Bring Back Profiling

Remember the good old days when the only crazies you had to worry about on flights were the ones who wanted to take you on a detour to Cuba? You’d land in Havana, maybe get the chance for a cup of good espresso with a fresh cigar and then head back to the U.S.

I’m not romanticizing what these guys did. I’m sure it was terrifying. And sadly some passengers died. I just want to make a point.

But at least the hijackers had somewhat plausible explanations for their actions.

For example,

On February 16, 1970, man who was born in Cuba, with wife and two children, successfully hijacked a 727 from Newark to Cuba;

In April 1970, a man who diagnosed with paranoid schizophrenia hijacked a plane on a sightseeing tour with his wife pulling a gun on the pilot demanding to be flown to Cuba. He told Cuban authorities “he felt persecuted as a black man in America and had heard that things would be better in Cuba.” Cuba suspected him of being a spy and deported him 1976. On arrival he was arrested for the hijacking by the FBI. He was freed in 1981 after spending years in jail and a mental hospital;

And on July 31, 2001, John Milo Reese stole a plane from Florida Keys Marathon Airport with the reported intention of delivering a pizza to Fidel Castro in an attempt to kidnap the Cuban leader. After crash-landing on a Cuban beach, he was returned to the U.S., where he was convicted of transporting a stolen aircraft, and was sentenced to six months in jail. In a later interview, he admitted to being slightly intoxicated and having lost his bearings in the air.

Now compare these to what Umar Farouk Abdulmutallab did on Christmas Day. It wasn’t to be with family; it wasn’t for political freedom; it wasn’t even to score with a hot chick! He said he was depressed and looking for a new jihad. Give me break.

As is typical for the terrorists of this decade, it was to destroy what the U.S. stands for. And he wasn’t just willing to die for his distorted belief, he wanted to die. How off the wall is that!

Now as traveling boomers, we’ll have to pay the price. I’m not looking forward to being told I can’t go the bathroom within one hour of my arrival time. Nor will I be able to rummage around in my backpack for a snack or a paperback. And I can’t even put a blanket or pillow on my lap!

If the TSA thinks these kinds of ridiculous rules will stop someone who wants to die, they’re wasting their time and our money. Profiling passengers while they’re in the airport is the only strategy that has a chance of working.

Look, if the overwhelming majority of terrorists to date were males of German-English background with blond hair and blue eyes and in the 50-60 age bracket, I’d have absolutely no problem with being pulled aside for a vigorous search. That is, as long as every one who fit the profile was treated the same way.

I’ve traveled to places like Hamburg, London, Santiago, Lima and Panama way before today’s terrorists were a glimmer in their fathers’ eyes. And I can tell you that even back then countries in Europe and Latin American could’ve cared less about hurting the feelings of anyone who gave the slightest indication of being up to something wrong.

And even today, Costa Rica, which doesn’t have an army, puts handguns on the hips of workers who man the security check points. Do you think they practice racial and ethic profiling? I can almost guarantee it.

However, that’ll never happen here. We live in a country that’s now afraid we might offend certain groups. Yet those same groups use that fear against us. Go figure.

So in the meantime, they best you can do, fellow travelers, is to stay alert. And just hope the screaming baby sitting in its mother’s lap next to you doesn’t need a diaper change 59 minutes before your flight is supposed to land.

Happy Traveling,

George

Merry Christmas!

Wishing you and yours a safe, a healthy … and a very Merry Christmas! George and Linda

Gold Isn’t the Only Way to Protect Your Nest Egg

Remember back in 1980 when inflation almost hit 15%?

Retirees on fixed incomes felt it the most. Imagine what it was like to have your food, electricity and prescription costs going up each month while your pension, Social Security and interest income stayed the same. The inflation numbers are pretty mild now. But as our Federal deficit continues to swell to historic highs, many investors fear that the inflationary times of the 1980s are coming back. And that could help explain why gold has been on a run … up almost 30% this year. Now the gold bulls are screaming: “I told you so!” However, as often happens when everyone thinks that something is a great idea, a buying frenzy might be evolving in gold ... I’m not saying you shouldn’t own gold. What I am saying is that if you’re one of the 76 million boomers on the verge of retiring, you might want to consider another way to protect your next egg from what is sure to be skyrocketing prices during your retirement years. Real estate has taken a bloody beating over the past three years. In fact, U.S. homeowners have lost about $5.9 trillion since the housing market’s peak in March 2006. And foreclosures continue to rise. But there are pockets in the U.S. that are starting to stabilize. You can see the numbers for yourself by clicking here. Meanwhile, other parts of the world are already seeing property values turn around. In China, prices are soaring! So much so that Chinese investors are lining up for buying tours in the U.S. to take advantage of real estate deals here. Even London is starting to see a comeback. Developers can’t keep up with the demand for small, single-family homes. There are other hot markets, too: Israel’s residential real estate went up 13.7% in the third quarter. Singapore’s jumped 15% at the same time. Now you’re probably not going to travel to Shanghai, London or Tel Aviv to get your piece of what could be the next global real estate boom. But you can buy stocks in some of the companies that are involved in these markets. These could include developers, real estate agencies and home builders. Mutual funds and exchange traded funds (ETFs) specializing in these areas can be a great way to go too. The point I want to make is that gold is not the only way to protect your retirement portfolio from runaway inflation. And real estate could offer some of the best bargains we’ve seen in a long time. Best wishes, George

A Classic IRA Mistake

During my 20-plus years in this business, I’ve seen a lot of clients make mistakes in handling their IRAs. And the following e-mail from a reader is a good example of one of the more common ones: “I have an IRA with a brokerage house. During the year (looking to be conservative) I bought CD's at 6 different banks. I funded the CD's by writing checks from my IRA brokerage account to my IRA at the various banks (never holding the checks more than a minute). Now I have been told that because I wrote the checks as I described above, they’re taxable events, and I owe large amounts of income tax. One bank told me they would send me a form 5498 and that would solve the problem. Can you give me any advice?” My answer: “No doubt, you made a simple transaction very complicated. You should have used a "custodial to custodial" transfer. It's a straightforward one-or two-page form that all financial institutions use. But what's done is done ... The brokerage firm will issue a 1099-R that will show the checks you wrote as taxable distributions. A copy will go to the IRS, so you can't ignore it. I suggest that when you do your tax return, you include:

• A letter that explains what you did.
• Copies of the brokerage statement that shows the withdrawals.
• Copies of both sides of the canceled checks.
• Copies of confirmations from the banks showing when the money was deposited.
• Your phone number and e-mail address so the IRS can get back to you if they have any questions.

Another thing … try to get all the banks to give you a form 5498. This shows that you made a rollover contribution to your IRA and include those with your letter to the IRS.” The lesson here is that before you move IRA or retirement plan money from one account to another think through the ramifications of what you’re doing. If you’re not sure, talk to your financial advisor or accountant. Otherwise a seemingly innocent transaction can turn into a kettle of worms. Best wishes, George P.S. I’m now on Twitter. You can follow me at http://twitter.com/efinancialwrite for frequent updates, personal insights and observations from my frequent travels around Costa Rica. If you don’t have a Twitter account, sign up today at http://www.twitter.com/signup and then click on the ‘Follow’ button from http://twitter.com/efinancialwrite to receive updates on either your cell phone or Twitter page.

Estate Tax Could Stay

The House voted this past week to keep the estate tax in play and exempt couples with estates of up to $7 million. This could certainly keep most Americans from worrying about their heirs getting socked with yet another tax from Washington. Let’s see how fast the Senate acts. If they drag their feet, though, the estate tax would be replaced in 2010 by a capital gains tax on anything over $1.3 million. This means that if heirs sell inherited assets, including homes, stocks and collectibles, they’ll have to pay between 15% and 28% on any appreciation realized since the assets were acquired by the deceased. In other words, the step-up in basis would be lost and could cost your love ones a heap of money. So let’s hope the Senate moves quickly. Stay tuned. Best wishes, George

This Show Misses One Important Point …

Do you ever watch HGTV? My wife and I enjoy most of their shows. She gets into Design on a Dime and My Parents’ House. I’m more inclined to watch House Hunters International and Bang for Your Buck. But there is one show that I think gives homeowners the absolute worst advice by omitting one all-important fact … The Income Property series shows how to turn a basement or other space attached to your home into a desirable cash cow. The show’s host, Scott McGillivray, does a heck of a job, too. He makes maximum use of the square footage, gets all the permits and produces a first-class product. The homeowners are always thrilled with how he turns a damp, dingy space into a beautiful rental unit. Yet no one talks about what happens afterward … Scott shows them the numbers: How much more the home should be worth, how much they should get in rent each month and how to word their ad. Next, the homeowners have to put on their landlord’s hat, which is what Income Property leaves out. I’ve owned and managed rental properties for over 20 years. And I’ve made my share of blunders. So I can give you firsthand experience of what these first-time landlords could realistically be in for. Imagine renting your freshly-finished basement apartment to a couple of college students … say two women … at the beginning of the school year. They work part-time and can easily come up with first and last months’ rent plus a security deposit. You run a background and credit check on each. No problem. You even call their parents. You lay down the rules: No smoking, no overnight guests, no pets, no loud music, etc. You have them sign a 9-month lease. September, October, November and December checks come in on the first of each month. “Wow, this is sweet,” you tell yourself. In January, however, there’s a bit of a problem. Christmas bills have caught up to the girls, and they can only afford to pay half. But they say that they’ll get caught up by the end of the month. It happens to everybody … the post-Christmas cash flow crunch. February rolls around and they’re still behind. Car problem this month. Plus there’s another little kink: One of the girls is moving back home ... misses her family. But not to worry, the remaining roommate has the perfect replacement. You meet the replacement. Seems nice enough, has a job and gives you cash to cover the past due rent. Things are looking good again. However, three weeks after she moves in, your driveway is packed full of cars when you leave for work in the morning. The neighbors across the street are complaining about the beer cans thrown in their yard. And you swear that you heard a dog’s barking coming from the basement while you were sitting in your living room watching TV. You speak nicely to both girls. They apologize. But the same thing happens the following weekend. You get a little firmer with them. Doesn’t work. Now you’re pissed. You remind them in writing that them must knock it off or move. Things calm down over the following week. But they’re a month behind on the rent. Then one day you get home early and decide to peak in the basement window while no one is there. The place is a pig sty! You never knew that two women could trash a place so badly. And there’s a big white mutt of a dog asleep on the brand new couch you bought. Now you want them gone. You confront them both and give them two weeks to get out. You feel better now. The two weeks pass. They haven’t left. You confront them again. They have no place to go, they say. Plus one has lost her job. So no rent money for you. This saga could go on and on until you go through the court system to evict these tenants, which could take a month or two. In the meantime, they’d be enjoying the beautiful apartment you built, rent free, just below where you live! How stressful would that be? I realize, of course, that property management is beyond the show’s concept. The producers want to show readers how to turn chicken s*** into chicken salad, which is certainly fine. And they do it quite well. The point I’m trying to make is that owning a rental property is a whole lot more than spending tens of thousands of dollars to convert your basement into a hip apartment and waiting for the check to come in each month. And having tenants, whom you very well may have to do battle with someday, living right under your nose is, in my option, just not worth it. Best wishes, George

Retirees and Those Close to Retirement Piling Up the Red Ink

According to the Employee Benefit Research Institute (EBRI), retirees and those close to retirement are finding themselves with rising levels of debt. The EBRI’s study found that the average debt for someone 55 and older had shot up almost 120% since 1992 to $70,370. Credit cards were a contributor to this increase. However, housing refinancing was the biggest culprit! This is the result of Americans who bought during the housing boom and then turned their homes into ATM machines as market prices seemed as though they’d go up forever. So now our generation faces one more obstacle for retirement security. If your debt is continuing to mount and you’re serious about retiring within the next 5-10 years, you better start getting your act together, Boomer. Put together a budget. Cut out everything you possibly can and become a debt hater. Put as much as you can into your 401(k) plan, your IRA and your Roth IRA. And save, save, save because you’re going to need every nickel of it. Best wishes, George

New Study Bears Grim News for Boomers Near Retirement

The Center for Retirement Research at Boston College just updated its National Risk Index. And it’s not a pretty picture … This study measures how prepared Americans are for retirement. It looks at households’ financial assets, housing and changes in Social Security benefits. And it concluded that 51% of Americans aren’t prepared to retire at age 65. That up from 44% in 2007. But hold onto to your hat fellow Boomers … those numbers don’t include the costs for heath care or long-term-care! If they were, a downright depressing 70% of Americans won’t be able to retire. Costa Rica is looking better and better with each passing day. In the meantime, though, reduce your debts as quickly as possible. Cut up those credit cards and sock as much as you can into your 401(k) and IRA. And by all means learn how to protect your wealth against the greatest risk you face. Click here to learn more. Best wishes, George

35 Million Workers About to Take It On the Chin

Our officials in Washington claim that only the “big money earners” will pay higher taxes under the “redistribution of wealth” policy that’s overtaking our country. Well here’s an example of how those benevolent folks are about to dip into our pockets a little deeper … Flexible Spending Accounts (FSAs) are a sweet benefit that lets employees pay some of their medical expenses with pretax money. That means if you’re in the 25% tax bracket, you could save 25% on out-of-pocket medical costs for things such as prescriptions, eyeglasses, and dental work. So you can understand why FSAs are popular. In fact, 35 million workers, with an average salary of $55,000, participate in them!

Your employer sets the amount you can set aside each year … usually between $3,000 to $5,000.

But within the health-reform bill that Congress is debating, the most you could contribute will be $2,500. The means the average worker stands to lose $625 in tax savings. The House limits wouldn’t take effect until 2013. The Senate’s limits in 2011. There you have it: Another example of Washington looking for every dollar it can find to fund politicians’ irresponsible spending ... even if that means going after American’s workers. Best wishes, George

Holy Smokes … Prices Have Gone Up Again!

MetLife just released its Market Survey for Long-Term Costs, and it seems that prices have gone up since I wrote A Boomer’s Guide to Long-term Care. On page 4, I had written that the basic cost of long-term care in the U.S. was:

• $66,795 per year for a semi-private nursing home room,
• $75,190 per year for a private room,
• And $19 per hour for a home health aid.

But that was back in 2006! Now, according to MetLife, the cost has shot up to:

• $72,270 per year for a semi-private nursing home room,
• $79,935 per year for a private room,
• And $21 per hour for a home health aid.

The newest numbers don’t mean that my book is out of date. All of the strategies I give to protect your wealth and assure you can get the quality of care you want are still as valid as the day I wrote them. And as far as ObamaCare doing anything to help you … according to The Washington Post, here’s what Sen. Kent Conrad (D-N.D.) had to say: "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of." The deal is that you would begin paying premiums immediately, but you couldn’t get any benefits until 2016. Then you’d be eligible for $75 a day, an increase since I reported on September 24. Let’s break out the calculator ... In today’s dollars, $75 a day would cover about 34% of the cost for a private room ($75 ÷ $219) … not a heck of a lot. But remember, the Obama plan won’t pay a single cent until 2016 … six years from now. So if we figure a 5% annual increase (health care costs typically outpace inflation), a $219 room will cost $293! And the $75 will only represent 25% of your cost. You’d be $218 short each and every day you need care. That’s a whopping $79,570 out of your pocket for the year. If you are willing to stay in a semi-private room, the amount you’ll have to cough up a mind-blowing $69,474. I’ll probably wait until ObamaCare passes before updating A Boomer’s Guide to Long-term Care … just so the numbers are accurate. In the meantime, I urge you to pick your copy. Simply click here. Because no matter what Washington throws in the kettle, it’s not going to be enough in case your health changes. Best wishes, George

A Perfect Plan Goes Awry

Last Tuesday, I gave you a little insight into what the Treasury Department is doing to keep track of people trying to hide assets overseas, specifically in Switzerland. I even made comment in jest regarding Costa Rica … my home away from home. Well it seems that if you’re thinking that Costa Rica is off the IRS’ radar, no matter what your defense may be, you better think again. A.M Costa Rica reported that the IRS had cuffs put on three U.S. expats who thought they could outfox Geitner’s posse. The three are accused of running a tax scheme that teaches U.S. citizens why they don’t need to pay income taxes. Two of them, a husband and wife, didn’t pay 2001 income taxes, sold their assets in California and filed a false bankruptcy petition. Tax fraud in Costa Rica is nothing new. But what’s interesting in this case is that the two women then went on a PR campaign to stay in Costa Rica as political refugees hoping to capitalize on the country’s tendency to welcome female fugitives from the U.S. Their sob stories didn’t work, and they face a boatload of charges. You can read the complete tale at: http://www.amcostarica.com/091509.htm#32. Best wishes, George

Question on Pension Buyouts

I wrote an article titled Lump Sum Versus Regular Pension Payments. It went into what you should consider before accepting an employer’s offer to cash out your pension plan. This piece generated quite a large number of e-mails from readers, including this one from Sandra:

“How does the lump sum work? I took a lump sum when I retired from Westinghouse. The IRS keeps wanting me to pay on the money I receive every year from Westinghouse. I used the Lump sum form and they have denied it. Please help me.”

I have a few concerns that I’ve passed on to Sandra:

1. Did she simply take the payout from her former employer and stick it in her checking account? 2. Is she over 70 ½ years old? If so, required minimum distributions from her IRA might apply.

I hope she gets back to soon; the IRS loses its patience very quickly. In the meantime, you can read the complete article at: http://www.investopedia.com/articles/retirement/05/lumpsumpension.asp. Best wishes, George

Secretary Geitner Wants to Know …

There has been a lot of press lately about the IRS clamping down on fat-cat investors trying to hide money in Swiss bank accounts. But did you know that not one … but two … overseers of our country’s money want to know about all the loot you’re stashing outside the U.S? It seems that you’re supposed to report financial assets held offshore to the IRS and the Treasury Department. Strange … considering that the first is part of the second. And if you don’t, you could be looking at a hefty fine: Up to $10,000 per year if it’s simply an oversight on your part, or more if Geitner’s posse can prove that you intentionally tried to deceive him. Any financial asset worth more than $10,000 must be reported. This includes:

• Bank accounts
• Life insurance
• Trusts with foreign accounts
• Discretionary beneficiaries of trusts
• Gold
• IRAs
• Pension plans
• Annuities

It’s understandable that the IRS wants to get its piece of investment income and capital gains you earn overseas. But making you report those accounts to the Treasury Department on its Foreign Bank Account Report (FBAR) is too much. And don’t count on your tax preparer to remind you to file … many aren’t aware of it. How about the Spam, guns, and ammo you’ve stockpiled in the hills of Costa Rica? I suppose that in the near future Geitner will want to keep tabs on those, too! And what about the wealthy legal immigrants who keep money in their home country? If they don’t notify the Treasury, they could be in a heap of trouble. Yet we coddle the illegals who flood across our border each day! … go figure. Best wishes, George

What the Government Give … the Government Taketh Away

As I reported just two days ago, the outlook for Social Security recipients was bleak. Now it’s official … the Social Security Administration announced that for the first time in 35 years, seniors will not be getting a cost-of-living adjustment for 2010. The average monthly payout will remain at $1,095. The lesson for Boomers: Make the most of your 401(k), traditional IRAs, and Roth IRAs because Social Security is no longer the sacred cow it was for your grandparents. Best wishes, George

No Raise For You!

Remember the Seinfield episode where George asked for a piece of bread and the Soup Nazi growls, “No soup for you.” Today’s seniors who depend on Social Security have been given similar bad news when it comes to an increase in their benefits ... For the first time in 35 years, Social Security beneficiaries probably won’t receive a cost-of-living adjustment ... the yearly increase that helps them make ends meet and keep up with rising prices. Millions of seniors will see their checks stay flat – or even decrease – while the costs of prescriptions, utilities and health care continue to climb fast. The official measure of inflation – the consumer price index (CPI) – has not increased in this crummy economy. Yet the things seniors need most are skyrocketing! The bad economy this year has hit seniors harder that most other folks. They spend an average of $4,400 out of pocket every year on health care alone. With home values dropping, losses in the stock market, and low returns on interest bearing accounts, it's no wonder that more Americans are counting on the promise of Social Security. My point in bringing this to your attention is to highlight the importance of not depending on the government for your wellbeing, including your retirement. Take responsibility for yourself: Get your finances in order, chop your expenses to the bone and save … save … save! Best wishes, George

A Special Tax Break Coming for High-Income IRA Owners

If your household’s modified adjusted gross income (MAGI) is above $100,000, you can’t convert your IRA to a Roth IRA. That means you miss out on all the great benefits Roths offer, such as tax-free buildup, tax-free withdrawals, and no minimum distribution requirements. But come January 1, 2010, high-income earners who were previously unable to convert their IRAs into Roth IRAs will be allowed to do so thanks to the Pension Protection Act of 2006. When you convert from a traditional IRA to a Roth IRA, you’ll owe tax on the amount converted. However, the revised rules give you a one-shot opportunity to spread the additional taxes out over 2010, 2011 and 2012. Consequently, you could put off the final tax payment until 2013. When you look all the red ink flowing out of Washington these days, this could very well be a ploy to bring in some quick cash. After all, money left in traditional IRA might not get taxed for decades! Even so, no matter what the Treasury Department’s motives are, this is a heck of a deal that’s worth checking out. Best wishes, George

Is Your Life Insurance About to Blow Up Your Estate Plan

Many people bought life insurance so their beneficiaries will have immediate cash to pay estate taxes, income taxes and other expenses that pop up after they die. The strategy certainly had merit: Pay premiums for a set number of years; then the cash value would generate enough of a return to cover the cost of insurance. In other words, the policy would pay for itself. This, of course, assumed that interest rates would remain high and the stock market would continue booming. However, now that interest rates are next to zero, and the stock market has taken a dump, scores of universal life and variable universal life policies are in trouble. And policy holders are shocked when they’re notified that their policies are about to lapse. This means they could end up paying premiums a lot longer than they ever expected! If you haven’t taken a close look at the policy you bought as an estate planning tool, you might want to dig out a recent statement. Compare the cash value to the projection you received when you were sold the policy. If the numbers aren’t close, contact your agent. And if your agent doesn’t provide an answer you understand, find an independent insurance expert to evaluate the policy for you. Best wishes, George www.e-financialwriter.com

Forgoing a Vacation Could Boost Your Retirement Fund

Can you give up a few days on the beach, a week at the in-laws’ house or a trip to Disney World? If so and you’re willing to stay on the job, you might be able to use those vacation days as contributions to your retirement plan. The Treasury Department now gives companies the option of allowing employees to transfer unused vacation pay into 401(k)s, Keogh and profit-sharing plans. This applies to sick-days and personal days, too. The existing contribution limits still apply … $16,500 … $22,000 if you’re over 50 years old. So as long as you don’t mind disappointing your spouse, your kids, or your mother-in-law, a vacation relinquished today could pay off in spades when you retire! Best wishes, George

Long-Term Care Gets a Little Attention From Lawmakers

Not everyone in Washington has ignored long-term-care in the Obamacare debacle. Even members of Obama’s party have realized that there are shortfalls in his healthcare plan … Senators Maria Cantwell, D-Wash and Herb Kohl, D-Wis. introduced the Home and Community Balanced Incentives Act of 2009. This act establishes financial incentives for States to expand the provision of long-term care services to Medicaid beneficiaries who do not reside in an institution. Then there’s the late Senator Edward Kennedy’s health care reform bill that includes a public-funding option for long term care. It’ll pay $50 a day minimum in LTC benefits as long as recipients have paid premiums for at least five years. At best, both of these bills would provide a morsel of relief for Americans in need. However, the chances of passage are slim. Reason: They have been sent to committee where majority of bills and resolutions die a slow death. And even if they are passed, the cost is astronomical. According to the Congressional Budget Office, the Kennedy bill is estimated to cost a whopping $1 TRILLION over 10 years … an amount taxpayers can ill afford. This tells me that anyone who is counting on the government to fix the long-term care problem is living in la-la land. The truth is that you’re going to be left fending for yourself. So your best solution is to take responsibility for protecting your wealth and assuring that you’ll receive the best possible care when need. And that means understanding what the government will and will not pay when your health changes. I suggest you take a look at my book, A Boomer’s Guide to Long-term Care. It could very well be the best investment you make this year! Best wishes, George

Refusing an Inheritance

David T. in Wisconsin asked this question about an article I wrote on refusing an inheritance: If a beneficiary disclaims an inheritance, and would have had to use the inheritance to pay for managed care in a nursing home, is that money subject to a "look back"? Thanks. Click here to read the article. No, David. As long as the beneficiary never received the money, it’s not subject to a “look back” for Medicaid purposes. Best wishes, George

Two Reasons Why This is a Good Time to Convert …

Despite the recent run-up, the S&P 500 is down by about 13% from a year ago ... and 33% off its October 2007 high. So as long as you qualify, now could be a good time to convert your traditional IRA to a Roth IRA. You see, when you make the conversion, you’ll have to pay ordinary income taxes on the amount converted. So compared to where the markets were last year, you stand a good chance of paying less tax now than you would have back then. And the beauty of a Roth is that the money will never be taxed again. Plus, there’s the issue of higher income taxes in the near future ... The U.S. is expected to have a $1.58 trillion deficit this year. And Treasury Secretary Geithner said at a recent town hall meeting that getting the nation’s fiscal house in order will require doing “difficult things.” Does that mean higher taxes for Americans? Geithner wouldn’t say. But right now, we have some of the lowest tax rates in history. So there’s a darn good chance that rates will go up to pay for the government’s ambitious spending. So when you combine lower stock values with relatively low tax rates, now could be an excellent to convert that traditional IRA and pay the taxes this year rather than later. Best wishes, George

Does Obamacare Ignore the Biggest Risk You Face?

As the health care reform debate drags on, one area is not getting a lot of attention: Long term care. And several of those who are very close to this issue are concerned. For example, former Majority Leader Tom Daschle, D-S.D., participated in a forum in Washington on the future of health care for seniors. Here’s what he had to say: “… so little attention is being paid to long term care. The repercussions of this explosion are huge.” The forum was sponsored by the Volunteers of America … the third-largest non-profit provider of nursing care in the U.S. and the seventh-largest non-profit operator of nursing homes. Charles Gould, the organization’s national president, said this: “This is the greatest problem they have, that Medicare doesn’t provide long-term care.” Gould added that today, 10 million people are in need of long term care. That number is expected to climb to 15 million in less than 10 years, and 60% of them will be seniors. So don’t cancel those long-term insurance policies just yet. Obamacare might leave you with some expensive gaps. George