The Senior Financial Strategies Workshop

1. Sponsored by: Personal Financial Strategies, Inc. “Helping Seniors to Achieve Their Personal Financial Objectives” The Senior Financial Strategies Workshop

2. Reduce or eliminate taxes Increasing Current Income Protect life savings Transfer to loved ones The Biggest Concerns of Our Senior Clients

3. Les Goldstein, Certified Senior Advisor, Investment Advisor Representative, Financial Consultant, Sigma Financial Corporation, Member, NASD/SIPC Adjunct Faculty Member, Morton College 20 year professional in investments, insurance, financial and estate planning Practice dedicated solely to serving the needs of people who are 55+ Lifelong Chicago-area resident Member; Senior Benefit Centers Network Financial Planning Association, Who Are We?

4. Richard J. Heuberger, Associate, Personal Financial Strategies, Inc. Financial Consultant, Sigma Financial Corporation, Member, NASD/SIPC Over 20 years of experience in consumer businesses in the Chicago area. Knowledgeable in tax reduction strategies, investing for income, asset protection and college planning for grandchildren. Who Are We?

5. Perry S. Dlugie, Associate Personal Financial Strategies, Inc. Financial Consultant, Sigma Financial Corporation, Member, NASD/SIPC In the Financial Services industry since 1993 Knowledgeable in asset protection and estate planning Who Are We?

6. Better Business Bureau:1-312-832-0500 State of IL Insurance Dept.:1-217-782-6366 Society of Certified Senior Advisors:1-800-653-1785 orwww.certifiedsenioradvisor.com Be Careful! Check Us Out!

7. Focus on senior issues only! Financial, Estate & Tax Planning Social Security Medicare & Medicaid Social aspects and trends of aging Health, Nutrition & Fitness Chronic Illness Long-term care Senior Spirituality What is a Certified Senior Advisor?

8. Competence Confidentiality Professionalism Fairness Integrity Diligence Certified Senior Advisor Code of Ethics

9. Committed to the issues that are important to you. Up-to-date on YOUR issues. Highest standards of professionalism and ethics. Why You Should Work with a Certified Senior Advisor

10. Why are We Here Today • Teach you how to: • Reduce or eliminate taxes. • Increase current income. • Protect your life savings from Nursing homes and Medicaid Spend-down. • Transfer your assets to loved ones.

11. Taxes - Alligator #1 • Social Security Tax • Capital Gains Tax • Interest Income Tax • Estate Transfer Tax(aka The ___ Tax)

12. The History of Social Security • 1935 - FDR introduces Social Security System • 1935 - Retirement Insurance • 1939 - Survivors Insurance • 1956 - Disability Insurance • 1965 - Medicare • 1972 - Supplemental Security Income

13. The Problem with Social Security Income • The more you earn, the greater the tax on your social security benefits.

14. One Goal: Help You to Eliminate Tax on Social Security • Single: $25,000 • Married: $32,000 • 50% of s.s. is taxable • Single: $34,000 • Married: $44,000 • 85% of s.s. is taxable Income includes nontaxable interest and ½ of S.S. benefits

15. Taxable Interest Income to Non-Taxable or Tax-Deferred Earnings EE Bonds Tax Deferred Guaranteed Fixed Annuities* * Guarantees are based on the claims-paying ability of the issuing insurance company Solution: Reduce Taxable Income

16. CD income is taxable even if it is reinvested! Mutual Funds too! Common Stocks also! The Greater the Income, the Greater the Income _____ !! Why Pay Tax on $’s You Don’t Need?

17. Convert Taxable Income to Tax Free or Tax Deferred! • Reduce your taxable income. • Reduce your tax liability • Reduce or eliminate taxes on social security • See the 1999 and 2000 tax returns in Folder

18. How Do We Reduce or Eliminate This Tax?? Capital Gains Tax

19. Defer capital gains taxes on investment real estate (NOT your primary residence). Net Result: Save $$$$$’s, no more management headaches; generate current income Possibly own a better property than you sold!! How to Sell Appreciated Real Estate

20. Invest like Fortune 500 Companies $ for $ tax savings Tax credits are issued by and guaranteed by the IRS.* * IRC/TEFRA 1986, Sec. 42. Fed. Income Taxes Lowered by up to $7000 Per Year?

21. Lower Federal Income Taxes. Make Required Minimum Distributions tax free. Preserve and protect your initial investment. Growth potential. Diversification. Benefits of an Investment in Tax Credit Real Estate

22. Getting Rid of the Tax Alligator • Better Choices than CD’s: • Tax Free Muni Bonds • Tax Deferred Guaranteed Annuities* • Tax Credit Real Estate • Investment-quality Real Estate • * Based upon the claims-paying ability of the underlying insurance company.

23. A Big Tax Alligator E Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 Estate Tax Exemption $1 million $1 million $1 million $1.5 million $2 million $2 million $2 million $3.5 million repealed Highest Estate Tax Rate 50% 49% 48% 47% 46% 45% 45% 45% N/A

24. Avoid unnecessary taxes Providing for your spouse Providing for your children, grandchildren and charity Keeping your “affairs in order” The Estate Planning Alligator

25. Simple trust planning can save $1,000’s in unnecessary taxes IRA and other retirement plan assets can be subject to total taxes of up to 70% after the death of the second spouse The Estate Tax Alligator Trap

26. “…heirs could lose up to 78% of IRA’s to estate and income taxes…” * Excellent for seniors who do not need IRA $’s to live on. Maintain control. Only certain companies are in compliance. * Business Week, April 9, 2001 Str-e-e-e-e-etch Your IRA

27. 72 year old husband, 69 year old wife Her IRA is $215,000 Assume 6% annual growth Kids and grandkids from age 37 to 1 Goal is to leave $’s to kids and grandkids after both spouses are deceased Example: The Stretch IRA

28. Both: Maintain Control of Account Both: Can Spend Down the IRA to Maintain Lifestyle Upon Death of Second Spouse, Current IRA will distribute $247,921to Beneficiaries Upon Death of Second Spouse, Stretch IRA will generate distributions of $------- to Beneficiaries!! Current IRA Vs. Stretch IRA

29. A 65-year-old has a 43% chance of entering a nursing home at some point in his or her lifetime,… * …family members and friends are the sole caregivers for 70* of elderly people.” ** 1 in 1200 use fire insurance. 1 in 248 use car insurance. 1 in 2 will need LTHC insurance. *** * American Association of Homes and Services for the Aging. ** Health Insurance Association of America, 1999. *** The Road To Wealth, 2001 by Suze Orman. Alligator #2: Long-Term Illness

30. Medicare: short term only. The average Medicare stay is only 23 days. Medicare spending down 45% in 3 years. 95% or more of long-term care needs are for custodial care, not covered by Medicare ever. * South Florida Business Journal, May 29, 2000 Long-Term Illness*

31. Medicaid: care in a Medicaid-Qualified nursing home only! No one wants to be in a nursing home! Long-Term Illness

32. Nursing Home: $168 per day! Home Care: $144 for an 8-hour shift! 1 person in 11 stays in a nursing home more than 5 years. 25% of informal family care giving is for more than 5 years. * MetLife Survey on Nursing Home Costs and Home Care Costs, 2002 What Does Care Cost?*

33. 5 Solutions: “Self Insure” Long Term Care Insurance Reverse Mortgage MoneyGuard Medicaid Planning Goal: Eliminate the Catastrophic Illness Alligator

34. Cost is based upon age, health, waiting period, benefit period and daily $ benefit. Do not delay! Poor health can cause disqualification GE illustration for female in average health, 2002. 4 years of benefits $120 per day 5% annual benefit increase 100 day wait period 60: $1572 per year 65: $2232 per year 70: $3480 per year 75: $5484 per year What Does Long Term Care Insurance Cost?*

35. “… 1 in 2 people who have LTC insurance will use it, …” * “I don’t care how high your premium will be, the total cost of your long-term care policy is going to be less than the cost of one year in a nursing home.” ** * The Road To Wealth, Suze Orman, 2002, pg. 210 ** The Road to Wealth, Suze Orman, 2002, pg. 213 What Do the Experts Say?

36. SO, WHAT IF YOU DON’T HAVE OR QUALIFY FOR LTC INSURANCE OR FIND THE PREMIUMS TO BE TOO EXPENSIVE?

37. Avoid Medicaid Spend Down!! Irrevocable Trust (5 year look back) Medicaid Qualified Guaranteed Annuities are legally protected from Medicaid spend-down rules * Guarantees are based on the claims-paying ability of the issuing insurance company. Medicaid Planning

38. Medicaid Spend Down

39. Do Not Spend - Down Your Assets Utilizing the provisions of the law (Title 42, code 1396(p)), you can convert countable assets to unavailable assets through properly structured annuities. Please consult a tax advisor for further tax information.

40. Assets Income Exempt Countable Unavailable The Medicaid Test

41. Cash $2000-single$90,660-married House One Car One Term Insurance Unlimited Whole Life $1500 Burial Fund $1500 Spousal Impoverishment Standards, January 1, 2003, Illinois Department of Human Services Exempt Assets*

42. Countable Assets • Everything Else!! • Savings • Investments • IRA’s • Deferred Annuities • Government Bonds

43. Community Spouse Maintenance Needs Standard is $2267 $30 The nursing home keeps the rest, unless…! * Illinois Dept. of Human Services, Bureau of Provider Assistance & Correspondence. 1-800-252-8635 The Income Test*

44. How Can We Protect Our Life Savings? • Convert Countable Assets to Unavailable Assets!

45. Applicants IRA Spouse’s IRA Spouse’s Pension Deferred Annuity Properly Annuitized Properly Annuitized Properly Annuitized Properly Annuitized Unavailable Assets

46. CAUTION!! Only an annuity with very specific characteristics can qualify. “Clients are often distressed to learn that the annuity they purchased, one of the features which they were told by the annuity salesperson would be to protect assets from nursing home costs, in fact, does not.” SOURCE: MEDICAL EDUCATION SERVICES, INC. PROFESSIONAL DEVELOPMENT NETWORK . JUNE 1999

47. The 4 Evils of Probate: Cost Time Public Record Contestability Alligator #3: Probate

48. Proper asset titling (beware of adding children onto accounts!!) Revocable Living Trusts How to Slay Alligator #3: Probate

49. Fact: Stocks, Bonds and Mutual Funds only increase in value. Fact: There is no risk or speculation on Wall Street. Fact: As a retired senior citizen, I can just go and earn any $’s that I lose. Fact: Elephants can ski. Alligator #4: Wall Street

50. Will Rogers Once Said ... “When it comes to investing money, I am much more interested in of my money than the return on my money.”