Who Will Rescue the Rescuer?

Today, all you have to do is turn on the TV or open a newspaper in order to hear another depressing story about the state of the U.S. economy and a magnitude of pending corporate failures. Many are watching eagerly to see if the government is going to bailout the likes of the automakers and some of the largest financial institutions in the world, and to what extent this is ultimately going to cost the American taxpayers. But the real question should be, “Who’s going to bail out the government when it can’t make good on its promises?”.

What do I mean?

Without major intervention, the government is going broke, and it's due to the generational tsunami that is the baby boomers! The problem is America has approximately 80 million people born between 1946 and 1964 that were essentially promised the world in the form of Social Security, Medicare, and pension benefits that are woefully underfunded to make good on these promises. Unfortunately, it’s very likely that promises will be broken since the monetary value of these future payments from programs like Social Security and Medicare are approaching $53 trillion dollars. That equals a bill of almost $174,000 for every man, woman, and child in the U.S.! Looks like I'm going to have to skip the cheese on my Whopper....

According to David Walker, former comptroller general and head of the Government Accounting Office,

“By the time today’s college graduates are ready to retire 40 years from now,the only things our government will be able to pay for are interest on the federal debt and some of the Social Security, Medicare and Medicaid benefits. All other parts of the federal government will be closed and out of business.”

Do I have your attention now? Walker also stated,

“The facts aren’t Democrat or Republican, the facts aren’t liberal or conservative; the facts are the facts. Our financial condition is worse than advertised. We need to act soon because time is working against us.”

Here’s some of the more startling statistics according to a study conducted by the National Center for Policy Analysis which state without a meaningful reform to entitlement programs like Social Security and Medicare and a major increase in the government’s revenue:

• By 2010, the federal government will have to stop providing for 10% of the programs it is currently funding.



• By 2020, the government will have to stop funding 25% of the services it currently provides.



• By 2030, it will only be able to provide 50% of the services it provides.



• By 2050, Social Security, Medicaid, and Medicare will consume nearly the entire federal budget.



• By 2082, the entire federal budget of the U.S. government will be consumed by Medicare alone.

I don’t know about you but I’ve grown accustomed to things like roads and schools being provided for me in exchange for my hard-earned tax dollars, but how are they going to be funded if we stay on the fiscal path we’re on? Anybody?

Raising Taxes or Cutting Benefits

One potential solution is to raise taxes, but that’s putting a Band-Aid on a gunshot wound considering the tax hike would have to be about 2.5 times today’s rates across the board to make a meaningful difference. I don’t know of anyone that wants to work 6+ months out of the year to pay their tax bill.

Another major hole in the tax argument is we have to consider that America is aging as a society due mainly to the baby boomer population and advances in medical technology. It’s projected that by 2030 approximately 1 in 5 people in the U.S. will be over 65 years old, and there will be something like 2 retirees for every American worker. It’s going to be impossible for so few workers to financially support the programs providing benefits that were promised to the baby boomers.

Promises will be broken.

My personal opinion is it will be a mix of reduced benefits in the future with higher taxes for all classes. There’s no more of the “rich” or whatever you call the top income earners footing the bill for everyone else. The math is impossible.

So What Should I Do?

According to Paul Volcker, former chairman of the Federal Reserve, in the book I.O.U.S.A.: One Nation. Under Stress. In Debt.

“Generally, people don’t change their behavior until they’re forced to. With
respect to the fiscal crisis looming out there in the future, we'll see whether a
democracy can deal with an obvious problem that’s going to be present in not too
many years. The earlier we take action to deal with it the better.”

The truth is Americans are going to have to re-evaluate what they expect from the government and are going to have to learn how to pay for what they’ve counted on Uncle Sam to provide in the past. The best advice I can give anyone is to stop counting on the government, or your company, or home-run appreciation on your home to provide for your retirement. You, along with the help of your financial professional, are going to have to take steps to make sure your financial future is secure with or without the government’s help.

Acacia Financial Partners & MassMutual to Provide Free Life Insurance to Families in Fargo, ND.

On December 16th, 2008 from 4pm-6pm we will be offering a $50,000 life insurance policy to working class families in the Fargo, ND area, at no cost. The program, called LifeBridgeSM, is provided through MassMutual Life Insurance Company who currently expects to issue a total of one billion dollars in free term life insurance coverage through its national philanthropic program. The policy proceeds help to pay for the education of eligible children if their insured parent or legal guardian dies during the ten year policy term.

How Does The Program Work?

If an insured parent or guardian dies during the policy’s term, MassMutual will deposit the $50,000 face amount into a trust administered by The MassMutual Trust Co., FSB, a wholly owned subsidiary of MassMutual, on behalf of the children. The trust will pay the educational expenses of the children directly to the educational institution they attend.

Qualifications

Parents and legal guardians between the ages of 19 and 42 may apply for this insurance coverage. They must have one or more dependent children under the age of 18, be working full or part time with a total family income of between $10,000 and $40,000, and be permanent, legal residents of the U.S. They must also be in good health, as determined by MassMutual’s underwriting guidelines.

How Can I Participate In This Program?

Parents and legal guardians may apply for this coverage during a special event on Tuesday, December 16, 2008 from 4:00 p.m. – 6:00 p.m. at Acacia Financial Partners, 23 Broadway N, Suite 305, Fargo, ND; reservations are necessary. For more information or to apply for insurance coverage through MassMutual’s LifeBridge program, contact us at 701-364-0371 or via e-mail at brakowski@finsvcs.com.

http://www.free-press-release.com/news/200812/1228338484.html

Finding Joy

Today I received a link to a great, albeit short, video that's filled with some truly inspiring quotes. Many of them are by great people like Norman Vincent Peale and Ralph Waldo Emerson, with my favorite quote being, "Sometimes in the winds of change you find your true path."

It added some joy to my day, so I wanted to pass it on!

Finding Joy Movie

When A Loved One Needs Care: My Family's Story

As many of you are aware, one of the main reasons that brought me to Fargo, ND is my Mom. Ever since I can remember my Mom has been living with Multiple Sclerosis, a debilitating disease of the nervous system, but it hasn't been until the past 5 years or so that the disease has progressed to the point that she couldn't do everyday activities like cooking, bathing, or going to the bathroom without assistance. What brought me to the area was the fact that she was getting worse and worse and would likely need some sort of professional care in the foreseeable future, so we wanted to make sure that her financial matters were taken care of ahead of time. But instead of helping with things like her will, I ended up becoming my mother's caregiver for about 3 months.

It was easily one of the most stressful times of my life.

"Don't Worry, We'll Take Care Of You!"

My little sister and I would always say that since she took care of us when we were younger, we'd do the same thing for her when she needed it. It's only fair, right? Something I hear all the time when talking to clients about long-term care insurance is, "I don't need it. My kids will take care of me.", and while I can certainly relate to the feeling of wanting to help a loved one, it's so much more than just getting the mail and picking up groceries once a week as I soon found out.

According to a USA Today/ABC News/Gallop poll of baby boomers:

• 41% have a living parent they are providing care for (financial help, personal care or both).


• 8% of boomers say their parents have moved in with them.

Of those who are not caring for an aging parent:

• 37% say they expect to do so in the future.


• About half say they're concerned about being able to provide such care.

An Average Night


"Brian!"

My eyes slowly open, and as I lay there trying to figure out if my Mom actually called my name or if it was just another nightmare, I look at my alarm clock: It's about 3:30am. I pause for a few seconds before trying to go back to sleep.

"Brian!" she yells again even louder. "Not again..." I think to myself as I try to clear the cobwebs out of my mind. "I just got up 2 hours ago to help her out of bed. What's wrong now?" Even though I'm a little cranky from being woken up for the second time of the night, I try not to show it. As I turn the corner into the living room, I see my Mom lying on her stomach next to her electric scooter.

"I fell again...." She says, almost on the verge of crying.

My heart sinks as I see her lying face down on the carpet, unable to get up by herself, and I immediately feel guilty that just moments before I was upset about being roused out of bed in the middle of the night. After picking her up and setting her onto the seat of her candy apple red scooter, I start slowly heading back down the hallway, finally able to go back to bed. Or so I thought.

"Brian? Will you help me go to the bathroom?", she quietly asks. "I'm afraid I'm going to fall again."

Another fifteen minutes pass as I place her onto the toilet, waiting for her to finish before helping her pull up her pants and lifting her back onto her scooter. "Thank you, honey.", she says as she slowly drives her scooter into the kitchen where she'll spend the rest of the night watching Andy Griffith re-runs on TV Land.


"That's alright, Mom. I love you. Do you need anything else before I go back to bed?", I ask as I try to hide the growing depression and frustration I feel about the entire situation.

She softly replies, "No honey. You go back to bed. I'll be alright."

I hope so.

The Financial Impact of Being a Caregiver

According to the AARP, the "typical" unpaid caregiver:

• is a 46-year-old woman who works outside the home while taking care of a relative.

• is forced to cut the hours she works at her regular job by about 41%, causing her salary and benefits to fall sharply.

• loses an estimated $659,000 in lost in pensions, Social Security benefits and wages as she takes time off from work to care for her aging parents.

• reports having one or more chronic conditions, such as high blood pressure, at nearly twice the rate of all Americans. Of those who say their health has worsened because of caregiving, 91% report depression.

A Potential Solution

When it comes to the unfortunate time where a loved one is simply unable to fully take care of themselves anymore, there are a few potential solutions. In my opinion, the best option is to look at purchasing a long-term care policy for your loved ones. I'll be writing a more in-depth article about some other available options in the near future, but I'll end this post with a saying that an associate of mine told me about why he's so passionate about helping people with their long-term care needs.

"Long-term care insurance allows families to care about each other, instead of having to take care of each other."

I like that.

USA Today: Becoming "Parent of Your Parent" an Emotionally Wrenching Process

Retiring in a Bear Market: Is Now a Good Time?

The Golden Years?

Retirement is often called the "Golden Years" since it's supposed to be the time when you are rewarded for a lifetime of hard word. But is it still considered "golden" when all you can afford to do is sit on your porch due to a falling stock market in the crucial years right before retirement? This couple didn't think so.

Here's a video that I found on foxbusiness.com that outlines a few options that allowed a couple to be able to securely retire during turbulent economic times.

Fox Business: Bear Market Retirement

Give us a call to discuss some different options that will allow you to have that secure retirement you've been working for and for a FREE retirement plan analysis. If your current strategy isn't going to work, when would you like to know?

Senate Passes $800 Billion Bank Bailout Plan

So it's official: The US Senate has passed the recent bank bailout package, which is now up to $800+ billion, by a 74-25 vote late this evening. Treasury Secretary Harry Paulson issued this statement shortly after:

“This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going,” Paulson said in a statement. “I urge the House to act promptly to pass this bill.”

A few of the key additions which added more than $100 billion to the proposed plan included:

• Temporarily raising the current FDIC insurance limits for bank deposits from $100k to $250k.


• Adding an additional $100 billion worth of tax breaks for small business and middle-class individuals, which include mechanisms to help keep the alternative minimum tax (AMT) from hitting 20 million middle-class citizens.


• An additional $8 billion in tax relief for those affected by the recent hurricanes as well as natural disasters across the Midwest.

Due to the fact that there's rumored to be no spending cuts to offset these additional tax breaks could likely raise some concerns with more than a couple Democratic members of the House, I'm sure.

Click here to see how your senator voted

Should You Abandon The Stock Market?

Before we get started, let's all take a moment to breathe and to think about all of the things that we have to be grateful for, because let's face it, things could be a lot worse. If you're reading this, you're most likely sitting in an air conditioned (or heated depending on if you live in the Midwest) building instead of struggling to survive in a cave somewhere, so we all are really fortunate.

The Sky Is Falling!

It's understandable that the average investor has probably lost more than a little sleep over the past couple of weeks with news headlines many times reading like something from a financial doomsday or sorts. Sure, things like bank failures, Wall Street titans like Lehman Brothers falling into bankruptcy, a fledgling housing market, and proposed record $700 Billion bailout *(see below) congress is enough to make to make anyone think, "What's the point of all of my hard work?". The point right now is to take a moment to think things through, formulate a plan, and not to make any panic-stricken "the sky is falling" decisions.

An Emotional Roller Coaster Ride

When you formulated your investment plan for your future, did you have a time horizon of 2 months or 20 years? Of course it's going to be on the latter side! The point of any properly structured portfolio is to be diversified enough so that fluctuations in the market don't wipe out everything that you're working so hard to achieve!

Now when most people look at investing, they many times exhibit behaviors that I equate to being on an emotional roller coaster. Imagine for a moment the track of a roller coaster. You have peaks, dips, and even the occasional corkscrew, and while it's exhilarating (and maybe a little frightening) you end up safe and sound at the end as long as you finish the ride. What many people try to do when it comes to investing is they try to time when they enter and exit the market and, frankly, for most people that just doesn't work.

When do you think it the best time to get into the market: at the top or at the bottom?

When the market is constantly going up, like the bull market of the 90's, many investors can't get their hands on enough capital to invest because there's a feeling of euphoria that goes along with the "I can't lose!" attitude, but this is typically the riskiest time to invest since most "investors" (read: speculators) tend to get in at the top of the cycle and get out at the bottom.

Now does that sound like a good idea? Buy high and sell low?

The 14 Steps of the Investment Roller Coaster

Have you said or thought any of the following:

Euphoric: "I should quit my job and invest full-time! Look at the money I'm making!"
Startled: "I think I lost money this week."
Nervous: "What happened? What's going on?"
Scared: "I didn't know my account could drop so fast!"
Desperate: "There's no point of selling now. I've lost too much."
Panic-Stricken: "My account is down how much? As soon as I get back to even, I'm getting out."
Defeated: "Get me out now!"
Resigned: "I'm never going to invest in the market again!"
Hopeful: "The market looks like it's starting to turn around."
Encouraged: "I should have stayed in the market!"
Upbeat: "It seems like everyone is making money in the market. Maybe I should start investing again."
Confident: "I've already made some money! This is great!"
Thrilled: "Investing is easy! Maybe I should put all of my money in the market!"

Does any of the sound familiar? When do you think the greatest opportunity to make money in the market is: when everyone is buying and prices are at their peak or when everyone is selling, essentially resulting in an equities "clearance sale"? Multi-billionaire investment wizard, Warren Buffet, recently made a minimum $5 billion bet on Goldman Sachs and really on the financial system as a whole, and I'd say he has a pretty good track record!

Keep in mind, where one person sees nothing but despair in a situation, another sees great opportunity.

The main thing right now is to not lose sight of your objectives due to a short term panic. Review your portfolio with your financial advisor, make adjustments as necessary, and know that these current challenges, like everything does, will pass.

* On a side note there is a precedent due to the S&L crisis of the late 80's where the government spent approx. 6 years and $125 billion ($200 billion in today's dollars) to acquire nearly 1000 failed saving & loans, along with defaulted mortgages and foreclosed properties, allowing by these institutions to remain solvent and adding stability to the financial sector.

Politics & Investing: Which Party is Better For Your Portfolio?

Which political party is better for your investments, Republican or Democrat? With the 2008 presidential campaign in full bore, perhaps we can get some insights into the future by examining a few administrations from the past.

Republicans: Reaganomics

The nation was struggling when Republican Ronald Reagan took office in 1981. Inflation had soared to 14 percent, nearly one out of every 10 workers was unemployed, and Americans were adding a new word to their vocabularies: stagflation, the marriage of high inflation and unemployment with slow growth.

Reagan acted boldly to reverse the nation's economic malaise:

* Whittling the tax system down to two marginal rates of 28 percent and 15 percent,
* Launching a massive military buildup that both buoyed the economy and our image abroad,
* Championing free trade with Canada; opposing big unions; creating Individual Retirement Accounts (IRAs) and 401(k)s, slashing social spending and reasserting the United States on the world stage.

When Reagan left office, inflation had retreated to 4.1 percent, unemployment had fallen to 5.2 percent, 20 million more jobs had been created and the stock market was on a tear. During his two terms, the S&P 500 Index1 averaged an annual 14.4 percent, between four and five percent higher than its historic norm.

Democrats: "It's the Economy, Stupid"

In 1992, Arkansas Democrat Bill Clinton believed that the election hinged on domestic economic issues. He had much to run on:

* Unemployment had crept up to 7.3 percent.
* Median income had fallen from about $40,000 to less than $38,000.
* The federal deficit had ballooned to $290 billion.

After his upset win, Clinton benefited from four key events during his two terms that buoyed the stock market:

1. The end of the Cold War enabled Clinton to reduce military spending and help turn a federal deficit into a surplus.2
2. U.S. productivity growth accelerated.3
3. The World Wide Web (1991) and the Internet browser (1993) were created, helping to rapidly commercialize the Internet.
4. The 1994 mid-term election produced a fiscally conservative Congress, causing Clinton to assert in his 1996 State of the Union Address, "The era of big government is over."

The stock market soared. The average annual return of the S&P 500 Index during Clinton's two terms was a remarkable 17.4 percent.

Both Sides Now

The stock market returns that buoyed the Clinton Administration peaked in March 2000, 10 months before George W. Bush became the nation's 44th president.

Domestic terrorism, international turmoil and soaring energy prices-arguably areas beyond the reach of any president-conspired to help create an economic morass for the new Administration. One area presidents do have considerable sway over, however, is taxation, and tax reform quickly became a lynchpin of the Bush economic platform.

Bush enacted three bold tax cuts. The first, in mid-2001, pumped some $40 billion back into the economy. A second tax cut in March 2002 and a third in May 2003 reduced tax rates on income, capital gains and dividends. Growth, low interest rates, international trade and money flows also seemed to move in the right direction during the second two years of Bush's first term:

* The economy grew at 4.3 percent in 2003.
* The stock market recouped its earlier losses.
* Unemployment declined as job growth picked up.

During his first two years, the S&P 500 Index averaged a negative 17.15 percent per year, while during the second two years of his first term the index averaged 19.45 percent annually.

Looking Ahead to Election Day

History tells us that economies can do well, or poorly, under either political party. So what should you do on Election Day 2008? By all means, vote. Vote for the person you think will best represent your traditions, values and aspirations. But as for your finances, follow basic rules that have stood the test of time:

* Don't react to short-term market fluctuations. Invest for the long term
* Diversify your investments to include small-, medium- and large-company equities as well as international and fixed-income holdings
* Fund retirement accounts to the maximum you can afford. As for non-retirement goals, add money regularly (monthly, semi-annually)
* Review your progress annually with your investment representative.

Just as history tells us that investments can do well or poorly under either political party, history also illustrates that equity markets move higher over time. Not in a straight line or without pauses and setbacks. But after every pause or setback, the markets have recouped and gone on to new highs—regardless of who has occupied the White House.

Politics and Investing

With the recent failure of IndyMac bank, along with all of the accompanying news about banks at the risk of failure it seems like the “credit crunch” has really begun to hit home. In fact, I’ve recently heard from several readers who are concerned about the safety of their money. With that in mind, I thought I’d pull together some information on FDIC insurance coverage.

What is the FDIC?

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. It was created in response to the large number of bank failures during the Great Depression, and serves as a sort of safety net that guarantee deposits held by commercial banks.

What’s covered?

The FDIC insures deposits received at an insured bank. This includes deposits into check and savings accounts, money market deposit accounts, and certificates of deposit (CDs). FDIC insurance cover the balance of a depositor’s account dollar-for-dollar up to the insurance limit, including both principal and interest accrued up to the closing of the affected bank.

If you’re not sure whether or not your bank is covered (it seems that most are), look for the FDIC sign in their window or (for online banks) a graphic indicating membership on the bank’s homepage. You can also call the FDIC toll-free at: 1-877-275-3342.

What’s not covered?

FDIC insurance does not cover money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities. Note that this is true even if these investments were bought from an insured bank. The FDIC also does not insure U.S. Treasury bills, bonds, or notes — these are back by the “full faith and credit” of the U.S. government.

Limitations of coverage

The basic insurance amount is a total of $100,000 per depositor, per insured bank. This $100,000 coverage level applies to all depositors of an insured bank except for owners of certain retirement accounts, which are covered up to a total of $250,000 per insured bank. The nice thing here is that your retirement accounts are separately insured from any other deposits you may have at the same institution.

While deposits in different branches of the same insured bank are not separately insured, deposits in one insured bank are insured separately from deposits in another insured bank. Also, because coverage is determined on a “per depositor” basis, joint accounts are covered for up to $200,000. Interstingly, the FDIC provides separate insurance coverage for deposit accounts held in different categories of ownership, such that you can apparently exceed the $100k limit by holding both single and joint accounts at one bank.

One potential “gotcha” has to do with business accounts. As long as the business is a separate legal entity, then the account qualifies for it’s own coverage. But if the business is being operated as a sole proprietorship, then the deposits would fall under the sole proprietor’s limits.

Maximizing your coverage

So what should you do if you have more than $100k kicking around and you want it all insured? As noted above, joint accounts represent one way of stretching your coverage by giving you an additional ownership class. Of course, this solution is limited to those with a spouse or other trustworthy individual who could serve as the account co-owner. Another possibility would be to open accounts at multiple banks, as this would provide you with as many $100,000 limits as you have banks. A related option is the Certificate of Deposit Account Registry Service (CDARS).

I’m not going to go into the CDARS in detail here, other than to say that it provides a means for easily spreading your assets around into CDs at multiple banks. Apparently you can insure up to $50 million by doing this, with the downside being that the CD rates are typically a bit lower than you can get on the open market. Bankrate.com had a recent article if you’re curious about this option.

Five Cent Nickel

The Power of Words

Here's a short, but great, video that shows the power of changing the way something is worded. Enjoy!