• The S&P closed at 679 on 3/9/09 and at 1126 on 12/30/09

• National unemployment breaks 10% while Michigan exceeds 15%

• The President of the United States fires the CEO of General Motors

• GM and Chrysler operate in bankruptcy

• The Detroit Lions actually win two games!

This is a very good time to focus on perspective. Abraham Lincoln
on perspective “It is said an Eastern monarch once charged his wise men to invent him a sentence to be ever in view, and which should be true and appropriate in all times and situations. They presented him the words: “And this, too, shall pass away.”

Albert Einstein stated “Not everything that counts can be counted,
and not everything that can be counted counts.”

Try this one: Today more than perhaps any time in the past, the strategic and tactical financial decisions we make will have a significant impact on our future financial wellbeing. During challenging times a long-term focus, along with short-term execution that aligns itself with focus makes all the difference
in the world.

As many know, I bleed Detroit Pistons basketball. The long-term focus of the leadership combined with short-term execution will in fact determine the Pistons
future success… or failure. Today’s decisions are critical.

You are our focus. Everything we do for our clients is structured and intended to ultimately increase their net worth, while reducing their overall risk. The mission is to do this without any real sacrifice in lifestyle. Our vision is that Financial Architects would be viewed by you as the most valuable relationship you have pertainingto your financial affairs.

We are here to join you in evaluating decisions that you are facing…
or perhaps should be contemplating, today. Right now you have friends who wish they had a relationship like the one you enjoy with us. Maybe you can do them a favor and share this edition of TIMELINES with them.

As always, questions and comments are encouraged. Call your Financial Architects Advisor today and schedule a review.

Our Plan must work under all circumstances.  Volatile markets.  Increased  taxes.  Low interest rates.  Sickness.  Health.  Prosperity.  Good times.  Bad times.  You know how it works.  Never a dull moment.

All you need to do is gather your documents.  If you can’t find them or are too busy… you are behind.

Gather auto, house, and umbrella policies. Medical and disability plans. Employee benefits. Wills. Trusts. POAs. Life policies. Bank and investment accounts. Retirement and college plans. Business agreements. Mortgage and debt information. Paystubs. Tax returns. Cash flows.

We summarize all this on a simple, efficient, ONE page financial model.  Planning is a lifelong process. We can help increase your overall wealth and income, while we reduce the many forms of risk. With no sacrifice in lifestyle.

Happy New Year! Time to get a Better Plan. Email me at cort@financialarch.com or call (248) 482-3606.

• “U.S. consumer prices continued to rise • at a moderate pace in December 2009 from the previous month, indicating that a soft economic recovery is keeping inflation contained.”

• “The most severe recession in decades • has led the jobless rate to rise to double digits.  In December, unemployment remained unchanged at a lofty 10% as employers cut more jobs than expected.”

• “The U.S. central bank has spelled out • that as long as core inflation and inflation expectations remain low and unemployment stays high, the fed funds rate won’t be raised from a record low.”

With all the spending involvement we have seen from Washington D.C., there arises the frequent question: ‘Aren’t we going to have massive inflation with all this money they are printing?’ We could agree that maybe this is a potential risk, although not an imminent one. Let’s first look at the definition of inflation.

in·fla·tion
A persistent increase in the level of consumer prices or a persistent decline in the purchasing
power of money, caused by an increase in available currency and credit beyond the proportion
of available goods and services. This means we need to be in a period of economic expansion combined with/caused by the massive availability of money. This contrasts with the opposite situation:

de·fla·tion
A fall in the general price level or a contraction
of credit and available money.
Where do we sit now? We would argue that we are still in a period of deleveraging and deflation.
Even though the economy has stopped declining and collapsing, there are still many deflationary forces that can cause prices to decline and thereby keep inflation at bay for some time. Some examples:

• Foreclosures wave that is still coming

• Likely 2010 termination of the Government spending that has been supporting this economy so far

• The sustaining of artificially low interest rates by the Fed illustrates that they aren’t inflation driven yet

• Falling commercial real estate prices

The Fed
The Fed knows that they need to keep short term interest rates low for some time because if they raise them too soon, they run the risk of stalling the economy and forcing us into the dreaded “double dip recession”. Being that 2010 is an election year, this would be political suicide.

Banks
Also, as most have assumed, we will eventually find ourselves in an environment of higher long term interest rates on mortgages. From this standpoint, the real estate market will be a very telling sign of whether deflation is at work or not. Ever wonder why the banks are not negotiating with homeowners about restructuring their debt and adjusting the mortgages down to current appraisal levels? If you were a bank, would you want to lock in low rates on what are perceived as risky assets with billions and billions of dollars? The banks have realized that they don’t know what to do with all the foreclosures and therefore are letting houses go to auction for cents on the dollar rather than working with homeowners. This process is going to take a while to work through and government intervention
is only going to extend the recovery time. And it is deflationary.

So, while we may worry about inflation at some point; this is not the immediate problem.
Therefore, to plan for inflation with a large portion of investment assets at this point would increase, not reduce risk.
Give us a call at (248) 482-3600 or send an email if you, or someone you know, needs to review their portfolios.

3 Main Reasons to consider converting:

1. You have money available outside of your IRA accounts to pay 1. the taxes in 2011 and 2012,
2. You will allow the ROTH-IRA conversion to compound for a minimum of 10 years,
3. You are experiencing a 1-3 year period of unusually low earned 3. income.

3 Main Reasons you should not convert:

1. You are certain that you have a lower taxable income (including 1. income from taxable IRA /401(k) accounts) in your non working retirement years,
2. You are expecting an increase in your taxable wages, due to 2. bonus, inheritance, etc,
3. If you have not considered the taxable impact a ROTH-Conversion has on your overall retirement distribution strategy.

Great News: The IRS, under current ROTH-Conversion rules, allows anyone who elects a ROTH-Conversion in 2010 to recharacterize the conversion back to a Traditional IRA by October 15, 2011.

Best Strategy: Call us at (248) 482-3600 and we will provide you with a detailed analysis using all of our resources available to help you make an informed decision. This is also a great opportunity to review the investment strategies in your short and long term accounts.

The opposite of this type of gift leaves most of us saying “If I had only known….”  For the vast majority of our planning clients, personal tax is the single largest annual transfer of money we experience.  When you look at Federal, State, Sales, Gas, Social Security, Property, etc we would find that taxes take most of our money.  Generally speaking, do you think that is true for you?  Intuitively speaking, do you think this is going to get better or worse in the future?

According to a Gallup Poll published Aug. 21, 2009, the vast majority of Americans expect taxes to go up in the next four years. In his July 21, 2009 column in the Washington Post, George Will wrote “…approximately 60 percent of taxpayers now pay either no income tax (43 percent) or less than 5 percent of their income.”  Simple math tells us that the lion’s share of taxes comes from you, the 40% who pay.

The real focus of our planning is to help you develop a strategy that delivers more long-term net worth than you would have achieved without our help. The ultimate purpose of that long-term net worth will be the production of income during retirement. How we carefully design your strategy to achieve that goal must anticipate the possibility and probability of higher taxes in the future. President Obama has promised that taxes will increase for the top income earners.  This is going to happen if for no other reason than someone must pay for all of the money the government is spending!

To achieve this we need to work together to break free from the “you should always do “ABC” and never do “XYZ” crowd.  We can help.  That is what we do. Questions or comments are encouraged.

Enter the ROTH IRA.Generally speaking no deductions in the year of contribution but the withdrawals come out tax free. So our clients with large incomes and good saving habits would naturally love the Roth. But. If you have an adjusted gross income (AGI) in 2009 over $176,000 you cannot have a Roth. If you want to convert a traditional IRA to a Roth, you cannot do this if your AGI exceeds $100,000!  So the very people that really need one can’t get one.  By default those that do not necessarily need one can get one. Logical? Heck no! The government set the rules.

Enter new rules for 2010. The income rules for converting existing traditional IRA’s to a Roth IRA are being changed in a drastic manor. The $100,000 AGI limit is being removed.

Be prepared!
This is where it gets tricky.  Just because “you can” does it necessarily mean “you should?” No! We will be able to help you and your friends work through the short and long term complexity related to this issue. Be prepared for an onslaught on advertising and marketing hype by mutual funds, banks and insurance companies. They will lead everyone to believe that this is good news.  And the government? It could be a windfall for them. Why? Taxes will be due on the converted amounts.

Call us!
Give us a call. We will look at this from a macro perspective.  There is a right answer for everyone. Please do not listen to the hype from the financial community and assume any sense of direction. Let’s get together and see what you should do. Let’s find your right answer. Stay tuned for more on this in future TIMELINES. We will also be posting new information on our Web Site www.financialarch.com

• Have I reviewed my auto, home, business, and other casualty coverages this year?
• Do I have the liability protection I need and want? Do my deductibles make sense?
• What is my “income plan” if I get sick and can’t work?
• Are my will and trust current? Is my trust funded? (It probably isn’t if you don’t understand the question)
• Have I reviewed my Life Insurance desires and wants lately?
• Have I looked at my Bank Accounts and Money Markets to gain the best rates?
• Do I have Savings Bonds which need a review and organization?
• Am I taking advantage of Tax Free and Tax Deferred Savings and Investment plans?
• Do I have some guarantees in my Strategy? Important today with all of the uncertainties out there!
• Have I reviewed how Income Taxes could impact my retirement?
• Do I use a process to preserve assets in this unpredictable market?
• Have I reviewed my mortgage this year?
• Do I have a Budget? Is my debt under control?
• Is my plan organized for my family in the event I can’t make decisions?

If any of the questions ring true for you it’s probably time to get together and review.  Perhaps someone else came to mind that you feel could benefit from a review.  Have them contact me as well.  Email me at cort@financialarch.com or call (248) 482-3606.

Surveys say approximately 70% of people over age 65 in this country will require some form of LTC.  Though many believe Medicare will pay for the majority of their LTC services, it does not; in fact, it will only pay for short-term medical care after a hospitalization.

What are the chances of your home burning down or your car being totaled? While these areas can be tragic, the odds of an occurrence are small compared to the risk of some sort of nursing care or assisted living when we are older. The average cost of a private room in a nursing facility is moving over $70,000/ year…some areas more, some less.  But still, expensive.

Some folks have enough wealth where they can self-insure this risk. But if that’s not you call us for further information about this offering.

If you would like to explore this, email me at jim@financialarch.com or give me a call at 248-482-3612 and we can discuss your options.

Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” Bernanke said in testimony to lawmakers today. “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.” Said Bernanke
(As reported by Bloomberg on June 3 (Bloomberg)
So, we either need to raise taxes or count on professional politicians in both parties to stop being who they are — big spenders of money they don’t have.  The only debate seems to be whether or not they spend money on things we favor or oppose. But what they appear to do best is spend their way into the next election cycle.

Raise taxes or cut spending? Hmm. Taxes up or spending down? What is your guess? Think about these statements:

1. Your money will never be worth more than it is today.  And…
2. Your taxes will never be lower than they are today.

You’ll hear many experts and economists talk in terms of the inflation dangers related to the huge infusion of dollars into the economy over the past nine months.  Think about it:  one day a certain chunk of money doesn’t exist and the next day it’s there!  One day notta and the next day a trillion dollars.  Hmm?  Will politicians who only exist to get re-elected be inclined to stop spending? And what if the next group says, “instead of a trillion in deficit spending we will CUT deficit spending to $800 Billion” and then take credit for saving $200b.  They neglect to mention they still spend $800b more than we have!
Or will they simply find a way to raise taxes in order to pay for past mistakes of another administration?

Inflation: How would rising inflation make your future mortgage payments feel compared to today? Lower!  Are you trying to pay your house off fast?

Tax Question: If taxes went up in the future, how would that affect your decision today to delay and defer taxes in an IRA or 401-(k)?  Could you be delaying into a higher tax bracket environment?

Everything we do for our clients at Financial Architects, Inc. is structured and intended to ultimately increase their net worth, while reducing their overall risk. The mission is to do this without any real sacrifice in lifestyle.

We all know people who have lost their jobs or are losing hope for their future.  We can help!  Ask your friends to give us a call.

These could be questions you are asking, and they certainly are issues we are dealing with.  The big question is:  Where do we go for information?  Here are some choices we have, even for those of us in the industry:

• The news media – their priorities don’t line up with ours, they are primarily interested in ratings
• Authors – Remember:  it is BEST SELLING AUTHOR, not best advice!
• Industry magazines – much of this information is “industry speak” which is almost always in the rear-view mirror
• Mutual Fund managers – these are very bright people, but asking a stock mutual fund manager if it is a good time to buy stocks is like asking a commissioned real estate agent:  “Is this a good time to buy real estate?”.  If they are honest, they will do their best to make the case, but it wouldn’t be wise to rely too much on that perspective right now.
• Friends and Family – this isn’t automatically a bad source of information, just make sure to understand how they get their information.
• Other sources – newsletters, forecasters, economists, etc.

It is important to keep in mind and notice the context from which each source generates their information.  A stock mutual manager by nature always looks for stocks to buy…even if the market is headed for a huge downturn.  Authors want to sell books.  Bond traders always like bonds.  We don’t ignore information just because it comes from a certain source, but it does take a bit more research.

We are ASSET managers, not stock portfolio managers.  If the stock market is to be part of the equation in creating value over the short to mid term, then we will have some money there.   As asset managers we provide a screen/filter between the overwhelming stream of information coming at us daily and the small amount of information that is actually useful in decision making.  Right now, the key is to find some other areas where money can be made in investment portfolios even if the stock market does not recover to any great extent for a while.  There are many areas of opportunity to create earnings for the portfolios outside the stock market.

Managing portfolios requires seeing what opportunities appear during times of disruption, then taking advantage of them while at the same time working to reduce overall risk.  If you or someone you know would like an overall review of your portfolio assets, please contact Chris Cousins at 248-482-3616.