Second Quarter 2013
Securities provided by Cetera Investment Services LLC.
Will you outlive your retirement money?
A December 2012 report from the U.S. census reveals that, in the 30 years
from 1980 through 2010, the number of Americans aged 100 and older
(“centenarians”) increased by 65.8%, while the overall population increased
by 36.3%. There were, according to the 2010 census, 53,364 people over
100 in this country. Other notable data points from the report:
• For every 100 female
centenarians, there are
20.7 male centenarians.
• The most common
living arrangement
for male centenarians
(43.5%) was living
with others in a
household.
• The most common
living arrangement for
the females (35.2%)
was in a nursing home.
• The number of
centenarians per 10,000 of
population for the country is 1.73, up from 1.42 in 1980.
Don Warren
Investment Services Manager
895 Main St., Box 938
Dubuque, Iowa 52004-0938
(563) 589-0831
1-800-373-1841
Kim Snook, CFP®, CRPC
Investment Services Officer
280 Kennedy Rd., Box 938
Dubuque, Iowa 52004-0938
(563) 583-5759
1-800-373-1841
Dyersville, Iowa
(563) 875-2492
Robert Eager
Investment Representative
• The state with proportionately the most centenarians is North Dakota, at
3.29 per 10,000, about 50% above the national average. Florida, everyone’s
likely first guess, has 2.18 per 10,000.
4730 Asbury Rd., Box 938
Planning for the very long term
1-800-373-1841
We don’t have a way to predict who will make it to the 100-year milestone.
Continued on next page
QuarterNotes is written by The Merrill Anderson Company.
Cetera Investment Services LLC and The Merrill Anderson Company are not affiliated.
Securities, insurance products, and advisory services offered through Cetera Investment
Services LLC (doing insurance business in CA as CFGIS Insurance Agency), member FINRA/
SIPC. Cetera is not affiliated with the financial institution where investment services are offered.
Investments are: • Not FDIC/NCUSIF insured • May lose value • Not financial institution
guaranteed • Not a deposit • Not insured by any federal government agency. Advisory services
may only be offered by investment adviser representatives in conjunction with the firm advisory
services agreement and disclosure brochure as provided.
Dubuque, Iowa 52004-0938
(563) 585-5704
Will you outlive your retirement money? . . . continued
Researchers have found that
centenarians spend most of their
lives in excellent health. In one study,
of those who reached age 102, 89%
had been living independently at age
92, and 73% were still independent
at age 97. Rather than experiencing a
long, slow period of gradual decline,
centenarians apparently enjoy a
persistently healthy life, with a
relatively rapid terminal decline.
Family history may not be as
important as once thought.
Researchers examined 10,251 pairs of
twins born in Denmark, Finland and
Switzerland from 1870 to 1910. They
discovered that the vast majority
died years apart, and the deaths of
identical twins were only slightly
more closely spaced than fraternals.
Studies have shown that longevity
is positively associated with higher
levels of education, higher incomes,
and attention to good health habits.
The implications of these
developments for retirement planning
are enormous. It’s one thing to
prepare for a 20-year retirement, to
age 85, for example. Adding another
10 or 20 years, preparing for financial
independence to age 100, is another
matter entirely. Centenarians may
spend as much time in retirement as
they did pursuing their careers.
Should you consider an annuity?
When a retiree is concerned about
outliving his or her money, one
alternative to evaluate is an immediate
annuity. Annuities are contracts
issued by life insurance companies
that can meet a wide variety of saving
and income needs.
With an immediate annuity, an
individual is trading a lump sum
of money for an income stream,
payments to be made monthly,
quarterly or annually. Payments may
last for the individual’s lifetime, for
the joint lives of an individual and
a spouse, for a specific number of
years, or for life, but not less than a
specific number of years. The amount
of the payments may be fixed or
variable, determined by financial
market performance. The age of the
annuitant or annuitants also will be
a factor in determining the size of
the payments.
Another choice to consider is a
deferred annuity. Payouts don’t begin
until a future date, allowing for taxdeferred buildup of the principal.
Each approach has advantages and
disadvantages.
For some retirees an annuity offers
peace of mind by shifting the burden
of investment management to
professionals. On the other hand, one
is sacrificing access to a significant
sum of money, which may remain
unavailable in case of emergency. If
you decide to explore the purchase of
an annuity, you’ll need to understand
all your choices and keep an eye on
expenses. Annuities are not right for
everyone, but they have been a boon
to many.
Seek informed advice
There are no simple answers when
it comes to managing a retirement
income for a long and comfortable
life. A mix of investments, such as
stocks, bonds, annuities and cash
for emergencies, may deliver the
necessary income for many families,
but careful planning still will be a key
to success.
We can help you reach that goal. If
you have questions about developing
your capital base or managing your
investments so that they last as long
as you do, please give us a call. We’ll
be happy to share our ideas with you.
© 2013 Cetera Investment Services LLC, member FINRA/SIPC. All rights reserved.
The more you have,
the more you may need
Everyone knows that life
expectancies have been
increasing over the years. When
Social Security began making
payments in 1940, men who
turned 65 that year could expect
to live another 12.7 years, women
14.7 years. By 2010, thanks
to healthier living and better
medical care, comparable life
expectancies had risen to 18.6
years for men and 20.7 years
for women. Increased longevity
is one reason that the normal
retirement age is being lifted in
stages, until it becomes 67
in 2027.
New research now suggests
that increased longevity has not
been distributed evenly across
the income spectrum. Most of
the gain has occurred in the top
half of the income distribution,
according to a study by the
Social Security Administration.
A Congressional Budget Office
report found a gap of 4.5 years
between the life expectancies of
the highest and lowest income
groups.
The outcome shouldn’t be too
surprising, as greater income
often translates into better
access to health care. The
sobering corollary for those who
have accumulated substantial
retirement resources—you may
need to factor a longer lifespan
into your retirement planning.
Is your will or trust now out of date?
Good news for many on the estate
tax front. The American Taxpayer
Relief Act of 2012 provides, for the
first time since 2001, permanent
rules for federal estate taxes. Not that
federal tax rules are ever permanent,
but at least these don’t have explicit
expiration dates. They include:
• Federal estate, gift, and generationskipping transfer tax exemptions of
$5 million, with inflation indexing.
The exemptions for 2013 are
$5.25 million.
• A top estate tax rate of 40%. As
recently as 2009, the rate was
45%, and back in the late 20th
century some estates faced a
marginal tax rate of 60%.
• A portable estate tax exemption for
married couples. For many families,
that means $10.5 million sheltered
from estate tax with minimal
estate planning.
What do these shifting tax laws mean
for you and your family?
A matter of interpretation
One routine estate planning approach
for a married couple is to have two
trusts, a marital deduction trust
and a “bypass” trust. With this
arrangement, all federal estate taxes
may be deferred until the death of
the surviving spouse. Compared
to a simple, “all-to-spouse” plan,
the family should enjoy a doubled
estate tax exemption, just as with the
portable exemption.
However, there may a problem with
such a plan at the moment. To reduce
the need for frequent will revision
to accommodate changing tax laws,
estate planning lawyers sometimes
use word formulas in wills instead
of numbers to divide an estate. For
example, the bypass trust routinely
might be funded “at the amount
exempt from federal estate tax.”
For a $2 million estate, back when
the exemption was $1 million, that
formula would put half the estate
into the marital deduction trust,
half into the bypass trust. Now, with
the enlarged exemption, the entire
estate might pass to the bypass trust,
disinheriting the spouse entirely. Is
that what is really wanted? Could this
ambiguity trigger a will contest?
If your will or trust provisions include
formula clauses, you’ll want to
schedule an early meeting with your
estate planning advisors.
More issues
Other factors to be taken up in an
early estate planning meeting:
Freedom from the federal tax
regulations. Families that need to
worry about estate taxes also need to
conform their estate plans to a variety
of federal regulations or risk still
higher taxation. Those who are very
unlikely to breach the tax threshold
now have more flexibility in crafting
their plans.
State death taxes. Most states
have eliminated their estate and/or
inheritance taxes. In the minority of
states that still impose them, state
death taxes begin to bite at much
lower wealth levels than the federal
estate tax. If you live or own property
in one of these states, your estate
planning needs to take that into
account.
Changing circumstances. Have there
been any marriages, divorces, births
or deaths in the family since your will
was drafted? If so, new beneficiary
provisions may be appropriate.
Changing assets and changing
values. Does your will mention
assets that you no longer own? Have
asset values changed markedly, up
or down, since the will was drafted?
These developments will need to be
factored into your testamentary plan.
Prudent asset management
Doing one’s estate planning can
trigger an evaluation of personal
investment management strategies
as well. That’s where we may be
able to make a contribution to your
planning. If you have questions about
your portfolio planning, please give
us a call.
Just Ask Us
I noticed that the
Dow Jones Industrial
Average set a new
record in March.
What’s the difference
between the DJIA
and the S&P
500-stock index?
These two market benchmarks move roughly
in parallel, which is perhaps surprising given
that their construction is so different.
The DJIA consists of just 30 stocks, and the
average is computed based upon the prices
of the stocks. That means price movements
of companies with higher share prices exert
a larger influence on the index than do
companies with lower share prices.
The S&P 500-stock index, by virtue of
including 500 large companies as opposed
to just 30, is generally thought to be a better representation of the market
as a whole. However, small- and mid-size businesses are not included in
this index, so a significant portion of the business sector is left out. The S&P
500 takes into account market capitalization, not just price. Accordingly, the
companies that are the most valuable have the biggest impact on the index,
as opposed to those with the highest share price.
The opinions expressed in this newsletter
are for general information only and are
not intended to provide specific advice
or recommendations for any individual.
To determine whether any of these
strategies are appropriate for you, consult
with your Cetera Investment Services
advisor or your attorney, accountant or
tax advisor before taking any action.
Neither Cetera Investment Services nor
any of its representatives may give legal
or tax advice. Investment theories are
provided as information only and are not
endorsed by Cetera Investment Services.
The information in this newsletter is not
an offer or a solicitation of an offer to buy
or sell any security. Advisory services may
only be offered by Investment Adviser
Representatives in connection with an
appropriate Cetera Investment Services
Advisory Services Agreement and disclosure
brochure as provided.