All Things Financial Planning Blog


Sixty-five is the New Fifty-Five

People are always telling me 40 is the new 30 and 50 is the new 40. Numbers do not lie, especially with age, but it is true that people are living longer and staying healthier later in life. For those of you approaching retirement, age 60 may very well feel like the new 50, and that youthful energy could keep you working well past retirement age. Of course, if you are approaching 65 you are subject to that twilight zone of rules surrounding Medicare, and if you are planning to work past 65 the rules for enrollment get even more complicated.

If you are already collecting Social Security benefits then your enrollment in Medicare is automatic. If you are not receiving Social Security benefits, then you have an initial enrollment period of three months before and three months after turning 65. If you miss the initial enrollment period you can face a fine and risk going without Medicare for several months even after you enroll.

Many who work beyond 65 keep their employer’s group health insurance because it the less expensive alternative. Medicare Part A, which covers hospitalization, is free to anyone over 65, but many people with an employer’s group policy postpone Medicare Part B, which covers doctors visits and other forms of outpatient care. The monthly premium for Medicare Part B is between $96.40 and $353.60 depending on your income.

You may choose to supplement your employer’s group policy with other private policies and Part D prescription drug plans that cover what Medicare doesn’t cover. There are also private Medicare Advantage plans. All these plans usually charge premiums, co-payments and deductibles.

You can switch at any time from your employer’s group health plan to Medicare. When you stop working you have eight months to sign up for Part B. This enrollment window is called the special enrollment period. If you miss the special enrollment period you must wait for the Medicare general enrollment period from January 1 through March 31 to sign up. Unfortunately, if you wait for the general enrollment period your Part B benefits will not go into effect until July and you may face late-enrollment penalties.

If you plan to work beyond 65 and delay enrolling in Medicare, you should keep good records and detailed notes from any phone conversations you have with officials or financial professionals that advise you. Your notes can be instrumental if you have to file for equitable relief from the Social Security Administration. Equitable relief is a legal protection that allows for immediate enrollment in Medicare Part B without penalty.

Consult the Medicare web site for more detailed information and to setup your “MyMedicare” account if you are ready to get started with enrollment.

I know it’s complicated, but the key is to stay on top of it. Call and ask questions to make sure you have completed everything you need to. Waiting and procrastinating can be costly!

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX


Planning Your Wedding, Avoid the Financial Hangover

We are heading into wedding season and many people are already neck deep in the wedding planning process. Then again, some are just beginning to plan a wedding for this time next year. One thing I have noticed is that more and more brides and grooms are choosing to pay for their own weddings. People are getting married later, and many times the groom and bride are already established in their own careers. They can afford to pay for the wedding themselves without the help of their parents. As a result, the bride and groom have more control over the decision making process and cost.

There is a lot of information out there across the web and in bridal magazines. But I think it is still worthwhile going over some basic principles:

  • Set a total budget number and work hard to stick to it. There is a wide spectrum of estimates as to what the average wedding costs ($9K, $15K, even $27K). I suggest you ignore them. What it comes down to is finding a number you’re comfortable with. Every couple has their limit, and despite influences (magazines, parents, etc.) saying your wedding must include this or that, you still have ultimate control over the costs.
  • Make a list of your top four or five priorities. Share and discuss them with your future spouse. This process will help you set priorities within your budget. For example, the food might be a high priority to the bride while the band or DJ might be more important to the groom, and so on.
  • Destination weddings are more and more popular and can be less costly.
  • Limit the number of people with input to the decision making process. Two or three is probably an optimal number for major decisions. The smaller stuff, one or two people. When too many people get involved, especially on the smaller decisions, you’re asking for conflict and added stress and most likely added expense.
  • Remember, this is YOUR wedding. In the end, the only two people who really matter are you and your future spouse.
  • Consider using a wedding planner for a larger event (150+ guests). In addition to management skills, a planner can secure discounts on products and services.
  • Monitor your spending on a month-by-month basis to ensure you are staying within your budget. Sometimes, during the main planning/purchasing phase, you may need to monitor spending on a weekly basis. Develop a system using a spreadsheet or budgeting software package.
  • Communicate, communicate, communicate with your future spouse.

The above suggestions may seem obvious, but in practice they can be quite difficult to achieve. When you dive into the process it is easy to lose perspective and find your wedding going overboard and over budget. It might be necessary to come up with an evaluation process, something you can quickly go through in your mind when making both large and small decisions. There is the simple question “Is it worth the cost?” But that is not always an easy question to answer. Talk it over before making any rash decisions. Another question might be “While this might give me great pleasure, does it really add any meaning to the occasion?” and the reverse “While this might be meaningful to me, does it add any joy to the event?”

As for judging the allocation of expenses within the total budget below are a set of guidelines offered by the CCCS (Consumer Credit Counseling Services).

Ceremony (location, fees, licenses) 3%
Receptions (location, food, cake, decorations) 48%
Attire (dress, tuxedo) 10%
Wedding Rings 3%
Flowers (bouquets, decorations) 8%
Music (ceremony, receptions) 8%
Photography (photographer video, prints) 12%
Transportation (shuttles, parking) 2%
Stationary (invitations, guest book, thank you notes) 3%
Gifts (for bridesmaids and groomsmen) 3%
Total 100%

Again, remember that this is YOUR day. And when all is said and done it’s not the “things” that matter, it’s the love you and your future spouse share. All your planning and hard work will pay off in the end, giving you the wedding you always wanted but not leaving you with a pile of bills. After all, you don’t want to have a glorious wedding day only to find yourself starting your marriage with a financial hangover.

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX

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Facing the Financial Strains of Unemployment

Unemployment — it is a subject nobody likes to discuss or even consider. But, it never hurts to be prepared for anything. If you feel your job may soon become a casualty of the recession or you are already unemployed, there are financial steps you can take to prepare for what may be an extended time without income. Here are some of the most critical financial considerations:

  1. Goals: If you have set life goals then now is a time to reassess them and see where you stand. If you have not set goals, then it is a good idea to sit down and set some short-term and long-term goals. This downtime may create an opportunity to do something completely different, start a business or change your profession. Then again, maybe you can make progress on a goal that has been sidetracked by other priorities. Assessing your goals can help you focus on what is important, reduce stress and keep you from wasting time and money.
  2. Expenses: Review your expenses. Separate the fixed expenses (mortgage, car payment, etc.) from variable expenses (electricity, gas, etc.) and focus on the variable ones first, since you can more quickly affect them. Determine which are essential and which are not, and even with the essentials evaluate just how essential they really are. Take each expense at a time and think about how you can reduce or eliminate it. Can you reduce your energy usage by being more economical? Do you need the 300+ channel cable TV package or can you suffice with a cheaper package or none at all? If you do not already track your expenses using financial management software, consider purchasing a financial software package like Intuit’s Quicken or Microsoft’s Money or use a free online solution like ( When you go shopping use lists and try hard to stick to the list. Avoid impulse purchases. This is even truer online where impulse buys are conveniently one click away.
  3. Debt: Avoid credit card debt, which carries a very high interest rate. It may seem like a good short-term solution to your cash flow problems, but when you start working again you may find it difficult to dig yourself out from under such hefty debt obligations. If you already have balances on your cards see if you can consolidate them on the card with the lowest interest rate. It is a good idea to pay cash from this point forward.
  4. Health Insurance: If your company has 20 or more employees, they are required by law to make your current coverage available to you for at least 18 months. You will be responsible for the entire premium. After the 18-month grace period you will need to find independent insurance. This additional expense should be incorporated into your analysis of expenses (see above).
  5. Life, Disability & Long Term Care Insurance: Your employer will be able to tell you what happens to your employee life, disability and long-term care insurance policies. In some cases they will let you continue the coverage by paying the premiums yourself. Unfortunately, in most cases you will lose coverage and may need to replace it quickly.
  6. Savings & Retirement (401k, IRA, etc.): You should have an emergency fund that can cover three to nine months, possibly nine to twelve months if you have a family or any major commitments. If you receive unemployment from the state make certain they withhold taxes or you will need to save to pay the taxes later. You do not want to end up with a large tax bill at the end of the year that you cannot afford and possibly face exorbitant penalties. If you are contributing to education accounts, consider putting such contributions on hold and make certain they start up again once you find a new job. You will need to decide whether to leave your 401k at your current company (if they allow you to) or roll it into an IRA.

We all hope to never face these considerations, but in such difficult times it is hard not to think the worst could happen. If it does, the above list should help you get started. Of course, a financial planner can advise you on many of these issues and help you get started planning and prioritizing.

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX


A Shorter, Cheaper (and Less Painful) Divorce?

In December, Brett Arends used his column in the Wall Street Journal to give Mrs. Tiger Woods some advice regarding how to deal with her husband’s philandering ways (WSJ, 12/11/09). Most of his advice was fairly typical (don’t rush to decisions, keep things private, etc.), but one of his recommendations was relatively new, because the concept is fairly new. Mr. Arends advised that if and when she decides to file for divorce that she and Tiger consider a collaborative divorce, a non-confrontational alternative that keeps proceedings out of the court system.

Of course, Mr. Arends recommended a collaborative divorce to Mrs. Woods because it keeps the process out of the public eye, but this is not the most significant justification for entering a collaborative divorce. In theory, a collaborative divorce reduces the amount of time, emotional pain, and most importantly, cost by taking the proceedings away from the courts. According to recent statistics, collaborative divorce does seem to shorten the length of divorce proceedings and lower the cost, but the method is still very young.

Although young, the collaborative law institutes around the country have determined the parameters for a successful process. All parties, including attorneys, agree at the outset not to take the divorce to court. Then, the parties engage in a mediation-like process to resolve their financial and custody issues. The difference between this process and mediation is that there is no third party. The two parties, with the help of their attorneys and advisors, negotiate a settlement that that they can present to a judge at the end of the process. There are attorneys that specialize in collaborative divorces, and collaborative law institutes around the nation train them on how to manage the process. These collaborative law specialists use a proven road map to keep the divorce on track and bring it to an orderly resolution. The road map emphasizes cooperation over confrontation, and problem solving over grievance airing. In addition, they can bring in other counselors to ease the process or get past sticking points including accountants, financial planners, psychiatrists, and even clergy.

The collaborative divorce is not immune to the same forces that cause court-managed divorces to go awry. One or both of the parties may find an issue irresolvable and decide to end the collaborative process and take the divorce to court. As agreed, when the collaborative process fails the attorneys must drop out completely. The parties must restart the divorce in the courts with new attorneys. Starting over with new attorneys, an expensive prospect, serves as ample incentive to make the collaborative divorce process work.

If the process breaks down and the parties end up in court then the process can be even more expensive than had they started out in the courts in the first place. This is why both parties must assess at the outset whether their situation fits well with the collaborative process. Their reasoning cannot be based solely on the idea that it is a good way to save money. Both sides must be willing to negotiate and compromise throughout the process. Also, situations that involve drug or alcohol addiction or domestic abuse are not candidates for the collaborative divorce.

Over the last ten years collaborative divorce has grown in popularity as a cheaper and less painful alternative to the courts system. Texas was the first state to legalize collaborative law in 2001, and 28 states has followed (Austin American Statesman, May, 10 2004). Someone considering a collaborative divorce should contact his or her state collaborative law institute. The institute should have a list of local collaborative law professionals. This is a relatively new area of law and interviewing several candidates may be necessary before finding the right ones to manage the collaborative process.

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX


A Reverse Mortgage Could Be A Wise Move For Some Retirees

The poor economy and tight credit market has sent many of our retired clients scrambling for sources of cash to fund large expenses. Short of selling off investments or going back to work, there are a limited number of options. One option that has become popular recently is the reverse mortgage or home equity conversion mortgage (HECM).

The reverse mortgage or home equity conversion mortgage is a loan that lets you convert a portion of your home equity into cash. What distinguishes it from a typical loan is that you do not have to repay the loan until you no longer use the house as a residence. You or your heirs must repay the balance of the loan at time of death, move out or sale. If the amount owed is greater than the value of the house, the lender eats the difference. If less, then you or your heirs keep the equity left over after paying off the loan. You must be over 62 to qualify for a reverse mortgage. Also, you must visit with a Federal Housing Administration (FHA) approved reverse mortgage counselor. The counseling session can be done over the phone if a counselor is not available in your area.

For the house rich/cash poor borrower the reverse mortgage is an enticing source to pay off mortgages or other debt, pay health care bills or other everyday expenses, or fund home renovations. Banks, brokers and savings and loans are more willing to make these loans since the FHA insures up to 90% of the balance.

What makes reverse mortgages enticing for the borrower is the ease of obtaining these loans. Eligibility is based on age, home value and equity and not income or credit history. Another advantage is flexibility. The borrower can take the loan as a lump sum, regular payment, a line of credit, or some combination of the three. Also, the size of the loan can be rather large. Congress set the FHA maxim loan limit for reverse mortgages at $625,000 earlier this year and extended this limit through 2010.

While the reverse mortgage is a valuable opportunity for the borrower over 62 years old it doesn’t come without certain detractions. The biggest detraction is cost. Due to the FHA, insurance reverse mortgages can be more expensive than conventional mortgages. The upfront costs can exceed 10% of the loan. Another negative is that if the borrower opts to take the loan as a lump sum managing such a large amount of money can be difficult. Also, reverse mortgages are deferred debt and increase your debt load. This can leave you with little equity left in your house in your later years when you most need it.

Another concern regarding the reverse mortgage is that the market for these mortgages has taken on similar characteristics as those that existed with the sub-prime mortgage market. Some brokers use predatory and aggressive marketing tactics. Some of the practices include encouraging the borrower to use the funds from their reverse mortgage to purchase an annuity or some other financial product like long term care insurance. These brokers are probably trying to pump up their commissions rather than help your financial future, since such financial instruments are unlikely to earn you more than the cost of a reverse mortgage.

There are alternatives to the reverse mortgage, such as ordinary consumer loans, a home equity line of credit, or selling your home and purchasing a less expensive house. Such alternatives might not be as easy to obtain and come with costs you are unwilling to pay. The reverse mortgage is an enticing source of cash in this difficult economy and tight credit market; but it is important that before making any decisions you first discuss your options with your financial planner and look at the effects it will have on your entire financial picture. This is a great product for some, but can cause future problems for others. Below are some additional Web sites you can visit to gain additional information.



National Reverse Mortgage Lenders Association (NRMLA)

Department of Housing and Urban Development (HUD)

National Council on Aging (NCOA)

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX


First Time Homebuyer Credit Extended! Now Includes Repeat Buyers As Well!

Great news!  The Worker, Homeownership and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for first time homebuyers purchasing a new home. It also added in a credit for repeat homebuyers of up to $6,500.

The first time homebuyer credit is still a maximum of $8,000 and is equal to 10 percent of the home’s purchase price. The maximum price of the home purchased is $800,000. What’s new is that you now have until April 30, 2010 to purchase your new home. Even better, you can sign a binding sales contract before April 30th and complete the home purchase by June 30th, 2010 and still qualify. Thus giving you more time if you choose to build a new home instead of purchasing an existing home. This new act also increased the income limits. The old phase out was $75,000 to $95,000 and the new phase out is $125,000 to $145,000. So, if you earn $125,000 and purchase a home with a sales price of $80,000 or more, you will receive an $8,000 tax credit. Keep in mind that you must remain in the home as your principal residence for at least 3 years or you will have to pay the tax credit back.

The new act also included provisions for current homeowners as well. To be eligible, you must have lived in your home for at least 5 consecutive years out of the last 8 years. This new provision is intended to assist new homebuyers in up-sizing their current home. The tax credit is up to 10% of the purchase price of the house up to $6,500. Again, the maximum sales price of the house is $800,000 and the income limitations are the same as for the first time homebuyer credit. The tax credit is up to 10% of the purchase price of the house up to $6,500.  Again, the maximum sales price of the house is $800,000 and the income limitations are the same as for the first time homebuyer credit. You must maintain the new home for 3 years as your primary residence or repay the credit as well.

The income limits above are based on your MAGI (Modified Adjusted Gross Income). To calculate your MAGI, you must first calculate you AGI (Adjusted Gross Income), which is total income for the year minus certain deductions (examples include 401k deductions and FSA contributions,) but before itemized deductions from Schedule A or personal exemptions are calculated. On forms 1040 and 1040A, AGI is the last number on page one and the first number on page 2 of the form. For form 1040-EZ, it is on line 4. When you are calculating MAGI, you would add certain foreign earned income. If you are unsure of your AGI or MAGI, you should work with your CPA to determine if you are eligible to receive the tax credits.

This is great news for those of you that were on the fence about buying your first home and those of you looking to upsize your current residence! Remember that purchasing a home is one of the biggest decisions you will make in your life. Working with a financial planner to determine if this is a good time and how much you can afford to spend would be advisable!   Below are some questions you should ask yourself before making the leap!

  • How much am I worth?
  • What is my budget?
  • How much can I really afford to buy?
  • Where will I get a loan?
  • Is my credit good enough?
  • How long do I intend to live in the house?
  • What will I give up to be a homeowner?

Good luck and happy hunting!

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX

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Tax Tips for This & Next Year

As we head into the fourth quarter of the year, now is a good time to consider year-end tax planning for 2009 and look ahead to what’s new for 2010.

First let’s consider what you might do between now and year-end to manage your 2009 income tax liability. We recommend you work with your CPA to see if any of these strategies could benefit you.

Harvest investment losses to offset any capital gains taken this year. Chances are you have some loss positions in your portfolio. If you’ve been fortunate enough to have realized any capital gains this year, consider selling loss positions to offset your gains. Even if you haven’t realized any capital gains, you can use up to $3,000 of capital losses to offset ordinary income, like salary, pension, and business income. A few caveats: You cannot re-purchase the same stock or mutual fund within 30 days of the sale or the loss deduction will be disallowed. Also, if you are carrying unused losses forward from 2008, you may not need to generate any additional losses this year to offset gains.

Maximize retirement savings. If your employer sponsors a 401k, check to see if you will have contributed the maximum tax deferred amount by year-end. For those under age 50, the maximum is $16,500 this year and for those over 50 it’s $22,000. If you have self-employment income, you can set up a retirement savings plan to defer some of your income (even if you participated in an employer’s 401k plan). There are certain types of plans that can be set up and funded all the way until the date you file your return.

Use up flexible spending accounts. If you contributed to a flexible spending account for health or dependent care expenses, you generally have until the end of the year or until the middle of March 2010 to “use it or lose it”. Make sure you claim the full amount before the deadline passes (check with your HR department for your company’s claim deadline).
Put back 2009 Required Minimum Distributions taken from an IRA. Congress passed a tax-break waiving the requirement for persons over age 70 ½ to withdraw a minimum amount from their IRA in 2009. If you are subject to the RMD rules and took a distribution for 2009, you can put it back by November 30, 2009 if you don’t need the cash.

Take advantage of energy credits. Certain energy-saving home improvement and home building expenses are eligible for a tax credit until December 31, 2010. To learn more about what’s eligible go to

Bunch itemized deductions into alternate years. This strategy takes some careful planning but can pay off nicely. If your total itemized deductions are usually close to the standard deduction ($11,400 for married filing jointly, $5,700 for single), you can bunch together expenditures for itemized deductions every other year and claim the standard deduction in alternate years. This strategy works best if you can control the timing of payments for your deductible expenses, such as property taxes and charitable donations. Since some deductible expenses, such as property taxes, are disallowed for the alternative minimum tax (AMT), you should be careful not to trigger AMT with this strategy.

Use highly appreciated investments instead of cash for year-end donations. Although the stock market has fallen significantly below its historic highs, you may still own appreciated investments. You can give shares of stock or mutual funds you have owned at least one year to a charity and get a tax deduction for the full market value of the investment, not just what you paid for it. This allows you to avoid capital gains tax that you might have incurred by selling the appreciated investment. There are certain limits that apply to how much you can deduct.

There are several tax breaks expiring at the end of 2009 unless Congress acts to extend them forward. You may be able to take advantage of some of these before year-end.

  • Deduction for sales and excise tax paid on the first $49,500 for new vehicles purchased between 2/17/09 and 12/31/09
  • First-time homebuyer credit for 10% of the purchase price up to $8,000 (expires November 30, 2009)
  • Teachers’ classroom expense deduction of $250
  • Bonus depreciation and enhanced section 179 expensing for businesses
  • Higher-education tuition deduction of $4,000, phased out at higher income levels
  • Itemized sales tax deduction
  • Tax-free unemployment compensation up to $2,400
  • Charitable contributions made directly from an IRA
  • COBRA premium assistance if employment is terminated before 12/31/2009
  • Additional standard deduction for real estate tax up to $500 for single filers and $1,000 for married filing jointly
  • AMT exemption increase

Looking ahead to 2010, we are keeping a watch for legislation involving the scheduled estate tax repeal. Back in 2001, the Economic Growth and Tax Relief Reconciliation Act phased up the estate tax exemption amount over several years to its current level of $3,500,000 with complete repeal of the estate tax for 2010. This law contained a “sunset provision” that meant unless Congress acted before 2011, the estate tax would revert to laws in effect in 2001. This means that if nothing is done, there will be no estate tax in 2010 (making it a good year to die!) and in 2011 the exemption will drop to $1,000,000.

Also in 2010, more taxpayers will have an opportunity to convert their traditional IRA or 401k to a Roth IRA. Currently, only taxpayers with adjusted gross income under $100,000 can make this conversion. In 2010, all taxpayers, regardless of income levels can convert. Why would you want to do this? The answer is complicated and depends on several factors including your income tax bracket – both now and anticipated, your ability to pay the resulting income taxes on converted IRA funds, whether you believe income tax rates will go up or down in the future, your investment timeline and your specific financial and estate planning objectives. We recommend discussing this topic with your financial and tax advisors before the end of 2010.

Tax planning should always be a coordinated exercise with your CPA and other financial advisors. The end of the year seems to close in quickly as we near the holidays so the earlier you get started the better. You can search for and select a financial planner at this Web site PlannerSearch.

taraScottinoTara Scottino, CFP®
Senior Vice President
Carter Advisory Services
Dallas, TX



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