When Jill’s surrogate mother died, a bittersweet experience was cleaning out her house. Every book had the name of who was to receive it (she was a retired librarian). The rest of the content in the house was overwhelming in its volume.

Many people decide to get rid of possessions to make it easier on the next generation or because they are moving into a smaller house, apartment, assisted living facility, etc. It can be a huge undertaking both physically and emotionally. Where do you begin? What do you do with what you no longer want?

Some people are comfortable taking on this task themselves but others prefer outside help. This need has been recognized. There are now Organizers/Movers to help and advise you. Some of their suggestions include:

  • Tape the size of the new cabinets on the current ones so you can visually see the difference
  • Touch something once and then make a decision
  • Create four piles: gift, sell, trash and move
  • Start with the easy projects (bathroom, closet) and move to the larger ones. Make decisions one room at a time
  • Invite friends, neighbors and relatives to come over and take what they want before getting rid of your possessions

Another bonus of using a Professional Organizer or Senior Move Advisor is they may be well versed in what can be auctioned, sent to a consignment store, antique dealer, estate-sale, eBay, Craigslist, etc. They may also make the arrangements for the stuff to be hauled.

Costs vary. Usually it is an hourly fee or by the project. Ask for an estimate of the time to complete the project. Also, confirm they make arrangements for disposal. Ask the Organizer if they assist in setting up your new home.

Below are two websites to find an Organizer or Mover:

Based on an article from Kiplinger’s Retirement Report, September 2014
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One of the issues we struggle with when designing a retirement plan is deciding on life expectancy. Should the plan assume you live until 95, 99, 101? After all, the fastest growing segment in the United States is the 85 years and older group.

Between 2000 – 2010, the population change was (U.S. Census Bureau):

  • 65+ years up 15.1%
  • 75-84 up 5.7%
  • 85-94 up 29.8%
  • 95 and over up 25.9%

Financial advisors and clients haven’t come to terms with increased longevity and the risk to retirement plans, claims Ron Gebhardtsbauer, clinical associate professor of actuarial science at Penn State University. “Consider that about 30% of couples age 65 today will have at least one spouse alive in 30 years, to age 90 and 8% of them will live to age 100.”

So, back to a retirement plan design. We frequently ask about your family’s longevity, causes of death, and a client’s health to estimate an age to run financial projections. In addition, all the numbers listed are averages. Most people asking for a retirement plan are well-educated with access to quality medical care. Usually, this profile will be at the upper end of the longevity range.

If we are too conservative (e.g. age 85), you might run out of money if you live longer. If the age is too far out from reality, you might not spend as much as you could were you to die earlier. It is a bit like Goldilocks and the Three Bears. We try to find an age not too hot and not too cold.

It is important that you help us determine the age. We can always run a shorter life expectancy and a longer one. It is important to update the plan every few years or if something changes in your life. We welcome the opportunity to work together on a new or updated plan. Please give us a call.

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In past years the estimate for usage of various commodities, especially metals, centered on China’s growth. At one time, China purchased 40% of the cement manufactured.

Nickel, used to make stainless steel and such obvious products as cookware, and the less obvious items such as guitar strings, is largely sold through Western companies. The price of a metric ton reached $50,000 in 2007, whereas it was just over $10,000 in 2004.

As China’s economy grew, the need for nickel to make steel prompted China’s steel producers to create what is called “nickel pig iron,” unlocking what the Wall Street Journal called the “mother lode of cheap supply.”

China now produces 400,000 metric tons of nickel pig iron, supplying a fifth of worldwide demand.

All commodity prices tripled from 2000 to 2011. Though economists have long warned about demand for natural resources outstripping supply, the global supply picture has changed to the best in years. Mine production for every major metal has doubled or tripled over the last decade, in part because of better tracking to find resources (according to the U.S. Geological Survey). “It’s kind of basic Econ 101: Scarcity induces some sort of innovation,” said David Jacks, an associate professor at Simon Fraser University in Canada, and an expert on commodity cycles over the centuries.

Other examples of innovation creating increased supply include:

  • Hydraulic fracturing (fracking) increasing oil and natural gas supply
  • Use of higher-yielding seeds in new patches of arable land
  • New drilling techniques to push farther below the earth to access resources
  • New formulas to mix chemicals and minerals to produce more supply

Precious metals’ prices dropped 28% in 2013!

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In our last newsletter, we told you the Volker rule was not being implemented. However, sentiment shifted with JP Morgan’s “London Whale”, which ended up costing the firm $6 billion.

The Volker rule was approved by the Federal Deposit Insurance Corp., the Federal Reserve Board, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Office of the Comptroller of the Currency. We think it is remarkable that all five agencies agreed to the same version (almost 1,000 pages!).

The Volker rule was a centerpiece of the Dodd-Frank Bill, with a goal of restricting trading activities by banks with depositors’ money. The Volker rule bans “portfolio hedging.” Hedging will still be allowed if tied to a specific risk such as currency or interest rate.

It also places new benchmarks for banks to buy/sell securities on behalf of clients (known as market making). Compensation structures will be restricted to discourage risky trading.

Other changes mostly bar a bank from trading its own account or owning significant percentages in hedge funds or private-equity firms.

“The Volker rule will make it illegal for firms to use government-insured funds to make speculative bets that threaten the entire financial system, and demand a new era of accountability from CEOs who must sign off on their firms’ practices,” President Obama said in a statement.

Jacob Lew, Treasury Secretary, stated that “approval of the Volker rule will help change behavior on Wall Street and protect taxpayers against the risk of another financial crisis”.

For most of us non-bankers, these details aren’t meaningful, but the context of the rule is critical to changing the corporate culture in banks about taking risk with taxpayers’ money. It also begins to define the activities a bank should undertake with insured deposits.

Some feel the rule goes too far but many feel it does not go far enough. From our perspective, having the rule in place is a first step, and—as they always say—the first step is the hardest.

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A new law (AB 241) went into effect January 1, 2014. It removes exemptions that had been in place for the category of workers known as Domestic Workers. They are now treated like any other hourly worker.

  • Overtime pay: Time and a half after nine hours in a day and more than 45 hours a week
  • Meal and rest breaks: Workers are entitled to a 30 minute meal break after five hours of work and a 10 minute break after four hours of work
  • Worker’s Compensation: Domestic workers no longer need to work 52 hours and earn more than $100 in the previous 90 days to be eligible for worker’s compensation (that is, they are eligible for and start paying into worker’s compensation immediately).
  • Uninterrupted Sleep Provisions: Live-in workers or those on 24 hour shifts have the right to eight hours of uninterrupted sleep.
  • Use of Kitchen Facilities: Domestic workers who work more than five hours may use kitchen facilities at no cost to cook their own food.
  • Paid Days of Rest: After one year of employment, workers are entitled to up to three days of paid rest, based on the number of hours worked each week.

To make this more complicated, the Department of Labor also issued new rules regarding personal attendants that do not become effective until January 1, 2015.

These regulations may require families and companies employing home health care workers to revamp care arrangements, because provisions for overtime and for the number of people who take care of a person over 24 hours will likely increase costs.

We are reviewing ways to account for the cost changes in long-term care scenarios within our financial plans. If you’d like to discuss this further, please contact us.

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The U.S. stock market ended the year with many of the American indexes reaching record highs on the final trading day for only the sixth time in its history.  The market chose to ignore such uncertainties as:

  • Government shutdown
  • Boston bombings
  • Ongoing Syrian uprisings
  • Debt ceiling debates
  • Federal budget debates
  • NSA revelations
  • Lingering economic aftershocks of Superstorm Sandy
  • Nuclear standoff with Iran

The S&P gains were the highest since 1997 and the third highest since 1970.  The small cap returns are the third highest since 1980, and the NASDAQ returns were the seventh highest ever.

Is this a bull market?  Commentators, investment strategists and economists don’t agree on whether we are experiencing a temporary rise in the midst of a long-term bear market, like that during the Great Depression, or the strong early stirrings of a long-term bull market, like the one that started in 1982.  The truth is, nobody knows, just as nobody knew that the U.S. stock markets would reel off such strong returns after the near-collapse of the global economic system.

Many feel the strong performance was a result of the easy money policy of the Fed. New variables introduced in late 2013 were the Fed’s reduction of bond purchases (which may result in higher interest rates) and the question of how Janet Yellen makes her mark as the new Fed Chair.

Long-term investors are frequently compared to farmers, who plant seeds with no foreknowledge of the weather during their growing season, or any sense that what happened this year has an impact on what will happen in the next one. There will be bad years and good years, but over time the good years tend to outnumber bad ones, which is why it makes economic sense to continue planting the seeds each spring—or to stay invested in the stock market when each coming year is a mystery.

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Numerous articles have been written about what has changed since the time Lehman Brothers collapsed until now. The tone of most headlines is pessimistic. A couple of examples: “How Financial Reform Became a Fiasco” (Research Magazine, August 2013) and “Five Years Later, The Plumbing is Still Broken” (New York Times, Gretchen Morgenson, September 15, 2013). Below we will take a brief look at the major issues that led to the collapse of Lehman and subsequently the financial system.

  • Leverage: In 2008, one of the biggest problems was the depth of bank borrowing. In 2008, it was up to 50 times what they were worth in net capital. While net capital has increased, there is still no restriction on leverage.
  • The Volker Rule: The rule limited bank activities to earning money by making loans and taking companies public. It was removed from Dodd-Frank. Investment banks can use our money in the stock market, derivatives, etc. The JP Morgan Chase Trader – “London’s Whale” is the most recent example of the lack of risk management. He lost $7 billion of the shareholders and company’s capital.
  • Complex Derivatives: This is the activity that guaranteed payment if derivatives defaulted (think AIG). There is some progress on this front. Interest-rate-swaps must now go through a central clearing house which tracks who owes what to whom. The Wall Street Lobby carved out significant loopholes. Banks and hedge funds continue to actively trade in derivatives without oversight and are unregulated.
  • Rating Agencies: They gave AAA ratings to the toxic mortgages. The companies issuing the products paid the rating agencies (conflict of interest). No change.
  • Wall Street Incentive System: The toxic products were sold by brokers, traders, etc. and the compensation was based on the sale. The more you sold, the higher the bonus. When these products fell apart, there was no penalty. The money was kept. Nothing has changed.
  • Too big to fail: Nothing has changed. Risky bets can be made with the expectation the government will bail them out again.

Intense lobbying by Wall Street has succeeded in blocking most of the changes to the financial system. This does not mean the financial crisis is going to occur again, but it isn’t very encouraging that Congress is bullied by the lobbyists into inaction.

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We can all find things to complain about. The dysfunctional government, our education system, stalled wages, etc. HOWEVER, compared to the rest of the world, we are in great shape for the future. Below are some of the reasons why.

Demographics: Despite the debate about immigration, the U.S. still has one of the most open immigration policies in the world. Only Canada and Australia are as open as the U.S. (Japan for instance, has no immigration which causes economic problems). Immigrants tend to be younger and of birthing age. This keeps the fertility rate in America close to 2.1 births per child-bearing woman. By comparison, Japan is 1.4, UK is 1.9 and Germany 1.4. Aging populations need young people in the work force to pay taxes and produce. Immigrants are fulfilling this role.

Entrepreneurial Spirit: Our country’s culture encourages challenging the status quo, questioning, and the ability to fail and try again. This is unique to the U.S.  Other countries discourage individuality. The Chinese have an expression, “The nail that sticks up must be hammered down.” Not so here.

Labor Flexibility: We may not want to but we can work part-time, take less for wages, or retrain for other jobs. This isn’t done overseas. Lifetime employment is the rule in many countries.

Strong Dollar: It is still the world’s primary trading currency. While we might complain about economic, political and financial strength, compared to the rest of the world, we are the most stable.

Foreign Dependence: The need for foreign financing is declining. The deficit is decreasing; energy independence is increasing; and robotics and capital intensive manufacturing are increasing. The U.S. will become the world’s largest energy producer in 2013. This changes the political and economic dynamic of energy-rich nations as our independence increases.

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Jill received a call from her life insurance agent reminding her to update her beneficiary designation.

A good reminder for all of us. If there has been a change in your circumstances (married, RDPs, divorce, etc.) call your agent to update your insurance documents and your advisor to update your retirement beneficiaries.

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California’s program is called Covered California ( Enrollment began October 1 with health insurance being bought to begin January 1, 2014. For this year only, there is a 90-day grace period for enrollment. The last day to purchase insurance is March 31, 2014. Otherwise, there is a penalty.

The chart below applies to a single person.



40% up to $6,350 Lowest


30% up to $6,350


20% up to $6,350


10% up to $6,350 Highest


While there are several plans available under each level, the network of doctors, hospitals, deductibles for prescriptions (including generic vs. brand names) may differ. Various medications may be covered differently.

Subsidies to pay for the premiums are offered up to many. For instance, a family of four making $94,000 has a credit on the premium. Now, you cannot be turned down for pre-existing conditions.

Helpers called “navigators” are being trained to help you compare plans. Insurance agents are being certified to help you through the program. This is the biggest medical insurance legislation since Medicare was created. People need to be patient as the kinks are worked out of the new system.

We suggest anyone who has an individual policy review what is available on the Exchange. If you have an employer group plan, it should be as good as or better than the Exchange plans. A good article for more detail was written by Tara Siegel Bernard, “A Guide to the New Exchanges for Health Insurance,” New York Times, September 27, 2013.

If you are a client of Financial Connections and would like to review your options, please give us a call. We can put you in touch with some people certified in the program.

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