The recession lasted 18 months and just as we didn’t know there was a recession until we were well into it, we are now told it ended in June 2009.

I was thinking back to my post last July, Dennis Kneale Recovery in which I remarked that he had declared the bottom was behind us, and it would just take time before it was declared. As you can see, the recession lasted longer the the prior three, and it will take somemore time before we feel that we are in a vibrant recovery. a bit of patience.

written by JOE \\ tags: Dennis Kneale Recovery, recession

In another guest post on Good Financial Cents, today I offer the first of a two part article on Estate Planning. In today’s installment, I discuss Wills, Beneficiaries, and Probate. Whatever your age, good estate planning is something you shouldn’t avoid, it’s the right thing to do to protect your family as well as the assets you’ve worked so hard to accumulate over your lifetime.

Joe

written by JOE \\ tags: beneficiary, Estate planning, Finance

A few weeks ago Mrs. Micah published a post discussing the financial list that you should create for those who leave behind, titled How to Save and Store Critical Financial Information For Your Family. Ever since I read that I’ve been thinking about her post as well as my own On my death, please take a breath. It occurred to me that the financial list Mrs. Mike created would be an excellent place to leave some further instructions to your beneficiaries regarding their inheritance, with an emphasis on the tax aspects of IRAs. This would be a good way to avoid the tragic mistake that I referenced in my earlier post.

Here is an example of what I had in mind;

Dear Rich,
Some of the money that I left you is in an IRA account. Please understand something about this account. When I left it to you there were no taxes due, but because this IRA was funded with pre-tax money, you owe taxes at your marginal rate as you withdraw it. Fortunately, withdrawals can be made based on your current life expectancy, so you can withdraw this money a little bit at a time over the years and hopefully pay very little in taxes along the way. The way the money is currently invested, even though right for me, may not fit with your investing style or needs. If you wish to reduce the stock portion and keep it all and CDs that choice is yours. You can sell the stock and reinvest the money into CDs or even place it a money-market fund and this transaction will not be taxable. It’s only when you withdraw the money from the IRA that you’ll be required to pay taxes. The required minimum distributions that you must take are just that, minimum numbers, if you need to take a bit more it’s your choice to do that as well. Just keep one thing in mind, if you take out too much money in one year you may jump into a higher tax bracket and pay more tax than is necessary. Lastly, the one thing I ask you not to overlook is to include a new beneficiary should something happen to you. Again this is your decision, a child, a friend, a family member, a charity, the choice is yours.
Use it in good health,

Obviously, you can fine tune this to your own style. The message here is that years of your planning can be undone by one mistake your beneficiary makes. Here’s a way to help avoid that.
Joe

written by JOE \\ tags: beneficiary, Finance, inheritance, IRA

First, Jim Cramer’s book persona is far more level headed than he appears on TV. Say what you will about the mad man on CNBC, but the author has an intelligent story to tell. He does not recommend individual stock picking for one’s investment portfolio’s bulk. He starts by suggesting that one have the rest of their finances in order and start with individual stocks only after they are on the path to a properly funded retirement, IRA, 401(k), etc. And then, with the $10,000 minimum “extra money” diversify so that five chosen stocks are in different sectors.
He also advises that one needs an hour’s worth of homework per week for each stock one owns. That seems like a conservative, not cowboy, approach. It also limits how many stocks someone with a day job should own.
The book also contains a stock worksheet which contains question one should answer before choosing a stock. It’s listed here, along with his 25 rules of investing.
If you put aside your notion of the TV pitchman (and he’s self deprecating about that persona in the book) he comes off as level headed, rational, and worth the few hours it takes to get through the book. The real question is this – have I learned something from this book I will use? Maybe. My stock picks are minimal, I’m mostly in index funds and ETFs depending on the account. My last individual stock pick was MO (Philip Morris before the name change) and the misses vetoed the purchase.

If you are at the point in your investing life where individual stocks are planned for your portfolio (and there are many sucessful investors who have never owned an individual stock) then this book is certainly worth the three or so hours of your time it will take to read.

JOE

written by JOE \\ tags: Finance, Investing, jim cramer

I have always enjoyed Scott Adams, convinced that he worked for the same company I do in my day job. (He doesn’t, by the way) When I read this, I was impressed and thought I’d pass it along.

1. Make a will
2. Pay off your credit cards
3. Get term life insurance if you have a family to support
4. Fund your 401k to the maximum
5. Fund your IRA to the maximum
6. Buy a house if you want to live in a house and can afford it
7. Put six months worth of expenses in a money-market account
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

I wasn’t planning to make a habit of quoting other author’s advice, but this was too good to overlook. This is from Scott Adams’ book “Dilbert and the Way of the Weasels.” As Scott Adams states, “Everything else you may want to do with your money is a bad idea compared to what’s on my one-page summary. You want an annuity? It’s worse. You want a whole life insurance policy? It’s worse. You want to invest in individual stocks? It’s worse. You want a managed mutual fund instead of an index fund? It’s worse. I could go on, but you get the point.”
I might put a caveat on the 401(k) advice (see my article), but these rules are worth reading and following.

JOE

written by JOE \\ tags: dilbert, Finance, invest

In January last year, I posted an article “What’s wrong with the health care system?” in which I discussed how a friend has a procedure which the hospital charged $1200, but the insurance deemed it worth $200, so they paid $180 and the friend paid $20 as a co-pay.

I recently received a reply from reader Ken I’d like to share:

One does not realize that 1) Employers pay health care costs directly but indirectly; and have insurance companies fight and account for those health care expenses for those companies. My employer uses a Blue Cross plan to minimize its health care costs then pays Blue Cross a fee for that service and a fee for reducing that very same cost. 2) An employer or pool of employers, pays a hospital or health care group or doctors, a predetermined annual amount to preform a guaranteed amount of services for an agreed amount of patients. e.g. The example above. The test may very well have cost $1200, but it may have been part of the agreed upon service that was to be provided by that provider for $1000 as part of the annual fee. The remaining $200 was treated as normal expense and required a co pay. The interesting part to all of this is when a couple both have same but separate health insurance plans to different employers, and because of the birthday rule, the same service is paid different amounts because who covers it first.
Ultimately it all boils down to this: There are always going haves and have-nots; and the haves are always going to be overcharged so they can pay for the have-nots. Doesn’t matter if it’s the present system or Obamacare or Hillarycare. What does matter is the ultimate cost in 1) dollars, 2) cuts in services,3) choice of doctors, 4) choice of care or treatment and 5) use of personal or public money.

In response, regular reader and deep financial thinker, Elle, offered a detailed, well thought response which seemed a shame to leave buried as a comment;

Ken,

1. Employers use health insurers so that employees may benefit from the cost discount attributable to having an enormous number of clients, thus spreading risk. Your use of epithets like Hillarycare and Obamacare are reckless disregard for the clear mathematics of the single payer system. Single payer would do the same as Blue Cross, but given the much larger number of clients and the fact that hospitals and doctors have to work with only one administrator, for less money.

2. When you talk about cuts in services, you seem oblivious to the fact that many health facilities overprescribe services, with no improvement in health outcomes. Why do they overprescribe? Because the doctors at such facilities are not on a straight salary but instead have a financial stake in everything they prescribe. In other words, they work on commission. The models to use are the Mayo Clinics and others, where such a conflict of interest is prohibited, and the docs are paid a straight salary. Before commenting further, you should read Atul Gawande’s June 1 article in the New Yorker on this.

3. Joe, the New York Times for a few years now has been running articles on how not only are doctors’ and hospitals bills’ to the uninsured and under-insured negotiable, but the billing departments actually expect people to call and haggle over the bills. The nominal fee on a bill is monopoly dollars. Plus consumers need to understand that the rate of errors on medical bills is on the order of 50% and typically sizable. It has become such a problem that there is now a profession called “Patient Advocate,” where someone (often a retired nurse or other health care professional) who knows how to decipher what is on the bill. See the article After a Diagnosis, Someone to Help Point the Way, also in the Times. .

People talk about letting the consumer “choose” and so let free market forces work, but the health care system has so much in it that is arcane that the typical patient could not possibly make an informed choice. So it is not a free market when buyers do not have access to needed information.

4. But more of those on the left need to acknowledge that there most certainly are preventive health measures that the “have nots” can implement, at enormous savings to us all. People just need a simple financial incentive structure to practice this preventive medicine. Such preventive medicine translates to national health savings on the order of 30%, from my reading. Google on what the President of Safeway (Steven Burd) did when he gave Safeway employees a health insurance rate structure that resulted in higher premiums for those showing poor habits in the areas of tobacco usage, weight, cholesterol and blood pressure. Safeway health costs went down as its employees started practicing more preventive medicine, more than justifying the financial incentives. See for example Safeway CEO on free-market health care solutions.

5. Never forget that a healthy blue collar and middle class are essential to the success of companies and so your stocks.

Thank you both for your comments, and Elle, you ever feel the urge to send me a guest post, my blog welcomes you.

Joe

written by JOE \\ tags: healthcare, Healthcare Reform, hillarycare, Insurance, obamacare