Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

The information presented is general in nature and should not be considered legal or tax advice. You should consult your legal or tax advisor for information concerning your own specific tax situation.

As economic conditions improve, regions are recovering at different paces. It is a good idea to maintain a global perspective, not just the US or hot emerging markets for a big score. Make sure your portfolio will benefit from extraordinary changes in the world.

Make sure you are paying attention to prices. Consider investing in attractive proceed areas like beaten down blue chips that under performed in the S&P in 2009.

Review your objectives and time horizons. Are you buying a home in the next five years, saving for college or is retirement your goal. Review your portfolio with a focus. Remember that lowering volatility through diversification can actually improve your return.

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

Just when it appeared that the economy was strengthening, some old bugaboos from 2008 and 2009 found their way back to the US. The Obama Administration’s home purchase tax credit program ended in April, as did the mini-housing recovery. Once again we have to pay attention to foreclosures and the risk of home prices sliding. Four quarters of small gains in employment came to a halt in May. Even though employment is a lagging indicator — it doesn’t recover until several quarters of economic growth — the end to nascent job gains will hurt still-negative consumer confidence. Indeed, a small boomlet in retail spending by consumers petered out in the Spring. And, recent stock market volatility reminds investors of recent events they would rather forget in 2001 and 2008. Is this time different, or are we destined to relive the bad old times?

This time around, we have one important difference: Europe. The size and impact of huge budget deficits in Europe scare investors — not just declining value of the Euro, which is bad enough — but because it seems that “no one’s in charge.” The lack of political and economic leadership in Europe is appalling and events may turn much worse before any major change. The problem isn’t Greece, Portugal or Spain as much as the lack of preparation by Finance Ministers and the European Central Bank. But — and this is a big but — Europe’s problems will have limited impact on the US. Some US exporters will sell less in Europe, and some US companies with European operations will be affected, but most Americans will so no impact. And, as US stocks have moved in lockstep with the Euro’s value, Europe does seem to be 90% of the problem.

However, the other 10% remains US employment. Why only 10%? Investors seem to have already been prepared for slowing job growth. It was unrealistic to expect the US economy to bounce back sharply, as this was the first recession in 70 years based on excessive debt and lower asset prices. Some of the accumulated debt has been repaid, but continued repayment will pressure consumer spending for at least several more years. And, since consumers normally spend us out of recessions, this pressure will limit the speed of any recovery. A new factor this time is added pressure from state & local government budgets, now being pared back sharply, and a new-found reluctance by Congress to add new stimulus programs due to the size of the Federal deficit. Budget cutting slows economic growth in the near term, even as fiscal discipline is positive in the long run.

As for stocks, the market had been getting expensive and had gotten ahead of itself in March and April. That always seems to be a reason for any selloff. I do not see this as “the big one.” Investors continue to avoid stocks, as they have through the entire 60+% rally from March 2009, so there is limited stock to be “dumped” from frustrated holders. Expectations both for the economy and stocks are limited, so negative surprises may be few. There might well be some near term limited downside — maybe even lasting into the Fall — but widespread investor fear and indifference always seems to eventually result in higher stock prices.

My economic forecast remains largely unchanged from earlier in 2010. Unemployment will remain elevated, and could reach 11% sometime later this year. The overall US economy will shrink 1% in 2010, and perhaps grow 3% in 2011. I had expected inflation to remain at low levels, but with weakness in the US dollar preventing actual deflation. Now, with our dollar a pillar of strength against the weak Euro and Yen, we will likely see lower oil and import prices later this year. This will provide some respite to the consumer, especially at the gas pump. That will be a welcome change in an economic backdrop that otherwise reminds us to much of the last time around.

Christopher H. DeVoe CFA is the Chief Investment Officer of Constellation Asset Management, Inc., an investment advisory firm located in Fayetteville, New York. Mr. DeVoe can be reached at (315) 449-1820.

What to keep
Knowing what keep by separating your papers by your need to use them, keeping short-term items together and a longer term items together.

Immediate needs files should include items for the past year including

• Unpaid bills
• Paid bills
• Bank statements
• Credit card statements
• An updated resume
• Income tax receipts for deductions
• Major purchase receipts
• Insurance policies

Long term files should include

• Bank statements (7 years)
• Credit card statements with home improvement expenses
• Canceled checks (7 years)
• Warranties and operating instructions for appliances
• Income tax record and back up for previous three years
• Gift tax returns
• Inheritance papers
• Retirement and all investment statements (all year end)
• Reports from trusts
• Birth certificates
• Social security cards
• Burial vault/plot deeds
• Will/living wills
• Powers of attorney
• Car titles
• House titles/deeds

What about taxes?

There are two types of tax information that you need to be concerned about: information you need in case of an audit and information you need to support your claims of income.

Keeping tax returns and supporting documents for seven years (because the IRS has six years from when you file to investigate.

Keep forever or until assets are sold

• Receipts for home improvements
• Receipts for major appliances
• Annual investment statements
• Gift tax returns
• Inheritance papers
• Copy of your will
• Health care proxy forms
• Power of attorney form

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

If there is any consolation to be taken from the past eighteen months, it is that most people pay more attention to their financial picture – not just their stock and bond investments, but savings and spending habits as well. However, most people do not have time to focus on their savings.

Let us take an objective look at how to improve your finances – you will be surprised at the results. Through simple measures you can make sure your finances are back on track.

Our second opinion will be practical – through inventory of your assets and liabilities, i.e. using some savings in a cash account that yields zero to repay certain types of debt. We will revisit your retirement goals, explaining the impact of inflation on your nest egg. We will help you save, save, save. We will help you to be smart about your different insurance plans.

People should look at finances the way companies do. You need to protect the value of your work. We wouldn’t let panic dictate investment choices. Last year’s losses had many people changing their asset allocation and diversification strategies. Regardless of what the market is doing, sticking to a strategy that matches your investment principles is important especially when it comes to risk.

Make sure you can find someone you can trust. Get a second opinion and keep asking questions. We are here to help. Your success is our success.

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

Why contribute to a 403b when my employer provides a pension?

Few pension plans provide an amount equal to salary. Studies have indicated that we will need about 80-90% of our pre-retirement income to maintain our lifestyles.  Your 403b will provide a healthy supplement to your pension and a huge inflation hedge.

My Favorite Advantages:

Ease of pay roll deduction

It is painless and automatic.  You don’t have to think about it. Did you know that bear (down) markets may actually do wonders for retirement?  Look beyond the short term and invest appropriately for the long term.

Lowers your tax bill

403(b) plans are made on pretax basis, which can greatly reduce your tax bill. You can lower your federal and state taxes because your contributions are taken directly out of your paycheck before taxes are paid.  This has the potential to accumulate faster because you are not paying any taxes on the earnings in the account until you withdraw them (this advantage is called tax deferral). Contribute $150 to your plan per paycheck and you’ve reduced your tax bill by 33% (includes federal and state tax).  In effect, your $150 contribution costs you only $101 dollars.  Please note that your contributions do not reduce your wages thus your social security benefits will remain in tact.

There is another special tax credit for low income savers.  Eligible 403(B) participation will receive a tax credit of up to 50%  (up to $2,000).  For 2009 the full credit is available to joint filers whose adjusted gross income (AGI) is less then $53,000 and single filers whose AGI is under $26,500

Use it as a planning tool. Have a big tax year or offset college cost.

Annually you can contribute (2009) $16,500 with a catch-up for those who turn 50 years anytime during the year of $5,500.    There is another catch-up provision for those who have at 15 years or more service for the same employer.   So, let’s say you inherited money you can offset or you have a kid going to college.  The plan offers flexibility.

Before committing to a 403b option what questions should you ask?

Will I be penalized for pulling my money out?  This is the most important question you can ask.  How available is my money?

Generally, penalty free distributions cannot occur until the participant reaches 59.5 years of age unless they have separated from service in the year they are turning 55.

For retirement before 55, you are eligible for substantially equal periodic payments.

You become disabled.

Hardship withdrawals are allowed if under severe financial distress.  The participant must have no other resources available. A hardship withdrawal may be taken for un-reimbursed medical expenses, eviction or foreclosure on primary residence. Please note that for hardship withdrawal only contributions, not earnings, can be withdrawn.

So I have decided to payroll deduct into a 403b. How do I set up my plan?

The regulatory requirements affecting retirement plans for tax exempt organizations have changed dramatically in the last year.  From written plan documents to vendor and investment approval these changes have made many new demands for employers and employees alike.

Ask your employer for a list of the participating investment companies available to you.  This is known as a vendor list. Select several investment companies from the list and then most importantly research these choices with an eye toward performance and cost.  Next, determine the amount of $$$ you would like to contribute per paycheck.  Finally, return the necessary paperwork to your employer and you are on your way.

What are my Investment Options?

Fixed annuities are contracts with insurance companies that guarantee that you will receive a rate of interest during your accumulation phase.

Variable annuities are contracts with insurance companies under which you make a series of payments into a tax deferred account. In return, the insurer agrees to make periodic payments to you at some future date.  Make sure the variable annuity is worth the money you are paying.

Mutual funds are pools of money invested in many different securities that are managed according to set objectives. For example, you can choose an aggressive fund for growth or a more stable fund for stability.

Other Considerations

Can you change the amount you contribute?

Yes.

Can you stop contributing altogether?

Yes.

Are there loans on my plans?

Possibly though not all vendors oblige.

What are my options for my 403(b) if I switch jobs?

Move money into your new employers 403(b), roll it into an IRA, or leave it where it is. Or, take a lump sum. Although this is not wise because it will trigger all kinds of penalties.

What happens to my 403(b) in the event of a divorce?

A distribution to an alternate payee will be permitted if pursuant to a qualified domestic relations order (QDRO). The spouse can roll the proceeds into an IRA or qualified plan.

What happens to my plan in the event of death?

Death benefits get paid under a 403(b) plan depending on when death occurs and who is named as the designated beneficiaries.

How will my 403(b) be taxed?

In most cases distributions are taxable as ordinary income.  Assets can not be left in the plan indefinitely, you must begin withdrawals no later than April 1 of the year following the year you turn 70.5 years of age.

Can you contribute to a 403(b) and 401K

Yes, as long as your aggregate contributions may not exceed your elective deferral limit.

Can I contribute to a ROTH IRA

Yes, ROTH 403(b) contributions are after-tax dollars that will grow tax deferred.  Withdrawals will not be taxed

Remember that planning for retirement is an on going process. The earlier you get started the better off you will be.  Your best friend when investing is time.

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

Economists are creatures of habit: we love a normal business cycle. You know, the kind that start out when consumers, aided by a little Government pump priming, get out from under the covers and spend a little more money, then businesses find their inventories are a bit too lean and they order a little more from manufacturers, who then call a few more employees back to work, etc. This makes it easy — you look at past economic cycles, increase your forecasts for economic growth a little each quarter and, voila, the economy recovers in a year and a half to two years. The positive feedback loop of more spending causing more hiring, then more spending, then more hiring, builds on itself. Recession over!

But, alas, this time around, the underlying condition of the consumer has thrown a monkey wrench into the process. Americans spent the past 15 years accumulating assets and spending largely with borrowed money; indeed, the average household now has 50% more debt, compared to their income, than in 1995. In Finance 101, I was taught that saving represents deferred consumption — I save by not spending now — while borrowing shifts spending from the future to today. Well, that future is now. Consumers are concentrating on paying down debt, and will continue to do so for several years. Since the consumer is 70% of spending, this will prolong the current downturn, probably into 2011. And, the positive feedback loop is derailed: reduced (or deferred) spending leads to layoffs, which reduces spending further, leading to more layoffs. etc. Small businesses are finding it harder to get credit and, if they do locate funding, may not be confident enough to spend it. True, stimulus spending by the Federal government, and tax breaks to purchase cars and homes, have helped offset some of the decline. But the cost to create (or prevent the loss of) each job through the stimulus program is well over $150,000, so this cannot be the answer to replacing the eight million jobs lost thus far in the current downturn. Therefore, it seems likely that the unemployment rate, which just reached the 26-year high of 10.2%, will be close to 11% by mid-2010. I forecast that the US economy will shrink 3.5% in 2009 and 1% in 2010. Inflation will remain muted, although the lower prices of most items will be offset by higher costs of imports such as oil, due to the weakness in the US dollar. Growth should resume in 2011 and continue at a slow rate through 2015. We cannot spend our way out of the current recession as we have in normal downturns. The recovery will be anything but normal, confounding economists and disappointing the American people.

Christopher H. DeVoe CFA is the Chief Investment Officer of Constellation Asset Management, Inc., an investment advisory firm located in Fayetteville, New York. Mr. DeVoe can be reached at (315)449-1820.

Savings bonds that are more than 30 years old will no longer be earning interest. Redeeming these and reinvesting the proceeds into an interest bearing investment may be a wise decision.

Series EE savings bonds dated May 1995 to April 1997 typically pay less than 2% interest. Consider reinvesting those assets to achieve a better return.

Series EE savings bonds issued after April 2008 pay 1.4% interest or less. These are good candidates for redemption towards a higher yielding investment.

Series I Bonds with fixed rates above 0.5% additionally pay a variable inflation rate. These bonds may or may not be a good idea to keep depending on inflation forecasts.

Keep in mind that savings bonds issued before May 1997 accrue interest twice a year. If you decide to redeem these bonds, you may want to wait until the first day or two after interest has accrued to maximize your investment.
Discuss your savings bond holdings with your financial professional to make the best decisions for your particular circumstances and financial needs.

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

1. Shred financial documents and mailings with personal information before tossing them in your garbage. The garbage is a great source of information for identity thieves.
2. Protect your social security number. If you are carrying your social security card around with you in your wallet, take it out and store it in a safe place. Don’t give out your social security number unless absolutely necessary and do not list it on your checks. If you are asked for your social security number, determine if it is really necessary. In recent years, many organizations and agencies have begun using alternate and safer ways to keep track of accounts.
3. Don’t give out any personal information over the phone, through the mail, or on the internet, unless you know, for certain, who you are dealing with.
4. Store your personal information at home in a secure location. This is especially important if you have roommates, guests, or contractors working in your home.
5. If you do not receive bills when expected, make some phone calls to make sure your mail is not going elsewhere.
6. If you receive unexpected credit card charges or statements, get to the bottom of them immediately.
7. If you receive calls or letters about purchases you did not make, make inquiries promptly to protect yourself.
8. Inspect your credit report on a regular basis, at least annually. You can visit www.annualcreditreport.com for a free copy of your credit report. Look for any discrepancies.
9. Review all your financial and bank account statements carefully.
10. Place a “Fraud Alert” on your credit reports if you feel your identity has been stolen. You can place a 90-day alert on your credit by calling one of the three nationwide consumer reporting companies.
11. Close accounts that have been infiltrated or tampered with.
12. Contact local law enforcement if you have reason to believe your identity has been stolen.
13. Report identity theft to the US Federal Trade Commission by calling 1-877-438-4338.
14. If you think your identity has been compromised or stolen, contact your financial professional as soon as possible for further assistance.

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.

The longer you wait to begin receiving your social security, the greater your monthly payments will be. For example, if a person is eligible to receive $1000 at full retirement age, and they begin accepting payments at age 62, they will receive $750 per month. In contrast, if they wait until age 70, they will earn extra credit and their payments will be $1320 per month – that’s a pretty big increase. **

The timing of social security requires an analysis of many factors and differs from person to person and couple to couple. For example, a person in poor health may elect to receive payments as soon as possible. However, lifespans are on the rise and taxpayers with other assets may consider delaying the receipt of social security to maximize their payments into old age.

**Figures and calculations provided in this article are illustrations and examples and are not intended to be relied upon for any purpose. For detailed information about your actual social security benefits, which vary from person to person, you can contact the Social Security Administration. The following link to further information from the Social Security Administration website may also be useful to you: http://www.ssa.gov/pubs/10035.html

Conveniently located in Central New York state, Ann Wolfson Associates is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Ann Wolfson Associates, please call (315)449-4730.