April 2011 - Susman
Home / Blog

Blog

Assessing Long-Term Care Needs

Is it normal memory loss or Alzheimer’s disease? Is it depression or dementia? The early symptoms of cognitive changes are often subtle and far more difficult to assess than those associated with a physical illness or disability. As a result, it can be difficult to determine whether a friend or family member can live independently or whether it’s time to seek long-term care services.

Your answers to the following questions may help you assess whether your loved one can continue to live independently or whether immediate intervention is needed.

Independent Living Test1

Medications

  • Are prescriptions not being refilled, resulting in failure to take medication when scheduled?
  • Has taking medication become difficult due to poor memory or confusion? Evidence may include problems taking pills on time, different pills mixed together in a pillbox, or an oversupply or undersupply of pills.
  • Have conditions previously under control become acute because medication is not being taken correctly?

Food and Groceries

  • Based on past food habits, are the cupboards frequently empty or being filled with unusual foods?
  • Is the food in the refrigerator often spoiled or kept long beyond the “use by” date?

Daily Business

  • Is the mail being picked up and opened regularly, or does it remain uncollected and/or unopened?
  • Are credit cards or checkbooks being misused or not balanced as well as in the past?

Social Contact

  • Has the amount of social contact changed dramatically, so that there are few public outings or limited social visits with close friends?
  • Has the ability to drive deteriorated? Is there a fear of driving or a recent history of multiple minor accidents that is leading to isolation?

Living Habits

  • Has there been a change in dress or appearance or a decline in personal hygiene that is not related to physical disability? Is dress appropriate for the weather?
  • Have housekeeping habits changed so that a normally neat and orderly home is now cluttered and not cleaned regularly?
  • Are pets that were normally well cared for suddenly not being fed or cared for as they had been in the past?

Solicitations

  • Is there a sudden increase in ordering unnecessary items through mail or televised advertisements?

Calls to Family Members or Health Care Providers

  • Has there been a marked increase in panic calls to family or medical providers without apparent need?
  • Have unnecessary calls been made to 911?

According to the American Association of Homes and Services for the Aging (AAHSA), among people age 65 today, 69% will need some form of long-term care, and by 2020, 12 million older Americans will require long-term health care.2 Consider protecting yourself and your loved ones with the security that Long-Term Care Insurance coverage can provide.

1Source: Long- Term Care Partners, LLC

2Source: American Association of Homes and Services for the Aging, “Aging Services: The Facts,” www.aahsa.org (accessed February 2010).

Long-term care insurance issued by Metropolitan Life Insurance Company, 200 Park Avenue, New York, NY 10166.

Like most long-term care insurance policies, MetLife policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. I’ll be glad to provide you with costs and complete details.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0410101541(exp0411)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Money Management Tips for Young Adults

Young adults today face a variety of challenges in their quest for financial security. Some of these obstacles are similar to those faced by previous generations, while others are unique to the times. If you are a young adult, here are five financial tips to help you manage your money and prepare for your future.

1) Invest in your future. Ongoing technological changes in various fields may require continuing education. You may wish to make ongoing career education a priority to enhance your skills and increase your professional potential. The more varied and flexible your skills, the more attractive you may be to prospective employers.

2) Open an emergency savings account. The uncertainty of the workplace may mean that your professional life will be interrupted by career changes. If you need to return to school full-time to change career paths, you may face periods of time without stable income. Creating an emergency fund to cover several months’ worth of living expenses can help you manage work-related transitions. This savings fund can also be used for opportunities, such as starting your own business.

3) Save early and continuously for retirement. Saving for your retirement is your responsibility—so apply discipline and diligence to this ongoing objective. You cannot necessarily depend on the government to provide future Social Security benefits. With employer-sponsored 401(k) plans, the responsibility of saving rests on your shoulders. Although you may be years away from retirement, the key is to make time and compound interest your allies.

4) Let retirement funds accumulate. If you change jobs early or often in your working years, consider rolling over your account into an Individual Retirement Account (IRA) or new company retirement plan. It may be tempting to cash in the account, especially if you have accumulated only a small amount, but doing so would make it immediately taxable and you may also incur an early withdrawal penalty. Perhaps a greater concern, however, is that you may be unable to make up for time already spent to accrue these savings.

5) Use credit wisely. Credit card companies frequently target young adults with the lure of “easy money.” While credit cards offer convenience (it’s virtually impossible to conduct some transactions, such as reserving airline tickets, without one), they also have the potential to create debt problems. Because payments can be stretched far into the future, overspending on credit can create an illusion of wealth. Paying off the full balance each month is the best way to control your use of credit.

Plan Now for the Future

Remember, the funds you accumulate during your working years may be your primary source of retirement income. Although inflation may threaten your nest egg, a little discipline and common sense over time may help you better manage your current and future financial affairs.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this brochure is not intended to (and cannot) be used by anyone to avoid IRS penalties.You should seek advice based on your particular circumstances from an independent tax advisor.

MetLife and its representatives do not provide tax or legal advice. Please consult your tax advisor or attorney for such guidance.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0910131096(exp1211)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Seven Steps to a Sound Financial Future

Today, many people find themselves bombarded by a constant stream of financial news from television, radio, and the Internet. Yet, does all this “information age” data really help you manage your finances any better than in the past? The truth often is that the “old-fashioned” practices, such as periodic financial reviews, lead to greater success in the long run. Why not spend a few hours reviewing your finances? The changes you make today could result in increased savings. Consider these seven steps:

Analyze your cash flow. When your income is greater than your expenses, the excess is called a positive cash flow. When your expenses exceed your income, the shortfall is termed a negative cash flow. A positive cash flow means that you may have funds you can set aside as savings. A negative cash flow can indicate that it may be a good idea to reorganize your budget to minimize any unnecessary expenses.

Develop a program for special goals. For every financial and retirement goal you establish, identify a projected cost, a time horizon (how long it will take to reach the goal), and a funding method (such as through savings, liquidating assets, or taking a loan). Consider your goals in terms of a “hierarchy of importance.” The bottom—or “foundation” tier—should include emergency funds to cover at least three months’ worth of living expenses. The middle tier should include such essentials as your children’s education. On the top tier, place the “nice-to-haves,” such as a new car, home renovation, or vacation.

Boost your retirement savings. Employer-sponsored pensions and Social Security may not provide sufficient income to maintain your existing lifestyle when you retire. Thus, it is essential to identify your retirement needs and plan a disciplined savings program for the future. Maximize your contributions to retirement accounts, and if possible, make “catch-up” contributions.

Taxpayers, who are 50 years old, or older, are allowed to make additional contributions to their retirement plans. Traditional Individual Retirement Account (IRA) and eligible Roth IRA holders can save an extra $1,000 a year in 2010. Those with eligible 401(k), 403(b), or 457 plans can save an additional $5,500 in 2010.

Minimize income taxes. Why give Uncle Sam any more of your money than is necessary? It is in your interest to take advantage of all income tax deductions to which you are entitled. Consider exploring any possible ways of reducing your income taxes. For instance, under appropriate circumstances, losses or expenses from prior years may be carried over to the next tax year. A qualified tax professional can help you implement a tax strategy that meets your needs.

Beat inflation. Your income and retirement savings must keep pace with inflation in order to maintain your buying power. This means that if the inflation rate is currently 3%, you need to achieve at least a 3% annual increase in income just to break even. If your long-term savings plan fails to keep pace with inflation, you may be unable to maintain your current standard of living.

Manage unexpected risks. As you undoubtedly know, life can sometimes throw you a “curve ball.” Without warning, a disability or untimely death can cause financial hardship for your family. Adequate insurance is an important foundation for your financial program—it offers the protection you need to help cover potential risks and liabilities.

Consult a financial professional. In today’s complex financial world, everyone needs help in making informed decisions. A qualified financial professional can help ensure that your financial affairs are consistent with your current needs and long-term goals.

Reviews can help bring focus to your overall financial picture. In the future, you will have the opportunity to alter your programs due to changing goals and circumstances. By faithfully tracking your progress, you will be in a better position to build financial security and realize the retirement of your dreams.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this article is not intended to—and cannot—be used by anyone to avoid IRS penalties. This article supports the promotion and marketing of insurance and/or other financial products and services. You should seek advice based on your particular circumstances from an independent tax advisor.

MetLife, its affiliates, agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and circumstances.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0910131535(exp1211)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

How Much Can You Earn and Still Receive Social Security?

Retirees are often ready, willing, and able to start new careers or businesses late in life that may earn them valuable incomes. However, some may feel that it is not worthwhile to work for wages, only to have to “give up” some of those earnings in the form of higher income taxes. Frustrating as that may sound, it is important to understand the fundamentals of Social Security income and taxation so you can make your retirement years more “golden” and less “taxing.”

Income Limits—Paying to Work?

The first factor you must consider is your age and the so-called Social Security “giveback.” If you are age 62 or older, under the full retirement age (65–67 depending on your birth year), and receiving reduced Social Security benefits, you must “give back” $1 for every $2 earned above $14,160 in 2010. If you attain full retirement age in 2010, your benefits will be reduced by $1 for each $3 earned over $37,680. Upon attainment of full retirement age, you may earn as much as you like and Social Security benefits are not reduced.

How Much Is Taxable?

A second factor affecting your Social Security benefits is the potential income taxation of those benefits. Let’s assume you are working and you also receive a check from the Social Security Administration (SSA) each month. You must first determine how much, if any, of your benefit is included in your gross taxable income. The first step in estimating this is to add up the following items: your wages, taxable pensions, interest, dividends, and other taxable income; all tax-exempt interest; any exclusions from income; your net earnings (net income less net losses) from self-employment; and half of your Social Security benefits.

This total is then compared to a first-tier threshold of $25,000 for a single taxpayer or a married taxpayer who is filing separately and lived apart from his or her spouse for the entire year, or $32,000 for a married taxpayer filing jointly. For a married taxpayer filing separately, who lived with his or her spouse for any period during the year, the first-tier threshold is $0.

For the sake of illustration, suppose your total applicable earnings are $27,000, and you are married and filing jointly. Since the total does not exceed the applicable threshold amount of $32,000, then no portion of your Social Security benefit is taxable. However, if the total exceeds the applicable threshold amount, a further, more complicated, calculation must be performed to determine the amount of your benefits that are taxable. You can refer to IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for more information, or consult your financial or tax professional.

As you can see, performing these calculations is no simple task. Thus, it is important for anyone who is thinking about taking Social Security benefits while still working to understand the potential tax consequences and to plan accordingly. As with all tax planning matters, it is wise to consult a tax professional to help ensure your planning decisions are consistent with your overall goals.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. You should seek advice based on your particular circumstances from an independent tax advisor.

MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.

Copyright ã 2010 Liberty Publishing, Inc. All rights reserved.

L0510108090(exp0511)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Is a Roth 401(k) Right for You?

Since it first became available in 2006, many employers have added the Roth 401(k) to their benefits packages as a retirement savings option. A Roth option, which is available for Individual Retirement Accounts (IRAs), as well as sponsoring 401(k) and 403(b) accounts, may be appropriate for some individuals, depending on their circumstances. So, is a Roth 401(k) right for you? Let’s take a closer look.

To Roth or Not to Roth

In order to decide whether the Roth 401(k) option has a place in your retirement plan, it is important to weigh the advantages and disadvantages of both types of 401(k)s. With a traditional 401(k), you make contributions on a pre-tax basis, which lowers your current taxable income, and earnings are tax-deferred. However, your retirement distributions will be subject to ordinary income tax. With a Roth 401(k), your contributions are not tax deductible, but earnings and distributions are tax free, provided you have held the account for at least five years and are at least 59½ years old. Is it better to pay taxes on your retirement funds now or later? The best choice for you depends on your current tax situation and your long-term financial goals.

It is important to keep in mind that the 401(k) annual deferral limits—$16,500 for taxpayers under the age of 50 and $22,000 for those over age 50 in 2010—apply to all 401(k) contributions, regardless of whether they are made on a pre-tax or after-tax basis. If you contribute to a Roth 401(k), you may have to reduce or discontinue your contributions to your employer’s conventional 401(k) plan to avoid exceeding these limits. However, you may contribute to both types of 401(k) plans.

Also, matching contributions made by employers must be invested in a traditional 401(k), not a Roth account. So, even if you make contributions exclusively to a Roth 401(k) account, you will still owe tax in retirement on withdrawals from funds contributed on a pre-tax basis by your employer.

What about the Roth IRA?

The Roth 401(k) is only available through an employer-sponsored plan, whereas the Roth IRA is available to all taxpayers (with income limitations). How do the two Roth options compare? First, you can save more money in a Roth 401(k) than in a Roth IRA. The 2010 annual contribution limits for IRAs of all kinds are set at $5,000 for taxpayers under the age of 50 and $6,000 for older workers. The Roth 401(k) is subject to the more generous elective salary deferral limits that apply to conventional 401(k)s—$16,500 or $22,000 for those over age 50 in 2010.

Furthermore, the Roth IRA is subject to adjusted gross income (AGI) limits; only those with AGIs below $120,000 for single filers and $177,000 for joint filers are eligible to contribute after-tax dollars to a Roth IRA in 2010. These income limits do not apply to Roth 401(k)s.

In addition, contributions to a Roth 401(k) can be made through payroll deductions, which puts retirement saving on autopilot. To participate, an employee who is currently contributing to a traditional 401(k) plan could, for example, opt to have his or her contributions diverted to a Roth version of the same plan. Unlike the Roth IRA, however, you will be required to begin taking distributions from a Roth 401(k) after the age of 70½.

If a Roth 401(k) makes sense for you, ask your company’s benefits administrator if the feature is available for your retirement plan. If it is not already in place, expressing interest in the Roth feature may increase the likelihood that your company will adopt the option.

Neither MetLife nor its representatives offer tax or legal advice. You should consult your own advisors with respect to such matters.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this article is not intended to (and cannot) be used by anyone to avoid IRS penalties. This article supports the promotion and marketing of retirement plans. You should seek advice based on your particular circumstances from an independent tax advisor.

Copyright © 2011 Liberty Publishing, Inc. All Rights Reserved.

L0410101431(exp0411)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Planning Your Charitable Gifts

Sometimes, our desire to give leads us to make commitments that are difficult to fulfill. Any endeavor worth undertaking, especially one that can benefit others, deserves our careful consideration before we begin. Doing so can yield the greatest results. When contemplating making charitable gifts, consider the following:

· Choose Your Causes. Good causes abound and regularly demand our attention. Choose a limited number of organizations that concentrate on areas that are important to you, and then research what kind of help they need.

· Budget Your Gifts. When planning your annual budget, include charitable gifts. Spreading your donations over the year can both lessen the impact on your finances and increase the total you may be able to give.

· Plan Your Volunteer Career. Volunteering can be a personally rewarding experience, especially when you can see the fruits of your labor. Carefully determine the time you have available to ensure your best efforts for your cause, and avoid overloading yourself.

· Review Your Plans. Just as you review your annual financial budget, you should review your annual time/value budget. Revise your volunteer commitments to include those where the rewards have been the greatest for both you and your cause.

· Consider a Testamentary Gift. If you are fortunate enough to be in a position to increase the amount you donate, or you are concerned about the future of the organizations you support, consider making a Testamentary gift.

What Is a Testamentary Gift?

Quite simply, a testamentary gift is a promise of funds to be made available from your estate upon your death, typically through your estate. However, using your estate as a conduit can lead to a reduction in your intended gift if any of the following are experienced:

· A decrease in the fair-market value of your assets before your death;

· Unforeseen estate expenses that must be made from your assets; and,

· The elimination of your gift if your will is contested.

You may be able to protect your gift from estate problems through the establishment of a trust; however, the legal and administrative costs associated with doing so may also have an adverse impact on your gift.

Guaranteed Protection for Your Charitable Gift

Your intentions—and your gift—can be protected against many of the factors above through the use of life insurance. The potential leverage of life insurance may result in a larger gift than you had hoped.

In addition, the simplicity of doing so and the satisfaction you will gain will add to the rewards of giving. The policy can be purchased with funds that you contribute to the charity, and as such, they are tax deductible as a charitable gift. The policy can be owned by the charity and removed from your estate, thus protecting your gift from the taxation, creditors, or legal contest to which your estate may be subject. As owner of the policy, the charity can decide whether they want to use your gift to pay the premiums or let the policy lapse. As beneficiary, the charity will receive the proceeds of the policy at your death. Depending on the type of policy purchased and the charity’s willingness to use your contributions to maintain the policy, these proceeds may be guaranteed and may even increase over time. Depending on the performance of the policy and other factors, the proceeds may exceed the amount you would have otherwise given outright during your lifetime or upon your death.

Imagine What You Could Do

Your gift through life insurance could allow you to give far more than you ever thought possible. It could help guarantee funding for your chosen organization and help ensure the continuance of its good works. It could mean that your best intentions become reality. The satisfaction that comes from knowing you have done the most you could will be your final, and well-deserved, reward.

All insurance guarantees are based on the financial strength and claims paying ability of the issuing insurance company.

Neither MetLife nor its representatives offer tax or legal advice. You should consult you own advisors before making any decisions.

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this article is not intended to (and cannot) be used by anyone to avoid IRS penalties. This article does not support the promotion and marketing of this life insurance. You should seek advice based on your particular circumstances from an independent tax advisor.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0410103705(exp0511)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

A Short Course in Budgeting for College Students

One “extracurricular” activity that every student should master while in college is personal money management. Typically, a student’s day-to-day spending is done on an improvised basis, meaning that overspending is often the norm rather than the exception.

It is estimated that during a school year the average college or university student will spend approximately $4,000 for books, supplies, transportation, and personal expenses (Trends in College Pricing—2009, The College Board). However, there is often room for economizing. The first place to look is at food and telephone calls. Difficulty may occur in controlling these expenses, especially if pizza is ordered regularly at 2 am and long-distance friends are simply a phone call away.

While many students may assume it costs less to live off campus than in a dorm, they may be in for a surprise. In college towns with a high demand for off-campus housing, accommodations within walking distance of the campus may tend to be expensive. Some landlords require a one-year lease—a period longer than the school year—thus, subleasing privileges should be included as part of an “economical” lease. However, off-campus students can save money by sharing housing and doing their own cooking.

Money Smarts 101

The following may serve as important steps toward helping your student understand college finances:

1. Before your student leaves for college, sit down and have an open discussion of expectations—both your child’s and yours.

2. Consider providing a lump sum each semester, making it clear how long the money must last.

3. Explain when checks or money transfers can be expected, the amounts that will be received, and any rules concerning the use of funds.

Since most students rely on savings and checking accounts—regardless of whether they include parental funds, their own, or a combination of both—it is important for them to understand how these accounts work. The ability to balance an account accurately and make needed corrections is especially critical.

Many undergraduates may keep most of their funds in hometown financial institutions. However, managing financial affairs long-distance can be difficult. Verifying an account balance quickly with an out-of-state bank can be both costly and time-consuming. So, it may be a good idea to keep a smaller account on campus.

While some parents may fear a credit card can give a student who has difficulty managing his or her affairs too much of a cushion, others find a credit card can provide a useful backup, especially in an emergency or for certain expenses. For instance, it can help with car rentals, plane fares, and railroad tickets. In addition, trying to get money to college students in different locations can be frustrating, and it is often impossible for anyone to cash personal checks away from home.

Making the Grade

Ideally, college students should take full charge of a semester’s spending. Life becomes much easier for parents when college-age children can manage their own finances, and the students will learn valuable life skills in the process.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0510104870(exp0511)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Guidelines for Keeping Credit in Check

Imagine you are at an auction and an antique lamp you love is about to come on the block. When you viewed the auction items earlier, you placed a value of $100 on the lamp. It is late in the auction, you have planned your bidding carefully, and you have exactly $100 in cash left in your pocket.

Price Equals Value

When the bidding reaches $90, you and one other bidder are still in the game. So, what is the likely outcome? If the bidding goes to $100, you will either get the lamp or drop out of the game. In this case, the amount of cash you have left equals the value you assigned to the lamp and effectively limits the amount you can pay. Assuming you are alone and cannot borrow some money from a friend, what you are willing and able to pay is controlled by how much money you have in your pocket. In this example, we might say the price of the lamp equals its value.

Expanding Value

Let’s now modify the scenario slightly and see how the outcome might change. Instead of it being late in the auction, this is one of the early items to go on the block, and it will be the first item on which you will bid. You have $500 in your pocket, the total amount you have allotted for the entire auction. The bidding has reached $90. What should you do? What are you likely to do?

Since you originally placed a value of $100 on the lamp, you should be prepared to drop out if a $100 bid does not secure the lamp. However, unlike the first scenario, in which you only had $100 left, you have a full pocket. Depending on how much you want the lamp, it is possible that you would exceed your initial limit and continue bidding, particularly if you thought that a bid slightly over $100 might be successful. What’s the big deal about going over a little? After all, you may not even be successful on some other items of interest.

Although in this case it’s probably not a “big deal,” you have expanded your definition of value. What was originally a $100 value has been expanded to, perhaps, a $110 value. Notice how easy it is to lose one’s sense of value and have something that you want become something that you feel you need.

The “Value” of Increased Buying Power

Okay, now let’s change the scene once more. This time, in addition to cash, the auction house will accept payment by credit card. What can happen to your sense of value when your buying power has been increased?

It appears that people may be less quality conscious in their buying behavior, may not negotiate as skillfully, and may pay more when buying by credit card than when making an identical purchase by cash. If the bidding were to surpass $100, it is quite likely that you would be willing to pay far more than your original assessment of what the lamp was worth.

This possibility suggests that “hard money” and “plastic money” carry different meanings. Hard money (i.e., actual dollars in your pocket or checking account) tends to be perceived as finite—when you run out of dollars, you’ve exhausted your buying power until you obtain more dollars. On the other hand, credit cards can expand your buying power up to the credit limit of the account.

The alluring aspect of being able to buy on credit can become transformed into an expanded sense of value. In the process, it is easy to lose track of the relationship between price and value, and to pay more than we know an object is worth. It is this changed sense of value that is, perhaps, the most concerning aspect of credit card purchases. We simply lose our sense of what a good deal is all about, and we become less smart about our shopping.

Buying on credit can be a great convenience, and it can make sense when we are temporarily short of cash. However, when buying on credit becomes our standard way of doing business, it can have some highly undesirable consequences. One way to guard against credit card abuse is to ask two questions when making a credit card purchase. First, would I still purchase the item if I were paying cash? Second, would I pay the same price if paying by cash?

By keeping the focus on value, you can better distinguish between things you would like to get and things you absolutely must have. Making this distinction can help you avoid the major pitfalls of buying on credit—overpaying on individual items and spending beyond your means.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0410100933(exp0411)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Payback Time: Facing Student Loans

It takes four years, on average, to graduate from most colleges and universities. During that time, students can amass some hefty debts. But, for many people, the degree is certainly well worth the burden of accumulated debt. So, these questions remain: How should you repay the debt? And, are there any plans that can help make the “payback” easier?

Today, there are more plans available that offer flexible payment schedules. Students applying for a federal student loan now can choose a graduated repayment plan that will allow you to make smaller payments upon graduating and larger payments at a later time when you may be earning more money in the working world.

Students also have the choice of an income-contingent repayment plan. This plan calls for them to pay a fixed percentage of your postgraduate income toward their student loans. This percentage could be approximately 5% to 10% of anything above the poverty level of a single person, which is $10,830 according to the Department of Health and Human Services (2009).

A third choice is an extended repayment plan that can lower monthly payments an estimated 20% to 30% and allow graduates to stretch out their loan payment schedules from 10 to 15, or even 20, years.

Consolidation Offers Flexibility

There is also good news for students who are already debt-laden. Under the Student Loan Reform Act of 1993, existing loans can be consolidated with a direct loan from the government. This plan offers a more flexible repayment schedule while interest rates remain the same.

To be eligible for this plan, student loan recipients need to ask their original lenders for an “income sensitive” repayment option. This plan adjusts the monthly payments for the loan’s capital, but not the interest, to annual income. If the original lender will not agree to this option, they may then be eligible for a direct loan from the government.

Two advantages of a direct government loan are as follows: First, the monthly installment payments of principal and interest are contingent upon income. Because the payments are withdrawn from wages, there will be less paperwork to muddle through. Second, as wages increase, the percentage withdrawn from pay will also rise, allowing the loan to be paid off more quickly and with less accrued interest expense.

For students who need to borrow for the current school year, direct loans (and the income-adjusted repayment plan) are also available if they’re attending one of the schools participating in this plan. Parents may also be able to take out a direct loan for as much as the entire cost of their children’s college education.

For information or inquiries regarding federal student aid programs, contact the Federal Student Aid Information Center at 800-433-3243, or check them out online at www.studentaid.ed.gov.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as specific tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. The client must rely upon his or her own professional advisor before making decisions with respect to these matters.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0610113593[exp0611][All States][DC]

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

A Living Will—Your Medical Directive

How do you feel about life-support systems for the terminally ill? How much thought have you given to the decisions your family may face when contemplating the choice of maintaining or terminating life-sustaining medical treatment for you? Certainly, it is an easy subject to avoid considering. However, it is important to recognize there are measures you can take now that can help solidify your thoughts and wishes on the subject, thus providing your loved ones with guidance in the event such decisions become necessary.

A Closer Look

At the present time, nearly all states have passed some form of law dealing with the requirements for living wills or health care proxies. While a health care proxy allows you to appoint someone to make decisions on your behalf, a living will generally allows you to specify the particular types of treatment you would like to have provided or withheld. Each state has its own set of requirements.

A living will is a medical directive—written in advance—that sets forth your preference for treatment in the event you become unable to direct care. The document may be drafted to include when the directive should be initiated and who has the decision-making responsibility to withdraw or withhold treatment. In addition to allowing respect for your wishes, the living will can help alleviate feelings of guilt or uncertainty experienced by those faced with the responsibility of making important decisions for loved ones.

The Patient Self-Determination Act

A far-reaching federal law, known as the Patient Self-Determination Act, requires all health care providers that receive Medicare and Medicaid to inform everyone over age 18 of their right to determine how they want to deal with this issue and to ask whether they want to fill out a living will. If you have received information on this subject, it’s no coincidence, since the law also requires increased emphasis on community outreach and education.

This law impacts virtually every hospital, nursing home, and health maintenance organization (HMO) throughout the country. It is important to note that the law does not mandate that health care providers require their patients have a living will. Instead, it stipulates that health care providers must provide written information about the patient’s rights to make decisions about medical treatment, including the right to make an advance determination about life-sustaining medical treatment, and record whether the patient has done so.

At the present time, it appears most of these organizations have determined this question can most appropriately be handled when a patient is admitted. Therefore, the next time you are admitted to a hospital—even for something as minor as having a mole removed—don’t be surprised if you are given information about these rights and are asked to fill out a form that asks whether you currently have a living will or wish to have one.

The living will is a legal document, and each state has its own specific requirements. A qualified legal professional can help you understand the benefits of a living will and what has to be done to assure its validity.

Before implementing any strategy discussed herein, you should consult with your own financial, tax, and/or legal advisors to determine its applicability in light of your own situation.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0410101704(exp0411)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116