Monthly Archives: August 2009

Is Your Retirement Plan In The Red

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.. and if not now, will your retirement plan be going into the red.  According to Jonathan Chevreau, Most Boomers’ retirement plans ‘going nowhere’. 

He is featuring the concepts that financial planner Jim Otar lays out in his forthcoming book, Unveiling the Retirement Myth.   In his opinion, most Baby Boomers have not saved enough to retire comfortably and should plan to remain in the workforce longer.

Otar describes three “zones” of retirement preparedness.

  • Green: good to go
  • Orange: (or as Otar calls it the grey zone) where extreme caution is appropriate
  • Red: where retirement plans are completely inadequate

His views might be described as depressing but reflects the dual reality that investments have not been performing well and that people are living longer.  His advice is that you should plan for the worst because unfortunately that may be what happens.

He has particular concern for those who are in the grey zone who may or  may not make it, depending on how lucky they are and the timing of their retirement.  For him, when you are within five years of retirement you are in the dreaded Retirement Risk Zone.  This is a dangerous period when investment returns may determine success or failure of one’s plans. Retiring into a vicious bear market may torpedo a retirement, while retiring into a bull market is more fortuitous.

Otar’s website has much more to offer on retirement planning.  His 500-page book will be available in the fall, but an unprintable “green” version is available for $3.99.  It probably should be required reading, particularly for those who are in that Retirement Risk Zone.

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UK Frozen Pensions Case Returns To The European Court Of Human Rights (ECHR) on September 2

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The International Consortium of British Pensioners (ICPB) had decided earlier that they would appeal a negative decision on the Frozen UK Pensions case and move to the 17-judge ECHR Grand Chamber. This appeal will now take place on September 2.

An article in the UK Telegraph outlines the case well. It is titled How saving the pound led to 54 years of injustice.

The real question is whether the appropriate resolution for these Frozen UK Pensions , should be deternined by legality, equity or morality. If it were based on equity or morality, then most observers agree on the outcome. Instead the UK Government has chosen to treat it only as a legal question and so far the answer has been no. Perhaps the ECHR on September 2 will come to a Yes view as the chairman of the earlier ECHR hearing did in his dissenting opinion. Some 500,000 UK pensioners around the world are watching with bated breath.

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US Health Reform Irks Some Seniors

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The US Government is working hard on  health reform to ensure Americans get the high-quality, affordable care they need and deserve. At this time, too many Americans can’t get the affordable care they need when they fall ill.

However President Obama’s health-care initiative may be a costly misstep in some eyes.

It was a long shot to think that a neophyte U.S. president, before celebrating the first anniversary of his inauguration, could radically transform the notoriously dysfunctional U.S. health-care system in a way Theodore Roosevelt first vowed to do in his losing bid for the presidency in 1912.

Obama will sign a reform bill later this year, which will require all Americans to purchase health-care coverage, including the close to 46 million Americans who have no coverage.  This will be subsidized by Uncle Sam to pay their premiums. Certain restrictions will be placed on private insurers, among them a prohibition against denying insurance to Americans with pre-existing medical conditions.

Powerful opposition to the health reform has become very vocal and many are up in arms.  The AARP (American Association of Retired Persons) has come out in favor of the reform but that has caused some members to resign in protest.

As many as 60,000 AARP members have left the group in protest over its stance on healthcare reform. The reforms did not sit well with the many AARP members who are upset over proposed cuts to Medicare that will total $313 billion over ten years.  They are in many cases defecting to the American Seniors Association, which bills itself as more conservative than AARP and solidly opposes President Obama’s healthcare reform proposals. 

Given this vociferous opposition, Obama has been promoting Health Reform on conservative radio.

The White House transformed its Diplomatic Reception Room into a radio studio Thursday, as President Obama took to the airwaves to promote his health care plan. He spoke directly with listeners of a nationally-syndicated radio program hosted by Michael Smerconish. Talk radio is a powerful vehicle for promoting political and social agendas in the United States. Conservatives have used the airwaves lately to aggressively attack Mr. Obama’s policies.

The fierce debate will certainly continue since in essence the Health Reform has some hidden victims.  These are some of them if anything like the existing Senate or House health plans become law:

  • Young people will have to buy policies that don’t reflect the low risk they have of getting sick.
  • Small Businesses will have to pay a tax up to 8% of their payroll, if they do not provide coverage
  • Health Savings Account (HSA) holders covered by plans with low-cost premiums and high deductibles that are designed for large, unexpected medical costs will have to buy policies
  • Medicare Advantage users will undoubtedly see changes

Although the objectives of the Health Reform are most laudable, President Obama will have to use all his diplomatic and persuasion skills if the Health Reform package is to be adopted without too many cuts and modifications.

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Wills and Probate To Safeguard Your Heirs

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Perhaps most people realize the importance of having a will so that you Don’t Leave A Mess for your Loved Ones.

Upon your death, your loved ones will be grieving your loss. Don’t make the process more difficult by failing to properly plan for your death. There are some important things to avoid in order to ensure your final wishes are met and to make the process smoother for your loved ones.

The link above describes what is involved.

However the will along may not be sufficient as revealed in the story of How Earl Jones, the Montreal Ponzi schemer, found his clients.

Court records reveal that in the summer of 1986, a cancer-stricken nurse named Dianne Creaser signed a will in a weak, barely legible scratch, appointing businessman Earl Jones as one of the executors of her estate. After her death, although Ms. Creaser had named her ex-husband as another executor of her estate, Mr. Jones went to the Montreal courthouse two months later to get a probate hearing confirming him as the sole person who would handle her assets.

That is why it is so important to understand what probate is and the steps involved in the probate process.

Probate is the legal process of distributing your assets according to your wishes, which includes determining the validity of your will, gathering your assets, paying your debts and taxes and then distributing the remaining assets according to your last will. To get the process started Your Personal Representative, the Executor, will submit your will to probate court to have it validated. The main advantage of probate is that the probate court is supervising the entire proceedings, and the probate laws are being followed.

The Probate Process arranges that any debts you owe, including taxes are paid. Thereafter it ensures that assets are transferred to your beneficiaries, as per your will.

The probate court oversees the following:

  • Swearing in your Executor
  • Notifying heirs, creditors, and the public that you are, indeed, dead
  • Inventorying your property
  • Distributing your estate

The length of probate will depend on the complexity and size of your estate. On average, the probate process can take between 1-2 years if there are no complications. However in some cases it goes on for decades. Given this, it is worth studying exactly what will be involved and arranging that the appropriate steps have been taken to safeguard the best interests of your heirs.

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Seniors Fall For Ponzi Schemes

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Seniors often have financial concerns as they contemplate their future and their perhaps dwindling assets.  If they rely on Social Security and state pensions, even those are questioned by some who liken them to a Ponzi scheme. The older members who are drawing out now are being paid out of a fund that is being refilled by contributions from younger members who hope they will find there is something they can draw on in the distant future.

It is all very concerning and is made much more worrying by the deep recession that only slowly may be receding.  Many seniors will be worriedly scratching their heads on whether they will have enough to live on, particularly if they are in good health and may have a long life.

Couple that with the many cases of Financial Abuse of Elders that was covered in an earlier post, and you end up with concerned seniors who are not sure who to consult.  Some financial abuse cases are perpetrated by the seniors’ sons and daughters or by other family members.  Who then to turn to?  If a trusted friend suggests a mature person whom they have confidence in, then this may appear less thorny than having to involve the family in your financial matters.

If that mature person gains your trust and confidence, then it may be only a matter of time before they are suggesting ways of investing where you can get better returns than the low interest rates the banks presently offer on savings.  Once on the hook, you may soon find that your goose has been cooked (to mangle metaphors).

It is probable that there are many more Ponzi schemes than actually hit the headlines.  Bernard Madoff was of course the biggest in history, but others have caused equal misery to many seniors.  Last month, we all learned of Earl Jones, the Montreal Ponzi Schemer, who preyed on family members and friends and lived the high life as their savings disappeared.

Last week, here in Vancouver we read that B.C. Ponzi schemers were found guilty of fraud:

Four British Columbia residents, Hal (Mick) Allan McLeod, Kenneth Robert McMordie (aka Byrun Fox), Dianne Sharon Rosiek and David John Vaughan, were ruled guilty of fraud for violating securities laws by a B.C. Securities Commission panel. They lied to investors about how their money was being invested, what they could expect as a return, and the risk level of these investments.  Their Ponzi scheme cost some 800 investors more than $10 million US.

Today the news is that a $50 million Ponzi Scheme Is Alleged in Detroit.

A class action suit in Federal Court claims  that John Bravata and Richard Trabulsy masterminded BBC Equities and Bravata Financial Group, which stole $50 million from hundreds of people in a Ponzi scheme, . They are said to have promised 8 to 12 percent returns in a real estate scam, guaranteeing “safer returns than other investment options,” according to the complaint.  They began by soliciting family and friends for money, then began holding “free lunch” seminars each week to target senior citizens. Half of BBC’s money allegedly came from IRA accounts.

In all these cases, the seniors are likely to see only a fraction of their original holdings.  This is financial abuse of the very worst kind.  The only safeguard is to seek financial counsel and advice from only reputable and knowledgeable individuals who will not benefit in any way from the impartial advice they may give you.

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CARS or Cash For Clunkers Means Some Win, Some Lose

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Ford Motor Co. said it would ramp up automobile production by 150,000 U.S. cars this year.  Sales have surged due to the U.S. “Cash for Clunkers” program. This is the popular name for the Cars Allowance Rebate System (CARS) program.

The rebate allows car buyers to receive up to $4,500 from the government toward the purchase of a qualifying new vehicle when trading in an older model that gets 18 miles per gallon or less.

 

Who’s Cashing in on All Those Clunkers?  According to the Compete blog, the cash for clunkers program boosted online attention from new vehicle prospects, both in terms of unique visitors to the cars.gov site and to OEM sites. That attention, combined with attractive incentives to junk an old gas guzzler and replace it with a newer, more fuel efficient model contributed to a July sales surge of more than 15% month-over-month.

Not everyone was happy.  According to watchdog groups, some ‘clunkers’ dealers were requiring payback agreements. The government website is very clear that Consumers Are Not Required To Sign Contingency Agreements To Pay Back The Dealer Should The Cars Credit Be Rejected.  Some dealers were also asking consumers to keep their “clunker” until the deal was approved by NHTSA.

Another unfortunate consequence of all this is that ‘Cash for clunkers’ is hurting charities.  Some charities rely on car donations to raise funds.  Instead people who would normally donate their car are now turning them in to dealerships.  While those who donate vehicles to charity receive a tax deduction for the price the car sells for at auction — typically $500 to $900 — the CARS program offers a $3,500 or $4,500 rebate for trading in a used vehicle.  That’s a very tough choice if you would really prefer to support your charity.

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The Right Credit Card

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The majority of people appreciate the convenience, ease, and flexibility that credit cards can provide.  What they have not appreciated in the past were some of the fees that some cards carry.  However as the New York Times headline said today Card Users, Take Heart: One Penalty Is Vanishing

The noxious penalty imposed on American Express and Discover consumers who exceeded their spending limit has finally died, quashed by legislation signed in May by President Obama to ease onerous fees for cardholders.  In recent days, American Express customers began receiving notices of the fee elimination, which takes effect in October. Discover Card customers will soon get similar notifications.

Such fees are often mentioned in the small print but people often do not do their homework well enough.  Credit cards offer flexibility and convenience providing you use and repay the card sensibly and responsibly.  The important thing is to compare alternatives and read all the small print.

There are many financial situations where it is important to see as wide a variety of suppliers so that you can learn what is important and what should be avoided.  A good example of such a website in Australia is http://www.compare2save.com.au/  For a whole variety of the more serious financial decisions you have to take, you will find that Compare 2 Save has the details on a number of service suppliers.  Loans, Bank Accounts, Insurance, Broadband suppliers, Car Hire, you will find the data you need to make comparisons. 

In particular they also have details on 8 credit cards you could consider.  There are credit cards with 0 percent interest on purchases for a generous period of time or prestige credit cards with additional benefits for those that qualify. … and the list goes on.

You must carefully research and compare different credit cards to find the one that best suits your needs. Not least, read all the small print and make sure you fully understand so that you do not live to regret your choice.

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Financial Abuse of Our Elders

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The shocking fraud perpetrated on unsuspecting seniors by Earl Jones of Montreal through his Ponzi Scheme is perhaps one of the worst examples of how vulnerable our elders are in these important matters.

There is a widely held view that financial abuse of our elders is reaching epidemic proportions.

Surprisingly the abusers are more often than not family members, friends, neighbors, and care givers. The recession is pushing more people to steal from their senior relatives. According to a report, “Broken Trust: Elders, Family, and Finances”, released by Metlife Mature Market Institute, seniors in the US are losing more than $2.6 billion every year through financial abuse.  The average victims are elderly women living alone. The sick and frail are more apt to be taken advantage of, and this applies even more to dementia patients. Some care takers in nursing homes are not above stealing from sick and demented patients.

Is Elder Financial Abuse the Crime of the 21st Century? That is certainly the opinion of Fred Joseph, president of the North American Securities Administrators Association.  He was quoted in a Washington Post article that focused on the link between the growing recession in the U.S. and the increase in elder financial abuse.  Though there may be debate about elder financial abuse as the ‘crime of the century’, there is no doubt that it is a mounting crisis in the U.S.

Financial abuse of elders can happen in a number of ways, according to the National Committee for the Prevention of Elder Abuse:

  • Forging an older person’s signature
  • Getting a senior to sign a deed, will, or power of attorney
  • Using property without permission.
  • Promising lifelong care in exchange for money or property – and not following through on the promise.
  • Using credit cards without authorization.
  • Engaging in confidence crimes (“cons’’) in which victims are scammed by gaining their trust.

They suggest that these red-flag warnings will help you spot financial abuse:

  • The senior is being encouraged to invest in unregistered securities or start-up companies
  • The investment is high-risk or speculative, such as rare metals or currency trading
  • The senior is asked to sign blank paperwork or to give discretionary authority over accounts to an adviser
  • The senior complains that an investment adviser won’t supply account statements
  • The senior makes out a check directly to the adviser or broker for the purchase of an investment

Here in Canada, earlier in the year, the Government launched a nation-wide advertising campaign called Elder Abuse – It’s Time To Face The Reality. The campaign launch on June 15, 2009 coincided with World Elder Abuse Awareness Day.  The Minister of State (Seniors), Marjory LeBreton confirmed that elder abuse cannot and will not be tolerated and that help is available.

There are a number of online resources on this subject

Here is an extract from the last resource:

What is the financial abuse of seniors?

Financial abuse refers to the misuse of a senior’s money, property or other assets by a relative or a person in a position of trust. A relative may be a spouse, sibling, or child, and a person in a position of trust may be a neighbour, home care worker, or staff person in a care facility. Financial abuse by strangers is not included in this fact sheet.

Some examples are:

  • Forcing or tricking a senior into selling his or her property
  • Stealing money or personal possessions
  • Forcing a senior’s signature on pension cheques or legal documents
  • Misusing a Power of Attorney
  • Pressuring a senior to provide services for no payment

Financial abuse is one type of elder abuse and it is sometimes referred to as material abuse. Financial abuse IS a crime. Often when seniors are financially exploited, they are subject to other forms of mistreatment, such as physical or psychological abuse or neglect.

How widespread is the problem?

As with other types of elder abuse, it is difficult to determine the extent to which seniors are being financially abused in Canada. This difficulty arises primarily from a failure to recognize or acknowledge that financial abuse is occurring.

Given the increasing incidence of such financial abuse of our elders, it is incumbent on us all to look out for our senior friends and family members to ensure that unwittingly they do not become victims of some smooth-talking fraudster.

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