Financial FOCUS
Snippets

By Gray Easterling

Do you remember the story of the three pigs? One built their house of straw because it was the easiest route to follow. The next pig built his house out of twigs, which was a little better. The third pig built his house out of brick, which took more time, more planning and involved more expense. As we all know, the house that survived the wind storm (the wolf) was the house made of brick. Perhaps there is a lesson to be learned that could be applied to your investment decisions. Taking a friend’s advice or picking a headline from CNBC as a base for buying into or selling away from a company may be easy, but it may lead to less than desired results. The money you save is important to you for both short term and long term objectives. You work hard to accumulate assets; you should put forth some of the same effort in making those assets work to your benefit. There is a large selection of financial newspapers, magazines and newsletters available to you. Competent financial advisors can also be engaged for guidance and advice. Pick someone that you not only are comfortable working with, but also one that has the experience and credentials necessary to provide you with the services you need. Check him or her out with personal or business contacts for independent appraisals of their work. A little time spent prior to investing may result in more positive long-term results.

In the online version of the Wall Street Journal for February 18th, there was an article entitled “Why No Estate Tax Could Be a Killer”. As you probably know, the estate tax lapsed on January 1st of this year. The lapse could raise taxes on some, according to this article. For example, if the deceased owned an asset with a market value of $110,000 and a cost basis of $10,000 that is sold by the heirs, there is a difference in the tax treatment from 2009 to 2010. In 2009, the heirs would have been able to “step up” the basis in the asset to $110,000, resulting in no capital gains tax. In 2010, there is no step up, resulting in a $15,000 tax. Apparently, there are other quirks in the law because the author notes that tax and legal advisors are suggesting that affected parties avoid irrevocable actions, like distributing or selling assets, until there is some resolution to the situation. If in doubt, please consult with your tax attorney or tax advisor for advice before making a decision that may be detrimental to you or your family’s financial health. While I have no reason to believe that the author is not reliable, I cannot guarantee his accuracy or completeness. For a more positive comment, in the same issue of the Wall Street Journal, there was an article noting that “Factories Gear Up to Hire”. It was reported that manufacturers are seeing signs that the economic recovery is on solid ground. You would expect a report that Caterpillar might be bringing back workers because of the emphasis on the transportation infrastructure, but it is interesting that Allen Edmonds Shoe Corp., a manufacturer of premium shoes for men is experiencing growth. Their business is up 14% year-to-date. Overall, the report is cautiously optimistic, which gives some hope for better bottom lines for business and consumer.

Recently, I was driving to Natchitoches for a meeting and it was a beautiful day. The sun was out, and there were no clouds in the sky, which was a luminescent blue. After so much cold, snow, rain and cloud cover, it was a lift to my spirit to be able to share in God’s creation. I was thinking of ways to describe my feeling and the only words that came to mind were “surprised by joy”, which is also the title of a C.S. Lewis book. Archibald Rutledge once wrote that, “Neither a day dawning nor a sunset is really a necessity. It is one of life’s extras. No one has to pay an admission fee. The human mind, being somewhat proud and perverse, may be inclined to reject this kind of proof of God’s love. But the human heart can hardly do so. And in things spiritual, I do not know but that the heart is by far the better guide”. My wish is that each of you may be surprised by joy as you prepare for Easter Day.

Securities and Investment Advisory Services offered through FSC Securities Corporation, a registered broker/dealer. Member FINRA/SIPC and Member of AIG Advisor Group. AIG Advisor Group, Inc. is the marketing designation for the wholly owned subsidiary broker-dealer members of American International Group, Inc. 3416 North Blvd., Alexandria, LA 71301, (318) 448-3201. The views expressed are not necessarily the opinion of FSC Securities Corporation.

How To Avoid Medical Identity Theft

By Atty Gen Buddy Caldwell

There is a new twist to identity theft—medical identity theft. Medical identity theft can affect both your finances and your health. Medical identity theft occurs when someone steals your personal information and uses it to commit health care fraud. Your personal information may include your name, Social Security number, or your Medicare Identification number. Medical Identity thieves may use your identity to receive medical treatment, prescription drugs, or even scam your insurance company by making a fraudulent claim.

Repairing damage to your good name and credit record can be difficult enough, but medical identity theft can have other serious consequences. If a scammer gets treatment in your name, that person’s health problems could become a part of your permanent medical records. In addition, it could affect your ability to get medical care and insurance benefits, and could even affect decisions made by doctors treating you in the future. The scam artist’s unpaid medical debts could also end up on your credit report, making you responsible for disputing those fraudulent charges.

It is extremely important to catch medical identity theft early on. First, read every “Explanation and Benefits” statement you get from your health insurer. Follow up on any item that you do not recognize. At least once a year, ask the health insurers you’ve been involved with for a list of the benefits they paid in your name. Finally, make it a regular practice to check your credit reports. You are entitled to a free report from each of the three nationwide companies every 12 months. You can order your free credit report from www.Annualcreditreport.com.

According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, you may be a victim of medical identity theft if:
you get a bill for medical services you didn’t receive;
a debt collector contacts you about medical debt you don’t owe;
you order a copy of your credit report and see medical collection notices you don’t recognize;
you try to make a legitimate insurance claim and your health plan says you’ve reached your limit on benefits; or
you are denied insurance because your medical records show a condition you don’t have.

If you think that you may be a victim of medical identity theft, ask your health care provider or hospital for your medical records. You have a right to get copies of your current medical files from each health care provider, though you may have to pay for them. You also have a right to have inaccurate or incomplete information removed.

If you are a victim of medical identity theft, file a police report with your local law enforcement agency. Also send the police report to your insurance company, medical providers and all three credit bureaus.

For more information about medical identity theft, please contact the Louisiana Attorney General’s Office at (800) 351-4889 or www.agbuddycaldwell.com. You should also visit the Federal Trade Commission’s website at www.ftc.gov.

Spending Our Money

By Wesley Watkins

Private Health Insurance in the United States is a highly debated and very controversial topic. Regardless if you are a supporter of private health insurance, you are on common ground with all Americans in the fact that you are a consumer of goods and services. Whether we adopt a governmental program or support the private business sector to provide our health insurance, we will still use our hard earned money to pay for goods and services. Whether we pay monthly premiums to private insurers such as Blue Cross or pay our government, it will be our dollar that will purchase goods and/or services. This is a basic concept that we must remember.

Healthcare reform must start with us. The idea of blindly choosing a higher cost, name brand, prescription drug instead of a generic is no longer acceptable. The main reason it was acceptable in the past is directly linked to the financial responsibility of the consumer. In other words, people weren’t concerned about the costs of their prescriptions when all they had to pay was $10.00 or $20.00 each time it was filled. However, with the rise in health insurance premiums, people are now choosing plans that do not have “copays” for prescription benefits. Instead, many plans now cover prescriptions as a part of the medical deductible. In short, this means that the $20.00 Zocor now cost $150.00; $25.00 Nexium now cost $180.00; and so on. I have seen a true “awakening” when it comes to the shift in financial responsibility. Knowledge is power; so the more a person knows about his/her healthcare costs, the better consumer he/she becomes. I witness people every week that reform their own health care. Unfortunately, it usually doesn’t happen until it impacts the person’s wallet. If you do not know the true cost of your medications, it’s time to find out. Go to your local pharmacist or search online (prices will vary slightly by pharmacy) and ask about your specific prescription. I found a great website, www.prescriptiongiant.com, where I can quickly find prices of prescriptions.

Your prescriptions are just one piece of your health care puzzle. You can find the prices for all your health care needs such as doctor visits, elective surgeries, eye care, dental care, etc. if you simply ask the person delivering the services to you. Remember, knowledge is power, and you are the consumer. It is your money, no matter who you give it to, so spend it wisely.

In summary, the above information is intended to improve your awareness of the rising cost of healthcare as well as educate and inform. If you or your company need benefit counseling from a trusted advisor who will help educate and inform you and/or your employees, feel free to contact me at (318) 445-9359.

The Pros and Cons of Alternative Investments

By Jeffrey L. Draughon

If you start to really look at all of your investing options and you start collecting advice, it would not be long before you ran into an investment professional who touts the benefits of a “public, all-cash, non-traded REIT. “ Your first response might be, “What’s the ticker symbol?”

Since they have no ticker symbols, your next conversation would probably consist of a description of what an “alternative” investment is and how, although there is a share price, it can’t be found on an exchange. Then, if market fluctuations make you queasier with age, this investment may start sounding pretty good the more you look into it because it’s a competitive investment that takes some of your money off of the daily pricing roller coaster. You may find that it’s an alternative worth exploring, although there are, of course, pros and cons.

Investments that are considered “alternative” are investments other than the traditional stocks, bonds, mutual funds and annuities offered by stock brokerage and insurance companies. They allow for a more direct way of investing in an entity in that you buy your shares, or units, from the company itself, not over an exchange like the New York Stock Exchange or the NASDAQ. They are usually long-term investments by nature with very limited liquidity.

One of the most common assets classes for alternative investments is real estate. Real estate investment trusts provide the opportunity to invest into a wide variety of different classes and types of real estate including, but not limited to, office, retail, industrial, houses, apartments, self- storage, timberland, healthcare and government tenant buildings. In addition, there are varying degrees of risk which usually can be measured by the level of leverage the program uses. For example, a program that buys buildings using all cash has no mortgage default risk, so interest rate risk and property value fluctuations are less of a concern. There is no mortgage to default, whereas a speculative program that uses a high level of leverage and is probably aiming for spectacular returns, is much more likely to default if there is, say, a commercial credit freeze such as we are experiencing right now. Low debt is also usually associated with competitive monthly or quarterly distribution payments with limited appreciation potential. High debt is also usually associated with little or no periodic distributions, but high appreciation potential.

Those are the extremes. There are many levels of risk in between and it takes some effort to gauge the level of risk you are taking. What is somewhat helpful is that the alternative investment industry is using some general terms when titling their programs that loosely describe the level of risk for the program. “Core” means no leverage. “Core Plus” means some leverage, with probably an overall loan-to-value ratio of 25% to 50%. “Value Added” or “Growth and Income” means moderate leverage, with probably an overall loan-to-value of 40% to 60%. ”Opportunity” means they are probably on the high side with 55% to 75% overall loan-to-value.

In general, REITs usually have a Share Repurchase Program which typically states that they will buy back your shares at a reasonable discount to the purchase price in the first two or three years, and then at either 100% or the appraised REIT value thereafter. However, they are limited to redeeming 5% of the REIT per year and can stop redemptions at any time if it’s in the best interest of other shareholders. A “public” REIT is also one of the easiest alternative investments for which to qualify. You will typically need to have either a net worth of $250,000, or a net worth of $70,000 combined with an income of $70,000. It differs, though, REIT by REIT, and state by state.

Investing in real estate entails certain risks, including, but not limited to, changes in the economy, supply and demand, laws, tenant turnover, and interest rates. Some real estate investments offer limited liquidity options. There is no assurance that the investment objectives of any program will be met. REITs are not right for all investors. Be sure to consult your advisor regarding your specific situation.

To sum it up, alternative investments can be useful in several ways. They can diversify your overall portfolio, provide some tax advantages, and provide strong cash flow and/or appreciation. On the minus side, your liquidity is very limited until the program goes full cycle and returns your principal along with whatever gain or loss it generated. As with all investments, the return of your principal is not guaranteed.

The Financial Consultants of Upton, Draughon & Bollinger are registered representatives with, and Securities offered through LPL Financial, Member FINRA/SIPC 207 Ansley Blvd., Suite A, Alexandria, LA 71303, (318) 442-4944.

The Respite From Mandatory Distributions Expires In 2010

By Carol Kinder

Required Minimum Distributions (RMDs) are minimum amounts that a retirement plan account owner must take annually, according to the Internal Revenue Service. The rationale for mandating distributions is that while the government allows taxpayers to defer taxes on retirement contributions, at some point the tax bill comes due. Ready or not, that point is age 70 ½ for IRA owners and plan participants. It is the year following the IRA owner’s year of death for Inherited IRAs. Beginning in 2010, the waiver has expired and RMD requirements revert back to pre-2009 norms.

Generally, a RMD is calculated for each account by dividing the prior December 31st balance of that IRA or retirement plan account by a life expectancy factor that is available on the IRS Web site.

Although an account owner is ultimately responsible for calculating the amount of the RMD, your financial advisor can help you access the calculation or put you in touch with your IRA custodian or retirement plan administrator.

Those age 70-1/2 or older who have IRAs and/or employer sponsored retirement plans as well as those with Inherited IRAs enjoyed a brief reprieve from having to distribute required minimum distributions (RMDs) should know that in 2010, the respite is over. Individuals who would usually be subject to receiving RMDs from IRAs, 401(k) and other qualified retirement accounts had earned a reprieve in 2009, thanks to the Worker, Retiree and Employer Recovery Act (WRERA). The WRERA allowed for a temporary waiver of the RMD rules requiring them to distribute funds from their retirement accounts for those 70 ½ and older or those with Inherited IRAs.

Now that we have entered a new year, any employer sponsored retirement plan participant age 70 ½ or older must take distributions, beginning the year he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. This delay is allowed only if the participant is not a 5% or more owner of the company and the plan allows the delay. However, any individual with a Traditional SEP and/or SIMPLE IRA should take their RMD by December 31st beginning the year you reach 70 ½. However, you may choose to delay that first RMD until April 1st the year following the year 70 ½ is obtained. If you delay that first year’s distribution until the following year, you should note that you will have two distributions taxable in the same year – your first RMD and your second RMD, which must be taken by December 31st. After your first distribution, annual RMDs must be taken each year by December 31st.

Those with Inherited Traditional and/or Inherited Roth IRAs have RMDs due by December 31st of each year, beginning with the year following the IRA owner’s year of death. Those who have inherited an employer sponsored plan have the ability to transfer these assets into an Inherited IRA. This must be done as a trustee-to-trustee transfer, rollovers are not allowed. Once in the inherited IRA the RMDs rules for distribution apply.

Wells Fargo Advisors does not render legal, accounting, or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that may have tax consequences. Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.