A Great Recipe ForTurning Lemons into Lemonade

Posted on August 11, 2011 by bluelinecpcu

By Nancy Coveleskie

We’ve all heard this saying before, haven’t we?  How do you apply in your everyday life?

I’ve been working on a project the last few days and have asked some friends and acquaintances for assistance.  I surveyed everyone via email on the following:

 The #1 biggest concern I have right now about making my financial goals a reality is (please pick the most important one):

  1. Being able to retire without the fear of running out of money
  2. Knowing what to look for in a financial expert?
  3. The state of the economy and knowing where my money is safe
  4. Having losses that I can’t recoup

What are your other concerns about money? 

As I sifted through the responses to the second question, people were rightly concerned about having losses they can’t recoup, but also confused about what to do with their retirement accounts.  It occurred to me that many people may not know how to turn an apparent loss (losing value in their retirement accounts) into a potential opportunity.

One of my favorite ways of creating tax-free income in the future is to use a Roth Conversion from existing qualified assets.  For many officers, this could be an IRA account of yours or your spouse.  If your spouse has a retirement plan at work, he or she may have “in service distributions” that could qualify.   In addition if you are already retired, your Deferred Comp, if properly structured, may be converted in quantities small enough to make the taxes manageable.  Since the value is most likely down after the market’s tumble, the amount you claim on taxes is also down.

Remember, the name of the game is to pay taxes while you still have deduction and to have tax-free income when you no longer have them, such as when the kids are grown and the house is paid off.

If you were in a 25% tax bracket, every dollar lost in value, when converted, just saved you 25 cents!  Is your account still down?  Yep.  Do you still have to pay taxes?  Yep.  Do you have to sell your positions in order to convert?  NO.   So now when the markets do come back, your growth will be on the tax-free side!  Always get competent tax advice prior to making changes to the tax status of your accounts.

How’s that for a good recipe?  Now that we have that problem solved, go sit on your deck with a cool glass of lemonade.

If you want help with how to take advantage of this idea, call our offices at 216-621-4440.

Filed under: Cashflow and budgeting, Money, Police retirement planning, Taxation of Retirement Benefits, Taxes | Tagged: , , , , , , , , , , | Leave a Comment »

Ignore a stray and it will go away!

Posted on June 16, 2011 by bluelinecpcu

By Nancy Coveleskie

Have you ever had a stray animal visit your house? As a little kid growing up in the country, everyone let their cats and dogs roam freely. As soon as a dog or cat would saunter toward our house, my sister and I were begging my parents to let us keep him.
What is the best way to keep a stray? Tend to its basic needs for food and water and bestow some attention on it, right? Isn’t that what we should do with anything we want to keep in our lives? Can we keep a car running longer by maintaining it? Can we keep our plants thriving by watering and weeding them? Will our carpeting last longer if we vacuum it on a regular basis? Can we nurture our children by telling them and showing them that we love them?

How about money? If we ignore it and disrespect it, will it go away? If things fail to thrive, deteriorate or simply go away when we don’t give them attention, why would money be any different?

When is the last time you dropped a penny at the checkout and didn’t bother to look for it because it was only a penny? If you do that, you are simply ignoring and disrespecting money, regardless of the amount. T. Harv Eker, author of The Secrets of the Millionaire Mind, gave me a great idea that I, in turn, taught to my kids. Whenever they find money on the ground, they pick it up, pretend to kiss it and declare (rather loudly) to the world “I am a money magnet!” A few days ago, my daughter used this technique and she was amazed that she kept picking up quarter after quarter…a dollar’s worth in all! She’s going from magnet to magnate, one coin at a time.

Do you ever throw money away on useless things that you know you don’t need, then justify your purchase by saying it was only 5 or 10 bucks? I used to be guilty of buying something, finding that it didn’t fit my needs, intending to return it, only to find it squirreled away somewhere without the receipt. Now I was stuck with it. Both are great ways of disrespecting money.

How much time do you devote to attending to your money each month? I don’t mean how much time to you spend paying bills, but truly setting intentions on how it will be spent or saved. Do you write out your intentions or goals? Do you plan for the money that is left? Have you taken time to transfer money from a 0% checking to a savings or money market account? Or is your money neglected and looking for somewhere to go where it is appreciated?

I challenge you to carve out a bit of time this month to plan for your money, not just leaving it to chance. Attend one of our upcoming breakfast workshop (see links to the left) and get started! And the next time you see a penny on the ground, see how many more strays you can attract!
Blue Line Financial Services at the Cleveland Police Credit Union has been guiding officers to a successful retirement for over 11 year. To learn how to capture your True Wealth and create tax-free income, call 216-621-4440.

Filed under: Cashflow and budgeting, Goal setting, Money | Tagged: , , , , , , , , , , , | Leave a Comment »

Things I’ll bet you DIDN’T know about DROP when you enrolled

Posted on February 17, 2011 by bluelinecpcu

By Nancy Coveleskie

Don’t get me wrong, I’m not about to bash DROP. It has been a financial Godsend to many of our officers, but there are a few things you need to know about how it works.

When you enroll in DROP and you are married, your spouse is your primary beneficiary. There is an additional form to complete in order to name a contingent beneficiary. A contingent beneficiary designation allows you to choose to whom the funds will go if your primary beneficiary pre-deceases you or in the event that you both die at the same time. Most people choose their children as the contingent beneficiaries.

Here’s where it gets dicey…there is only one spot on the form for a contingent beneficiary. What should you do if you have 2 or more people you would like to name? I had this dilemma, as I have two children. So, I called down to the Pension Board and was told that Ohio Revised Code 742.3711 allows for only one contingent beneficiary. I was told that in order to add beneficiaries I should name a will or trust as the contingent beneficiary.

WHAT? Didn’t they realize that by doing so, it would create immediate taxation of all of the funds? Think about it, if you have $500,000 in income in one year, you would be at the top marginal tax bracket. This is currently 35% and is slated to go up to 39% in 2013. In addition, this has the potential to trigger Alternative Minimum Tax, which is even higher!!

Is there a work-around? Yes, fortunately, but it isn’t exactly easy. In 2007, the IRS allowed trusts to accept qualified funds and let them remain so, not triggering immediate taxation. However, the trust wording has to reflect this change.

Do you have a trust? How old is it? Does it have the proper wording? Are you inadvertently taking choice and control from your beneficiaries and giving it to the IRS?

Give us a call at the Cleveland Police Credit Union and let us help you get the retirement you think you and your family deserve. We believe in giving officers choice and control over their financial matters, and setting up a complimentary meeting is a step in the right direction. We have been helping police officers for 11 years. Nobody knows retirement planning for police officers like Blue Line. Nobody.
Blue Line Financial Services, Inc.

A wholly owned subsidiary of the Cleveland Police Credit Union
2301 Payne Avenue
Cleveland OH 44114
216-621-4440

Filed under: DROP Planning, Money, Police retirement planning, Taxation of Retirement Benefits, Taxes | Tagged: , , , , , , , , | Leave a Comment »

How Far Could You Drive Without Looking at Your Dashboard?

Posted on January 23, 2011 by bluelinecpcu

By Nancy Coveleskie
I remember when I was first learning to drive like it was yesterday. The only car available to me was a stick shift, Although I mastered letting up on the clutch while simultaneously pressing on the gas, I wasn’t very good at determining when I should shift into the next gear. My mom taught me how to watch the tachometer, waiting to hit a certain RPM until I shifted to the next gear.

Few of today’s automatic transmission cars have the need for the tachometer on the dashboard, but they do have many important components such as gauges, oil gauges, trip odometers, check engine lights, compasses and clocks. Some are nice, but some are crucial. Could you imagine taking a trip cross country without knowing how fast you were going, if you had enough fuel to make it to the next gas station or without knowing that your car was one degree from overheating?

When you think of your goals for your financial future as a cross country trip in your car, you need to know your destination, but you also want to have some way of measuring your progress. T hat’s where your financial dashboard comes into play. Following a paper trail of statements every month is like keeping track of your mileage and gas purchases because your gas gauge isn’t working. It’s not efficient, and doesn’t contain up-to-date information. If it is that difficult to manage your short-term budgeting – a mere day trip, how can you hope to go cross country?

Well, Cleveland Police Credit Union members now have a FREE Financial Dashboard for their everyday budgeting needs. Money Desktop puts all of the pieces of your financial puzzle in one place. It will allow you to input information on your accounts from other institutions so you truly have ONE dashboard for your month to month savings, checking, bill pay, credit cards and more.

Some of the features now available include:
• See where your money really goes
• Monitor your credit
• Manage debt like you mean it
• Protect your identity
• Get cash-back shopping
• Make a budget that works

Log into your existing account at http://www.clevepolicecu.com and click on Money Desktop. Many new features are being added over the next few weeks, so keep logging in. Questions? Regina Kelly at 216-861-3535 will be happy to help out.

To learn how to plan your road trip to retirement, call me at 216-325-1358.

Cleveland Police Credit Union  ~  2301 Payne Avenue  ~  Cleveland OH  44114

http://www.ClevePoliceCU.com

 

Filed under: Cashflow and budgeting, Goal setting, Money | Tagged: , , , , , , , | Leave a Comment »

Fashion, cars and money – what do they have in common?

Posted on October 27, 2010 by bluelinecpcu

Hemlines go up, hemlines go down, lapels and ties widen and narrow yet again. Even car styles make a comeback. Many new cars on the road today have the lines of cars from the 40’s. You can even buy a brand new muscle car that looks like it rolled off the showroom floor 40 years ago.

We Americans are definitely a nostalgic lot. However, this is the first time in my years that I’ve seen people go back to some of the old financial instruments of our parent’s years. No, not the mattress. Although these days it pays about the same interest as a passbook savings, but without the fees. What I mean is that people are tired of get-rich-quick, followed by the 10 years teeter-tottering, followed by waiting for the next get-rich-quick so they can make up for lost time. For generations, slow and steady won the race and it looks like people are turning back to that concept.

One area in which I see a resurgence of interest is in life insurance. Nearly everyone over 45 that walks through our doors owns or used to own a small whole life insurance policy. They are usually for $5,000 or more in death benefit. People are often confused about them, but since they don’t pay premiums anymore, they simply sit in the file drawer at home. Did you know that many of these policies still pay dividends, which add to the death benefit? Did you know that many older policies have cash values that grow at 4% or more per year?

Many Americans still think of life insurance as a necessary evil…buy it as cheaply as possible and hope they don’t use it. There are many living benefits to life insurance that got stripped away with the latest generation of term policies, which is a shame. Now more than ever, we need safe places to put money where it can actually exceed the inflation rate and be excluded from taxation. Life insurance fits the bill perfectly.

There are also some unique ways to use whole life policies to transfer assets to the next generation on a tax free basis. Say that mom or dad are getting on in years and intend to leave their money to their kids, but want to have access to it, “just in case”. They could put the money in a whole life policy, have access through loans, have the money grow for them, but when they die a multiple of their original deposit will transfer directly to heirs. Another advantage? Life insurance proceeds are tax-free to the recipient.

How is insurance used for younger individuals? One exciting use is to mirror a Roth IRA, but with the distinct advantages of no maximum contribution limits, no pre-age 59-1/2 penalties and access to loans that can be paid back on your terms. You can be your own bank! Newer policies will give you even more growth potential, without being in the market, by using indexing methods to determine the growth.

If you don’t have life insurance as part of your overall financial picture, you’ve got to get with the times.

To learn about these and other strategies, call Blue Line Financial Services, a wholly owned subsidiary of The Cleveland Police Credit Union at 216-621-4440. You do not need to be a member.

Filed under: Money, Police retirement planning | Tagged: , , | Leave a Comment »

If you think that retirement simply means rolling your DROP and Deferred Comp, think again.

Posted on September 15, 2010 by bluelinecpcu

Being married to a firefighter has its advantages. (Okay, you can stop laughing now) One of the biggest is in knowing first-hand how much attention police and firefighters get when it is nearing the time to retire. We could have a steak dinner every night of the week, courtesy of all of the retirement seminars being offered.

What is the catch? Why are all of these financial companies surfacing now? The answer is quite simple: DROP and Deferred Compensation rollovers.

There is so much more to think of when an officer is retiring that we tend to think of the rollover part as the easy part. If you roll your accounts into an IRA, then you postpone taxation. Eliminate taxation? NO, postpone it. But what about your pension option – do you know which one is best for you? How about which one is best for your spouse? Do you know how pension maximization works? Did you know that a properly executed pension max plan could possibly save you hundreds of dollars per month off the cost of a survivor benefit? Did you know that it could save your spouse thousands of dollars in taxes in the future? Did you know that it gives you greater flexibility in the future?

If all you heard about was how to roll and invest your DROP and Deferred Comp, then you may have missed that part.
While everyone is concentrating on the rollover, a bigger problem with Sick and Comp Time payouts is facing many officers. We can show you the tax effects of taking your payouts over several years and perhaps even using a Deferred Comp Catch-up. The goal is to level off your taxable income, avoiding spikes in the marginal tax bracket. Fred Bartin at the CPCU can help with these calculations.

We know both the questions you have and the questions you should have, and we have the answers. We have several seminars scheduled on a monthly basis through the end of the year. Visit the links to the left of our blog to enroll and for details. We are always happy to meet individually as well. We may be reached at the CPCU at 216-621-4440.
Blue Line is a wholly owned subsidiary of the Cleveland Police Credit Union. You do not need to be a CPCU member for our services.

Filed under: Cashflow and budgeting, DROP Planning, Money, Police retirement planning | Tagged: , , , , , , , , , , | Leave a Comment »

Despite all your preparations, it still happened – you’re lost!

Posted on April 22, 2010 by bluelinecpcu

Despite all your preparations, it still happened – you’re lost!

I love the GPS dashboard device that my wife bought me for Christmas a few years back that tells me where to go and when to turn! I still carry a real, actual, good old paper Rand McNally road map in my car, but my GPS gets me from point A to B without any headaches.

If only planning for our retirement could be so easy! Just select a destination and sit back while you listen to the little woman inside your GPS tell you where to go. But wait, what about that gravel road and then dirt trail that suddenly ends? Do we dutifully followed the GPS directions while the navigation system re-plots a new route based on coordinates that are now miles from the intended destination? Yikes! Even the best navigation system in the world makes mistakes.

Can you feel my sense of bewilderment? I did everything I was supposed to do, and look at what happened? Can you imagine when the destination is your retirement instead of a road trip? Could you imagine doing everything you were supposed to do, but not ending up where you were told you would be? Many Americans are feeling that frustration these days.

It would be nice to know in which direction to head, to know if there is a detour ahead, and to have a Plan B in case your original plan…The Plan…can’t get you to your destination. In fact, the right plan could let you know to call ahead and let everyone know that you’ll be late.

There are typically three categories of future retirees:
• People who don’t have a plan, and perhaps don’t want one
• People who are still using yesterday’s ideas and concepts
• People who will get to where they want to be by knowing where the roadblocks are and allowing their GPS to reset and guide them to their destination.

Is your roadmap obsolete or GPS re-plotting your route? How will you prepare for the future and what will you tell your children and grandchildren? Stay alert and watchful so you can adjust your destination, if needed, and avoid the roadblocks that will inevitably pop up along the way. Unfortunately, a GPS or a college degree won’t guarantee you a smooth trip or happy ending. In your journey through life, a little humor, a lot of common sense and practical honest advice will help!

Filed under: Goal setting, Money, Police retirement planning, Uncategorized | Tagged: , , , , , , | Leave a Comment »

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