Saturday, February 27, 2010

OMG … Obama’s Sounding Like a Republican!

Immediate annuities were once part of the foundation for many Americans heading into retirement. Safety was their biggest concern. And with an annuity all they had to do was pay in a lump sum to get a guaranteed, fixed income that they could not outlive.
But then the stock market started going up … up … and up. And annuity owners watched in envy, settling for lowly returns, while stock market investors stuffed their pockets with double-digit payoffs. The pendulum then swung the other way … and new retirees ignored the safety of annuities in search of stock market gains.
We all know what happened next … the market tumbled. Now the boring, oft-ignored annuity is getting a closed look by wary Boomers, including President Obama.
Last month, President Obama’s Middle Class Task Force concluded annuities can help Americans secure a better retirement. Imagine, a politician advocating, in a round-about way, that Americans should start assuming more responsibility for their future rather than relying on the government to bail them out!
Obama must have taken a look at the report by the trustees of Social Security and seen that the system will start running a deficit in 2016 and be flat broke by 2037. You can click here to read the report for yourself.
For decades, financial advisors and insurance agents have been suggesting annuities to keep clients from running out of money during retirement. And finally the government is onboard with the idea.
Immediate annuities can replace the pension plan your employer discontinued, or perhaps never offered. Plus they can supplement your Social Security income. There are some tax benefits, too. Income from an annuity is only partially taxable since some of it is a return of principal. This could help reduce the taxability of your Social Security benefits. You might even consider using an annuity to cover your fixed expenses each month (mortgage, car payment, etc.).
Check with your financial advisor or insurance agent to get an idea of how much income an annuity could pay you. There are online sources too, such as In its most basic form, an immediate annuity is a contract issued by an insurance company in which you hand over a chunk of money in return for a guaranteed lifetime income. But there are a lot of bells and whistles available, such as joint payout and inflation protection. So a financial advisor or an agent could be the better source to explain all of these and help suggest the best option for you.
Will President Obama or anyone in his administration run out and buy an annuity? It would be interesting to track. But I doubt it. Most of those guys are loaded. And just like Congress, they have a sweet setup … they’re covered under the Federal Employees’ Retirement System. Nonetheless, I’ll give Obama credit for stepping over the line and suggesting that individuals and private industry can come up with a better way to secure our retirement.
Best wishes,

Thursday, February 18, 2010

French Give One More Reason for Moving to Costa Rica

The mountains, the beaches, the fresh air and the stress-free lifestyle … all great reasons for retiring to Costa Rica. But now, the French just gave you one more! It seems that France has classified Costa Rica as a tax haven … uncooperative because it has not implemented internationally agreed tax standards. The French also go by the standards set by the Paris-based Organization for Economic Co-operation and Development (OECD). It identifies three key factors in considering whether a jurisdiction is a tax haven:
1. Nil or only nominal taxes. Non-residents can escape high taxes in their country of residence.
2. Protection of personal financial information. The country has laws that protect businesses and individuals from scrutiny by foreign tax authorities. 3. Lack of transparency. The country can make it difficult, if not impossible, for other tax authorities to apply their laws effectively. And now, since Costa Rica is considered a tax haven, the French are as mad as a wet hen! In fact, they plan to tax dividends, interest and license fees paid by French firms to people or other firms domiciled in tax havens at 50% rather than the current maximum of 33%. Well, as far as I’m concerned, the Costa Rican government deserves a big round of applause for indirectly telling the French and everyone else to take their tax laws and shove them where the sun doesn’t shine! Maybe if Europe and the U.S. would manage their finances better, hard-working citizens wouldn’t be fleeing with their money to countries such as Costa Rica for some tax relief. Best wishes, George
P.S. For the complete reporting on the French's war against tax havens, click here.

Tuesday, February 16, 2010

Wealthy Americans Worried, Too

It’s not just the middle-class Boomers who are worried about their financial future. According to a Bank of America survey, 53% of Americans with investable assets of $250,000 or more are afraid they won’t have enough money to last through their retirement years.
Of those who are retired, 59% say rising health-care costs are a big concern. And among those who still work, more than half made spending cutbacks last year. Retirement has taken a back seat, too, with 29% postponing the day they can tell the boss to take a hike.
Also interesting is that 67% of the retirees claim they didn’t work with a financial advisor for their retirement planning. Fifty percent of the non-retirees said they have an advisor, and 44% intend to use one to help them grow their 401(k)s after they retire.
The bottom line is that:
1. The majority of above-average net worth retirees are not secure about their future. 2. There’s a growing trend for working Americans to hire a financial advisor to help map out their retirement or at least to get a second opinion on what they’re doing. 3. The wealthier people are finally realizing that they can’t rely on the government and must cut expenses. Most importantly, you might consider following their lead — spending less and saving more — and taking responsibility for your future.
Best wishes,

Saturday, February 13, 2010

Don’t Let This Roth Conversion Tax-Trap Surprise You

Converting a traditional IRA or employer-sponsored retirement plan to a Roth IRA can make sense for many boomers. Once converted, you and your beneficiaries won’t ever have to worry about income taxes on the earnings and withdrawals. Plus you can kiss the required minimum distribution rule goodbye. And to make it better yet, this year the income restrictions have been lifted. So anyone, regardless of income, can do the conversion. Most people and their advisors know that when you convert, you’ll have to pay ordinary income tax on the pre-tax contributions and earnings converted. And if you convert an annuity, you’d probably assume that the conversion value would be the surrender or cash value. But you might be wrong … and you could get socked with some unexpected taxes. You see, your annuity might have guarantees that the IRS considers taxable. For example, a guaranteed minimum withdrawal benefit allows you to take out up to a certain amount every year — such as 5% or 6% of your initial investment — no matter how your investments perform or how long you live. Considering the hit the markets have taken since October 2007, these guaranteed benefits could be worth more than the cash value of the annuity. So before you convert your IRA or employer-sponsored plan to a Roth, make sure you understand what kind of assets you’re converting. And if you find an annuity among them, contact the issuing insurance company for the correct value so you won’t have a big surprise come tax time. Best wishes, George

Tuesday, February 9, 2010

Gulf of Nicoya View Homesite in Costa Rica

I just returned from Costa Rica. While I was there, I got to spend time with my good friend, George Lundquist. George runs a dynamite tour for people thinking about retiring to Costa Rica. He also has several developments going on in the Barbacoas area. Here’s a glimpse at just one of them: Feel free to post any questions or comments you have about retiring to Costa Rica. And if you’d like more information about George Lundquist’s tours, click here. Pura vida! George