Personally Speaking...

Should Savings Rates Be the Proper Focus of

Retirement Planning?

Family Wealth Decisions Group

FAMILY WEALTH DECISIONS GROUP

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Syosset, NY 11791

CRN-1334957-102615

Doug Lemons

Beth Tinelli

Tyler D Simmons

Roy S Gilbert

Jul-Sep 2015

vantaged retirement accu-

mulations. We truly hope

that young people reading

this newsletter (and their

parents) take this to heart.

Without diminishing the im-

portance of Doug's discus-

sion, I have given (and will

In prior issues, Doug Lemons

wrote passionately in his ad-

vice to his daughter about the

need for our young people to

take on the lion's share of the

responsibility for funding

their own retirement. He dis-

cussed the use of ROTH

IRA's and ROTH 401(k) ac-

counts for long term, tax ad-Continue on page 2

Continue on page 5

Our Team

Inside This Issue

Personally Speaking 1

Should Savings Rates 1

Be the Proper Focus

Of Retirement

Planning?

Medicare Premiums 1

Set to Rise for Many

People

Cybersecurity 2

Update

Quarterly Market

Commentary 3

Aesop’s Corner 6

Ira’s IRA TIP 7

CPA Continuing 8

Education (and

even if you are

not a CPA)

“safe withdrawal rate” and

using that number to derive

a “wealth accumulation tar-

get” may not be the best way

to figure out one’s retire-

ment plan.

Indeed, he believes that the

focus of retirement planning

should not be on withdrawal

For individuals in the accu-

mulation stage of life (25, 35,

45), is there a fundamental

shift in the way we think

about retirement planning on

the horizon? Wade Pfau, an

associate professor at the Na-

tional Graduate Institute for

Policy Studies in Tokyo cer-

tainly thinks so. What Pfau

believes is that focusing on a

Rob Lichtenstein

Medicare Premiums Set to Rise for Many People

Continue on page 3

Last week it was announced

that Social Security would

not pay a cost -of-living in-

crease in 2016, due to disin-

flation over the past year,

which in turn is largely due to

declining energy costs. At

the same time, Medicare pre-

miums are set to increase.

However, there is a provi-

sion in the law, often

dubbed the “Hold Harmless”

rule, which states that Social

Security benefit payments

cannot decrease due to ris-

ing Medicare Part B premi-

ums. “Hold Harmless” does

nance lifestyle, it may cre-

ate a future problem. Han-

dling repayment of student

debt or other debt acquired

in a way which fits your

goals is an important plan-

ning objective.

Third: Maintain good

credit. You acquire and

maintain a good credit rat-

ing by paying bills on time

and by not stockpiling un-

needed credit lines or

overusing credit. A good

rating may be your most

important asset and can be

the key to successfully and

affordably leasing a car,

getting a credit card, rent-

ing an apartment or pur-

chasing a home. Damage

to a good credit rating can

occur quickly, its restora-

tion often takes much

longer.

Fourth: Protect your

identity. In today's digital

world, many bits and piec-

es of one's identity may be

"out there" waiting to be

gathered and used. There-

fore, it is important to per-

petually be vigilant so as

not to make it easy to as-

semble usable information

about you. You should

protect your Social Securi-

ty number, on-line pass-

words and your credit re-

ports. You were born into

the digital world and you

are very comfortable with

on-line communications

give) my daughter some

additional advice about a

few other topics which I

believe also deserve con-

sideration.

First and foremost:

Budget. Outgoing can-

not exceed income.

Moreover, "living within

your means" also in-

cludes carving out some

portion of your budget

for savings (in addition

to retirement plans) and

for insurance protection

(life, health, disability

and liability). Anecdo-

tally, we have found a

commonly recurring is-

sue for retiring baby

boomers to be an unreal-

istic expectation about

the ability of their accu-

mulated resources to sus-

tain their comfortable

lifestyle. Understanding

how much you spend and

what it's spent on earlier

in life than 5 - 10 years

prior to retirement can

help manage your expec-

tations.

Second: Eschew debt.

Debt is a four-lettered

word and should be treat-

ed accordingly. Outside

of the business and in-

vestment world, there is

no good debt – just less

bad debt. Sometimes

debt is necessary, such as

mortgage debt to finance

the purchase of a home.

When it is used to fi-

Page 2 Link to Survey

and all forms of social

media. You should pro-

tect against this familiarity

causing you to let your

guard down.

As parents, we are full of

advice. After all, we have

lived longer, made mis-

takes and have experi-

ence. Our goal is to pre-

vent our children having

avoidable bad experienc-

es. Sometimes we can be

successful, sometimes not

so much. As parents, fail-

ure will never keep us

from trying.

Roy S. Gilbert

CRN-1324864-101415

ONE TRILLION DOLLARS

PER YEAR - The na-tional debt as of 9/30/05 was $7.933 tril-lion. The national debt as of 9/30/15 was $18.151 trillion. Thus, the national debt has increased $10.218 tril-lion over the last 10 fiscal years, i.e., fiscal years 2006-2015 (source: Treasury De-partment).

NO DOUBLE TAX - “Pass-through” businesses (e.g., S-Corps, sole proprietorships, part-nerships, LLCs) gener-ate 54% of overall US business income (source: National Bu-reau of Economic Re-search).

Personally Speaking… (from p. 1)

The IRA Breach

Apparently the IRS breach

which occurred in May

was larger than the approx-

imate 100,000 first report-

ed, as about 330,000 peo-

ple may have been affect-

ed.

The breach occurred

through a website tool

which taxpayers could use

to access old tax returns.

Apparently, the answers to

the security questions to

access the tool may be in

the public domain or avail-

able to hackers due to the

plethora of other infor-

mation database breaches

and information gathering

engines on the web.

The IRS has taken the tool

offline and has issued or

will issue PIN numbers to

the 330,000 people affect-

ed. However, the tool to

assist in recovering a lost

PIN uses the same sort of

inquiries as the tool that

was breached.

On a related note, Finan-

cial Planning magazine on

9/25/15 has reported that

the IRS has agreed to re-

verse its policy and provide

identity theft victims with

copies of the fraudulent tax

return that has been filed

under their name by scam-

mers, so they can take the

proper steps to secure their

personal information.

CRN-1324870-101415

Click to Comment

Cybersecurity Update

Page 3 Link to Survey

Should Savings Rates Be the Proper Focus of Retirement

Planning? (from p. 1)

A wise investor once com-

pared short-term market

movements to a person

walking a dog. He said,

“Imagine an excitable dog

on a very long leash in New

York City, darting random-

ly in every direction. The

dog’s owner is walking

from Columbus Circle,

through Central Park, to the

Metropolitan Museum. At

any one moment, there is no

predicting which way the

pooch will lurch. But in the

long run, you know he’s

heading northeast at an av-

erage speed of three miles

per hour. What is astonish-

ing is that almost all of the

observers, big and small,

seem to have their eye on

the dog, not the owner.”

That distinction is a key component to our method

of financial planning.

Click to Comment

Quarterly Market Commentary

Source: Wade Pfau, “Safe Savings Rates: A New Approach to Retirement Planning over the Life Cycle,” Journal of Financial Planning, May 2011

rates, but rather on sav-

ings rates. Unlike the 4

percent rule that is gener-

ally accepted as a “safe”

withdrawal rate, there is

no such number for a

“safe” savings rate. It will

vary based upon when

you start to save and what

your asset allocation is.

This chart gives you vari-

ous scenarios of savings

rates for different saving

times. Interestingly, it

indicates that asset alloca-

tion may not have a huge

impact. For example, for

the typical 30-year retire-

ment time frame, saving

for 40 years makes your

safe savings rate 8.77%.

However, this figure also

shows that if you only

save for 20 years and

want a typical 30-year

retirement, your safe rate

rises to over 30%.

Pfau sums his theory up

rather simply when he

states, “That starting to

save early and consistent-

ly for retirement at a rea-

sonable savings rate will

provide the best chance to

meet retirement expendi-

ture goals.”

Robert Lichtenstein

Family Wealth Decisions

Group CRN-1324846-101415.

As of mid-2015, such a de-

cline had not occurred in

almost four years.

As the third quarter began,

the Fed openly discussed

raising interest rates for the

first time since 2006. The

Chinese economy, long a

driver of economic expan-

sion, began to cool. Against

this backdrop, equity mar-

kets gave up modest gains

and headed south. While

the year-to-date declines are

still modest, from peak-to-

trough, most equity indices

finally experienced a 10%

correction. Of course, there

has been much said in the

media about what this short

-term movement means for

now and what it portends

for the future. Respectfully, we think they are looking at

the wrong thing.

We have come a long way

since the financial crisis of

2007 and 2008. As we all re-

member, speculation and fall-

ing home prices triggered a

chain of events that led to the

deepest recession in decades.

Since then, contrary to an army

of pessimists and doomsayers,

world economies and invest-

ment markets have been re-

turning to normal. Confidence

and liquidity have slowly re-

turned as unemployment rates

have improved. Global equity

prices have surged.

As the economic recovery con-

tinued, at least one thing was

not quite normal. Markets had

become remarkably calm. His-

tory tells us that a periodic

10% decline in equity prices is

common. Over the last 100+ years, a 10% correction has

occurred about once per year.

Continue on page 4

markets, which are often tied

to commodity-based econo-

mies, were hit the hardest. The

MSCI Emerging Markets In-

dex fell 17.9% and is down

15.5% year-to-date.

Fixed-Income: Bond prices

bumped along weighing the

positive and negative effects

of falling commodity prices

and a Fed potentially ready to

finally begin raising rates. In

the end, it was a stand-off.

The Barclays Aggregate, a

broad measure of the domestic

bond market, managed to eke

out a 1.2% gain for the year.

That brings the calendar year

performance up to 1.1%. In-

vestors should bear in mind

that rising interest rates, when

they do finally come, are not

necessarily a bad thing. Years

of higher coupons and rein-

vestment are likely to over-

come any price erosion over

time.

Investors are always confront-

ing uncertainty. That is the

nature of investing. What

makes this even more difficult

is that the uncertainties are

ever-changing. Over the past

few years, we have grappled

with an impaired economy,

struggling to regain its

strength. This recovery was

sustained with the help of gov-

ernment intervention and arti-

ficially low interest rates. We

made it through.

Over the next several years,

the challenges will be differ-

ent. Now that the crisis has

passed, we must eventually

adjust to the withdrawal of

fiscal stimulus. This will like-

ly mean that, somewhere

along the way, interest rates

Domestic Equities: Domes-

tic equities dealt with a

number of headwinds in the

third quarter. In addition to

the China and interest rate

concerns, the continuing

decline in commodity prices

were on the minds of inves-

tors. The S&P GSCI Spot

Crude Index fell another

24.2% for the quarter. As

the booming shale fields of

Texas and North Dakota

cooled, people wondered if

the American energy renais-

sance would continue. If

not, what affect would it

have on the multitude of

industries supplying trans-

portation and services to the

industry? The S&P 500

dropped 6.4% for the quar-

ter. Year-to-date, the index

is down 5.3%. The Russell

2500, a gauge of smaller

domestic stocks, fell 10.3%

for the quarter. For the year,

the index is down 6.0%. It

should be noted that falling

energy prices do have a

bright side. Falling prices

put money back into the

pockets of consumers, thus

potentially stimulating other

parts of the economy.

International Equities :

While some of the issues

with Greece and Ukraine

settled down, investors

found other things to worry

about. Moving from the geo

-political to the economy,

some investors sold. The

MSCI EAFE index fell

10.2% for the quarter. Like

the domestic markets, this

represented giving back the

gains of earlier in the year.

So, even with the bad quar-

ter, the index is down only

5.3% for the year. Emerging

Page 4 Link to Survey

will return to more normal

levels. This will not neces-

sarily be a bad thing. It

could mean that the econo-

my is finally strong enough

to stand on its own. There

will be fits and starts along

the way as we make the

transition. We will make it

through those as well.

Our analogy about the man

walking the dog might seem

simple and quaint. The un-

derlying principles are pro-

found, if properly applied.

First, observe the entire

situation and separate the

few important factors from

the overwhelming noise.

Secondly, use the infor-

mation available to quantify

and monitor possible out-

comes. Lastly, and perhaps

most importantly, during

times of great distraction,

remember that there is a

person at the core of your

analysis.

Click to Comment

It is possible that the current

return of volatility in the

markets will continue. We

are ready for that. Our prin-

ciples will get us through

whatever comes. After all,

this is just a return to the

normal state of the markets.

Fortunately, there are things

we can do. We listen careful-

ly to your goals. Then, we

apply our unique discipline

and intelligent allocation

toward helping you accom-

plish them. This is our ap-

proach in all market environ-

ments.

We will be in touch soon. In

the meantime, if anything

has changed or if you need

anything, please let us know.

CRN-1319496-100715

Quarterly Market Commentary (From p. 3)

% Return as of 09/30/2015

Equity Indexes 3rd Q YTD 3 Yr

S&P 500 -6.4 -5.3 12.4

Russell 2500 -10.3 -6.0 12.4

MSCI EAFE -10.2 -5.3 5.6

Emerging Market -17.9 -15.5 -5.3

Wilshire REIT 2.9 -3.0 10.1

Bond Indexes

TIPS -1.1 -0.8 -1.8

Aggregate 1.2 1.1 1.7

Governments 1.7 1.8 1.3

Mortgages 1.3 1.6 2.0

Investment Corporate 0.8 -0.1 2.2

Long Corporate 1.1 -3.7 2.0

Corporate High-Yield -4.9 -2.5 3.5

Municipals 1.7 1.8 2.9

Cash Equivalents

3-Month T-Bill 0.0 0.0 0.1

Consumer Price Index 0.4 0.7 1.1

not apply to all Medicare

beneficiaries, but it does

apply to most of them,

roughly 70%-75% of en-

rollees. For these 70%-

75% of enrollees, Social

Security checks will not

decrease in 2016, but will

remain the same amounts.

What is good news for

most Medicare enrollees

is bad news for the rest,

the 25%-30% of those for

whom “Hold Harmless”

does not apply. These

enrollees must bear the

total cost of the increase

in Medicare premiums

next year. Premiums are

projected to rise as much

as 52% for enrollees for

whom “Hold Harmless”

does not apply.

Who does “Hold Harm-

less” apply to?

In order for the “Hold

Harmless” rule to apply,

the retiree must have

Medicare Part B premi-

ums deducted from Social

Security benefit checks.

These individuals must

also be paying the basic

Medicare premium

amount and not an adjust-

ed amount that is paid by

“higher income” individu-

als and couples, the so-

called IRMAA (income-

related monthly adjust-

ment amount) provision.

Page 5

Medicare Premiums Set to Rise for Many People

(from p. 1)

Link to Survey Click to Comment

For an explanation of this

provision, see our news-

letter article on our web-

site, “Don’t Look Now,

But Medicare is Already

Means Tested.” http://

cdn.sqlogin.com/prod/

sq_uploads/

familywealthdeci-

sions.com/documents/

newsletter/FWD-

Newsletter2nd-

Quarter.pdf

Who is not “Held Harm-

less”?

(1) Individuals and cou-

ples who pay a higher

Medicare premium

than the basic amount.

Note: the basic Medi-

care premium in 2015

is $104.90 per month.

(2) Individuals who first

sign up for Medicare

in 2016.

(3) Medicare beneficiaries

who have elected to

delay claiming Social

Security benefits, in

order to receive a

higher Social Security

benefit amount at a

later age.

(4) Individuals who are

entitled to both Medi-

care and Medicaid.

State Medicaid agen-

cies usually pay the

Medicare premiums

for these individuals.

These are the categories of

individuals whose Medi-

care premiums are set to

increase in 2016, perhaps

by as much as 52%. The

basic Medicare premium

amount is set to go from

$104.90 to $159.30 in

2016. For individuals

earning more than

$214,000 (or $428,000

for a couple) the project-

ed increase is to $509.80

per month in 2016 from

$335.70 per month in

2015.

There is still a chance

that Medicare premiums

may not go up by this

amount for these enrol-

lees. Sylvia Burwell, the

Secretary of Health and

Human Services, has in-

dicated that she is explor-

ing ways to reduce the

increase to affected bene-

ficiaries. Congress has

also recently indicated its

interest in reducing the

increase for these enrol-

lees. Time will tell.

Doug Lemons, CFP® CRN-1131194-102115

Reference: Michael Kitces,

“How the Medicare Hold

Harmless Rules May Spike

Part B Premiums by 52% in

2016,” https://

www.kitces.com/blog/

understanding-the-medicare-

part-b-premium-hold-

harmless-provisions-for-

social-security-beneficiaries/

CAP ON STUDENT DEBT - Legislation introduced in the Senate in early January 2015 would limit a college student from borrowing no more than $30,000 per year (with a lifetime maximum of $150,000) in federal government-backed loans to pay for tuition and living expenses (source: S.108 legislation).

IN THE HOLE - Students

finishing medical school graduate with an average debt of $176,348. 84% of new doctors have accumu-lated some amount of education debt (source: Association of American Medical Colleges).

AT LEAST THAT MUCH -

21% of 1,003 pre-retirees surveyed in the first quarter 2015 believe they will need to accumulate at least $1 million in order to “live comfortably” during their retirement years, up from 15% in 2005 (source: Employ-ee Benefit Research Institute Retirement Confidence Survey).

WHEN I’M SIXTY-FOUR -

In the last 15 years, the age that an aver-age American male begins his retirement has increased by 2 years to 64 years old (source: Center for Retirement Research

at Boston College).

AESOP’s Corner—

Page 6

A mouse wakened a sleeping lion, who was about to crush and eat the intruding rodent. The mouse begged for his freedom commenting that if released, he may be able to return the favor.

The lion released the mouse as he was so enthralled with the idea of a mouse helping him.

Sometime later, the lion became tangled in a trap and as the hunters were approaching, the mouse appeared and gnawed away at the ropes, ultimately freeing the lion.

Interestingly, there is a sequel of sorts floating around wherein the lion offers the mouse a reward and the mouse chooses the lion’s daughter as his wife. However, she accidently steps on the mouse on their wedding night.

Link to Survey Click to Comment

The Moral of this Fable is: Even the least may help the greatest

The fable’s moral teaches that a kindness is never wasted and that no-one should be thought ill of because of a perceived low social class. The sequel seems to suggest the opposite: that one should not marry out of one’s class.

In dealing with investments, there are no “low” classes. The oft-denigrated fixed income and alternative asset classes can provide counterbalancing stability to the excitement and volatility of the equity asset clas-ses.

Does your investment philosophy allow for the “least to help the greatest”?

CRN-1324875-101415

Ira’s IRA TIP

Page 7 Link to Survey Click to Comment

Did you know that calculating Required Minimum Distributions (RMDs)

can be MUCH more complicated than you think?

Your tax-deferred retirement accounts can allow you to accumulate wealth

that has not been subject to income tax. However, in most cases, you must

begin making regular, taxable withdrawals from these accumulations by the

time you have reached 70 ½ or within a certain period of time after you in-

herited one of these accounts.

Traditional IRA accounts, inherited IRA accounts, 401(k) accounts, 403(b)

accounts and inherited 401(k) and 403(b) accounts all have their own rules

for calculating RMDs. In fact, you may have to calculate RMDs separately

for each type of retirement account you have. Consolidation of different

types of retirement accounts may not always be possible or in your best in-

terest.

We believe that Mark Twain was correct when he commented on the dam-

age that could result from those things you think you know for sure that just

aren't so. Therefore, we urge you to consult your tax advisor to help you to

calculate your RMDs correctly and avoid penalties.

CRN-1324861-101415

CPA

Continuing

Education

Page 8

Seating is very limited, therefore advance RSVP to Beth at 516-682-7564 is required for attendance

Location Seminar Social Security Planning I

What Workers Should Know to Maximize

Retirement Benefits

10:45am-11:45am

Social Security Planning II

What Individuals Should Know to Maximize Family

and Survivor Benefits

12:Noon-1:00pm

Syosset office January 20, 2016 1 CE 1 CE

Syosset office April 20, 2016 1 CE 1 CE

Link to Survey Click to Comment

Location Seminar

When I’m 65

10:45am-11:45am

Medicare—Managing Health Care Expenses in

Retirement

12:Noon-1:00pm

Syosset office November 18, 2015 1 CE 1 CE

Syosset office February 17, 2016 1 CE 1 CE

We Provide Continuing Education for CPAs (Contact Us to Schedule)

As part of our continuing effort to provide

CPE credits for CPAs, we include our

schedule for CPE events. These events are

open to CPAs only and not to the general

public. These events will be held at our of-

fices . Refreshments will be provided. We

expanded our course selection to provide a

well rounded series of topics in keeping

with your requests for a more well rounded

syllabus. Topics now include insurance and

annuity planning, Social Security planning,

business exit strategy and back by poplar

demand , estate planning and retirement

planning. A full list of seminars may be

found on our website:

http://familywealthdecisions.com/Web/

WebObjects/Web.woa/wa/menu?sid=fw-cpe-

seminarsC:\Users\ISPDAL\Documents\My%

20Music

Contact us to arrange a private CPE session for

your firm at your office (3 or more CPAs re-

quired for private CPE session). We have at our

disposal subject matter experts that can provide

answers to your client’s specific needs. If you

are interested in arranging for one or more semi-

nars for your firm, please contact Beth Tinelli at

516-682-7564.

(email BethT@FamilyWealthDecisions.com)

Location Seminar Savvy IRA For Boomers CyberSecurity

12:Noon-1:00pm

Syosset office December 16, 2015 1 CE 1 CE

Syosset office March 16, 2016 1 CE 1 CE

Even if you are not a

CPA and would like to

attend, please call us.