was a local handyman whom my parents occasionally hired for small repairs around our home. In early l942, he was building something in our backyard and I tagged along trying to determine what it was. I knew instantly that it was going to be solid and lasting because he
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Playing it Safe ... “Observations” - Continued was erecting and securing steel pipes in holes filled with cement. The poles were about ten feet high with a steel crossbar running to a pole of the same height about eight feet away. Attached to the crossbar were chains to hold two perfectly balanced swings. Mr. Longere even wrapped the chains in old garden hose so that we wouldn’t injure our hands. My sister and I thoroughly enjoyed swinging and pretending to fly through the air for hours. As testimony to Mr. Longere’s skill and the sturdiness of the swing set he had built, returning home after four years during World War
II, we found our swing was still as vibrant and solid as we had left it. These personal observations are priceless to me. They represent a lifetime of living with “my eyes and ears wide open.” Doing so has enriched my life more than I deserve and more than I could ever explain in a short article. It is my sincere hope that you too have taken or will take the time to fill your memory vault with similar observations that will not only last but also will enrich your lifetime. Have a wonderful New Year!
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About the Author: Norm Wilkens A nationally recognized speaker and writer, Norman Wilkens has traveled to forty-seven of the fifty states speaking on topics of marketing, advertising and public relations. His most noteworthy subjects include: Healthcare Marketing; Multigenerational travel and Baby Boomers - their contribution to society and economics. He is presently serving as Midwestern Contributor to California’s AAA WESTWAYS Magazine. Among Wilkens’ current activities are the Butler University Alumni Board of Directors; Butler’s Central Indiana Alumni Chapter Board; Chairman of the Board of Visitors for the new Communication College of Butler; Board of Directors of Ruth Lilly Educational Foundation; Salvation Army of Indiana Advisory Board and as an Elder at Second Presbyterian Church of Indiana. Email: NormWilkens@aol.com
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“Networks” -by Dr. Jack Marrion The refrigerator is empty and we are
hungry. For most of us the solution is simple; go to the grocer and get food. If you were to model this it would be shown as Hungry Consumer >>> Grocery.
However, the food delivery network is not quite that simple. See the chart below. FOOD DELIVERY NETWORK
Truck Processor Grocery Consumer
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AND each of these variables in our network has variables in their own network ... Farmer’s Network: Getting Seed >> Sowing >> Fertilizing >> Weeding >> Weather >> Harvest >> Truck
Truck’s Network: Farmer >> Food Processor >> Workers >> Weather >> Fuel >> Roads >> Grocery
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Safe Retirement ... “Networks” - Continued Food Processor’s Network: Farmer >> Truck >> Factory >> Energy >> Workers >> Processing >> Truck
Grocery’s Network: Farmer >> Food Processor >> Truck >> Energy >> Store >> Workers >> Hungry Consumer
Each of these is an individual network, but they are interconnected. Thus, a problem in one network can affect all. If the road is closed due to snow the truck cannot bring the food. If there is a strike at the food processor the grocer will not get those canned peaches. Even though as hungry consumers we have acted in a perfectly straight forward fashion (Hungry Consumer ← Grocer) we may wind up still being hungry. The good news is these network can adapt (e.g. if one peach factory has a strike the Grocer will buy peaches from a different factory), but that doesn’t make these arrangement any less complex. The same complexities affect our finances. We might research a utility stock and select it because the company has strong management, an excellent balance sheet and growing earnings. And yet the value of that stock may fall because other investors are concerned that China may not keep growing as fast. Does our utility company sell electricity to China? No, but due to concerns about this unrelated network the value of all stocks, including ours, goes down. How about this: The reason your bank certificate of deposit is paying 0.3% is because the Federal Reserve is keeping interest rates low to recover Back to Table of Contents
from a recession caused by a collapse in the value of derivatives traded by institutions that were used to hedge collateralized mortgage obligation issued by investment banks consisting of mortgages on homes primarily located in California, Florida and Nevada that were issued to less than stellar borrowers because of an easing of credit standards by Fannie Mae back in 1999 due to pressure from politicians. Why are you only earning 0.3% in the bank in 2014? Because of the actions of politicians back in 1999. The problem with all this interconnectivity is it can be close to impossible to see a threat coming or to anticipate how an action in one network will affect a variable in another. This is why it can make sense to insure against the unknown. There are fixed annuities available that contractually guarantee that an income will never go down, regardless of what other networks do. There are other fixed annuities that provide an opportunity to earn competitive interest and protect the principal from the threats posed by other networks. It’s a complex world; fixed annuities make it all a little simpler. About the Author: Dr. Jack Marrion Dr. Marrion’s research on senior decision making and the financial world have been featured in hundreds of publications including: Business Week, Kiplinger, Smart Money, and The Wall Street Journal. He is the author of six books and a frequent media guest. Email: firstname.lastname@example.org
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Article Highlights • Basis is the point from which taxable gain or loss is measured • Good basis records are required to minimize taxable gains Improvements, casualty losses, business depreciation, legal expenses, title costs, etc., can all affect basis. Back to Table of Contents
An important tax term that everyone should know is “basis.” The odds are very high that you will encounter the term sometime during your lifetime, and it can have a profound impact on your tax liability. Simply stated, “basis” is the monetary value from which a taxable gain or loss is calculated when an asset is sold. For example, you purchase 100 shares of ABC stock for $10 a share. Your basis for those shares of stock is $1,000 (100 x $10). Then, if the stock were sold for $1,500, you’d have a gain of $500, which is determined by subtracting your basis from the sale price. However this is a very simplistic example of basis. Determining basis, as you will see from the following explanation, can be complicated.
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Personal Finance ... “Basis Is An Important Tax Term to Know” - Cont. Cost Basis This is the simplest form of basis and is what you originally pay when you purchase stock, other financial securities, a house, rental property, cars, business assets, land, and other assets. However, even cost can be a little tricky as it includes the asset acquisition costs such as: brokerage costs, escrow closing costs, acquisition travel, legal services, title charges, sales tax, etc. So in our earlier example, let’s say you paid a broker $50 to purchase the ABC stock; then your cost basis would have been $1,550.
depreciation you have deducted against your rental or business income. Examples of assets where basis is typically adjusted downward due to depreciation include rental property, business vehicles, tools, business machinery, etc. In some cases, business assets can actually be 100% deducted (expensed) in the year they are acquired, in which case the asset’s basis is reduced to zero.
Adjusted Basis After purchasing an asset your basis will change, either up or down, if you make improvements to the asset, suffer damage due to casualty losses, or claim business depreciation or amortization. One example of how your basis increases would be purchasing your home and then adding a pool, family room or other improvements; the cost of the improvements would increase your basis. Keep in mind that routine maintenance is not considered an improvement and does not increase your basis in an asset.
Depreciated Basis An example of when your basis decreases would be a business asset that you are depreciating (deducting as a business expense the cost of the asset over its useful life). In this case, the basis is reduced by the amount of the
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Personal Finance ... “Basis Is An Important Tax Term to Know” - Cont. Inherited Basis When you inherit an asset, you inherit it at its fair market value (FMV) at the decedent’s date of death. This is because the FMV is included in the value of the estate of the decedent and taxed if the estate’s value exceeds the exemption credit. This is not necessarily the basis for a future sale because there may be subsequent improvements, casualty losses, and perhaps depreciation taken after the inheritance. If the inherited asset was used in business before the inheritance, all prior depreciation is disregarded in the hands of the beneficiary.
Gift Basis If someone gifts an asset to you, your gift basis generally is the same as the giver’s basis; however, the gift comes with some potential tax strings attached since you’ll also be receiving the giver’s built-in gains at the time of the gift. Thus, unlike inherited basis, you assume the tax liability for built-in gains. For example, say your aunt gave you 100 shares of stock for which her basis was $1,000. Thus, your basis is $1,000. At the date of the gift, the stock was worth $2,500. You sell the stock for $5,000 a couple of years after receiving it. Your tax gain is $4,000 ($5,000 - $1,000), which includes the $1,500 ($2,500 $1,000) gain your aunt would have had if she had sold the stock on the date she gave it to you, plus the $2,500 ($5,000 - $2,500) gain from the date you received the stock. The rules are a bit more complex, and not covered in this article, if the asset’s value at the date of the gift is less than the giver’s adjusted basis.
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Determining your basis and the resulting gain or loss when an asset is sold can be complicated, and of course, good records are needed to verify the basis, including improvements and other adjustments in case of an audit or the sale of that asset. You are encouraged to consult with this office with any questions relating to basis and the potential gain from the sale of a personal or business asset.
About Thompson Myers & Associates, PC Accounting Firm Thompson Myers & Associates’ accounting and payroll staff have been delivering professional services to small businesses in Central Indiana for over 20 years. Having worked with hundreds of small business clients, we have significant expertise with a wide variety of service businesses in Indiana. We have especially strong experience and expertise in working with businesses in the healthcare (medical, dental, etc.) and food service (restaurants, caterers, etc.) industries. We recognize the value of a personal hands-on approach to doing business and earning clients for life. Thompson Myers & Associates is committed to carrying out our services with integrity, excellence, and respect for others. Our dedication and client support are beyond compare—focused on putting your best financial interests at the forefront. Phone Number: (317) 571-8080 Email: email@example.com Website: https://www.thompsonmyers.com/
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Safe For Life Safe Movie Watching Check the reviews and ratings before going to see the movie in theaters. By Steve Dinnen My school teacher daughter likes movie actor Leonardo DiCaprio, but said she was taken back during her recent viewing of his latest film, the Wolf of Wall Street. It seems that along with a tale of cheating and deceit by money grubbing Wall Streeters, director Martin Scorsese tossed in a whole bunch of steamy sex scenes. Both Mr. Scorsese and my daughter knew it was rated R - Restricted - meaning it is intended for people 17 years and older. This viewing guide was assigned by the movie industry trade association Motion Picture Association of America. Regarding Wolf of Wall Street, the MPAA specifically stated that the movie has sequences of strong sexual content, graphic nudity, drug use and language throughout, and some violence. She might have made a safer decision had she followed a Back to Table of Contents
review written by the Catholic News Service, catholicnews. com/movies.htm. Its rating on this film was “O” - morally offensive - a little finer point than that made by the MPAA. To the news service reviewer, Wolf of Wall Street “contains
a benign view of sinful and illegal actions, domestic violence, strong sexual content, including graphic aberrant and adulterous sexual activity and full nudity, drug use, frequent profanities, pervasive rough and crude language and a few ( Page 13 )
Safe For Life ... “Safe Money Watching” - Continued obscene gestures.” Wow, what a difference. Yes, there are divergent opinions when it comes to movie reviews and guidelines. The safe way to figure out if a film suits your demeanor is to check out several reviews whenever possible. The MPAA review is obviously the most widely used and understood guide, but not the only. Besides Catholic News Service, longtime film reviewer and shareholder activist Nell Minnow does a fair assessment of movies on her “Movie Mom” blog, which you can find at beliefnet.com. Minow actually liked Wolf of Wall Street, though her notes on its clearly spelled out that it contained those objectionable snippets of sex, drugs and rock and roll. And she even said that parts of the movie were more worthy of an MPAA rating of NC 17, which means anyone under 17 is not supposed to be allowed to view the film.
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NC17 is a death warrant for general movies, and film makers will go to great lengths to avoid it. They’re apparently OK with an R rating, as studies have shown that between 1995 and 2012 that category was the most widely assigned, ahead of both PG and PG 13. PG means parental guidance is advised. PG13 means parental guidance is strongly recommended. The other category used by MPAA is G, for general audience. Nowadays this is a relatively rare rating, as Hollywood types figure a G rating will be seen as too much of a film for little kids. Maybe that’s why the Christmas-time fare from Disney, Frozen, scored a PG rating (for mild action), though my 51-year-old nephew just saw it and reported back that “for 98 percent of the people, there was absolutely nothing wrong with it.” The PG rating is apparently for the other 2 percent.
About the Author: Steve Dinnen Steve is a freelance writer specializing in financial and travel news. He received his Bachelors Degree from Drake University and his Master of Journalism from Oklahoma University. Mr. Dinnen served as Sr. Business Reporter for the Des Moines Register, Business News Editor for the Indianapolis Star and served as Editor (freelance) for the Christian Science Monitor of its weekly personal finance column. Email: firstname.lastname@example.org.
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