Archive for December, 2009

Thinking Hard About Retirement and Death

Posted on December 29, 2009 by Jason

The New York Times, December 25th, 2009

WITH 2010 a few days away, there are several tax matters
that wealthy investors need to consider next year. The two at the top
of the list are whether they should convert their taxable retirement account to a tax-free Roth individual retirement account and how to deal with the uncertainty over the estate tax.

“There is frustration due to the legislative uncertainty,” said
Daniel Kesten, partner in the private client services group at Davis
& Gilbert, a tax firm. “Congress had eight years to address this,
but they waited until the last year when two wars and health care
interrupted their thinking.”

That leaves the wealthy with decisions to make about two of the biggest financial events of their life: retirement and death.

ROTH CONVERSION
Starting in 2010, there will no longer be an income limit for Roth
I.R.A.’s, which allow people to contribute post-tax money that can
appreciate tax-free. The income limit has been $100,000 a year for
individuals. The question is whether
converting an existing I.R.A., the proceeds of which are taxed when
distributed, into a tax-free Roth I.R.A. makes sense.

While
Congress approved the change in 2006, the opportunity to convert seems
to come at an enticing time. Those whose pretax retirement accounts
lost a lot of their value in the last two years might want to withdraw
the money, pay tax on the amount and then put it into a Roth. For
wealthy investors who do not see themselves falling into a lower income
tax bracket at retirement or who believe tax rates will rise
significantly, this could be a shrewd move.

But this requires a
degree of omniscience that few showed with the recession that began in
December 2007. “Why bother?” asked Tony Guernsey, head of national
wealth management at Wilmington Trust.
“Is it that much money?” He used the example of buying a Treasury bill
with a week to maturity: you know the government will pay you back. But
the same cannot be said for what the tax landscape — or your wealth —
will look like when you retire.

The bigger benefit may come to
people who plan to pass their Roth on to heirs. Unlike regular
retirement accounts, there is no minimum distribution requirement with
a Roth, and the tax-free treatment of its assets can be passed to an
heir. “The real benefit is coming in the estate planning aspects,” said
Mitch Drossman, national wealth strategist for Bank of America
private wealth management. “The beneficiary must take minimum
distributions. But it will be growing tax-free and distributed
tax-free.”

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Hard Choice for a Comfortable Death: Sedation

Posted on December 29, 2009 by Jason

The New York Times, December 29th, 2009

In almost every room people were sleeping, but not like babies. This
was not the carefree sleep that would restore them to rise and shine
for another day. It was the sleep before — and sometimes until — death.

In some of the rooms in the hospice
unit at Franklin Hospital, in Valley Stream on Long Island, the
patients were sleeping because their organs were shutting down, the
natural process of death by disease. But at least one patient had been
rendered unconscious by strong drugs.

The patient, Leo Oltzik, an 88-year-old man with dementia, congestive heart failure
and kidney problems, was brought from home by his wife and son, who
were distressed to see him agitated, jumping out of bed and ripping off
his clothes. Now he was sleeping soundly with his mouth wide open.

“Obviously,
he’s much different than he was when he came in,” Dr. Edward Halbridge,
the hospice medical director, told Mr. Oltzik’s wife. “He’s calm, he’s
quiet.”

Mr. Oltzik’s life would end not with a bang, but with the
drip, drip, drip of an IV drug that put him into a slumber from which
he would never awaken. That drug, lorazepam, is a strong sedative. Mr. Oltzik was also receiving morphine, to kill pain. This combination can slow breathing and heart rate, and may make it impossible for the patient to eat or drink. In so doing, it can hasten death.

Mr.
Oltzik received what some doctors call palliative sedation and others
less euphemistically call terminal sedation. While the national health
coverage debate has been roiled by questions of whether the government
should be paying for end-of-life counseling, physicians like Dr.
Halbridge, in consultations with patients or their families, are
routinely making tough decisions about the best way to die.

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At Tiny Rates, Saving Money Costs Investors

Posted on December 29, 2009 by Jason

The New York Times, December 28th, 2009

Millions of Americans are paying a high price for a safe place to put
their money: extremely low interest rates on savings accounts and
certificates of deposit.

The elderly and others on fixed incomes have been especially hard hit. Many have seen returns on savings, C.D.’s and government bonds drop to niggling amounts recently, often costing them money once inflation, fees and taxes are considered.

“Open a Savings Plus Account today and get a great rate,” read an advertisement in the Dec. 16 Newsday
for Citibank, which was then offering 1.2 percent for an account. (As
low as it was, the offer was good only for accounts of $25,000 and up.)

“They’re advertising it in the papers as if they’re actually proud of that,” said Steven Weisman, a title insurance consultant in New York. “It’s a joke.”

The advertised rate for the Savings Plus account has expired, according to the bank’s Web site; as of Friday, the account paid an interest rate of 0.5 percent. The bank’s highest-yield savings account, the Ultimate, was paying 1.01 percent.

The best deal Mr. Weisman has found is 2 percent on a one-year certificate of deposit offered by ING Direct, an online bank that has become a bit of a darling among the fixed-income crowd.

Interest on one- and two-year Treasury notes was just 0.40 percent and 0.89 percent, as of Monday. Bank of America offers 0.35 percent on a standard money market account with $10,000 to $25,000, and Wells Fargo will pay 0.05 percent on a basic savings account.

Indeed,
after fees are subtracted, inflation is accounted for and taxes are
paid, many investors in C.D.’s, government bonds and savings and money
market accounts are losing money. In fact, Northern Trust waived some $8 million in fees on money market accounts because they would have wiped out all interest, and then some.

“The
unemployment situation and the general downturn in the economy had an
impact, but what’s going to happen now as C.D.’s mature is that
retirees and the elderly are going to take anywhere from a half to
three-quarters of a percent cut in their incomes,” said Joe Parks, a
retired accountant in Houston on the advisory board of Better Investing, an organization that works to help people become savvier investors. “It’s a real problem.”

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Life Expectancy at All Time High; Death Rates Reach New Low, New Report Shows

Posted on December 23, 2009 by Jason

US Center for Disease Control, December 19th, 2009

U.S. life expectancy reached nearly 78 years (77.9), and the
age-adjusted death rate dropped to 760.3 deaths per 100,000 population,
both records, according to the latest mortality statistics from the
Centers for Disease Control and Prevention (CDC).

The report, “Deaths: Preliminary Data for 2007,” was
issued today by CDC’s National Center for Health Statistics. The data
are based on nearly 90 percent of death certificates in the United
States.

The 2007 increase in life expectancy – up from 77.7 in
2006 — represents a continuation of a trend. Over a decade, life
expectancy has increased 1.4 years from 76.5 years in 1997 to 77.9 in
2007.

Other findings:

  • Record high life expectancy was recorded for both males
    and females (75.3 years and 80.4 years, respectively). While the gap
    between male and female life expectancy has narrowed since the peak gap
    of 7.8 years in 1979, the 5.1 year difference in 2007 is the same as in
    2006.
  • For the first time, life expectancy for black males reached 70 years.
  • The
    U.S. mortality rate fell for the eighth straight year to an all-time
    low of 760.3 deaths per 100,000 population in 2007 — 2.1 percent lower
    than the 2006 rate of 776.5. The 2007 mortality rate is half of what it
    was 60 years ago (1532 per 100,000 in 1947.)
  • The preliminary number of deaths in the United States in 2007 was 2,423,995, a 2,269 decrease from the 2006 total.
  • Heart disease and cancer, the two leading causes of death, accounted for nearly half (48.5 percent) of all deaths in 2007.
  • Between
    2006 and 2007, mortality rates declined significantly for eight of the
    15 leading causes of death. Declines were observed for influenza and
    pneumonia (8.4 percent), homicide (6.5 percent), accidents (5 percent),
    heart disease (4.7 percent), stroke (4.6 percent), diabetes (3.9
    percent), hypertension (2.7 percent), and cancer (1.8 percent).

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Housing Recovery Will Revive Retirement Plans

Posted on December 23, 2009 by Jason

US News & World Report, December 16th, 2009

Buy a house, pay the monthly mortgage,
watch your home’s value grow, and eventually sell it and fund your
retirement dreams. It seemed to be the natural order of things until
the bubble burst. For older homeowners, the new order of things is to
either sell your home at a huge loss or stay put and hope things will
get better before you’re too old and frail to have any retirement
dreams left. For recent homeowners, there is no dream. But there is a
nightmare: Buy a house at an inflated value, pay a teaser mortgage
until you can’t afford it, watch your home’s value fall like a rock,
and then sink with that rock as you either default, renegotiate your
loan, or sink further underwater each month. Renting never looked so
good.

Still, things are recovering, albeit slowly. And older homeowners can at least begin to plan an exit strategy. The S&P/Case-Shiller Home Price Index
showed recovery in the third quarter—its second consecutive quarterly
gain—and while prices are nearly 9 percent below a year ago, they are
finally moving in the right direction.

In the 20 markets tracked by the index, S&P says, “Las Vegas
remains the most depressed market. Prices have declined for 37
consecutive months, with a peak-to-trough reading of -55.4 percent.”
Prices in Las Vegas were nearly 29 percent lower in the third quarter
than a year earlier, while the other largest year-over-year declines
were in Phoenix (down 22 percent) and Detroit (off 19 percent). The
best performances were turned in by Dallas and Denver (down only 1
percent) and Boston (off 3 percent).

The National Association of Realtors
(NAR) tracks median home prices in nearly 170 metropolitan areas. While
median prices during the third quarter were down more than 11 percent
from a year earlier, the NAR says it’s seeing gains in the volume of
home sales, including nine straight monthly increases in pending home
sales.

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Gold Is the New Tupperware, and You’re Invited to the Party

Posted on December 23, 2009 by Jason

The Wall Street Journal, December 21st, 2009

It’s much more fun than a pawnshop; the cash is only so-so but comes in handy

The
1950s were big for Tupperware parties. The 1970s were hot for Mary Kay
cosmetics. As this decade hobbles to a close, a new kind of social
gathering is invading America’s living rooms: the gold party.

Shannan
DeCesare, 40 years old, brought four gold chains, two unloved
bracelets, some earrings that had lost their mates and a couple of
other old pieces to her neighbor’s house here last week. Minutes later,
she was showing off a check for $610. “Merry Christmas to me!” she
exclaimed amid applause from the small group of women clustered around
host Christine Smith’s dining-room table. “Don’t tell my husband,” she
joked, as she pondered how she might spend the loot.

Worries about inflation have pushed gold prices above $1,110 an
ounce, up 50% from a year ago. And many people stung by the weak
economy are looking for discreet ways to raise extra cash without
sneaking down to the pawnshop.

As a result, gold parties are
booming, creating opportunities for aspiring entrepreneurs — and a new
worry for regulators. Typically, small companies promote the parties
through word of mouth or by advertising in communities likely to
produce plenty of sellers. The companies provide a specialist to value
sellers’ items, and pay the host a cut of about 10% of proceeds.

One
golden rule: “What happens at a gold party stays at a gold party,”
jokes Margaret Petrucelli, 43, who founded her firm, It’s a Gold Mine
Party LLC, a year ago after she was laid off from the mortgage division
of investment bank Goldman Sachs Group Inc. She now has a network of
about 30 specialists holding 30 to 40 parties a week on her behalf
across the country.

“It can be really difficult for a lot of
people to walk into a jewelry store or pawnshop holding a little bag of
gold,” said Lisa Rosenthal, 46, whose two-year-old Massachusetts
company, Party of Gold, has grown to 130 specialists working more than
1,000 parties a month, primarily in the Northeast.

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The elderly need to beware of lenders–and relatives

Posted on December 21, 2009 by Jason

The Los Angeles Times, December 20th, 2009

The recent conviction of a Long Island woman who stole the home of a
93-year-old retired barber suffering from Alzheimer’s disease should
serve as a warning to the friends and relatives of elderly people about
the surprising ease with which some older homeowners can be exploited
financially.

The elderly are victimized to the tune of $2.6 billion a year,
according to a recent report from MetLife’s Mature Market Institute.
And that’s a conservative guess because it has been estimated that only
one in 25 cases of financial abuse is ever reported to authorities.

At a conference last month of specialists in reverse mortgages, a
financial tool that seniors can use to tap into the equity they have in
their homes without having to sell or move out, lenders were asked to
help uncover ploys and schemes designed to fleece unsuspecting and
often overly trusting seniors.

That might seem somewhat ironic when you consider that lenders,
especially those dealing in mortgages that don’t have to be paid back
until the borrower dies or moves away of his own volition, often stand
accused of robbing the elderly with their backward loans.

But that’s just not the case, says Lisa Nerenberg, an expert in
the prevention of elder abuse who told members of the National Reverse
Mortgage Lenders Assn. that most of the time, they’re not to blame.

“There’s an epidemic of financial elder abuse, but the chief
perpetrators aren’t lenders. It’s family members,” says Nerenberg, a
consultant who previously headed the San Francisco Consortium for Elder
Abuse Prevention.

Read more of this article.

Person of the Year 2009

Posted on December 21, 2009 by Jason

Time Magazine, December 16th, 2009

A bald man with a gray beard and tired eyes is sitting in his
oversize Washington office, talking about the economy. He doesn’t have
a commanding presence. He isn’t a mesmerizing speaker. He has none of
the look-at-me swagger or listen-to-me charisma so common among men
with oversize Washington offices. His arguments aren’t partisan or
ideological; they’re methodical, grounded in data and the latest
academic literature. When he doesn’t know something, he doesn’t bluster
or bluff. He’s professorial, which makes sense, because he spent most
of his career as a professor.

He is not, in other words, a typical Beltway power broker. He’s
shy. He doesn’t do the D.C. dinner-party circuit; he prefers to eat at
home with his wife, who still makes him do the dishes and take out the
trash. Then they do crosswords or read. Because Ben Bernanke is a nerd.
(See pictures of Ben Bernanke’s life from childhood to chairmanship.)

He just happens to be the most powerful nerd on the planet.

Bernanke is the 56-year-old chairman of the Federal Reserve, the
central bank of the U.S., the most important and least understood force
shaping the American — and global — economy. Those green bills
featuring dead Presidents are labeled “Federal Reserve Note” for a
reason: the Fed controls the money supply. It is an independent
government agency that conducts monetary policy, which means it sets
short-term interest rates — which means it has immense influence over
inflation, unemployment, the strength of the dollar and the strength of
your wallet. And ever since global credit markets began imploding, its
mild-mannered chairman has dramatically expanded those powers and
reinvented the Fed.

Federal Reserve edges away from crisis measures

Posted on December 21, 2009 by Jason

Washington Post, December 17th, 2009

The Federal Reserve said Wednesday that it will shut down some of the
emergency triage measures it put in place at the height of the
financial crisis but will leave interest rates near zero out of
continuing concern about the weak U.S. economy.

The decision reflects steady improvement in the functioning of
financial markets. In recent months, the Fed’s emergency programs to
support money-market mutual funds, short-term corporate lending,
investment banks and overseas banks had gotten little use, and major
banks have begun to repay their government bailout money.

Even the troubled auto giant General Motors recently said it plans to return some federal assistance next year.

Still, the central bank’s plans to terminate its unconventional
lending programs on Feb. 1 will present a new test for the financial
industry. There have been waves of worry in global markets in recent
weeks, particularly in Europe and the Middle East, and losses on
commercial real estate could endanger many smaller U.S. banks in the
coming year.

The programs being wound down were major parts of the Fed’s efforts
to aid the broken-down financial system by directing cash into
dysfunctional private markets, using its own ability to create money
and an obscure provision in the Federal Reserve Act allowing loans to
almost any entity under “unusual and exigent circumstances.”

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Digital Habits Shift Across Age Groups

Posted on December 18, 2009 by Jason

The New York Times, December 14th, 2009

Children aren’t the only ones whiling away hours on the Internet;
people of retirement age now spend even more time online than
youngsters.

More Americans than ever across all demographic groups are looking
at screens — TV, computer and mobile devices — and the videos on them,
according to Nielsen’s third-quarter report.
While minutes spent watching conventional TV (which still accounts for
99 percent of all video content watched) and videos on mobile phones
remained level or dipped slightly from last year, consumers devoted
21.1 percent more time to DVR use and 34.9 percent more to Internet
video.

Viewers 25 to 64 years old use the DVR more frequently
than do those 12 to 24 years old, who watch more video on the Internet
or a mobile phone than older Americans. People over 65, however, spent
47 percent more time than the previous year watching embedded video
within social networks, which showed 98 percent total growth in the
amount of time users spent watching video.

“Consumers are adding
second- and third-screen video consumption on top of historically high
levels of TV consumption,” said Nic Covey, who studies cross-platform
use for Nielsen. “They have an insatiable demand for media and will
choose the best medium available, and that’s why we continue to see TV
as the prominent medium.”

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