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Craig Sutherland

MARKET MONTH: AUGUST 2010

The Markets

Concerns in August about slowing economic growth and the potential for a double-dip recession took a large bite out of domestic equities' July gains. The Dow once again fell briefly below the 10,000 mark, and the S&P 500 continued to bounce around within the trading range it has exhibited for much of the summer. As investors rotated into large-cap stocks, both indexes outperformed the tech-heavy NASDAQ and the small-cap Russell 2000 last month.

A classic "flight to quality" was part of the reason equities struggled. Prices rose on the 10-year Treasury as the yield at one point hit a 16-month low. As bond investors grew less concerned about the possibility of recovery-driven inflation and its potential impact on longer-dated bonds, the spread between two- and ten-year yields grew narrower.

Market/Index	2009 Close	Prior Month	As of 8/31	Month Change	YTD Change
DJIA	10428.05	10465.94	10014.72	-4.31%	-3.96%
NASDAQ	2269.15	2254.70	2114.03	-6.24%	-6.84%
S&P 500	1115.10	1101.60	1049.33	-4.74%	-5.90%
Russell 2000	625.39	650.89	602.06	-7.50%	-3.73%
Global Dow	1984.48	1855.79	1777.69	-4.21%	-10.42%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	3.85%	2.94%	2.47%	-47 bps	-138 bps

The Month In Review

· The August Bureau of Labor Statistics report showed unemployment stubbornly remaining at 9.5%,* as an increase in private-sector payrolls wasn't enough to overcome the end of 143,000 temporary census jobs. Despite generally strong corporate profits, companies weren't doing much hiring, preferring to increase hours for existing staff. That 3.6% increase in total hours worked fueled a 0.9% drop in business productivity after five quarters of strong growth.

· The Federal Reserve Board will continue to buy Treasury bonds with the proceeds of existing purchases, but won't take additional measures--at least for now. Chairman Ben Bernanke outlined additional steps the Fed can take if necessary to help support the weak economy. However, he still forecast stronger economic growth in 2011.

· The economy is still growing, but at a slower pace than previously thought, and much slower than in the first quarter. The Bureau of Economic Analysis' estimate of gross domestic product (GDP) was revised downward to 1.6% instead of 2.4%.

· American incomes were up 0.2% in July, according to the Bureau of Economic Analysis, but spending rose even more, up 0.4% from the previous month. That helped cut into the savings rate, which fell to 5.9% of income from June's 6.2%.

· Despite slowing growth in Chinese imports from other countries, the U.S. trade deficit hit its highest level since October 2008, the Commerce Department said.

· The housing market continued to suffer from the end of the federal tax credit. Sales of both new and existing homes fell dramatically, according to the Commerce Department--down 12.4% and 27.2% respectively.

Eye on the Month Ahead

As the third quarter nears its close, investors will be on high alert for any signs that a sluggish recovery might slide back into recession. Back-to-school retail sales will suggest consumer mood, while housing market data will be closely watched to see whether sales could get any worse. And any new quantitative easing measures by the Federal Reserve Board could have an impact on both the bond and equities markets.

Key data releases: U.S. manufacturing, construction spending (9/1); pending home sales (9/2); unemployment/payrolls, U.S. service sectors (9/3); international trade (9/9); Treasury budget (9/13) retail sales (9/14); industrial production (9/15); wholesale inflation, international capital (TIC) flows (9/16); consumer inflation, consumer sentiment (9/17); housing market (9/20); housing starts, Federal Reserve announcement (9/21); home resales (9/23); durable goods orders, new home sales (9/24); home prices, consumer confidence (9/28); final Q2 GDP (9/30).

* Unemployment data based on August 6 report for July 2010. Data source: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

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Investing in Green Technology

If you're considering investing in green technology hoping to make another kind of green--the folding kind--you'll need to deliberate carefully. Interest from governments, the public, and venture capital enhances the attractiveness of green companies. Also, daydreaming about finding the equivalent of Microsoft, getting in early, and retiring on the proceeds is a popular pastime. But while technologies that can help clean up and preserve the planet may have enormous potential, potential isn't necessarily the same thing as profit.

What is green technology?

Generally, the concept (also known as "clean technology" or "cleantech") includes renewable energy (or technologies that can improve the environmental footprint of existing energy sources), clean water, and clean air, as well as technologies that can help reduce overall consumption, particularly of nonbiodegradable substances. Such a broad scope can make it difficult to choose among the myriad investment opportunities.

Individual stocks or funds?

One of the key questions for many investors is whether to invest broadly in the future of green technology as a whole, or focus on specific companies. If you have special knowledge of an industry, you may be able to rely on your understanding of the field, but don't let that blind you to fundamental considerations about a particular stock.

If you don't have expertise about a particular field, the time or energy to acquire that expertise, or the stomach for what can be a very bumpy road with an uncertain destination, an alternative strategy is to invest in larger companies that have made a significant commitment to green initiatives. Though behemoths typically don't have the rapid growth potential of their smaller cousins, they often have the resources to acquire green technologies, or manufacture and market them globally more efficiently than a smaller company might.

Some exchange-traded funds and mutual funds focus on green technology or specific segments of it, such as wind or solar energy. If you believe in the future of an industry but hesitate to commit to one company, a fund that concentrates on your area of interest might be the ticket. Be sure to investigate its investment objective, risks, fees, and expenses, which can be found in the prospectus available from the fund, and carefully consider them before investing.

Researching green

If you choose to focus on individual stocks, here are some considerations that are especially important for developing technologies:

What's the competitive landscape? An idea that seems promising can quickly be superseded by the latest innovation. While it's difficult to forecast technical turning points, it's helpful to know the major players in the field, their key development efforts, and roughly how they're positioned. Don't forget that cleantech is a global playing field; many other countries are making significant green investments, hoping for homegrown worldwide dominance of the industries of the future.

How dependent is a company on external support? Last year's American Recovery and Reinvestment Act (aka "the stimulus bill") authorized billions of dollars for tax credits, loan guarantees, and pilot programs related to green technology. However, political support for such initiatives can come and go, as can investor enthusiasm for specific technologies.

How capital-intensive is the technology? Many green technology companies may have little or no profits yet but a substantial need for capital from a cash flow standpoint and/or as a result of the technology itself. That could make a company vulnerable to a potential credit crunch, which could have a significant impact on its ability to develop and market even the most promising technology.

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Transferring Your Family Business to Your Children

You've spent years building your family business. It's been a source of pride and income for both you and your family. But now you may be thinking about how to hand over the reins to your children. Because transferring your business interest to your children may have income, gift, and estate tax consequences, it can take careful planning to prevent some (or all) of the business assets from having to be sold to pay those taxes. Your business succession planning should include ways to ensure the continuity of your business with the smallest possible tax consequences.

Some common strategies for minimizing taxes are discussed briefly below, but remember, none of these strategies are without drawbacks. Before you act, consult a tax professional as well as your estate planning attorney.

Gifting or bequeathing your interest outright

If you don't need continued income from the business and you don't want to retain some control, you can simply give the business to your children outright. To minimize the gift tax consequences, you can first use your $1 million lifetime exemption. Then, you can begin a systematic program of making annual gifts to your children in amounts that equal the annual gift tax exclusion (currently $13,000 per year per recipient). By transferring your interest in this manner, you may be able to transfer all or a significant portion of the business free from federal gift tax (although these transfers may still be subject to state gift tax). The disadvantage here is the amount of time that may be needed to transfer your entire interest.

If you can wait and transfer your business at your death, Section 6166 of the Internal Revenue Code allows any estate taxes incurred because of the inclusion of your family business in your estate to be deferred for 5 years (with interest-only payments for the first 4 years and interest plus principal due in the fifth year), and then paid in annual installments over a period of up to 10 years. This will allow your beneficiaries more time to raise sufficient funds to pay the taxes or obtain more favorable interest rates if they need to borrow the money. Be aware that the business must exceed 35% of your gross estate and other requirements must be met.

Selling your interest outright

If you need income from your business, you can sell your business interest (for full fair market value) to your children. This will avoid gift and estate taxes, but you may owe capital gains taxes. Long-term capital gains tax rates, however, are currently lower than gift and estate tax rates.

Using a buy-sell agreement

If you want to sell your business interest to your children but retain control over the business for a while, consider using a buy-sell agreement. This is a legal contract that prearranges the sale to happen when a specific event occurs, such as your retirement, disability, divorce, or death. When the triggering event occurs, the children will be obligated to buy your interest from you or your estate. The price and sale terms will have been predetermined. Remember, however, that you will be bound under a buy-sell agreement: you won't be able to sell or give your business to anyone except the buyers named in the agreement (unless they consent).

Using a grantor retained annuity trust (GRAT)

A GRAT is a trust into which you would transfer your business interest. The value of the gift is determined using the IRS's current interest rate (published monthly by the IRS). The trust must terminate at a specified time (e.g., 10 years). You receive annuity payments during the term of the trust, and at the end, your children will receive the business. Hopefully, the business will have appreciated beyond the IRS's interest rate, allowing the excess to pass tax free. Be aware however, that if you die during the GRAT term, your entire business interest will be included in your gross estate for federal estate tax purposes. You will have failed to transfer your business interest and lost the tax advantages of the GRAT, and you will have incurred the costs of creating and maintaining the GRAT for nothing, so structure your GRAT carefully.

Creating a family limited partnership (FLP)

An FLP is a type of business entity. First, you establish a partnership with both general and limited partnership interests. Then, you transfer the business to this partnership. You retain the general partnership interest for yourself, allowing you to maintain control over the day-to-day operation of the business. Over time, you gift the limited partnership interests to your children, leveraging your lifetime gift tax exemption and the annual gift tax exclusion. You also save taxes because the value of the gifts may be eligible for valuation discounts, such as the minority interest and lack of marketability discounts

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In-Service Withdrawals from 401(k) Plans

You're probably familiar with the rules for putting money into a 401(k) plan. But are you familiar with the rules for taking your money out?

All 401(k) plans are not the same

Federal law specifies the withdrawal options that a 401(k) plan can offer. But your plan can be stricter than the law allows (i.e., offer fewer withdrawal options), and may even provide that you can't take any money out until you reach normal retirement age (usually 65). However, many plans are more flexible.

Withdrawing your own contributions

If your plan allows, you can withdraw your own pretax and Roth contributions (and in some cases, any investment earnings on them) for one of the following reasons:

You terminate employment
You attain age 59½
You become disabled
You incur a hardship

Hardship withdrawals are permitted only if you have an immediate and heavy financial need, and only in an amount necessary to meet that need. In most plans, you must need the money to (1) purchase a principal residence or repair a principal residence damaged by an unexpected event (e.g., a hurricane), (2) prevent eviction or foreclosure, (3) pay medical bills, (4) pay certain funeral expenses, (5) pay certain education expenses, and (6) pay income tax and/or penalties due on the hardship withdrawal itself. In addition, you generally must have already utilized all other available distributions and nontaxable loans under all plans maintained by your employer. But think carefully before making a hardship withdrawal--in most plans your employer must suspend your participation in the plan for at least six months after the withdrawal, and you could lose valuable employer matching contributions.

Withdrawing employer contributions

Getting employer dollars out of a 401(k) plan can be even more challenging. Many plans won't let you withdraw employer contributions at all before you terminate employment. But some plans are more flexible, and let you withdraw at least some vested employer contributions before then. "Vested" means that you own the contributions and they can't be forfeited for any reason. In general, a 401(k) plan can let you withdraw vested matching or profit-sharing contributions if:

You become disabled
You incur a hardship
You attain a specified age
You participate in the plan for at least five years, or
The employer contribution has been in the account for a minimum of two years

Taxation

Your own pretax contributions, company contributions, and investment earnings are taxable when withdrawn from the plan. If you've made any after-tax contributions, they'll be nontaxable when withdrawn. Each withdrawal is deemed to carry out a pro-rata portion of taxable and nontaxable dollars. Any Roth contributions, and investment earnings on them, are treated separately: if your distribution is qualified, then your withdrawal will be entirely free from federal income taxes. If your withdrawal is nonqualified, then each withdrawal will be deemed to carry out a pro-rata amount of your nontaxable Roth contributions and taxable investment earnings. And keep in mind that taxable distributions made prior to age 59½ are generally subject to a 10% premature distribution tax in addition to any income tax due, unless an exception applies.

Plan loans

Many 401(k) plans allow you to borrow money from your own account. A loan may be attractive if you don't qualify for a withdrawal, or you don't want to incur the taxes and penalties that may apply to a withdrawal.

In general, you can borrow up to one half of your vested account balance (including your contributions, your employer's contributions, and earnings), but not more than $50,000.

You can borrow the funds for up to five years (longer if the loan is to purchase your principal residence). In most cases you repay the loan through payroll deduction, with principal and interest flowing back into your account. But keep in mind that when you borrow, the unpaid principal of your loan is no longer in your 401(k) account working for you.

Be informed

You should become familiar with the terms of your employer's 401(k) plan to understand your particular withdrawal rights. A good place to start is the plan's summary plan description (SPD). Your employer will give you a copy of the SPD within 90 days after you join the plan

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Americans Are Saving More

The American savings rate continues to climb. For the last two decades, the savings rate hovered around zero percent. Now, it has leaped to over 6%. The recession and the credit freeze seem to be the turning point. But, is this change in the savings rate temporary? That is the big question. Economists are concerned that without a spike in consumer spending, the economic recovery will be less robust.

While the overall economy might suffer a bit from a more restrained consumer, your personal economic recovery will benefit from your increased savings. Fifty years ago, the American savings rate was 12%. During the recent economic boom times, more and more people stopped saving and increased their consumer debt. Credit cards became ubiquitous. People refinanced their mortgages, taking equity out of their homes, spending it on consumer products. Businesses too, got caught up in the credit frenzy, over leveraging their books. Now, both individuals and businesses are cutting back.

Americans are going back to basics. They are paying off debt and increasing their savings. Ben Franklin was quoted as saying, “that a penny saved is a penny earned”. That is good, old fashion common sense. We need to save for rainy days. But, Franklin did not live in times with income and social security taxes. In today’s environment, a dollar saved is more like a $1.30 earned. After all, you must first earn $1.30 to net $1.00 after taxes.

Paying off debt is the best action anyone can make. For every dollar of credit card debt you reduce, you save 18% - 20% in interest. It is virtually a guaranteed return on your dollar. Today, Americans are paying down debt at an increasing clip.

These changes in attitude do not seem temporary. A structural change is occurring in our society. Americans are remembering what is really important... family and friends… not possessions. Flamboyant excess is out. The virtue of “all things in moderation” has taken its place.

Does this structural change spell trouble for the economy? If Americans continue to spend less and save more, that will likely slow the economic recovery. But, capitalism needs capital as fuel for long-term growth. Over the last twenty years, American business relied on foreign investments as its capital source. An increased savings rate will mean more “home-grown” capital sources for American business, which, in the long term, will be a positive for economic growth.

In summary, Americans increased saving rate might slow the economic recovery in the short term, but it produces positive benefits for the economy as a whole. But, for your personal economic recovery, increasing your savings and paying off debt will reap nice rewards. Financial advisors generally agree that a 10% savings rate is the benchmark. This rate should increase as you approach retirement. The key to saving is to pay yourself first. Put your monthly savings ahead of all your bills, and then you can spend whatever is left.

Please feel free to pass this on to anyone you feel might benefit. We appreciate all of your referrals.

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Economy to Grow in Third Quarter - Low Inflation Risk

According to a survey released today by the Securities Industry and Financial Markets (SIFMA), the economy is expected to start growing in the third quarter of 2009, but the expansion will be slow through the first half of 2010.

The economic survey of economists from the association’s member firms predict a .8 percent GDP for the July through September period, accelerating to 1.9 percent in the fourth quarter. The prediction for 2010 is forecasted at 2.1 percent.

The survey, which was conducted from May 27^th – June 12^th, also showed the majority of respondents did not believe inflation was an immediate threat. The core inflation rate, which excludes energy and food, is predicted to be 1.6 percent in 2009 and 1.2 percent in 2010.

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Financial Wellness

Americans’ saving rate has climbed to the highest level in a decade. According to usdebtclock.org, we are saving approximately $54,000 per minute. But that is not all. We are paying down debt at a rate of $100,000 per minute!

Consumers and businesses are deleveraging (paying down debt) while keeping expenses in check. Sadly, the federal government is going in the other direction. The federal government is borrowing money at an unprecedented pace. Deficits skyrocket as spending increases. The rate of federal government spending is now at $5 million per minute. Multiply that by 60 minutes in an hour… 24 hours a day… 365 days in a year; you’re talking real money! This year’s deficit is expected to come in at $1.4 trillion. Our national debt is now $11.9 trillion. That is equal to $38,000 per citizen, or $86,000 per taxpayer.

With that in mind, we can’t rely on the federal government. We need to protect ourselves financially. How will you manage your money more successfully? Should you rebuild your retirement accounts? Contribute to your kids’ college funds? Buy a new home? Increase your rainy day fund? Which should you do first, and in what order?

There never seems to be enough savings to go around. Financial experts recommend saving 10%, or up to 20% of your income. Easier said than done. Even with our new found frugality, few are saving at this rate. David Laibson, a Harvard economist estimates that about 10% of Americans save too much; 30% have good savings habits, while the rest spend like there is no tomorrow.

Rebuilding your financial infrastructure takes planning, and implementation of new habits. First, reduce your consumer debt. Some credit cards can charge over 20% interest. Every dollar used to pay down debt saves you 20% in interest. Paying down debt is a guaranteed return on your money.

The next step is building a rainy day fund. Emergencies do come up, often when we can least afford them. The roof may leak, the refrigerator breaks down, the car needs a new transmission, etc. An emergency fund should be equal to three to six months of income. In these times when the unemployment rate is at 10%, an emergency fund equal to six months of income is prudent.

After your rainy day fund, consider saving for future fun. By saving a little each paycheck, you can have money for clothes, vacations, a new car, or (even a new big screen HD, 1080P TV). Believe it or not, the most common budget buster is clothes. Most people don’t budget for the fun stuff. They end up using credit cards and piling up the debt. So, establish a fun fund so you can do fun things without using your credit.

Saving for retirement is problematic. It requires giving up something today for a future benefit. This kind of delayed gratification requires discipline. To help, practice creative visualization. Picture yourself in retirement, living the life you have always wanted… playing golf… traveling… or spending time with your grandchildren. Being financially secure enough to be able to take care of yourself, without being a burden, is a great achievement.

Retirement plans can help you put more gold in your golden years. They also provide significant tax savings. With 401ks and other pension programs, you use pre-tax dollars to fund the plan. Your contributions reduce your income tax burden saving you taxes now. The amount of savings is equivalent to your tax bracket. For example, for every $10,000 in contributions to your 401k, you save $2,500 in a 25% tax bracket. Earnings grow tax deferred, (no current taxes are due on your earnings). Only when you begin taking withdrawals, are they subject to ordinary income tax. Many employers provide for a match equal to a percentage of your contribution, sweetening the pot further. A 3% match on $10,000 would increase your 401k by $13,000 per year. When you consider the tax savings of $2,500 (in the 25 percent tax bracket), your cost is $7,500, while your account grows by $13,000.

Converting your traditional IRA to a Roth IRA is worth considering. Roth IRA contributions are not tax deductible like traditional IRAs, but grow tax free, and produce tax-free income. Consult with your wealth manager about the possible advantages of converting your IRA to a Roth IRA.

If you are just starting out in life, make savings a habit. Put away the same amount each paycheck. Increase your savings as your income grows. Start by putting aside money each week towards your emergency fund, and your fun account. If you have unsecured debt, pay that off first. Start slowly with your retirement account and build as you go.

If you have a family, consider saving for college. If your kids are young, all the better… you have more time for the account to grow. Coordinating your retirement savings with your college plan makes perfect sense. If you have fully funded an emergency account and a fun account, consider splitting your savings between your retirement fund and a 529 College Savings Plan.

If you are an empty nester, focus on retirement. For the years 2009 and 2010, you can make contributions up to $16,500 per year towards your 401k. If you are over age 50, that amount jumps to $22,000 per year. Contribute as much as you can. Look into purchasing long-term care insurance to protect your nest egg. The younger you are, the lower the premiums.

If retired, you will need a different plan. Up to now, it was all about accumulation. Now, it is all about income. Start by making sure you are receiving the maximum amount of social security retirement benefits. This is more difficult than it sounds. Visiting with a professional wealth manager may help you earn more. Consider rearranging your portfolio. Think of your portfolio as being divided between short term (0 – 5 years), medium term (5 – 10 years), and long term (10+ years). If your financial situation is sound, you may consider contributing to your grandchildren’s 529 College Savings Plan.

Counting on the debt-ridden federal government for your financial security is a dangerous proposition. It’s up to us. Self reliance and preparation is the way to financial security.

Please feel free to pass this on to anyone you feel might benefit. We appreciate all of your referrals.

Please note: If you should make withdrawals from your IRA or your 401k prior to the age of 59½, you may be subject to taxes and penalties.

Technorati Tags: Economics,401ks,IRAs,Roth IRAs

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Bailouts & You

On September 15, 2008, Lehman Brothers collapsed. It was the final straw that broke the proverbial camel’s back… just weeks before the Government took over Fannie Mae and Freddie Mac. The repercussions turned a mild recession into a crisis.

The financial stress was caused by a number of factors, but none as damaging as the bursting of the real estate bubble. Home values fell and foreclosures hit all time highs. Financial institutions were in trouble. The Lehman Brothers bankruptcy exposed the depth of the financial problems. The very next day, the Government (taxpayers) bailed out AIG. Next, the Federal Reserve, Treasury Department, Congress and the President looked for ways to bail out the big money center banks and TARP (Troubled Asset Relief Program) was created.

On October 3, 2009, TARP celebrated its first birthday. There were no parties or fanfare. This milestone is best forgotten.

The initial plan was to buy “troubled assets” (mortgages) from the big money center banks. The goal was to free up capital and increase bank lending. In the process, the taxpayer would earn interest on those assets. Many believed the $700 billion “investment” could be repaid and even make a small profit. Despite these moves, credit all but disappeared. Business virtually stopped and the Dow fell. By the end of September 30, 2008, the Dow was at 8,600 and falling fast. Today, the Dow is hovering around 9,600 and has been climbing since March.

Within a month, the program morphed. Instead of buying “troubled” assets, TARP funds were used to buy preferred stocks of financial institutions. The hope was that TARP would improve bank capitalization and increase lending. Banks taking TARP funds were required to pay a 5% dividend and issue warrants to the Government. To date, $365 billion has been allocated with $444 billion left. So far, only $70 billion has been returned.

Earlier in 2009, TARP morphed once again. TARP funds which were designated for financial institutions were used to bailout Chrysler and General Motors. Despite the public outcry against further bailouts, it appears that TARP will be extended to October, 2010.

While the Treasury Department is handing out bailout money and taking over major corporations, don’t expect the same for us. We are on our own, and we know it. The savings rate has climbed from 0% to over 7%. While many economists expect the consumer will return to “the good old days” when we spent more than we earned, financed through credit cards and home loans. Don’t believe it.

This great recession has created a major paradigm shift. The new model most resembles the behavior that was so pervasive during the depression… careful spending, personal savings, and a greater reliance on ourselves. Extravagance is out and prudence is the standard. This is not just a passing fad. It is here to stay!

The national economy will have to recover without the normal post-recession consumer spending bump. This slower consumer spending will lead to slower growth. But what is good for the national economy is not always good for your personal financial recovery. Your financial well being comes from increased savings and investments, paying down or eliminating consumer debt, and greater prudence in shopping behavior.

Please feel free to pass this on to anyone you feel might benefit. We appreciate all of your referrals.

Technorati Tags: Economy

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The “Pink Slip” Blues - The Six Things You Should Know

According to the Bureau of Labor Statistics, the number of unemployed in July was 9.4%. Since the start of the recession in December of 2007, the number of unemployed people has skyrocketed to 6.7 million. Most economists believe that the recession is coming to an end. Despite this good news, economists believe that the unemployment rate will climb through the first half of 2010. Only then will the employment picture start to improve.

What should you do if you or someone you know is worried about receiving a pink slip? If you have time, start by paying off high interest consumer debt (credit cards) and avoid future debt. Do not make any unnecessary purchases. Hoard your cash. Make sure your emergency fund equals six months of your expenses. Focus on upgrading your skills. Make yourself a more valuable asset to your employer or future employers.

What should you do if you receive that dreaded pink slip?

First - understand that feeling a sense of shock, fear, and even anger are normal human reactions. But, you must not let that hold you back. The best weapon against fear is to take action.
Second – review your severance package. Request a copy of your company’s severance policy before you meet with your boss or the HR Director. Be prepared to negotiate for the best possible package. The best time to negotiate a severance package is at the start of your employment. Live and learn!
Third – file for unemployment benefits. It will take some time to process your claim so file as soon as possible. If you were fired with cause or quit, you will not be entitled to unemployment benefits.
Fourth – review your financial situation. Use a money coach or financial advisor. They can help you evaluate where you are, and whether you should liquidate some of your assets. They will also be able to help you prioritize which assets should be liquidated first, while keeping an eye on the tax ramifications. Your retirement account should be reviewed to determine if you should rollover your 401k assets into your own IRA.
Fifth – continue to develop your skills. Take classes at the local community college and sign up for your industry’s advanced certifications. Consider changing your career path to something more akin to your likes and desires. Consider going it alone. More businesses are created during difficult economic times than in boom times.
Sixth – review your insurance coverage. Go over all your options with your money coach or financial advisor. Look at all types of insurance coverage. Take a hard look at your health insurance. You may be able to bargain for the continuation of employer-paid health insurance for a period of time. A Federal law called COBRA requires that group health plans with 20 or more employees must allow a terminated employee to continue that coverage for 18 months. You may be able to purchase your own policy at a lower rate, so choose carefully. Your children may qualify for the State Children’s Health Insurance Program (SCHIP) which provides health insurance to children whose families earn too much for Medicare. Check your state’s requirements.

Please feel free to pass this on to anyone you feel might benefit. We appreciate all of your referrals.

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Americans Are Saving More

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Craig Sutherland
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The Markets

The Month In Review

Eye on the Month Ahead

Gifting or bequeathing your interest outright

Selling your interest outright

Using a buy-sell agreement

Using a grantor retained annuity trust (GRAT)

Creating a family limited partnership (FLP)

Home Office Annoucements

Calendar of Events

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