God makes all things beautiful

I am asking you all to pray today for Syria and for the safety and well-being of Syrian refugees. Since the outbreak of the Syrian Civil War, more than half the population has been displaced creating 4 million refugees. The scenes have been heartbreaking – small children dying in desperate attempts to flee the war-torn region, older people begging to be allowed to cross borders, and temporary camps unable to handle the overflow. According to a United Nations report, four out of every five Syrian now lives in poverty, 30% of them in abject poverty and the country’s fundamental resources – education, health and social welfare – have all collapsed. I don’t have any answers to what’s happening in Syria, but, as I sat in church on a peaceful Sunday in Wisconsin and listened to a favorite hymn, I did have this thought:  God makes all things beautiful. What that means to me is that we should act with compassion toward the Syrian refugees, support them in any way we can, and pray for a resolution to their plight. As always in situations that garner global headlines, I caution you to vet the charities to which you donate carefully. Because more than 8,000 children have crossed the border out of Syria alone, I also support the United States Fund for UNICEF. Founded in 1947, the fund directs more than 90% of its donations to the program and only 2 percent to administrative cost. There are other worthy Christian charities as well, including Lutheran World Relief and Christian World Relief. I also will pray for the refugees and for the countries that house them.  If you don’t believe in God, send positive thoughts. As Pope Francis says, the issue is to obey your conscience. May God bless the beautiful people of Syria and all refugees.

We want YOU to understand when to take Social Security

He’s always been a strange uncle and now he’s saying he wants YOU to help with a few chores around the house. But nothing is ever easy with this guy.  He offers to pay you twenty dollars in two years or thirty dollars in five years. Pulling out five different charts, he says his payment plan is all very simple, and points to numbers like a mad scientist.    Words like “indexing”, “inflation”, and “credits” fly like spittle from his mouth. Cautiously you back away, hoping against hope that he will put himself to sleep with his ranting.  You mumble that you hear someone calling, and turn: tumbling, fleeing, running, sprinting.  You’re safe.  For now. Sadly, most Americans approaching retirement don’t have this option.  They must confront the intricacies of Uncle Sam’s Social Security head on.  And while it would take a novel to fully explore the pros and cons of different filing strategies, I hope to analyze one of the more common ones: out-investing Social Security. The strategy goes like this: take Social Security at the earliest possible age (62) and reinvest the benefits, with the intent of using market returns to exceed the penalty for starting benefits early.  There are some advantages to this tactic.  It creates an asset reserve that can be used for expenses or gifting during the retiree’s lifetime.  If the retiree dies young, he or she will have the benefit of having received more Social Security Security and more investment returns.  And even if they live a long life, excellent returns on their investments may overshadow the loss to Social Security benefits. However, there are several counterarguments. The first is that Social Security itself offers very competitive returns.  Each year benefits are delayed after 62, they will increase anywhere from five to eight percent.  This is simple interest rather than compound, but over an eight year period the difference isn’t severe.  To get similar average… | Read More »

Don’t make maximizing your 401(k) a DIY project

There is something exhilarating about a challenge; something satisfying about being presented with a daunting task and working hard to complete it!  A hard job done well is simply fulfilling.  Over the Labor Day weekend you would have found me in a 104 degree garage re-painting 10 closet doors.  It was sweaty work and I did my share of grumbling, but that made it even more sublime in its completion. However, there are some jobs that I just do not tackle.  With age, comes wisdom (so they say) and I am aware that I don’t have enough time in my week, month, or year to get even marginally good enough at some skilled tasks.  It is not worthwhile.  For instance, I don’t do my own taxes.  There are multiple rule changes and schedules and tax benefits and pitfalls that affect me.  It’s better for me to admit I need help than to get halfway through and belatedly realize I need decades to become anywhere close to proficient (or passionate) enough to really excel at tax prep. For that, I take advantage of Winch Financial’s excellent tax preparation services. I feel the same way with my 401(k) investment choices. Your 401(k) is the most important piece of wealth you have, second only to owning a home. An alarming majority of 401(k) investors do not pay much attention to this hefty portion of their wealth.  Many set up their account and close their eyes.  That is simply short sighted.  If you are not thinking about it, it is now time to begin!  Six of the biggest questions to consider are: How much are you funding your account? What is your employer’s match? Are you able to fund your 401(k) to the maximum – currently $18,000 in 2015 with an additional $6,000 catch-up contribution if you are 50 or older What investment options are open to you / what investments are you actually… | Read More »

Be careful where you retire. Not all Partnership programs are equal.

In an effort to encourage more people to purchase long-term care insurance, the Deficit Reduction Act of 2005 (DRA) created the Qualified State Long Term Care Partnership program. The program offers special long-term care policies that allow buyers to protect assets and still qualify for Medicaid when the long-term care policy runs out. If your LTC policy qualifies for this program it essentially doubles the amount of possible protection from that LTC policy; you not only receive the policy payout to cover the cost of your care, but you also avoid having those assets count against your estate if your policy runs out and you have to apply for LTC through Medicaid. Because these programs run through the state government, it is critical to consider where you intend to retire. Not all states have this program, and even some that do will not honor a policy sold in a different Partnership Qualified state. For instance, these eight states have no Partnership LTC program: New Mexico, Alaska, Hawaii, Mississippi, Illinois, Michigan, Vermont, and Massachusetts.  Not only do they not have the program, they also will not honor a Partnership qualified LTC policy sold in another state if you move there and apply for Medicaid LTC services. California has a Partnership program but doesn’t have reciprocity with other states and will not honor a policy from another Partnership state. All the other states have Partnership programs and have reciprocity with other Partnership states and will honor qualifying policies sold in those states. It is possible that the states listed above without Partnership LTC programs could develop them in the future.  As always things change in the government on a state and federal level frequently. Part of our job here at Winch Financial is to keep up with those changes to give the best advice our clients.  If you have a LTC policy that qualifies for the Partnership program in the state you… | Read More »

Beware confirmation bias in investment decisions and in life

“A lie can travel halfway around the world while the truth is still putting on its shoes.” Mark Twain Mark Twain lived from 1835 to 1910 and the first transatlantic cable was completed in 1858, so even in Mark Twain’s day, a false rumor could travel pretty fast.  How much further, then, can a rumor travel these days, what with fiber optic cables, satellite TV and cell phones? But this still begs the question of why rumors and lies travel faster than the truth.  Doesn’t the truth have access to the same communication channels as those rumors?  Yet we’ve all experienced situations in which false information, or a rumor, will get passed around (and believed) even though the truth of the matter was easily in reach if someone just took the time to look. There are a couple of reasons for this.  First of all, the truth is usually boring, while the rumor will often be juicy and entertaining.  Second, the truth is usually complex, or nuanced.  Human beings and social organizations are complicated.  Who of us has ever met a perfect person, or worked in a perfect organization?  The truth, whatever it might be, will of necessity be a reflection of the imperfect situation from which it arose.  The rumor, or lie, will often be simple – or better yet, simplistic – easy to understand, easy to communicate and easy to relate to. But there is another reason that rumors, or lies, travel faster than the truth and that is because rumors or lies travel on a glide path that is paved by our own preferences.  The science of Behavior Finance calls this “Confirmation bias”, the propensity to accept any piece of information that conforms with what we desire, and the rejection of information that does not.  This is a mistake that investors make all of the time.  As an example, consider Bob.  Bob is holding a stock that has… | Read More »