Happy Holidays and Best Wishes in the New Year

December 27th, 2010 by Charles Mayfield, CFP®


All of us at Chappell, Mayfield & Associates are especially thankful for the opportunity to serve our clients.  2010 has been an amazing year full of challenges, victories and many blessings.

In May, I married the most wonderful woman in the world, Julie.  Cass celebrated the 1st of many birthdays for his beautiful daughter Olivia.  Our blog, www.AtlantaPlanningGuys.com, helped us to gain national recognition in several major publications.  Cass & I were featured on a consumer advocacy television program here in Atlanta regarding retirement planning.  Our business grew thanks to our many loyal clients helping to spread the word about the work that we do for them.
For all of this and more, we wanted to say “Thank you.”  None of this would be possible without the trust and commitment of our clients.  We are so fortunate to have the opportunity to work with you all.  2011 will undoubtedly present us with a healthy mix of challenges and opportunities, and we are so thankful to be able to help steer you through them all.
From all of us at Chappell, Mayfield, we hope that you and your family have a save, happy and healthy New Year.  We look forward to continuing to dedicate ourselves to you in 2011 and beyond.

4 Easy Things You Can Do For Others, Before the End of the Year

December 13th, 2010 by Cass Chappell, CFP®

And get a Tax Deduction!

It really is better to give than receive.  But how cool is it to do BOTH!?!?!  Before January 1st gets here, you still have time to give to others AND receive a tax deduction.


Contribute $2000 to the Georgia 529 plan for your child’s education


There is no longer an income limit for parents, or grandparents, to receive a state income tax deduction for contributions up to $2000 per year.  At the 6% tax bracket here in Georgia, that amounts to $120 in state income tax savings.  Note: The contribution must be to the Georgia 529 plan in order to receive a Georgia state income tax deduction.  This tip only applies to Georgia residents.


Donate clothes or other items to charity


Goodwill has locations all over town and they always make it easy to drop off your unwanted clothing.  Make sure you get a receipt from them.  You will need it for your taxes.  There are also services that will come pick the clothing up from your home.


Accelerate future charitable cash contributions to this year 


If you are considering making a cash donation to a charity in the future, consider doing it this year.  You receive the tax deduction in the year that the contribution is made.


Add a little extra to your shopping cart at the grocery store


Many area Publix and Kroger stores make it very easy to give food to the needy.  At the check-out line they will either have pre-packaged meals for the holidays that they will distribute for you or pledge cards of varying denominations that can be added to your bill.  They will take care of the rest!  Be sure to keep your grocery receipt as the dollar amount of your gift is tax deductible.

Got Employer Stock?

November 29th, 2010 by Cass Chappell, CFP®

How to take advantage of Net Unrealized Appreciation (NUA) in a 401(k)

Employer stock inside a 401(k), or other tax-deferred employer sponsored retirement plan, is quite common for employees of large publicly held corporations.  Unfortunately, another common trend among several American corporations in the last several years has been significant layoffs. But before former employers attempt to roll those shares over, they should consider the tax implications specific to these investments.

There is a special tax rule that may benefit any (former) employee who finds themselves holding company stock.  The term is Net Unrealized Appreciation (NUA).  NUA allows for a lump sum distribution of employer stock to be taxed as income to the extent of its cost basis, or it’s purchase price.  The difference between the cost basis and the current market value is known as the capital gains, which are taxed at the ordinary income tax rate.

This screams for an example:

  • Mary has $500,000 in company stock in her 401(k)
  • Mary only paid $200,000 for this stock throughout the years
  • She takes a lump sum distribution-in-kind of this stock from the retirement plan, moving the proceeds to a bank account, brokerage account or other non-tax deferred retirement account (more on this later)
  • $200,000 is taxable as ordinary income (her cost basis)
  • When she sells the stock the $300,000 of NUA would be taxed as a long term capital gain (15%).  Any gain from the date of distribution until the date of sale would be taxed as either short or long term capital gains (depending on whether it was shorter or longer than a year)

What does this mean?

Currently, the highest tax bracket for income is 35% and the highest tax bracket for long term capital gains is only 15%.  In the example above, Mary (if she was in the highest tax bracket) would pay 35% on the $200,000 cost basis but only 15% on the $300,000 of NUA. HOWEVER, if Mary rolled the proceeds over into another tax-deferred retirement account, such as a 401(k) or an IRA, the company stock’s NUA would eventually be taxed at her ordinary income level or 35%.

Who does this apply to?

Anyone who has separated from his/her company and has employer stock in their retirement plan. If a distribution of this type is made before 55 (or in some cases, 59) then a 10% penalty may apply.


Financial companies have been encouraging people to rollover their old 401(k)’s for years now.  BUT…If Mary rolls her old 401(k) over to an IRA, the opportunity to use the NUA rule is lost.  This must be a lump sum distribution-in-kind of all stock from an employer sponsored retirement plan.  If you have a 401(k) at a former employer, you should seek out a knowledgeable advisor before making any decision to move those funds.

The Fiduciary Standard – Peace of Mind for American Investors

November 17th, 2010 by Cass Chappell, CFP®

“We must hold ourselves strictly accountable. We must provide the people with a vision of the future.” – Barbara Jordan

One part of the recent Dodd-Frank Bill (a.k.a. Financial Regulation) required the SEC to conduct a 6 month study into the standards of care which broker-dealers and investment advisors apply to their customers, and report to Congress on the results in January of 2011.

After the findings are presented, the SEC is expected, but not required, to set rules to provide that “the standard of conduct for all broker-dealers and investment advisors, when providing personalized investment advice, shall be to act in the best interest of the customer without regard to the financial or other interest of the broker-dealer or advisor providing the advice.”

As I’ve stated before, this is a GREAT recommendation and one that will certainly only help to protect investors who are seeking financial and investment advice from professionals. Why should investors expect anything less than working with an advisor that has their best interests in mind?

As it stands now, registered investment advisors (RIAs) and advisors regulated by the Securities and Exchange Commission (SEC) are bound, by the Investment Advisers Act of 1940, to a fiduciary standard that boils down to a duty to disclose “all material facts” and “employ reasonable care to avoid misleading” clients.

Stock brokers and registered representatives (RR’s) are regulated by a separate entity, FINRA, and must conform to the Securities Act of 1933 and the Securities Exchange Act of 1934.  They are expected to make recommendations based on the “suitability” to the buyer.  This would include cost considerations and the buyer’s experience with the securities in question.

Let me be VERY clear.  Just because someone is an RR and not an RIA does not automatically make that advisor dishonest.  Likewise, being an RIA doesn’t guarantee that they are a saint.  Remember, Bernie Madoff was an RIA.  At the end of the day, each category has its share of good and bad professionals.  This potential extension of the fiduciary standard should be exciting for those of us who adhere ourselves to these higher standards, but scary for those who would rather not.

Many advisors (like Charles and I) actually have the ability to act either as  an RIA when we work for fees (fiduciary standard) or as a registered representative in the limited cases where we work for a commission (suitability standard).  We should be bound by the same standard of care in either case, right?  Of course we should!

Interestingly, most Americans are unaware that potentially applying the fiduciary standard to all financial professionals is part of the Financial Regulation bill, nor do they understand that all “financial planners,” “financial advisors,” “financial consultants,” “account executives,” etc, ARE NOT HELD TO THE SAME STANDARD.

But to their defense, why should they know that? When you seek help from a high level professionals, like a physician or a lawyer, shouldn’t you assume that you are receiving care based on your needs, not just having procedures done that will fill up the doctor’s quota?

It’s for this reason that all financial professionals should be held to the same standard.  If we are going to truly help people reach their retirement goals, live better lives and have less stress when it comes to their family’s financial futures, then we need to hold ourselves to the highest of standards. 

The consumer must confidently know that their advisor is supposed to be acting solely in their interest. Only then will we be able to create a level of trust synonymous with that of the family doctor, and not a salesman.

A Lesson You’ll Bond With—Part 3

November 8th, 2010 by Charles Mayfield, CFP®


“Bond Risks”

Bond Basics—Part 1: http://atlantaplanningguys.com/?p=1214
Bond Pricing—Part 2: http://atlantaplanningguys.com/?p=1229

Welcome or our final chapter of Bond Basics!  As investors, we tend to assign less risk and more safety to these types of investments.  While this is a true generalization, NO investment is without its risks. To wrap up this three part series, I’d like to discuss some of the risks that are associated with bonds and some ways to mitigate them.  There are two fundamental risks to bonds that I’d like you to be familiar with: Market Risk & Interest Rate Risk.

Market Risk:  Bonds are an investment, just like equities.  They have a price at which they can be bought and sold on any given day.  We have already discussed the price at which most bonds come to market, the “issue price.”  Once any bond has been purchased, the price at which you can turn around and sell it will fluctuate based on several factors.

  • Interest Rates: if interest rates rise, prices for existing bonds tend to fall.
  • Up/Down Grading a Bond’s quality:  A bond is rated based on the likelihood that the issuing agency or company will be able to pay back the debt in a timely manner. If the rating of your bond goes down, the price will likely follow.  This is sometimes referred to as “credit risk”.

People tend to purchase bonds with the assumption that they will hold them to maturity.  In this case, market risk is less of a concern.  Market risk becomes relevant if and when the bond holder decides to sell the debt and finds that its current value is less than original issue price.

Interest Rate Risk:  “I thought the interest was fixed on a bond?”  Yes, you are correct.  Most bonds have a fixed interest rate, the coupon.  When a bond matures the holder is paid back their initial investment.  Interest rate risk comes into play when the investor goes looking to replace the bond that has just matured.  If prevailing interest rates have dropped, the investor will be forced to invest more money to receive the same income.

Example: John’s ABC Bond matures and he is paid $1,000.  It was a 10-year note paying 8% semi-annually ($80/year in interest).  If prevailing interest rates for a brand new 10-year note are 6%, the investor would have to invest over $1,300 to get the same $80 payment.


Now that we have talked about several of the predominant risks associated with bond, let’s discuss a few ways to guard against them.

Proper Allocation:  If you have been following our blog for a while, you know that we typically recommend a client allocate between 25-40% toward Fixed Income. Investors tend to overweight their allocation to bonds as they age and this can further exacerbate these common risks. We typically recommend further diversification among different types of fixed income investments—Corporate, High Yield, Treasury and Municipal bonds).

Bond Laddering:  This technique involves buying bonds with varying maturities.  We already know that longer maturities tend to have higher coupons.  Focus on spreading your investments out across a broad spectrum of maturities.  This can alleviate the ugly side of interest rate risk when rates fluctuate.

In summary, having a basic understanding of how bonds work, on their own and as part of an overall investment plan, can go a long way to helping investors mitigate risk and maximize returns. While CERTIFIED FINANCIAL PLANNER™ practitioners exist to help set investors up for financial independence, we truly believe that knowledge is power.  Invest wisely.

Bottom line, talk to your investment advisor.  Bonds are a critical component to long term performance.  Be sure you have all the facts before you invest.

A Lesson You’ll Bond With- Part 2

November 1st, 2010 by Charles Mayfield, CFP®


“Bond Pricing”

As CERTIFIED FINANCIAL PLANNER™ professionals, our goal is not only to provide sound investment advice and services, but also to educate our clients, providing them will a full understanding of their portfolio, their risk level and the steps necessary to reach their retirement goals. Through AtlantaPlanningGuys.com, we are able to extend that information sharing beyond our client base, affording others the power that comes with basic knowledge and understanding.

In Part One of “A Lesson You’ll Bond With” we discussed the basic components of a bond and the various issuing sources for them.  This week we will focus on the nature of bonds, how they react and why they react the way that they do.  When evaluating your retirement plan, it is so vital to fully understand the role bonds play in your overall portfolio, and should play in any investor’s portfolio.

Let’s focus on two distinct areas:  Coupon Rates, Pricing.

Coupon Rate: The coupon rate is the annual interest rate that the bond issuer (borrower) promises to pay the bond holder (investor).  This interest rate is typically fixed for the life of the loan.  Coupon rates will vary depending on several factors. 

  • Credit worthiness:  Debt issued by the US Government is typically thought of as the ‘safest’ investment out there.  The government will always pay its obligations, even if it has to print the money to do it.  The safer the investment, the lower the interest rate (coupon) that is promised on that debt.  Across the spectrum of bond issuers, government debt will almost always pay the lowest rates in the market, as it has the lowest perceived risk of default.
  • Maturity:  The longer the debt is issued for, the higher the coupon will usually be.  In other words, a 10-year note may be paying a 4% coupon.  Debt issued by the same agency on a 5-year note will pay a lower coupon, say 2%.  There is a cost to the lender associated with tying money up for a longer period of time.
  • Tax Incentives:  Bonds issued by state and local governments, or any agency that receives exempt status from Federal taxes, will usually pay a slightly lower coupon.  If the interest the bond holder receives is tax free (at the Federal level), the effective interest rate can be slightly lower.

Pricing (the Market Price)Bonds come to market at Par Value (Corporate Bonds- $1,000; Municipal Bonds- $5,000 & Federal Bonds- $10,000).  The market price of a bond is the present value of all future principal and interest payments.  The Yield (or the return that you get on a bond) and price of a bond are inversely related.  From the moment the Bond hits the trading floor, its price can begin to fluctuate, though the coupon rate—your annual interest payment—will remain the same. When a bond’s price in the market drops, the yield goes up—an investor has the potential to get “more for their money.” Consider the equation: Yield = Coupon rate/Bond Price.

  • If you buy a bond at 1,000 with a 10% coupon ($100), your Yield is 10% – $100/$1000
  • If the bond price dropped to $900 before you bought it, your Yield would be over 11%, as you would still get $100 annually, but on a bond that you purchased for only $900 – $100/$900 = 11.11%
  • If the bond price rose to $1100 before you bought it, your Yield would drop to almost 9%, as you would still getting $100 annually, but on a bond that is now selling above it’s Par Value, you spent $1100 now to get the same $1000 at maturity – $100/$1100 = 9.09%

Bond prices will fluctuate based on two primary factors:

  • Prevailing Interest Rates:  Since we know interest rates are inversely related to bond prices, a newly issued debt will affect existing bonds if the interest rate is higher or lower.  A new 10-year bond issued at 8% interest will cause the price of another 10 year bond paying 7% to fall.  Conversely, if the new issue only pays 6%, the price for the existing bond that pays 8% will rise.
  • Credit Worthiness (although in a different way):  Rating agencies will assign a rating to most bonds; this rating is an interpretation of the bond’s risk.  Put another way, the rating is an attempt to categorize the risk involved and give a general idea of the likelihood that the issuer will be able to make the interest payments and pay back the proceeds at maturity.  This rating can change at various points in the bonds life depending on the financial stability of the issuing company or municipality.  All other factors being equal, a bond with a higher rating will most certainly fetch a higher price than a similar bond that has a lower rating.  The idea here being that an investor is willing to pay a ‘premium’ for the higher likelihood he or she will get their money back.


Bonds are subject to market and interest rate risk if sold prior to maturity.  Bond values will decline as interest rates rise and are subject to availability and change in price.  Interest income may be subject to the alternative minimum tax.  Municipal bonds are federally tax-free but other state and local taxes may apply.  The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.

A Lesson You’ll Bond With- Part 1

October 25th, 2010 by Charles Mayfield, CFP®


“Bond Basics”

Bonds are an integral part to any diversified portfolio.  They add needed diversification to balance the volatility of stocks.  In addition, the income they provide is a complement to the capital gains (and losses) of stocks.  Studies have shown that a diversified portfolio should have between 25 and 40% in bonds.

This three part series is going to get into the basics of a Bond and how it works.  Furthermore, I’d like to cover the factors relating to Bond performance and why they are so important to overall portfolio diversification.  In terms of personal finance and diversification, Bonds are often referred to as ‘fixed income’ instruments.  Another way to think of bonds are as ‘debt instruments’ because the issuer is actually taking a loan from the buyer. 

I want to stress that we are covering the basics here.

Face Value or Par Value:  This amount represents two figures.  The first the initial price at which a bond is issued.  In other words, what it sells for at its initial offering.  It also represents the amount the bond holder will be repaid when the bond matures.  I’ll address these different types of bonds in a later post.  However, for now, just know that Corporate Bonds have a Par Value of $1,000, Municipal Bonds are $5,000 and Federal Bonds are $10,000.

Maturity Date:  This one is pretty self explanatory.  All bonds have a stated maturity.  In other words, it’s when the issuer will repay the debt.  This is often referred to as the ‘term’ of the bond.  Maturity dates will vary with each bond and in some cases have no maturity date at all (Perpetual Bonds). Most bonds are issued with a term of up to 30 years.  When they are issued with a maturity of less than 12 months, they are generally considered money market instruments rather than bonds.  

Coupon:  This is the stated interest rate that the issuer promises to pay on the bond.  This term originated because early bonds were issued with coupons attached to them.  When the ‘coupon date’ (see below) came up, the bond holder would cut the coupon off and exchange it at a bank for the payment.

Coupon Date:  This term states the dates on which the issuer pays the bond holder.  Most bonds have a semi-annual coupon date.  So the holder of the bond receives two payments per year.

Bond Yield:  This represents what the bond is paying relative to the price at which you could sell it.  Since the interest rate on a bond is typically fixed, the bond holder’s yield will fluctuate as the price of the bond goes up or down.  Simply stated, to calculate the yield of a bond, divide the coupon amount by the price.  Here is a basic example of how yield can change:

You own a bond that pays you $100 per year and is worth $1,000.  The yield would be 10% ($100/$1,000).  Let’s assume for a moment that prevailing interest rates drop.  The price of your bond is now $1,100 (we’ll discuss why this happens in Part 2).  The yield is now 9.09% ($100/$1100).  You are being paid the same amount of money.  However, since your bond is worth more now, the yield is decreased.

Now that you know the basic language around a bond, let’s discuss the four main types.  A bond is generally classified by the primary assets underlying their issue.

Government Bonds / Treasury Bonds:  Often considered the safest form of bond, these bonds are back by the full faith and credit of the issuing government.

Agency or Mortgage Bonds:  These are typically secured by real property and issued or guaranteed by various government agencies.  Examples include Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

Municipal Bonds:  Issued by state and local governments and agencies that are subject to certain tax preferences.  The payments from these bonds are typically exempt from federal taxes.

Corporate Bonds:  Corporations issue bonds as a means to raise money.  They are backed by the credit (ability to pay back the debt) of the issuing company.  The coupon rate for corporate bonds is typically higher than that of government issues due to the added risk that the company may not be able to repay the note.

High Yield Bonds: As its name implies, a high-yield bond pays a higher rate of interest than other corporate bonds.  These bonds are issued by corporations whose credit rating is less than “investment grade”.  Along with the higher interest rate, you get a higher probability that the issuer will default and not be able to pay the promised interest and principal.

Bonds are subject to market and interest rate risk if sold prior to maturity.  Bond values will decline as interest rates rise and are subject to availability and change in price.  Interest income may be subject to the alternative minimum tax.  Municipal bonds are federally tax-free but other state and local taxes may apply.  The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.

Healthcare Reform – Good news for those with pre-existing conditions in Georgia

October 18th, 2010 by Cass Chappell, CFP®

Affordable Care Act gives an option to those for whom healthcare was previously unavailable.

**This post does not address issues for those with Medicaid**

In March of 2010, Congress passed, and President Obama signed, the Affordable Care Act.  This law created a new program, the Pre-Existing Condition Insurance Plan (PCIP), which makes individual health insurance available if you have been denied coverage from a private insurer due to a pre-existing condition.  

Historically, individual insurance was difficult to obtain in Georgia….unless you were perfectly healthy.  Results from a congressional investigation revealed that 1 in 7 applicants was denied health coverage by the four largest for-profit insurers in the U.S., based on pre-existing conditions.   Inexplicably, however, the plan is only available to those who have been uninsured for 6 months or more?!?!?!

Prior to the passage of this law, Georgia was only one of a handful of states that offered no high-risk pool for those able to pay for insurance, but unable to qualify based on a pre-existing condition and their ability to secure coverage through an employer.

“The ability to secure coverage through an employer” was the key factor for many…and something that was on the very top of my list of “Things I Would Change if I Were in Charge”.

When it comes to health insurance, people generally fall into two groups: those who can get group health insurance through their employer and those who can’t (for a variety of reasons).

Group health insurance offered at work – Group Health Insurance

If you were lucky enough to be a part of this group, then you were unlikely to EVER face any issues around securing health insurance.

  • NO pre-existing condition exclusions
  • GUARANTEED acceptance
  • Premium increases are capped

If you leave employment, coverage can be continued for a limited time via COBRA (for companies with more than 20 employees) or Georgia State Continuation (those with less than 20 employees). While each program works differently, in both systems an insured is able secure a “group conversion” policy once these programs run out.  In other words, if you are chronically ill (or even if you just have several health related issues) AND you have group health insurance through your employer, then you will always be able to have insurance – provided you pay the premiums.

No group insurance available – Individual Health Insurance

More and more people are falling into this category. Once upon a time this group consisted of only the self-employed. Unfortunately, premiums for group plans have increased at such a rate that some small businesses have decided these plans are no longer affordable.  Individual insurance in Georgia could be characterized like this:

  • Pre-existing condition exclusions allowed
  • NO guaranteed acceptance
  • Premium increases are unlimited

In other words, if you didn’t have access to group coverage, and you had a pre-existing condition, then it was unlikely that you would be able to get insurance in Georgia at ANY COST…unless you were indigent.  

When someone would call into our office asking about purchasing individual health insurance, unless they were perfectly healthy (and I mean PERFECTLY healthy), the discussion almost always led to the ability to secure group coverage through an employer.   

“Can we “create” a company that would allow you to purchase group health insurance and fall into these far more favorable rules?” In Georgia, you only need two employees to qualify for group coverage.  Maybe your spouse is self-employed and could technically be considered an employee?”

Why should whether or not someone’s employer offers health insurance have any bearing on your ability to not only get health insurance, but also on whether the insurance could contain exclusions?  It shouldn’t!!!  The new PCIP was created to level the playing field in this area.

The creation of this Plan should be a welcome relief for many Georgians who have had difficulty securing quality individual health coverage.  Based on information I found HERE, the plan appears to be affordable too.

Mortgage Rates Are at Record Lows – Have You Considered Refinancing Your Mortgage?

October 11th, 2010 by Charles Mayfield, CFP®


Fifteen-year fixed rate mortgages averaged 3.72% last week (Oct 7), the lowest rate on record since Freddie Mac began tracking mortgage rates 39 years ago in 1971, according to Reuters and The Wall Street Journal.

Thirty-year fixed rate mortgages averaged 4.27% the week ended October 7th, also a record.  Few homeowners currently have a fixed rate this low.  If you have an ARM, or any kind of adjustable rate home loan, then this decision is even easier. Now may be the time to lock in a low monthly payment on your home loan.

If your credit scores are good, and you’re not planning to move in the next few years, then it makes a lot of sense to refinance your current mortgage and lock in a super low rate for the duration of your time in your house.  You could save hundreds of dollars per month on your payment and potentially thousands in interest over the life of the loan.

Here are a few factors to consider as you think about refinancing:

Use a scrupulous lender.  Shop around. Avoid banner ads and flashy billboards from companies with hidden fees. It’s smart to use a bank you have a relationship with or get a referral from someone you trust who has refinanced lately and had a good experience. Ask whether the lender will pay for the appraisal and origination fees. Negotiate from a position of strength.

Don’t pay points. Paying discount points means that the borrower offers to pay the lender an upfront sum in the form of “discount points” to reduce the interest rate on the loan, thus obtaining a lower monthly payment. It probably doesn’t make sense to purchase discount points unless you know that you’re not going to sell the house or refinance before the calculated “breakeven point.” Selling or refinancing prior to this point will result in a net loss for the buyer.

Don’t get greedy and try to take cash out. Match the amount you borrow with the amount you owe.  It makes qualifying for the loan much simpler. Remember that your house is a long-term investment and not an ATM.

Knowledge & information are important. Make sure you can document your income and be certain your house is worth more than you need to borrow.  Get a free copy of your credit reports and clean up any errors to avoid any surprises or snags.

While you’ve got your documents out and are getting organized, you may also want to evaluate whether you have the best deal on your homeowner’s insurance. Ask a trusted adviser or agent to take a look at your policy and see if the limits and deductibles are where they should be, or whether another carrier may able to offer you a better deal.

If you live in the home that you’re refinancing, make sure you take advantage of your local homestead exemption. Check with the county government if you’re unsure.  Also, if you’ve recently turned age 65 (or older) you may be exempt from paying some property taxes for local schools that other homeowners have to pay.

Will rates stay this low for awhile? No one really knows for sure. Mortgage rates are generally tied fairly closely to intermediate- and long-term Treasury yields. If the Federal Reserve continues their policy of “Quantitative Easing” by buying Treasury bonds, that will keep Treasury rates fairly low. If, on the other hand, Bernanke & the Fed see strength in the economy, or become concerned about the deficit and their balance sheet, then they may put a stop to the easy money policies that have led to low rates.

There are a number of reasons why the Federal Reserve may continue on this path at least into November:

  1. They believe lower rates will lead to more economic activity
  2. More economic activity would likely prevent the possibility of a double-dip recession
  3. Mid-term elections are coming up – No one in Washington wants a slow economy
  4. Lower rates usually mean a weaker dollar, which is considered good for exports
  5. More exports means more manufacturing, which means more jobs
  6. More jobs means lower unemployment and leads to more consumer confidence
  7. Lower unemployment and more people working means more tax revenue for the government
  8. Quantitative easing helps to avoid deflation (to be avoided at all costs)

The process of refinancing is not painless or quick.  But it can be well worth the effort.  The government wants you to have more disposable income, so they are keeping rates low for now.  Why don’t we keep more money in our accounts, instead of paying it to someone else?

Lessons from the Sandwich Generation

October 4th, 2010 by Charles Mayfield, CFP®


Last week we went over a few things to consider when unexpected money shows up on your doorstep. While that is a great financial “dilemma” to encounter, let’s focus for a moment on the complete inverse of this situation. Fortunately, modern medicine has made it so that American’s are living much longer than in past generations. Unfortunately, many in our older generations are not financially prepared to pay for their own care during their golden years, leaving the burden of care to their children—who, ironically, still must save enough to not pass that burden on to their children! I myself am a proud member of what has been dubbed the “Sandwich Generation.” According to statistics, I have a high likelihood of simultaneously caring for my children and parents (hence sandwiched between the two).

Let’s first look at a few of the factors that play a significant role in the creation of this Sandwich Generation.

 - Modern Medicine:  Doctors and advanced treatments seem to continue doing a great job of keeping us alive.  This is despite a continued downward trend in the overall health of our population.  In other words, we are living longer NOT better.

 - New Family Dynamics:  Couples are having children later and, as a result, their children may still be minors when their parents become senior citizens. Families these days aren’t as concentrated as they were 10 or 20 years ago.  Societal changes have led to more young adults moving far away from their parents, making caring for their elders much more travel and time intensive.  In some cases, the closest child to mom and dad gets saddled with the lion’s share of care.

 - Dual Income Families:  We are seeing more families with both spouses working.  This can make care giving especially challenging should the need arise.

 - The “Kind” of Care:  Most care administered to the elderly is classified as ‘unskilled care.’  Often times, those in need require assistance with daily activities such as bathing, feeding and dressing themselves.

 - Cutting of Benefits:  Medicare continues to cut benefits for skilled care and offers very little, if anything, to cover unskilled care. 

Here are just a few helpful tips to prepare you for caring for elderly parents/family members:

• Time for a Family Meeting: Communication with siblings/parents is critical.  Don’t be caught off guard when it comes to who is responsible for what. 

• Long Term Care Insurance:  If they qualify for coverage, this is a great way to provide much needed funds to cover the unexpected expenses associated with unskilled care.
      * If budgeting for premiums become difficult, consider sharing premium obligations among family members.  It will be money well spent should the need arise.

• Talk to an Attorney: The titling of assets can play a critical role in qualification for any government programs that could lend assistance when the time comes.  It wouldn’t hurt to make sure that critical documents like a Power of Attorney and Healthcare Proxy are in place.

• Tour the neighborhood: Knowing your options for Nursing Homes, Assisted Living Facilities and Adult Day Care can better prepare you to make critical decisions during a very emotional time. 

Caring for your elderly parents can certainly be stressful and lifestyle changing – as can be preparing for your own elder care. We suggest talking with a financial advisor and/or an elder care lawyer BEFORE the road begins to get bumpy. Having a solid plan and funds in place can expedite the process when housing and care decisions must be made and provide an overall more pleasant experience for all family members. And for those in this Sandwich Generation, do what you can to prepare for your own long-term care now. Sometimes taking care of your children goes beyond school supplies and trips to the dentist.