Money ConceptsLinda Wells101 Devant St. #603Fayetteville, GA 30214678-817-0210770-461-2954lwells@moneyconcepts.commoneyconcepts.com/lwells

July 2012

Mid-Year Reality Check: Covering Your Bases inUncertain Times

Ways Parents Can Help Their Boomerang Kids

Natural Disaster Planning for Small Businesses

Is it true that Social Security beneficiaries arebeing required to receive their paymentselectronically?

Mid-Year Reality Check: Covering Your Bases in Uncertain Times

See disclaimer on final page

Imagine playing a complicatedgame, but the rules of the gameare changing, and the new ruleshave yet to be announced. That'swhat income tax planning is likethis year. In fact, if there was

ever a year to spend some quality time withyour financial professional, this is it. Here are afew items to discuss.

How will higher rates next year affectyou?Federal income tax rates are scheduled to jumpin 2013, with the bottom (10%) ratedisappearing, and the top rate increasing from35% to 39.6%. Starting in 2013, high wageearners--those with wages exceeding $200,000($250,000 for married couples filing jointly and$125,000 for married individuals filingseparately)--will also have to pay an additional0.9% in the hospital insurance (HI) portion oftheir payroll tax, commonly referred to as theMedicare portion.

Could the current federal income tax rates beextended again? Of course, but it's far from acertain bet, and the odds are that any actionwould not take place until after the presidentialelection. That means any financial plan you putin place has to account for this uncertainty. Andthe uncertainty extends beyond just tax rates,because a number of popular tax breaks arealso scheduled to expire at the end of the year,while others have already expired. So, anypotential moves have to be considered in thecontext of several "what if" scenarios. Forexample, if you have the opportunity to defercompensation to next year, you have to reallythink about whether that makes sense, or if youwould be better off paying tax on the income atthis year's rates.

Potential investment movesIn addition to increased tax rates on earnings,the rates that apply to long-term capital gainand qualifying dividends are scheduled toincrease in 2013. The maximum rate onlong-term capital gain will jump from 15% to20%. And while qualifying dividends currentlybenefit from being taxed at the rates that applyto long-term capital gain, in 2013 they'll be

taxed at ordinary income tax rates. Alsobeginning in 2013, a new 3.8% Medicarecontribution tax will be imposed on the netinvestment income of individuals with modifiedadjusted gross income that exceeds $200,000($250,000 for married couples filing jointly and$125,000 for married individuals filingseparately). That means someone in the top taxbracket could potentially end up paying tax onsome investment income at a total rate of43.4%.

Potentially higher rates in 2013 could be amotivating factor in your investment strategy.For example, you might want to consider sellinginvestments that have appreciated in value torecognize long-term capital gain in 2012, beforethe maximum rate is scheduled to increase.Alternatively, you might consider timing the saleof an investment to postpone the recognition ofa capital loss until 2013, when it could be morevaluable.

Roth conversions--is this the year?If you've been on the fence about convertingtraditional IRA funds or pretax 401(k)contributions to a Roth account, you ought togive the matter one last hard look before theyear ends. That's because when you convert atraditional IRA to a Roth IRA, or pretax dollarsin a 401(k) plan to a Roth account, theconverted funds are subject to federal incometax (to the extent the funds representinvestment earnings, tax-deductible IRAcontributions, or pretax 401(k) contributions) inthe year that you make the conversion.

If tax rates go up next year, so will the effectivecost of doing a Roth conversion. Additionally,qualified distributions from Roth IRAs and Roth401(k)s are free from federal income tax. Thatcould make a big difference in retirement ifyou're paying tax at a higher rate at the time.Whether a Roth conversion is right for youdepends on a number of factors. If it makessense for you, though, it might pay to thinkabout acting now, rather than later.

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Ways Parents Can Help Their Boomerang KidsIt's been called the new retirement wild card.But it's not inflation, health-care costs, or taxes,though those things certainly matter. What is itthat's causing so much uncertainty? It'sboomerang kids, and the money their parentsspend on them.

The trendAccording to the U.S. Census Bureau, therewere 6 million young adults ages 25 to 34 livingat home in 2011--19% of all men (up from 14%in 2005) and 10% of all women (up from 8% in2005). Not surprisingly, the percentages arehigher for young adults in the 18 to 24 agebracket, with 59% of young men and 50% ofyoung women living with their parents in 2011.

Sociologists have cited a number of reasons forthis trend--the recession, college debt, the highcost of housing, delayed marriage, and atendency toward prolonged adolescence. Butwhatever the reason, there's no doubt thatboomerang children can be a mixed blessingfor their parents, both emotionally andfinancially. Just when parents may be lookingforward to being on their own and preparing fortheir retirement, their children are back in thenest and relying on their income. While theextra company might be welcome, you don'twant to sacrifice your emotional and financialhealth to help your kids.

Set ground rulesIf your adult children can't afford to live on theirown, establish ground rules for moving backhome, including general house rules, how longthey plan to (or can) stay, and how they cancontribute to the household in terms of rent andchores. As an adult, your child should beexpected to contribute financially to thehousehold overhead if he or she is working.Determine a reasonable amount your child cancontribute toward rent, food, utilities, and carexpenses. You can then choose to apply thismoney directly to household expenses or set itaside and give it to your child when he or shemoves out, when it can be used for a securitydeposit on an apartment, a down payment on acar, or some other necessary expense.

You should also discuss your child's long-termplan for independence. Does your child have ajob or is he or she making sincere efforts tolook for work? Does your child need or want togo back to school? Is your child working andsaving money for rent, a down payment on ahome, or graduate school? Make sure yourchild's plans are realistic and that he or she istaking steps to meet those goals.

It's a balancing act, and there isn't a road mapor any right answers. It's common for parents to

wonder if they're making a mistake bycushioning their child's transition to adulthoodtoo long or feel anxious if their child isn't makingsufficient progress toward independence.

Turn off the free-flowing money spigotIt can be tempting for parents to pay all of theiradult children's expenses--big and small--in aneffort to help them get on their feet, but doingso is unlikely to teach them self-sufficiency.Instead, it will probably make them furtherdependent on you.

If you can afford it, consider giving your child alump sum for him or her to budget rather thanjust paying your child's ongoing expenses orpaying off his or her debt, and make it clear thatis all the financial assistance you plan toprovide. Or, instead of giving your child moneyoutright, consider loaning your child money at alow interest rate. If you can't afford to hand overa sum of cash or prefer not to, consider helpingwith a few critical expenses.

Evaluate what your money is being spent on. Acar payment? Credit card debt? Healthinsurance? A fancy cell phone? Student loans?General spending money? Your child is goingto have to cut the frills and live with the basics.If your child is under age 26, consider addinghim or her to your family health plan; otherwise,consider helping him or her pay for healthinsurance. Think twice about co-signing a newcar loan or agreeing to expensive leasepayments. Have your child buy a cheaper usedcar and raise the deductible on his or her carinsurance policy to lower premiums. Help yourchild research the best repayment plan forstudent loans, but don't pay the bills unlessabsolutely necessary. Same goes for creditcard balances. Have your child choose a lessexpensive cell phone plan, or consolidatephones under a family plan and have your childpay his or her share. Bottom line--it's importantfor your child to live within his or her financialmeans, not yours.

Solidify your own retirement planEven if your child contributes financially to thehousehold, you may still find yourself paying foritems he or she can't afford, like student loansor medical bills, or agreeing to pay for biggerticket items like graduate school or a housedown payment. But beware of jeopardizing yourretirement to do this--make sure your retirementsavings are on track. A financial professionalcan help you see whether your current rate ofsavings will provide you with enough incomeduring retirement, and can also help youdetermine how much you can afford to spendon your adult child now.

A financial strain

Parents naturally want to helptheir children during hardtimes, but in some cases, thefinancial strain of another adult(or two or three) in the housecan be too much of a financialshock. If your adult child needsto move back home, discusshow long your child plans tostay and how he or she cancontribute financially to thehousehold.

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Natural Disaster Planning for Small BusinessesWhether your small business survives a naturaldisaster may depend as much (if not more) onthe plans you put in place now, before adisaster occurs, as on what you do after adisaster strikes. Here are some disasterpreparedness ideas for you to consider for yoursmall business.

Before the disasterEvaluate possible natural disasters that mayaffect your small business. Determine theprobability of a disaster occurring and its likelyimpact. Some natural disaster risks to considermight include hurricanes, tornadoes,straight-line winds, thunderstorms, lightning,snow and ice storms, avalanches, extremetemperatures, flooding, drought, volcanoes,earthquakes, tsunamis, mudslides, sinkholes,and wildfires.

Identify the critical functions of your businessthat must be maintained or restored as soon aspossible. Be sure to consider the means ofcommunication for your business, whetherthrough phones, Internet access, or directcontact at a physical location. Also, considerpossible disruptions to your supply lines.

Identify critical functions of your business thatrequire power. Consider a power backupsolution in case of a power outage.

Estimate the revenue that may be lost ifdisaster strikes. For both the short term andlonger, will you still have goods or services toprovide, and customers to purchase them?

Identify expenses that must be paid even if anatural disaster strikes. For example, mortgage,lease, or rental payments may still need to bemade even after a disaster strikes yourbusiness.

Keep emergency contact information handyand in a safe place. Also, back up all of yourcritical data and keep a copy at one or moreother safe locations. If your small business hasmore than one location, consider whetheroperations could be redirected to otherlocations if a natural disaster strikes at onelocation.

Maintain one or more disaster kits. Considerstocking the kits with water, nonperishablefood, a flashlight, a portable radio, batteries, afirst aid kit, and a cell phone.

Consider any steps that could mitigate the risksof a natural disaster. For example, rent or buildfacilities that may withstand the forces of ahurricane or an earthquake, or locate on sitesless prone to flooding.

Insure against losses to your small businessresulting from natural disasters. Property

insurance may insure against some damage toproperty. Key person life insurance may protectagainst the loss of a key employee. Businessinterruption insurance may cover certainexpenses if you are unable to operate yoursmall business due to a natural disaster.

Caution: Special insurance may be required ifyou wish to insure your small business againstcertain natural disasters such as flooding orearthquakes.

Communicate your business plans for a naturaldisaster with your employees. Consider runninga disaster drill to put your plan to the test.

Monitor impending or approaching potentialnatural disasters, where possible. Takeappropriate steps to keep your employees andyourself safe.

After the disasterCommunicate with your employees. They mayhave to deal with personal disaster-relatedissues of their own.

Focus initially on restoring critical functions asquickly as possible. Hopefully, any planning youdid prior to the disaster will serve you well.

Document any damage or losses and contactyour insurance company or agent. You mayneed to mitigate damages (for example, havinga roof that is damaged tarped so that furtherdamage does not occur).

The Federal Emergency Management Agency(FEMA), along with state and localgovernments, may provide some assistance.However, most assistance provided by FEMA isto individuals, rather than to businesses, and isintended to provide only for essential needs.The assistance cannot duplicate any benefityou receive from insurance.

The Small Business Administration (SBA) canprovide a disaster loan for up to $2 million(generally, at favorable terms). The loanscannot duplicate any benefit you receive fromyour insurance or FEMA. The loans can be forlosses that are not covered by or compensatedfor by your insurance (including deductibles).The loans can be used for the repair orreplacement of certain physical property usedin your small business, or for normal financialobligations of your business that you couldhave met if the disaster had not occurred.

If your business is in a federally declareddisaster area, you may be entitled to special taxtreatment. This may include an extended timefor filing tax returns and paying tax, or certainother favorable tax provisions occasionallygranted to individuals who work or live in afederal disaster area.

The survival of your smallbusiness after a naturaldisaster may very welldepend on the disasterpreparedness plan youcreate now.

Page 3 of 4, see disclaimer on final page

Money ConceptsLinda Wells101 Devant St. #603Fayetteville, GA 30214678-817-0210770-461-2954lwells@moneyconcepts.commoneyconcepts.com/lwells

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2012

All Securities Through MoneyConcepts Capital Corp., MemberFINRA / SIPC11440 North Jog Road, PalmBeach Gardens, FL 33418 Phone:561.472.2000Copyright 2010 Money ConceptsInternational Inc.

Investments are not FDIC or NCUAInsuredMay Lose Value - No Bank orCredit Union Guarantee

Is the Social Security Administration mailing out annualSocial Security Statements?In 1995, the Social SecurityAdministration (SSA) beganmailing out annual SocialSecurity Statements to

everyone age 25 and older. These statementswere designed to help Americans plan for thefuture by providing a detailed record of theirearnings and estimates of Social Securitybenefits. Last year, the SSA suspended mailingthese statements because of budgetaryconcerns, but in March 2012, the SSA resumedmailing annual statements to workers age 60and older. If you're age 60 or older, you shouldreceive your statement every year, about threemonths before your birthday. The SSA is alsoresuming the mailing of one-time statements toworkers who are age 25 to introduce them toSocial Security programs and benefits.

The SSA has also unveiled an online version ofthe Social Security Statement, available at theSSA website, www.socialsecurity.gov. You'llhave immediate access to your statement onceyou've signed up for a "My Social Security"account. Statement information includes aprojection of your retirement benefits at age 62,at full retirement age, and at age 70; projections

of disability and survivor's benefits; a detailedrecord of your earnings; and other informationabout the Social Security program. Individualswho are receiving paper statements in the mailwill have the option to sign up for onlinestatements instead. While workers areencouraged to use the online statement option,in some cases, the SSA will mail statementsupon request to individuals under age 60,including domestic violence or identity theftvictims who have blocked online access to theirpersonal information.

There's also another way to estimate theamount of Social Security retirement benefitsyou will be eligible to receive in the future undercurrent law. You can use the SSA's RetirementEstimator, which is also available at the SSAwebsite. To use this calculator, you must haveenough credits to qualify for benefits, and youmust not already be receiving benefits orwaiting for a decision on your benefitapplication. You can create various scenariosthat will illustrate how different earningsamounts and retirement ages will affect yourfuture retirement benefit.

Is it true that Social Security beneficiaries are beingrequired to receive their payments electronically?That's correct. On March 1,2013, the U.S. TreasuryDepartment will stop mailingpaper benefit checks. After

that date, all Social Security beneficiaries (aswell as anyone receiving another type of federalbenefit, such as Supplemental Security Incomebenefits, Railroad Board annuity payments,federal retirement benefits, or veteransbenefits) will be required to receive theirbenefits electronically. The federal governmentestimates that switching to electronic paymentswill save taxpayers $1 billion over 10 years, andcut down on the risk of lost and stolen checks.

Most Social Security beneficiaries are alreadyreceiving benefits electronically, and if you'reamong them, you don't need to doanything--you'll continue to receive yourbenefits via the method you've chosen. But ifyou're receiving a paper check, you need tochoose one of two electronic payment optionsas soon as possible.

The first payment option is to have your benefitdirectly deposited to a bank or credit unionaccount. The second option is to have yourbenefit put on a Direct Express® Debit

MasterCard® prepaid card that can be used topay bills, make retail purchases, or withdrawbenefit funds from an ATM or a financialinstitution. Most transactions are free, althoughfees do apply to certain services. The TreasuryDepartment recommends the direct depositoption for anyone with access to an account ata financial institution. The Direct Express® cardis most appropriate for individuals who need thebenefits of direct deposit but who don't have anaccount at a financial institution. If you haven'tchosen an option as of March 1, 2013, you'll beautomatically enrolled in the Direct Express®

card option. If you're applying for SocialSecurity benefits for the first time, you'll beasked to choose your payment option at thattime.

To sign up for electronic payments, you need tovisit the government website,www.GoDirect.org, or call the U.S. TreasuryElectronic Payment Solution Center at (800)333-1795. You can also sign up for the directdeposit option at your bank or credit union, orfor the Direct Express® card atwww.usdirectexpress.com.

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