Wealth Management Articles

Celebrate Life and the Benefits of Insuring It
Americans are more likely to have employer-sponsored life insurance coverage than to own their own life insurance policies. Unfortunately, the major problem with employer-sponsored group insurance is that you usually lose coverage after you leave your job or retire (unless the policy is portable). Owning your own life insurance policy is one way to help keep your family protected, regardless of whether your employment situation changes. Fortunately, owning your own policy may offer some other attractive benefits as well. Read more...

A Question of Identity
Identity theft costs individuals and businesses $52 billion a year. Not only is ID theft costly, it can also be a major hassle that affects you and your credit score for years. The key to preventing identity theft is awareness. How aware are you? Read more...

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Wealth Management Bullets

• With everything that’s going on in Washington--most of which is focused on health care reform--Congress is letting other things slide and is probably setting itself up for either a fast and furious end of the year or, perhaps in more typical fashion, simply passing “patchwork” legislation. It is entirely possible that the reform of estate taxes will get a one year “patch” as opposed to permanent legislation by simply extending the current $3.5 million exemption per individual and a top tax rate of 45%. Under current law, the estate tax disappears in 2010 and then reverts back to an exemption of $1 million per individual and a 55% top tax rate in 2011. It has long been suggested that Congress will “fix” this problem before 2009 is over, but it is beginning to look as if the real debate won’t happen until next year. The Democratically controlled Congress doesn’t want to be blamed for raising taxes in the future; therefore, there is little chance that the estate tax will actually disappear in 2010.
• What is a saver to do with interest rates so low? The vast majority of money market accounts are paying virtually no interest. CD yields are better but are still very low by historical standards. It is at such times that investors begin seeking out other alternatives, sometimes to their detriment. Bond prices move inversely with interest rates. With both short and long-term interest rates at either historical or extremely low levels, this means that in a rising interest rate environment, bonds will face pressure and thus potentially decrease in value. In fact, thus far this year, the 10-year Treasury Note has moved from a yield of about 2.1% to the current rate of about 3.4%. This rising interest rate has forced down the price of the 10-year Treasury Note. As the economy recovers, interest rates should continue to rise and, ironically, the greatest bondholder is probably in U.S. Treasuries because of their very low rates relative to other alternatives such as municipal and corporate bonds. When interest rates begin to go up, corporate bonds will likely not suffer as much because corporations will likely be perceived to be in a better economic position. Thus it will provide some “security” to their bondholders. The spread between corporate bonds and Treasury bonds will likely narrow. Perhaps more disturbing, however, are the increasing ads that are being run and the claims being made concerning “high interest rates for guaranteed products.” A simple maxim is: The higher the yield, the greater the risk regardless of what anyone may say to the contrary. Investors need to be wary of these pitches being made by unscrupulous promoters and/or unknowing salespeople who really don’t understand the risks involved with some of these types of products.
• On Monday, September 10, 2001 the Dow closed at 9605.51. For obvious reasons, the market did not open on September 11th of that year. Fast forward to Friday, September 11, 2009 and the Dow closed at 9605.41. In essence, over that eight year period of time, other than dividend income, the Dow did not produce any return for investors. (Source: BPN Research)
• Who has the number one global brand in the world? According to Business Week, it’s Coca Cola, which has a substantial lead over number two, IBM. Rounding out the top five are Microsoft, GE and Nokia.
• It is now official. The IRS has announced that the 2010 inflation adjustment for all things tax related will be a paltry 0.19%. The IRS has been indexing since 1985, and this is the lowest inflation factor ever applied. This follows on the heels of the 2009 adjustment, which was a record setting 4.26%. As a result, virtually all tax-related numbers will remain unchanged for 2010.
• We all know that health insurance has become more expensive, but now we can put some real numbers to it. According to the Kaiser Family Foundation, employer-sponsored health plans have seen their family premiums rise 131% over the past 10 years, which represents an average compounded return of 8.7% per year.
• Americans have been reading about how Social Security will go into a deficit position and, at some point, run out of money completely. The last time Social Security was “fixed” by Congress was during the Clinton years. It appears that Social Security has now become yet another victim of our recession. With all of the jobs that have been lost over the past few years, less money has gone into Social Security. Thus it is anticipated that in 2010 and 2011 Social Security will run in a deficit position. That is to say, it will collect less than it pays out. This happened once before back in the ‘80s. As the economy improves, it is expected that Social Security will go back into a positive position…at least for a few years, but beginning in 2016, without a “fix” Social Security’s deficit position will become permanent and eventually, in 2037 the Social Security Trust Fund is projected to run out of money. The current situation is exacerbated by the fact that many people who have lost their jobs and are eligible for Social Security have begun taking their benefits earlier than they otherwise might have simply because they need the cash flow. Congress, both Republican and Democratically controlled, has failed miserably in trying to protect America’s retirees. Eventually, they will have to deal with these issues and the answers are neither simple nor pleasant. It will involve increased taxes and decreased benefits. It will become a huge battle that will require difficult choices to be made.

Somerset's Wealth Management Team is pleased to provide this reprint with permission from ProVise Management Group, LLC, a SEC Registered Investment Advisor

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