Stock Blunders

When it comes to stocks, big blunders can be devastating. Big mistakes picking stocks can be nearly impossible to bounce back from. Why?

It's really a mathematical exercise. Here's an example. If you buy a stock for $100/ share and it falls to $60 a share that's a bruising 40% loss. Some investors assume a 40% gain would erase that loss. That's not true, unfortunately. A 40% gain would only get you back to $84 a share. To get back even after a 40% loss an investor would need a 67% gain.

Climbing back from stock losses is extremely difficult due to the harsh reality of math. That's why investors picking individual stocks need to be extra careful in not allowing losses to get so big that they are nearly insurmountable.

The sheer difficulty of coming back from a big market loss isn't just theoretical. A study of actual returns of the Standard & Poor's 500 stocks bear out how investors who get hammered with a big loss have such a difficult time coming back. What does all this mean? For the average investor it means avoiding the loss in the first place is the key to success. A wise investor should be willing to give up some of the upside of the market in return for downside protection.

The world of fixed indexed annuities (FIAs) offers exactly that. The opportunity to have 100% downside protection in return for a smaller portion of the upside return is the main value proposition of an indexed annuity.

There are three miracles of indexed annuities:

1. No loss of principal
2. Ability to reset and measure gains from the low point of the index annually.
3. The Ability to capture and lock-in all gains annually.

The advantage of a fixed- indexed annuity is that you can't lose your principal, regardless of indexed performance unless during the early withdrawal period you withdraw your money by surrendering your contract.  With FIAs, your clients can have their cake and eat it too.

Retirement Plan Still Working Exception

If you have a qualified employer retirement plan, you generally need to start taking your required minimum distributions (RMDs) no later than April 1st of the year following the year you turn 70½.  This is your required beginning date or RBD.  Certain employer retirement plans, however, may have a “still working exception” for their employees who reach 70½ but are still actively working for that employer.

An employee who is over 70½ years old, still working for the company and doesn’t own more than 5% of the business may elect to delay his/her RBD for taking RMDs until April 1st of the year following the year the employee retires.  It’s important to note that employer plans may offer this option but they are not required to offer a still working exception.

Assume you have a 401(k) and the plan permits a still working exception, an option you have elected.  Now assume you are 73 years old and you decide to retire in July this year.  Your retirement immediately triggers your RBD as April 1, 2017 - your RMD requirement begins the instant you retire.

In this example, if you chose to delay your first RMD and do not take it until, say, February 2017, you will still need to take your 2017 RMD by December 31st next year.    

*There is no “still working exception” for IRAs, Simple IRAs or SEP IRAs.

Portfolio Protection

Will the Wolf Destroy a Lifetime of Hard Work?

As a financial service professional, you take upon yourself the role of helping your clients build their financial futures. Undoubtedly, during your years of training for this demanding profession you have come across the financial planning pyramid (at least one of MANY versions) used by financial advisors to explain the concept of asset protection and financial priorities.

As you will recall, the foundation of the financial pyramid is protection yet many clients’ portfolios are completely unprotected from the “4 Risks of Retirement.” Those risks are:

• Longevity Risk
• Interest Rate Risk
• Market Risk
• Tax Risk

As a financial service professional, you take upon yourself the role of helping your clients build their financial futures. But many advisors have not dealt with the wolf that lurks in the shadows, the 5th risk to retirement…the financially devastating effects of expenses stemming from Long-Term Care (LTC).

Many top advisory firms are taking a fresh look at a better way to assure the foundation of protection is secured before discussing investing. Today we know that less than 10.7% of Americans have the correct protection in place to deal with the wolf. So are we suggesting you sell

them LTC insurance? Nothing could be farther from the truth! In fact, we are not fans of LTC insurance and don’t believe it’s the best option for dealing with and managing risk.

Advisors need to take this growing LTC risk seriously. Not only is the client’s portfolio at risk from an LTC illness they (or a spouse) may suffer, but an advisor’s income is in jeopardy. How? Clients begin to withdraw hundreds of thousands of dollars out of accounts that are being managed by the advisor to deal with this uninsured risk. This is portfolio protection for the client and it is portfolio protection for the advisor!

There are two questions every financial professional should ask clients:

1) You may never need care, but if you did, how will that affect your family, spouse, adult children, family dynamics and finances?

2) If you need care, how will you pay for it?

Today there are NEW solutions to the catastrophic problem of a Long-Term Care event. This solutions allows clients to reposition and leverage an existing asset, typically money in CDs, savings, annuities, IRAs or retirement plan funds, as a guaranteed single premium.

We have found that many advisors don’t feel comfortable discussing these gaps in protection with clients so they simply never raise the issue. But what about the likelihood that 70% of those reaching 65 will experience an LTC event before age 85 that will last, on average, 3.9 years and cost $100,000 per year?

Our Elite Marketing Program can help you articulate this problem and motivate prospects and clients into taking action. This solution can help safeguard a client’s assets by providing income tax free money to handle LTC expenses in their own home or in an assisted living facility.

Additionally, should the client’s needs change or the client simply changes his/her mind at any time, the client can request a full refund of the single premium.

• Special Highlights of this Solution:
• This is Not an LTC Policy
• Premiums are 100% Guaranteed - No Risk of Increase
• Joint Life Coverage
• Lifetime Benefits
• Qualified Money Allowed
• Turn Highly Appreciated Non-Qualified Annuities into Tax-Free Money

Helping your clients protect their assets and prepare for the future is essential as 10,000 Baby Boomers retire each month. By addressing this critical LTC risk, you will open new doors of opportunities and unearth new clients, creating new revenue streams. This will also differentiate and grow your practice, protecting it in the long term.

Top advisors are asking their clients these questions and adopting these new strategies – shouldn’t you too

Table Bay Financial Network is America’s Premier FMO combining preferred products, unparalleled marketing and world-class training designed to drive and increase revenue while drastically cutting marketing costs. Call us.

Today’s Safe Refuge for Lofty Returns and Matchless Tax Advantages

Are you looking for the flexibility of adjustable premiums and face amount, with the opportunity to increase cash value? What if you could do this without downside risk of investing in the market? It’s not a dream; it’s a reality with Indexed Universal Life Insurance.

What is Indexed Universal Life? 
IUL policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit. It is perfect for those individuals that need permanent life insurance protection but wish to take advantage of possible cash accumulation. Indexed Universal Life works great for key-man insurance for business owners, estate-planning vehicles, premium financing, and retirement income.

How Can They Do That? 
A portion of the paid premium goes to annual renewable term insurance based on the life of the insured. All fees are paid and the remaining premium goes into the cash value of the policy. The cash value is credited with interest based on increases in the equity index. However, it is not directly invested in the stock market. Most IULs offer a guaranteed minimum fixed interest rate and a choice of indexes. The index gains are credited back to the policy either on a monthly or annual basis. For example, if the index gained 5% from January 2010 to January 2011, the 5% is multiplied by the cash value. The resulting interest is added to the cash value. If the index goes down instead of up, no interest is credited to the cash value, but their account value does not go down.

The Perks!

• Minimize Risk: The policy is not directly invested in the stock market, thus reducing risk 
• Death Benefit: Permanent coverage 
• Low Cost: The premiums are low 
• Cash Value Accumulation: Cash value credited to the policy grows tax deferred. The cash value can pay the insurance premiums, which over time may allow the policy-holder to stop paying premiums out of pocket.

Can Your Clients Really Trust Their Trust?

As the old saying goes, “people with trusts get them because they don’t trust.” If you have clients with a trust, are they sure that the trust terms are designed to distribute their assets the way they want? We always stress the importance of periodic reviews of your clients’ critical documents like beneficiary designation forms, especially whenever they experience a life changing event such as a birth, death, marriage or divorce. But have your clients also reviewed their trust and estate plan lately?

Many clients fail to understand that just because they may have spent a lot of time and money having a trust created, that doesn’t mean that they never need to look back once the ink is dry. They may have had the best law firm in their area draw up a comprehensive trust instrument, but what if their planning strategy and goals have changed? What if new laws have since been enacted?

Recently, an advisor’s client discovered that the trust her husband set up contained provisions that conflicted with their recently modified financial plan and distribution goals. The trust had been drafted several years before and they never reviewed the trust terms despite the fact that not only had many life changing events occurred in their family but their financial strategy and planning goals had also changed. Unfortunately, the client’s husband passed away and she is now stuck with the flawed trust terms, resulting in irreparable and unintended results for their beneficiaries, their children and grandchildren.

Marriage, divorce, birth or death may occur at any given time. Tax law changes go into effect on a routine basis. Even though you cannot predict what will happen and when it will happen, your clients can adjust their estate plan as needed when any life changing event occurs or new legislation affects their tax planning.

Help your clients ensure their assets flow the way they want and in the most tax efficient manner possible. It is important that clients regularly review important documents such as wills, trusts, beneficiary forms, powers of attorney and anything else they may have in place to provide for and protect their loved ones.

Do you know how to conduct document reviews with your clients? Table Bay advisors have exclusive access to our proprietary Discovery Checklist System. Our checklists were designed to help advisors and their clients identify potential problems and preventative steps can be taken before it is too late.

Who Will Pay For Mom's Or Dad's Nursing Home Bill?

Filial Support Laws and Long-Term Care

Imagine this: One day you’re sifting through your mail. In the pile of letters, bills and junk mail, you find a letter from a law firm informing you that you need to pay $50,000 to cover the cost of your father’s recent nursing home stay, or the care facility will sue you. While this may seem far-fetched, depending on your parents’ state of residence, this could be a possibility.

If your parents live in one of 29 states or Puerto Rico that has filial responsibility laws on the books, you could potentially be held legally responsible for their care under certain circumstances, such as when your parents are ailing and without sufficient financial resources to take care of themselves. Until recently, these statutes have been largely ignored. However, several recent court decisions indicate that there might be renewed interest in enforcing them.

Filial support laws aren’t new. In fact, they were initially derived from England’s 16th century “Poor Laws.” At one time, as many as 45 U.S. states had statutes obligating an adult child to care for his or her parents. Some states repealed their filial support laws after Medicaid took a greater role in providing relief to elderly patients without means. Other states did not, and a large number of filial support laws remain dormant on the books.

Now, with long-term care costs on the rise and funding sources under pressure, nursing homes and other health care providers may have increasing incentive to seek to use the courts to compel children to either help a parent financially or be at risk for covering the cost of his or her care. Today we have tremendous solutions to battle back against the long-term care dilemma. Learn more by calling us today at 1-866-225-1786.

Disclaiming an Inherited IRA

There are several reasons why someone may choose to disclaim an inherited IRA. However, once that decision is made, it is important for the disclaiming beneficiary to avoid common errors.

In short, a disclaimer is a legal document and formal refusal of an inheritance by a beneficiary. Disclaimer rules apply to all IRA beneficiaries. Beneficiaries are not required to accept an IRA (or any portion thereof) and may instead choose to disclaim all or a portion of their share.

To have a valid disclaimer, the beneficiary must not have accepted or benefitted from the IRA assets or property. The only exception to this rule is the year of death RMD taken for the deceased owner. All disclaimers must be submitted in writing to the IRA custodian within 9 months of the IRA owner’s death.

Disclaimers are irreversible, permanent decisions. Some beneficiaries make the mistake of disclaiming an IRA, with the intent to pass on the disclaimed assets to someone else like their child or spouse. Disclaimed IRA assets may only go to the contingent beneficiary or beneficiaries named by the original owner. Disclaiming beneficiaries have zero control over the disclaimed amounts and how they flow.