Tuesday, December 29, 2009

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,


Thursday, December 24, 2009

Merry Christmas!

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

Sunday, December 20, 2009

First Wave of Boomers Having a Tough Time

A recent online survey by Golden Gateway Financial of 300 people 62 or older found that 30% of the respondents said they’ve slashed spending and have made other sacrifices just to get by. What’s more …

  • 27% said unexpected medical expenses have prevented them from paying other bills,

  • 25% have postponed dental and eye exams to save a few bucks,
  • And 15% have stopped taking medications or reduced the dosages because they cost too much.
    • This is indeed sad. And unfortunately it’s a prelude of the “recession lifestyle” that many boomers face. My suggestion: If you are still working, slash expenses to the bone and put away as much as you can into your 401(k) and Roth IRA. And if the above just is not possible, consider looking at retiring where you can actually live quite comfortably on Social Security alone. Costa Rica would be my choice … excellent climate, friendly locals and top-notch medical care. But it might not be your cup of tea. Nevertheless, now is the time to put together a plan “B” because retirement for the middle class in the U.S. is quickly becoming nothing more than a fantasy. Best wishes, George P.S. I’m heading to Costa Rica on January 23. And I’ll spend some time with my good friend, Costa Rica retirement expert, George Lundquist. You may want to check out George’s tour to see if retirement in this paradise is right for you.

      Friday, December 11, 2009

      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

      Tuesday, December 8, 2009

      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.

      Sunday, December 6, 2009

      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

      Tuesday, December 1, 2009

      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