Client Newsletters

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Monthly Client Newsletter | June 2010

H ere comes summer! With all the talk in Congress regarding financial reform and the impending "sunset" of many tax provisions, we now find ourselves in a "wait and see" period while tax bills work their way through the system. In the meantime, regulations are beginning to become available for portions of the recently passed Health Care Reform Bill. And don't forget, summer is a great time to conduct a mid-year review of your financial situation.

Health Insurance Coverage for Children Under Age 26
Before you say 'I do...'
Great Vacations for Less Money
Savings Rates Are in the Tank

Health Insurance Coverage for Children Under Age 26

IRS Regulations for Health Care Reform

As part of the recently passed health care reform bill, health insurance can now be offered for children under the age of 26. In mid-May, the IRS issued proposed regulations for implementation of this part of the bill. Here is what you should know:

Background
Prior to the revision, health plans typically terminated coverage for dependents at age 19 for non-students and up to age 24 for full-time students. Coverage often required the child to be a dependent using the same definition for a dependent found in the tax code. This meant residing with a parent, meeting a marital test, and qualifying using a financial support test.

New Regulations

	The new regulations begin on the first health plan year on or after September 23, 2010.
	You must be given a 30 day or longer enrollment opportunity no later than the first day of the plan year beginning after September 22, 2010. This enrollment invitation includes any children and young adults that were dropped from your plan and are now once again eligible for coverage.
	Your employer could, at their discretion, offer this enrollment opportunity before the required implementation date so you need to be alert to the timing of this change from your employer.
	The only requirements are that the child is under the age of 26 and the child must be your child through birth, foster arrangement or adoption.
	What prior qualifications are eliminated? Child's employment status, residency requirements, financial support tests, marital status, education status, and eligibility under another health plan. This means the child does not necessarily have to be your dependent.
	Who cannot be added? Grandfathered health plans can still exclude your child if they are eligible to enroll in another employer-sponsored health plan other than a parent's plan. Also your grandchildren and the spouse of one of your children cannot be covered.
	Benefits and costs for plan coverage cannot discriminate between this new group and prior insured non-adult children.

What to do? Be aware of this pending change and if you have a child that needs coverage you may wish to drop a quick note to your employer to see when their plan change is anticipated.

Before you say 'I do...'

The financial conversations you should have with your fiancé

Before heading down the aisle, couples should openly discuss their finances to avoid unnecessary conflict a financial surprise may cause. Here are five money questions to stimulate an open discussion before you say "I do":
	What is your net worth? Net worth is the value of what you own minus what you owe others. How much do you have in assets? How much debt do you owe? Are you behind on any payments? Does anyone owe you money? It is important that both of you are clear on what your combined finances will look like after marriage. No one likes finding out on their honeymoon that their next twenty years together is going to be plagued with paying off pre-marital debt or even worse, paying back-taxes to the state or federal government.
	What is your credit rating? While it may not be a very romantic question, it is important to exchange credit ratings. Credit ratings are a snapshot of a person's past history with money and will also very likely guide your financial future together. Does your partner have a history of racking up credit card debt? Is there a history of late or skipped payments in your future spouse's financial history? If so, what steps are they taking to improve their score? Will you be able to buy a home with your credit scores?
	What are your financial goals? Discuss both short and long-term financial goals. These will change and evolve over the years, but begin by discussing major goals so you know that you are on the right track together. When do you want to buy a home? If you both own a home, will you sell both and buy a new home together, or will you move into one partner's home? Do you need to work on paying down debt? How affluent do you want to be? When do you want to retire?
	How will you control money once you are married? You may both be accustomed to controlling your own finances. How will you combine finances once you get married? Will you keep separate accounts? Who will be responsible for paying the bills on time? How will you make big financial decisions? If one person spends more, is the other partner okay with that or do they expect the other person to cut back? You should plan on having monthly money discussions to make sure you are sharing common goals on how much you are spending and saving.
	What is your history with money? Most money behaviors are learned, so it's important to discuss your history with money. How did each of your families deal with money while growing up? How did that influence your relationship with money? How might that affect your current relationship? What are your first memories of money? Remember, money is not just about numbers--it is also about emotion.

Be respectful and take the time to understand your partner's perspective and you will be more likely to avoid money arguments in the future. Transitioning into a married life together will have its own surprises, but with proper communication, financial surprises do not have to be one of them.

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Savings Rates Are in the Tank

What can you do with your money?

The interest rates banks and other financial institutions pay on your savings have been abysmally low for over a year. Money sitting in savings accounts earns little more than it would in a checking account--or under your mattress, for that matter. So what can you do with your money if you are sick of lending it to financial institutions with very little compensation in return?
	Invest in your future. Invest some of your savings in yourself by starting a business, investing in another business, or going back to school. Investing in yourself often yields the best return on your money.
	Lend money. Banks are more risk averse than ever. For example, car loans that were easily qualified loans a few years ago, are now being turned down. While risky, lending money to a person you trust that has proper collateral (like a car) can be a way to make a reasonable return.
	Invest in assets. With the housing market in the dumps, now might be a good time to look into moving to your dream home. Interest rates are low, and qualified home buyers who do not over extend themselves can end up with a nicer nest egg at retirement. Or perhaps there is a hobby you wish to pursue where the underlying assets have a long-term history of going up in value.
	Look for a better return. Shop around for better interest rates. Consider joining a credit union, which often has significantly better savings rates.
	Certificates of Deposit (CDs). CDs usually have good interest rates relative to savings accounts and are generally issued by banks, so they are FDIC insured. However, remember your money is locked-in until the CD matures, anywhere from 3 months to 5 years. Given the low rates environment, it probably makes sense to shorten the length of CD maturities you are willing to buy.
	Pay Down Debt. When the interest you pay on your debt exceeds the interest you make on your savings by a dramatic amount, it may make sense to pay down extra debt until savings rates turn around. For example, if your savings rate is 1% but the interest on your credit card debt is 13%, you are better off paying down $100 in credit card debt because you save yourself $13 instead of making only $1.
	Be Patient. Many believe that since a deeper recession may have been avoided, interest rates on savings will begin to go back up. If this is true, you may not want to commit the bulk of your cash to long-term investments in order to retain flexibility when savings rates rebound.