Don’t Cry For Me Argentina

Not only did Argentina lose the World Cup final in a heartbreaker this past weekend to Germany, they now must turn their attention to a problem that could potentially once again cripple their economy.

In 2001, Argentina succumbed to what was at the time, the largest sovereign default in history. Public debt in Argentina as a percentage of GDP reached had reached 166% and with an unemployment rate exceeding 21%, Argentina had no other option but to miss payments on their bonds.

Since 2003 a new Argentine government has implemented a debt management strategy under the premise that it was necessary to resume economic growth in order to be able to service debt. There has been progress and over the past ten years the domestic economy has grown steadily.  Argentina is the second largest economy in South America behind Brazil.

Argentina’s economic progress over the past 10 years was helped by a deal they made with their creditors.   Under the deal, 92% of bondholders agreed in 2005 and 2010 to write off two-thirds of the bonds’ pre-crisis value.  This provided Argentina with time to rebuild its economy.  Restructuring deals are voluntary between the borrower, in this case Argentina, and its creditors. Bondholders are not obliged to agree to a devaluing of their debt, but risk a full default and loss of all their funds if they don’t.

Some investors may buy debt ahead of a restructure and bet that they can demand a better deal.  This is what a group of US hedge funds led by billionaire Paul Singer did.  They bought the Argentina bonds for pennies on the dollar while the economy was in turmoil in 2001 and then demanded to be paid the full dollar back.  The Argentine government has been in a 12-year legal battle in the US courts, arguing that this is unreasonable and that the hedge funds are engaging in blatant profiteering.  The charge of the hedge funds engaging in profiteering is not a shock as that is what the mission of most hedge funds is.

Earlier this month, the US Supreme Court ruled that Argentina must pay the hedge funds that had refused to participate in the debt restructuring deal the full $1.3billion value of the debt.  Payments on the restructured bonds come due on June 30th; after that, there is a month long grace period—some maneuvering room—and then Argentina will officially be missing its payments on the bonds it has spent years trying to pay back.

There are two possible outcomes, either Argentina negotiates with the holdout creditors (since paying them back in full is all but impossible), or it would once again default on its debt.

The Supreme Court’s decision will make it more difficult for other countries to restructure its debts in an arbitrary and unjust manner. It should also lead to an improvement of the legal frameworks governing defaults by sovereign countries.

Some economists have suggested that the rulings will disrupt or impede future sovereign debt restructurings by encouraging holdout creditors to litigate for full payment instead of participating in negotiated exchange offers. They argue that incentives for holdout litigation are not limited because of significant constraints on creditor litigation, substantial economic and reputational costs associated with such litigation, and the availability of contractual provisions and negotiating strategies that mitigate the debtor’s collective action problems. They also claim that the fact-specific equitable remedy in the Argentina case was narrowly tailored to Argentina’s unprecedented disregard for court opinions and for international norms of negotiating sovereign debt restructurings and is therefore unlikely to be used in future debt restructurings.

Lionel Messi couldn’t bring a World Cup back to Argentina, maybe they need to bring Diego Maradona out of retirement to negotiate with the hedge funds to save the economy.

Should You Rent Or Buy A Home

A recurrently hot topic in personal finance is the debate over whether to buy or rent a home. The conventional wisdom has always been that everyone should strive to be a homeowner and to stop paying rent.  Prices in some markets still haven’t recovered from the drops in 2008/2009 and the government is still offering incentives to home buyers. But is buying a home always the best decision?

Kyle Fishman recently wrote on article on Seeking Alpha arguing that renting is far superior to owning a home.

His reasons include:

•             Homeowners still have to pay rent in the form of property tax, maintenance/repairs, insurance, mortgage interest, and opportunity cost (the amount invested in the house could have alternatively been producing gains in the stock market)

•             Transaction costs – you pay 7-10% of the cost of the house when you purchase it on legal, real estate agent, title check, inspections, ..)  You then pay another 7% to 10% when it comes time to sell.

•             Convenience.  It’s the landlord’s responsibility to make necessary repairs, keep the driveway plowed, and the lawn mowed.

•             You are more mobile; it’s easier to move quickly whether you find another job or have some other reason to move such as safety concerns, conflicts with neighbors, or changes in the neighborhood.

Given all of these issues, you might wonder why you should seriously think about owning a home. Here are some advantages and disadvantages to consider:

•             Security – Owning a home will give you a sense of security that you cannot find in a rental unit.

•             You can customize your home to your individual needs, as opposed to rental units, where your options are more limited.

•             You will have a sense of permanence and a feeling of being part of a community when you own your home.

•             Most homes do appreciate in value over time.  In addition, owning a home will reduce your federal and state tax obligations because of the deductibility of interest payments on your mortgage.

•             A home is a vehicle for forced savings. You have probably heard the argument for term life insurance over your whole life: Buy term and invest the difference. The reality is that most people who buy term life insurance spend the difference. Having a mortgage payment due forces you to make payments. Over time, you will find that you have accumulated significant equity in your home.

•             If you have a fixed-rate mortgage, your mortgage costs will be stable for the entire period of your mortgage, which is commonly 30 years. Rent typically increases yearly.

There are many factors that go into the decision whether to buy or rent.   Here is an article sent to me by Robert Liano that that has the best calculator I’ve seen to help you make that decision.

Reverse Mortgages: Tapping Your Home for Retirement Income

The Reverse Mortgage has long been viewed as a last resort for older Americans with home equity but little cash.  Regulators and financial services firms are hoping that changes and reverse mortgages become a mainstream financial strategy.  You should be cautious about jumping in.  First the basics: A reverse mortgage is a type of loan which allows seniors to access the equity in their homes without having to pass credit or income requirements. The qualifications for a reverse mortgage include the owner being at least 62 years old, that the home is occupied by the owner and that the owner has equity in the home.

The loan can be taken as a lump sum, lifetime payments, or a line of credit.  It doesn’t have to be repaid until you move or die.

Total Annual Loan Cost
Although the interest rate on an HECM mortgage is set by the government, and the origination cost of an HECM loan is limited to 2% of the value of your home, the total cost of the loan can still vary by lender. Furthermore, in looking for a lender, borrowers must consider third-party closing costs, mortgage insurance, and the servicing fee. To assist borrowers in comparing mortgage costs, the federal ‘truth-in-lending law’ requires mortgage providers to present borrowers with a cost disclosure in the form of the total annual loan cost (TALC). Do be sure to use this number when comparing loans from different vendors; just keep in mind that the actual costs of a reverse mortgage will depend largely on the income options selected.

Interest RatesThe interest rate on HECM reverse mortgages is tied to the one-year U.S. Treasury security rate. Borrowers have the option to select an interest rate that can change every year or one that can change every month. A yearly adjustable rate changes by the same rate as any increase or decrease in the one-year U.S. Treasury security rate. This annual adjustable rate is capped at 2% per year or 5% over the life of the loan. A monthly adjustable rate mortgage (ARM) begins with a lower interest rate than the ARM and adjusts each month. It can move up or down 10% over the life of the loan.

A reverse mortgage is typically structured so that the total loan amount, including interest and fees, will not exceed the value of the home over the life of the loan. However, if the proceeds from your home’s sale exceed the balance of the loan, then you, your spouse, or your heirs will receive the difference. Should the sale not cover the loan balance, then, in most cases, the lenders insurance will cover the difference.

As with conventional mortgages, reverse mortgage lenders make money the old-fashioned way: through interest, origination fees and points. The interest rate varies according to the market. However, closing costs are significantly higher with reverse mortgages.

In addition, borrowers continue to be responsible for real estate taxes, conventional homeowners insurance and home repairs, and have the added burden of paying for mortgage insurance, too.

Why would borrowers have to pay mortgage insurance? After all, that insurance is required for regular mortgages if borrowers don’t have a large enough down payment, and its purpose is to protect lenders in the event of a default. With a reverse mortgage, there’s no such risk to lenders.

But other risks exist. Mortgage insurance guarantees the lender will receive its full repayment. For example, a decrease in the property’s value adversely affects the lender’s reimbursement. Mortgage insurance also covers the lender in the event the mortgage is held over a very long period of time and accrued interest exceeds the value of the home. 

Pros of Reverse Mortgages

  • Reverse Mortgages Are A Source Of Income – When you take equity out of your home through  reverse mortgage, you can decide on receiving a line of credit, payments or even a lump sum. For those living on a fixed income, you can supplement your income by taking a reverse mortgage and choosing the fixed payments option.
  • Tax Benefits – Because the income from a reverse mortgage qualifies as a loan, the proceeds are generally tax free. However, you would want to consult your tax attorney for more specifics related to the tax implications of doing a reverse mortgage.
  • Generally No Social Security Or Medicare Implications – Though reverse mortgages can be used to provide fixed payments to the homeowner, there are usually no penalties relating to social security or Medicare payments that the homeowner may currently receive.
  • You Will Never Owe More Than The Home’s Value – A reverse mortgage allows you to receive fixed payments, and it is possible to receive more in payments than the value of the home. However, according to FTC guidelines, you will never owe the lender more than the home is worth.
  • Equity Overage Is Yours - You or your beneficiaries will receive the overage if the home if sold for more than the loan amount.
  • Title Retention – The title to the home remains in the name of the homeowner.

Cons of Reverse Mortgages

  • Potential Medicaid Impact - It is possible that Medicaid eligibility could be affected by a reverse mortgage.
  • Fees – In processing a reverse mortgage, lenders generally charge origination and closing costs which can equal several percentage points of the home’s value.
  • Debt Counseling Requirement - Homeowners must go through mandatory debt counseling as a pre-requisite to obtaining the loan. This is meant to make sure the homeowner is fully informed about all the aspects of their decision. But, it can come off as a hassle.
  • Interest Rate – Many reverse mortgage options offer variable rates. Interest rates are currently near historic lows, but could rise significantly over the course of the loan.
  • Taxes And Home Owner’s Insurance – With a reverse mortgage, the home owner is still responsible for paying homeowner’s insurance and taxes. Failure to make these payments could cause the loan to be called due prematurely.
  • Home Equity Used – Your home equity will be consumed by taking the mortgage. You will have fewer assets to leave to your family as a result.

Taking out a loan against your home is a big decision that will impact your current finances and the estate that you leave to your heirs. There are substantial costs involved, including loan origination, servicing, and interest. You also need to remember that, with a reverse mortgage, your debt increases over time due to the interest on the loan. If you change your mind about the loan, or need to move out of the property due to health reasons, proceeds from the sale of the property are used to pay off the reverse mortgage. Depending on the size of the loan and the value of the property, there may be little or no money remaining after the loan is repaid.

A reverse mortgage isn’t right for everyone. You should consult a financial professional who is familiar with your situation before you would take this option. Although being able to access the equity in your house without having to make monthly payments is attractive, the costs and fees associated with a reverse mortgage are negatives that must be considered. People should remember they might not be able to bequeath their house to heirs, which could also be a significant deterrent.

Before taking out a reverse mortgage, you should research the topic thoroughly, compare costs from a variety of lenders, and read all disclosure documents. While investing the proceeds from a reverse mortgage is generally not advisable because of the need to recoup the costs of the loan plus the interest, the income from a reverse mortgage may provide an opportunity to refocus other elements of your investment portfolio. Prior to assuming the mortgage, consider the cash flow the reverse mortgage will provide and review the implications this new source of income will have on your overall investment strategy.

Do You Need a Digital Asset Will?

According to a report from a digital research firm eMarketer, American adults spent more than five hours each day on the Internet last year, up from four hours and 31 minutes in 2012, and three hours and 50 minutes in 2011. Social media sites occupy a large portion of that online time: Data from research firm Ipsos Open Thinking Exchange shows that Americans between the ages of 18 and 64 who use social networks say they spend an average of 3.2 hours per day doing so. Nearly three-quarters of online American adults use social networking sites, and some 42% of online adults now use multiple social networking sites, says Pew Research Center.

In the process of spending more time online, Americans are creating a legacy of data that will outlive them—the inevitability of death poses new challenges. Not only are there consumers who wish to tidy up their virtual effects before they die; there are also estate lawyers in the early process of establishing what constitutes digital ownership, technology firms clamoring to offer new services that deal with the remnants of digital life, and social media companies coming up with platforms that memorialize the dead.

“The norms are evolving,” says Andrea Matwyshyn, a professor of legal studies and business ethics at Wharton. “There will be a feedback loop over the next few years: Customer savvy and sophistication will increase, companies will begin to streamline their approaches, and the legal industry will formalize estate planning.” “We have become progressively more reliant on digital communication and social media”, notes Matwyshyn. “To many people, their digital persona is equally—and in some cases, more—important [than their physical] identity.” And yet very few people have made arrangements for what will happen to their digital persona and online possessions when they die.

In 2012 the government included a “social media will” to its list of personal finance recommendations. The government suggests appointing an online executor to be responsible for the closure of email addresses, blogs, and other online accounts. This person would also carry out the deceased’s wishes with regard to their social media profiles.  Someone’s desire may be to completely cancel all profiles or keep them up as a memorial for friends and family to visit.

Surprisingly five states currently have laws governing digital estate management: Oklahoma, Idaho, Rhode Island, Indiana, and Connecticut.  In structuring respective statutes, each state built upon the language of the states that had acted before it.  Connecticut was the first state to enact digital estate planning legislation, doing so in 2005.

Currently, there is no universal definition of digital asset or a digital estate, which can be troublesome for attorneys seeking to assist clients with digital estate planning.  According to one industry resource, the term “digital asset” encompasses e-mail, word processing documents, audio and video files, and images, which are stored on digital devices, and mobile devices, without regard to the ownership of the physical device in which the digital asset is stored.  By contrast, a person’s “digital account” may consist of a variety of personal assets, including e-mail accounts, software licenses, social networking accounts, and domain registration accounts.  Simply put, digital assets are the actual files, and digital accounts are the “access rights to files.”  This account/asset distinction can be critical; even if the files themselves are readily available, their management and transfer to an executor or agent may be subject to an Internet-based service agreement.

The vast majority of our digital assets—such as digital photos or Facebook timelines—have little value beyond the sentimental. But even these require careful estate planning, according to Gerry W. Beyer, a professor at Texas Tech University School of Law. In the old days, he says, people passed down scrapbooks, memoirs, picture albums, and musty files of old newspaper clippings. “But now, many of us don’t have physical property like that to transfer. So all that stuff will disappear.”

Certain digital assets have monetary value both today and in the future, such as domain names or a blog that generates income. Avatars or virtual property in online games such as World of Warcraft or Second Life also have quantifiable value, Beyer notes. Digital assets—personal iTunes music libraries and Kindle books, for example—are in a different class. If you have, say, a large digital book collection, the transfer of usage rights is limited and closely monitored. “You don’t technically own those,” says Beyer. “You have a license to use them. That license dies with you. But if those are owned in a trust, your beneficiaries may be able to continue to use them.”

A growing number of companies are finding ways to monetize postmortem digital effects. After all, just because most of our digital content is sentimental, it does not mean it is of no economic value. “Quite the opposite, actually,” says Pinar Yildirim, a professor of marketing at Wharton. “Say you upload photos today, and 100 years later, long after you are gone, your great-great grandson wants to have them. It represents an opportunity for any company that may want to justify its investment in storing that digital content.”

It may be helpful to think of digital assets in terms of four different categories: personal, financial, business, and social media.  Although there is some overlap, people often develop separate plans for the disposition of each asset category. To elaborate, personal assets are files that are “typically stored on a computer or smartphone or uploaded onto a web site,” including photographs, videos, or even music playlists. Social media assets, on the other hand, generally entail social interactions with a network of people through various mediums, including websites such as Facebook and Twitter, as well as e-mail accounts.  Financial assets may include bank accounts, Amazon accounts, PayPal accounts, accounts with other shopping sites, or online bill payment systems.  By contrast, business assets generally include customer addresses and patient information.

Without a plan in place, you risk burying your family in red tape as they try to get access to and deal with your online accounts. If you have, say, a Yahoo email account, your emails might be deleted before your family has a chance to review them. In other cases, maybe your family gains access to emails that you’d rather they didn’t see. Or, maybe you’ve been blogging for years, and your family wants to maintain your online writing as a sort of memorial.

These are the sorts of problems that a digital estate plan — one that details your online assets — can help prevent. Keep in mind that, given the legal complexities, a digital estate plan won’t guarantee your wishes are met. But it will help your executor as he or she attempts to manage and distribute your assets. And it’s not only an issue of family photos and other sentimental assets. If you have an online-only bank account or a PayPal account, your executor may never know about that account if not for your digital estate plan. And what if you have a fortune in Bitcoins on your computer?  Divvying up your online assets is complicated: These accounts often are governed by the terms-of-service agreement to which you agreed upon opening the account. Often, service providers have created those agreements to comply with federal laws that limit access to account information to authorized users.  Most state laws don’t offer specific support to executors in taking control of digital assets. Even where such laws exist, they are often well behind the reality of today’s technology. (The Uniform Law Commission, a nonprofit that drafts model legislation for states to adopt, is in the process of drafting a proposed law on digital assets — a Uniform Fiduciary Access to Digital Assets Act — but there is no guarantee states will adopt the legislation.)

To protect your digital assets, make a list of your online accounts so your executor knows about your online assets. Your inventory should include login IDs and passwords. You could store the information with one of the online services, in a safe-deposit box, or put it on a CD or flash drive and give to a trusted adviser. But don’t put your login information in your will — wills that go to probate become public record.

Next, detail how you want to dispose of each asset. Get specific. For example, “If I’m dead, memorialize my Facebook, delete my Twitter and LinkedIn, and here’s how to get the cash out of my PayPal,” suggested Jean Gordon Carter, an estate-plan attorney and partner at Hunton & Williams LLP in Raleigh, NC.

Keep in mind that your wishes may run afoul of the service provider’s policies, depending on the terms of service associated with each account — terms which, by the way, can change at any time. The best you can do is leave a detailed digital estate plan, and hope for the best. If that’s precisely what you’d like to have happen — maybe your emails are not for your family’s eyes — then don’t provide your password for that account in your estate plan, and note that you’d like that account deleted without being read.

Email service providers and others have started to change their policies in response to the complexities of dealing with digital assets after an account owner’s death. Some email providers, for example, may provide an estate’s executor with a copy of the decedent’s emails (it’s unlikely that they’ll provide the username and password).

For its part, Facebook will delete an account or allow the user’s timeline to be memorialized once it receives proof of death and proof of the relationship between the decedent and the person making the request.  Although it is awkward to have to deal with each provider separately, where they do offer the mechanism, it’s the easiest way to deal with what you want to have happen after your death,

Designate a digital executor, pick a trusted friend or relative to handle your digital assets after you die. This person could be your main executor, or someone else. If your mom has no idea what Facebook is, you don’t want her going in and trying to handle it. In some cases, it might make sense to name a different fiduciary for that role. You can name two executors and say one has ‘limited power to handle my digital assets.

Get specific: Name the person, and name each account for which you name them as an authorized user.  Naming such a person is no guarantee, but it’s certainly better to be proactive and nominate someone. Then that person has the ability to say, ‘This person authorized me to have access.’ That will certainly facilitate things after death.

Hopefully, within the next few years a uniform law will be drafted and enacted by the states, allowing families to easily gain access to a decedent’s digital estate. Once this law is in place, people can fully utilize the digitalization of the world that continues to increase each day —both during life and after it.

Self Directed IRA

Wealth Manager Marc Bautis Encourages Real Estate Professionals to Use Their IRA to Invest Wisely in Real Estate

Marc Bautis, wealth manager for real estate professionals, believes that one of the best ways for his busy clients to secure their financial future is to invest in something they know – real estate.

NEW YORK, NY – Marc Bautis, author, speaker, wealth manager, and founder of Bautis Financial encourages real estate professionals to grow their personal wealth by investing in real estate and enjoying a positive cash flow, as well as market appreciation. “The April 15th tax return filing deadline is close,” says Marc. “But there is still time to make contributions to your IRA and explore using your IRA to invest in real estate.”

When counseling real estate professionals, Marc often finds that they don’t have a personal benefits package. He believes that they, as well as all other small business owners, should have a clear financial plan for their future. That’s why Marc focuses on assisting his clients with creating and implementing a comprehensive or segmented strategy that helps them achieve their financial goals.

“I enjoy speaking with real estate agents, mortgage bankers, and other real estate professionals about using their self-directed IRA to invest in real estate, because real estate is an asset that they already understand and have experience with,” explains Marc. “My role is to give them the education, support, and guidance they need relating to the complex IRS rules so they can spend their time on their business without having to worry about their personal finances.”

The IRS allows an IRA to buy, sell, and exchange real estate as an asset without losing the tax benefits associated with the IRA. Marc uses his financial and real estate experience to help his clients analyze eligible properties and choose the best investment option.

Bautis Financial is a registered investment advisory firm located in Rutherford, New Jersey that offers retirement planning, asset management, education planning, and estate planning services. Marc is a public speaker and the author of The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime. Available on, the book guides readers through a realistic assessment of their current financial status, discusses smart savings strategies, and teaches how to convert savings into a predictable and sustainable income stream.

Real estate professionals seeking to plan for their financial future should contact Marc today at 201-842-7655 for a free, no-obligation consultation.

Health Care Planning in Retirement

When most people think of what could financially derail their retirement, things like inflation, market losses, and taxes come to mind.  Health care costs are rapidly emerging as a major expense during retirement and the number one risk to a successful retirement. With lifetime employment a relic of the past and longevity on the rise, it should be a top-priority to include health care expenses and planning as part of the financial and retirement planning you do with your financial advisor.

For more than a decade, Fidelity, one of the world’s largest providers of financial services, has calculated an annual estimate of medical expenses for retirees.  The estimate applies to retirees with traditional Medicare insurance coverage and does not include any costs associated with nursing-home care. A 65-year-old couple retiring in 2012 was estimated to need $240,000 to cover medical expenses throughout retirement.  The estimate has increased an average of 6 percent annually since Fidelity’s initial calculation of $160,000 in 2002, with the exception of 2011 when the estimate declined $20,000.  As people age, health care costs typically continue to increase beyond the inflation rate, mainly because declining health requires more hospital visits, medications, and assisted care. Statistically, health care costs skyrocket in the last few months of life. Variables such as long-term care insurance and comprehensive living wills can help keep those costs in check to a degree. But because everyone’s situation varies, it’s important to consider the current health status of you and your spouse, your family history, and any employer-based health benefits that will be available to you in retirement. All this information plays into longevity calculations and what may be required to meet your future medical expenses.

If you’ve been covered by a generous employer group health plan, you may be in for a rude awakening when you retire. Although the government may subsidize some of your health care costs under the Medicare program, you will still be responsible for certain out of pocket costs.

Here are a few tools that can help with your planning:

Fidelity Health Care Expenses Cost Calculator– makes a comprehensive assessment of how much retirees are likely to spend on health care in retirement based on their age, financial resources, and insurance status

AARP Doughnut Hole Calculator-allows users to input information about medications and dosages to figure out how to avoid the dreaded donut hole

My Medicare Matters– gives you help with reviewing plan choices and guiding clients through the maze of Medicare choices

Medicare Interactive– offers answers to specific Medicare questions and in-depth information about virtually every aspect of Medicare. It’s run by the nonprofit Medicare Rights Center

Medicare – provides an official government site full of resources including information about the various parts of Medicare

Here are some things to consider for keeping health care costs under control after you retire:

Avoid Medicare late enrollment penalties, find out when you need to enroll in Medicare and be sure to sign up during your enrollment period.

Shop carefully for private insurance, Medicare does not cover everything. In order to avoid coverage gaps for prescription drugs and the portion of medical services that Medicare doesn’t pay for, you will need to have private insurance.

Reduce the income-related monthly adjustment amount, If your income is over $85,000 (if single) or $170,000 (if married), you will be charged an income-related monthly adjustment amount on top of your regular Part B and Part D premiums. These are cliff thresholds, which means if your income is just $1 over the amount, you will be charged the higher amount. Talk to your financial and tax advisors about ways you may be able to reduce your modified adjusted  gross income in order to avoid these excess charges.

Be a cost-conscious consumer of health care, one of the factors underlying the meteoric rise in health care costs over the past two decades is the growing role of health insurance in our country, because it tends to make consumers unaware of costs when they seek health care services. This is especially true for workers with comprehensive employer health insurance.  Once you go onto Medicare you will need to be aware of health care costs. Otherwise you could be surprised by some rather large medical bills. Start by asking if your doctor accepts Medicare, some don’t. Ask if the doctor accepts assignment, which means you will be billed no more than the Medicare-approved amount, with you (or your Medigap insurer) being responsible only for the deductible and coinsurance amounts. Examine your insurer’s drug list and be aware of the copayments and coinsurance amounts for drugs you take. Do this annually, because drug plans change from year to year. Take into consideration all of your health care needs, including dental care and other services not covered by Medicare, and be aware of all of your out-of-pocket costs, preferably before they are incurred.

Seek preventive care and stay healthy, although staying healthy won’t help you reduce your premium costs, it will certainly help you avoid copayments and coinsurance amounts. Stay healthy by exercising and eating right. Get your free flu shot every year. Take advantage of Medicare’s free screenings, such as mammograms, prostate cancer screenings, colorectal cancer screenings, and others. Certain conditions, if discovered early, can be treated quickly and easily and at a much lower cost than if hospitalization or expensive drugs are required.

Although the current health care costs of healthy retirees are lower than those of the unhealthy, the healthy actually face higher total health care costs over their remaining lifetime.  Researchers cite three reasons why this happens: First, people in good health can expect to live significantly longer, so they are at risk of incurring health care costs over more years. Many of those currently free of any chronic disease will succumb to one or more such diseases at some point before they die. And third, people in healthy households face an even higher lifetime risk of requiring nursing home care than those who are not healthy, reflecting their greater risk of surviving to advanced old age, when the risk of requiring such care is highest.  That said, staying healthy is never a bad idea. Here are some wellness tips to consider as you grow older:

Protect your assets with Long Term Care Insurance: Americans routinely buy all sorts of insurance – for cars, homes, health and even pets and boats.  But when it comes to long term care insurance, relatively few sign up.  The cost of insurance is expensive, but the cost of long term care can be crushing.  Each year it is estimated that 11 million US adults need some type of care.  You can learn the basics of long term care at this website:

Eat right, exercise, etc. You know the drill. Exercise is especially beneficial as you grow older.  According to the U.S. Surgeon General’s Report on Physical Activity and Health, inactive people are nearly twice as likely to develop heart disease as those who are more active. Lack of physical activity also can lead to more visits to the doctor, more hospitalizations, and more use of medicines for a variety of illnesses.

Reduce stress. Chronic stress can lead to heart disease, sleep problems, digestive problems  depression, obesity, and memory impairment. One way to reduce stress in retirement is to have a financial plan in place so you can relax and feel confident that money will not be a problem.

In conclusion, when deciding how much to save for retirement, and how rapidly to draw down their wealth during retirement, households need to consider what risk they are prepared to accept of having their assets substantially depleted by health care costs, and whether they should insure against health care costs by purchasing long-term care insurance.

Bautis Financial Mobile App Now Available on IOS and Android



 Bautis Financial

Secure your Castle, Achieve your Dreams


‘Bautis Financial App’ Available on iTunes and Google play for iPhone, iPad and Google Android Phones

 Stay on top of your investments with information from the Bautis Financial mobile app. Learn best practices and strategies on how to improve your personal finances.

Bautis Financial provides independent financial advice, exceptional service, and a commitment to our clients. As a Wealth Manager, Bautis Financial will help create and implement a comprehensive or segmented strategy that will help you achieve your financial goals

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Bautis Financial, LLC is a registered investment advisor established in 2008 serving clients in New Jersey and New York. Bautis Financial provides financial advisory, comprehensive planning, and asset managing services. To learn more about Bautis Financial, please visit:

To Download on Apple:

To Download on Google:

Free • Category: Finance • Released: Mar 20, 2014 • Version: • Size: 17.1 MB • Language: English • Seller: Bautis Financial, LLC • © 2014 Bautis Financial • Rated 4+ • Compatibility: Requires iOS 5.0 or later. Compatible with iPhone, iPad, and iPod touch. This app is optimized for iPhone 5.

Why Everyone Needs a Will

A will is a legal document that specifies who will inherit your bank accounts, real estate, jewelry, cars, and other property after you die. A will tells the world exactly where you want your assets distributed when you die. For parents, making a will is the single most important thing you can do to make sure your child is cared for by the people you would choose if anything should happen to you. In your will you can designate a person (guardian) to care for your children if you die before they become legal adults. And you can designate a property guardian or trustee to manage your money for your children until they reach adulthood. You can appoint one person to act as both personal and property guardian, or choose two people to carry out the separate roles.

A will also allows you to name your executor, the person who will be in charge of your estate. Before you select an executor, make sure you understand the tasks he or she will need to perform, which include distributing your property, filing tax returns and processing claims from creditors. Your executor should be someone you trust completely – and don’t forget to ask if he or she is willing to take on such a big responsibility.

To make a will you don’t necessarily need a lawyer, (although I recommend using one) but you’ll need to invest time, energy, and probably a little money to do it right yourself. Many families have written legally valid wills by using a self-help book or a will-writing software program, although mistakes are more likely with a do-it-yourself will.  Reviews of will writing software programs – If the cost of using a lawyer is holding you back from writing a will, you can use a service like and do it yourself. On the other hand, if the thought of plowing through pages of legalese is too daunting, call a family lawyer. Ask for recommendations from family, friends, or trusted professionals you work with. A lawyer can cost you anywhere from a few hundred to a few thousand dollars, but the money buys you expertise and peace of mind.

To save money, think through what you want to include in your will first and then contact a lawyer to go over the finer details. Also, find out whether your employee benefits include free legal consultation. Such consultations may be limited to 30 minutes, but that could be a very helpful half hour.

Here are a few ideas to start you off:

•              Make a list of all your assets, including bank accounts, investments, real estate, life insurance, and personal property.

•              Decide exactly whom you want to inherit what, and when. For instance, you might want your daughter to inherit her grandmother’s gold bracelet when she turns 16.

•              Choose a guardian for your children.

•              Choose an alternate guardian in case your first choice is unwilling or unable to do the job.

•              Decide whether you want someone else to handle the assets you leave your children. If so, choose that person.

•              Choose an executor to carry out your wishes and handle the necessary paperwork after you die.

•              Decide whether you want to include a letter stating how you’d like your children to be raised and educated, your funeral to be arranged, and so on.

After making your will, you’ll need to sign it in the presence of at least two witnesses. If you’re using a document called a “self-proving affidavit” with your will (to make things simpler when the will goes through probate court after your death), your signature must be notarized as well.  Tell your executor where your will is and how to get access to it when the time comes.

A will is also useful if you have a trust. A trust is a legal mechanism that lets you put conditions on how your assets are distributed after you die and it often lets you minimize gift and estate taxes. But you still need a will since most trusts deal only with specific assets such as life insurance or a piece of property, but not the sum total of your holdings.

For 2014, the lifetime gift tax exemption increased to $5.34 million – the same as the federal estate tax exemption – meaning you can leave up to $5.34 million to your children without worrying about estate taxes. Couples can together leave over $10 million.

Keep in mind that life insurance policies, pension benefits, and real estate all count toward your total assets. (This is different+ from the annual gift tax exclusion, which is $14,000.)

If you know or suspect that your estate will be worth more than the exemption amount, talk to an estate planning professional about how to minimize the tax burden on your children.

You may amend your will at any time. In fact, it’s a good idea to review it periodically and especially when your marital status changes. At the same time, review your beneficiary designations for your 401(k), IRA, pension and life insurance policy since those accounts will be transferred automatically to your named beneficiaries when you die.

Dying without a will — also known as dying “intestate” — can be costly to your heirs and leaves you no say over who gets your assets. Even if you have a trust, you still need a will to take care of any holdings outside of that trust when you die.

Your assets go into “probate” – an expensive and drawn out legal process which determines who inherits your estate, and can take anywhere from a few months to a few years, depending on how complicated the estate is.

So-called intestacy laws vary considerably from state to state. In general, though, if you die and leave a spouse and kids, your assets will be split between your surviving mate and children. If you’re single with no children, then the state is likely to decide who among your blood relatives will inherit your estate.

Without a will, the courts decide what happens to your assets and who is responsible for your kids. Without a will, there’s no guarantee that when you die your money will go to the people you want or that your children will be cared for by the person you believe will do the best job. Moreover, if you and your partner both died without a will, the state courts and social services department would appoint someone to raise your children. And that person might have very different ideas about parenting than you do. Even if you think you have almost no property to leave your children, it’s worth making a will to make sure you get to choose their guardian.

Social Security: Taxes and The Earnings Test

I hosted a great workshop yesterday on Social Security Planning at the Leonia Public Library with over 25 people in attendance.  Two questions I get at almost every workshop are about the Earnings Test, and how Social Security benefits are taxed. Here is an explanation of those two concepts.

How does the Earnings Test work?

Social Security will withhold $1 of Social Security benefits for every $2 of earned income if you are receiving benefits and under your Full Retirement Age (FRA).  Social Security asks people under their Full Retirement Age (66 or 67) who are receiving benefits to estimate their earned income for the year.  Let’s say a person who is receiving $1,500 in Social Security benefits plans to earn $30,000 this year.  The government will allow you to earn $14,160 in income before they start withholding benefits.  To calculate how much benefits will be withheld, subtract $14,160 from $30,000 and you get $15,840.  Divide $15,840 by 2 and you get $7,920 in withheld benefits.  Rather than withholding the benefits proportionally each month, no benefits would be paid for as many month as it takes to make up the $7,920.  After the year is over and actual earnings have been reported, any necessary adjustments will be made.  Once you hit your full retirement age you will not longer have any benefits withheld no matter how much income you earn.

How are Social Security Benefits taxed?

Social Security Tax


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This table shows the taxation of Social Security benefits based on the various income levels. “Income” in this case means provisional income, which includes adjusted gross income, plus one-half of the Social Security benefit plus any tax-exempt interest. If provisional income is under $32,000 for a married couple no benefits are subject to tax. If provisional income is between $32,000 and $44,000, up to 50% of a married couple’s benefits are subject to tax. If provisional income is over $44,000, up to 85% of benefits are subject to tax. The thresholds for a single individual are $25,000 and $34,000. In the case of married filing separately and living with spouse, 85% of Social Security is taxable regardless of income level.

For a schedule and to register for an upcoming workshop please go to

Bitcoin: A Primer

Over the ages, we have used all sorts of things as money: feathers, shells, paper, etc.  Yet, we wonder what makes money what it really is?  The question comes up as a new kind of currency is graving attention. The Bitcoin is an innovative payment network and a new kind of money for today’s digital age, no printing press required.

Just like you can have a dollar, a euro or gold, you can have a Bitcoin. It holds a store of value like any other currency. Bitcoin is completely digital and is stored on your computer. It is decentralized and runs on a peer-to-peer network, which means that not one person or institution can regulate or control Bitcoin. Instead of a trusted third party like a bank, Bitcoin creates trust through a cryptographic system, making sure that only you can use your Bitcoins.

Like gold, no central bank controls Bitcoin currency so governments cannot print or mint more of it. Using computers and complex software, people can “mine” Bitcoins by solving complex mathematical problems. If they solve the problem, they get Bitcoin. But since the process of mining is so difficult most people just buy Bitcoin from various exchanges popping up.

People can choose to pay for things using their Bitcoins. Sites like and are already accepting this digital currency and/or they can invest in the Bitcoin currency as they would invest in the stock market or in gold, and earn a return on their investment as the price in U.S. dollars per Bitcoin rises. In recent months, one Bitcoin unit has been worth about $700. It has been as low as $50 and as high as more than $1,200.

Although it isn’t a household name, Bitcoin has quickly gained cult status among believers in virtual currencies, thanks to wild fluctuations in its price , moves by mainstream retailers to accept it for payment and increased regulatory scrutiny.

Now, what about the market volatility and other concerns such as security, raised by Bitcoin detractors? Bitcoin has only been around for five years, and since then it has exploded. Any security will be very volatile in its infancy. As time goes on, volatility decreases.

Mt. Gox, a Bitcoin exchange based in Tokyo, Japan, suspended all trading on February 24, and several hours later its website went offline – as in, no data; a blank page. It was revealed that possibly $350 million to $380 million in Bitcoin had been stolen from the exchange due to a security breach. This left people who had entrusted Mt. Gox with their Bitcoin wondering if their digital currency was forever lost. The sudden disappearance of Mt. Gox, the first and most widely known Bitcoin exchange, has raised concerns about the sustainability of the online currency market. The Mt. Gox debacle sent the Bitcoin value down more than $100 earlier in the week, causing people who had invested in the currency to experience heavy losses, if only temporarily. By the end of the week, it was trading around $550 a unit.

While many people use Bitcoin as a payment, some prefer to use it as an investment like a security to hold on to and sell off later. Mahir Jethanandani, a junior at Saratoga High School in Saratoga, California, has become a self-described Bitcoin enthusiast, immersing himself in the news and research surrounding this new digital currency. In March 2013, Jethanandani invested in Bitcoin through Coinbase, an exchange with low transaction fees. He purchased Bitcoin at around $100 a unit and sold his investments eight months later when the news about China was emerging. “I managed to pull out of Bitcoin with an obscene investment return,” notes Jethanandani. “I bought Bitcoins at $100 and sold them off at $900.”

Bitcoin can be used entirely as a payment system; merchants do not need to hold any Bitcoin currency or be exposed to Bitcoin volatility at any time. Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want.  In addition, merchants are highly attracted to Bitcoin because it eliminates the risk of credit card fraud.

Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage. Every day, more and more consumers and merchants are buying, using and selling Bitcoin, all around the world. The overall numbers are still small, but they are growing quickly; and, ease of use for all participants is rapidly increasing as Bitcoin tools and technologies are improved. Remember, it used to be technically challenging to even get on the Internet. Now it’s not.

Money is money because we think it has value today, we think it will have value in the future and we will be able to use it as a medium of exchange. In other words, money is money because we believe in it; clearly all those who bought in believe that Bitcoin has value.