December 4, 2008
Vol 1, Issue 3
Jean Keener
Jean Keener
Happy holidays!  I hope you enjoyed a plentiful Thanksgiving and are looking forward to the rest of the holiday season.  As our family gathered and gave thanks last week, one of the blessings I celebrated is having wonderful friends, family, and clients like you in my life.  Thank you.
December's newsletter has lots of focus on year-end planning issues.  I hope you will take a moment from the holiday hustle and bustle to take a look at your finances.  If you have a financial plan, it's important to update it at least annually.  If you don't have one, this is a great time of year to get one.  I would be happy to meet with you to discuss any financial issues that concern you right now.

As always, feel free to e-mail me at [email protected] with requests for newsletter topics you'd like to see covered.  Thank you, and happy holidays!
Free Retirement Seminar
hand writingFigure out if you're saving enough to fund your desired retirement.  This free seminar will provide the tools to make a realistic assessment of your current retirement savings and come up with a plan to get on track or stay on track.  A free copy of Investing in an Uncertain Economy for Dummies will also be given away to one of the attendees.

Keller Public Library
640 Johnson Drive, Keller, TX
January 5, 2008, 6:30 pm - 8:00 pm
Advance registration recommended: (817) 743-4840
In This Issue
Free Retirement Seminar
Year End Planning Considerations
2009 Key Numbers
Getting Out of Debt
College Financial Aid
Option for Retirement Income
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Planning for Year-End

Time is an issueAs the calendar marches toward December 31, there are some key things everyone should consider before the end of the year.  Taking care of these items now could help reduce the amount of taxes you need to pay on April 15.

If you're an employee with access to a 401(k), 403(b), or 457 plan, have you maxed out your contributions for this year?

If you're self-employed, have you set up a retirement plan for yourself to save on taxes now and build your retirement nest egg?  It's not that hard to do, but depending on the best type of plan for you it may need to be done before the end of the year.

 Have you considered whether your portfolio needs to be rebalanced, or whether it would be beneficial to harvest some losses for tax purposes?
You may want to pay property taxes or make charitable contribution before the end of the year to earn the deduction now instead of next year.
If you use a vehicle for business purposes, you may want to take advantage of significantly increased depreciation amounts on vehicles place in service before the end of the year.  Through the end of 2008 only, you may be able to deduct up to $10,960 for a car or $11,160 for a truck.
If you're planning on installing energy-efficient doors or windows on your home, you may want to wait until the beginning of 2009 because of tax credits available starting Jan. 1. 
These are just a few of the considerations.  For more, check out the Year-End Tax Planing post on
2009 Key Numbers 
giftHere's a really handy reference for you in 2009.  If you look at your finances on any sort of ongoing basis, you may want to print it out and keep it on your desk.  It has everything from tax brackets to retirement plan limits, mileage deduction amounts, adoption credits, phase-outs, education tax credits, social security info, medicare premiums, and lots more.  Enjoy!   2009 Key Numbers
Getting out of Debt: Your Strategy
family in parkOkay, maybe you're not drowning in consumer debt, but if the water level is just too high and seems to be getting deeper, it's better to take action sooner rather than later. Interest charges are steep, and you know that if you start falling behind in your payments, the late fees will just add insult to injury and make your balances even higher. You'd like to get out of the situation you're in before you get soaked. What's the best way to go about it?

First, plug the hole

Are you still using credit? If so, attempting to get out of debt while you're still incurring more of it is like trying to bail out a boat that's still leaking.

Review your expenses and compare them to your income. If you're spending more than you're earning, you're probably using credit, even if only for the occasional "emergency." In order to bail out of debt, you'll first have to plug the leaks in your budget.

As you go about making your budget more seaworthy, look for ways to reduce your expenses to the point where you create a cash surplus. You can then use this surplus to accelerate your debt repayment. This is a key element to any strategy that accelerates repayment of consumer debt.

Line up your ducks

List all your unsecured debts (don't include your mortgage, student loan, and/or car loan); Family portraitrank them from the one with the highest interest rate charged to the lowest. Hopefully, you're current with all of them (including the unlisted ones); if not, first direct any surplus to getting current.

Once all your debts are current, make the minimum payment on all of them and direct any surplus toward increasing the payment against the debt with the highest interest rate. As the minimum payments required on all your debts start to go down (as happens with credit cards), don't pay less on your total debt. Instead, make the minimum payments on all of them and keep shifting the "extra" to increasing the payment on the debt with the highest interest rate.

Take your best shot

Once that debt with the highest interest rate is paid off, add the amount of the payment you were making toward it to what you're paying on the debt with the next highest interest rate. Once again, as the minimum payment requirements on other debts with lower interest rates decline further, put the "extra" created toward this highest-interest debt.  Because the amount you pay toward each debt increases in size as you move down the list of your debts, this repayment strategy is often referred to as snowballing.

An alternative approach
Some snowballing methods recommend that you pay off your debts starting with the smallest balance first, regardless of its interest rate, and also apply to this debt any surplus, while keeping your payments the same each month on all of the rest of your debts (regardless of their decreasing minimum requirements). While this approach offers the psychological satisfaction of paying off smaller debts quickly and paying extra against the principal on all your debts, it may not save you as much in total interest charges as the approach outlined above.
How much financial aid will my child be eligible for?
College GradsYou can now get an estimate of how much financial aid your child will qualify for before you actually apply.  The U.S. Department of Education offers an online financial aid tool to help families better prepare for the cost of college. Called the FAFSA4caster (catchy, isn't it?), it's modeled on the government's official aid application, the FAFSA (Free Application for Federal Student Aid). The tool examines a family's financial data and estimates how much aid a student might expect to get. To use the tool, visit
To complete the FAFSA4caster, gather the following information for you and your child:
  • Social Security numbers
  • Federal tax information or tax returns, including W-2 information
  • Information on savings, investments, and business and farm assets
  • Records of any untaxed income (such as Social Security or welfare benefits)
To get as accurate an estimate as possible, you should answer all the questions on the tool, even if you have to estimate or guess.
Using the FAFSA4caster isn't exactly a quick process, but when you're ready to apply officially for federal aid, the FAFSA4caster will automatically transfer all of your data (that's password protected and saved securely) to your online FAFSA application, saving you the hassle of keying in all your information again. And, if your financial circumstances change, you'll get the opportunity to update any answers on the FAFSA that you originally submitted on the FAFSA4caster.
By providing an advance estimate of federal aid eligibility, the FAFSA4caster can help you forecast how much money you and/or your child may need to come up with to meet college costs--information that can also come in handy in the college selection process. By having an idea of the numbers ahead of time, you can help minimize unwelcome surprises.  You can also work with your child sooner rather than later to fill the gaps between financial aid and the cost of their desired school.
For more on increased pell grant maximums, new GI bill provisions, and loan forgiveness for public servants, visit
Guaranteed Retirement Income Option 
Man on DockEveryone like a guarantee.  Unfortunately, in the financial services industry they're few and far between.  And those that are available often come with a steep price -- if you can even figure out what the price is.
As you know, I don't sell any products or accept commissions on products I recommend.   One of my jobs is to help you sort through all the clutter and find the right option for you.  I decided to highlight immediate annuities in this newsletter because there are some good ones out there at a reasonable cost, and for some situations they can be a perfect component of a secure retirement income strategy.
A single premium immediate annuity (SPIA) can provide a steady stream of income that lasts for the rest of your life.  In exchange for a lump sum of money you pay to an insurance company, you'll receive income that begins immediately.  The amount of income you receive is based on a number of factors, including your age at the time payments begin, your gender, whether payments will be made to only you or jointly to you and another person, and whether payments will be made for a fixed period of time or for the rest of your life or joint lives.

Most immediate annuities include a number of payment options. The more common payment options are:  
  • Life only. Payments continue during your lifetime, but stop at your death.
  • Period certain. Payments are made for a fixed period of time (e.g., 5, 10, 15, 20 years). If you die prior to the end of the chosen period, your beneficiary will continue to receive payments for the remainder of the fixed period.
  • Life with a period certain. Payments are made for the rest of your life or a minimum period of time. If you die prior to the end of the minimum payment period, the beneficiary you name in the annuity will receive the payments for the remainder of the period certain, but no longer. If you outlive the period certain, payments will end at your death.
  • Joint and survivor. Payments are based on the lives of two people, typically you and your spouse. When either of you dies, payments continue to be made to the survivor. This option can also be combined with a period certain option, in which case payments will continue until both of you have died or for the minimum period of time you select, whichever is longer.
  • Installment refund/cash refund. If you die prior to receiving at least the return of your investment in the immediate annuity, your beneficiary will receive an amount equal to the difference between what you invested and what you received. Your beneficiary will receive this amount in either a lump sum (cash refund) or periodic payments (installment refund).

The amount of each SPIA payment you get can be affected by the payment option you select. For example, a 60-year-old man who invests $100,000 in an immediate annuity may receive annual payments of $7,260 for the life only option, $6,696 for life with a period certain of 20 years, or $7,920 for a fixed period of 20 years. (This example is for illustration purposes only and does not reflect actual insurance products or performance, nor is it intended to promote a specific company or product.)

 Are there taxes to pay?

Generally, you pay income taxes on that portion of each payment that represents earnings or interest credited to the immediate annuity. The remaining portion of each payment is considered a return of your investment and is tax free.

Other factors to consider

While a SPIA can offer a measure of relief from retirement income concerns, as with most investments, there are other factors to consider. Generally, once you invest in a SPIA, your payments are "locked in" with little flexibility, although there may be some exceptions. Normally, you don't have access to the principal unless the annuity provides for it, so be sure the payment option you select will meet your income needs. You should also make sure you fully understand all costs associated with the annuity and receive an illustration before purchasing it.  Also, consider whether there are other investment choices available that may better suit your retirement income goals. This is just one option.
I hope you found this newsletter informative.  KFP offers a free, no-obligation get-acquainted meeting to start the financial planning process.  To learn more or schedule a time, call 817-993-0401 or e-mail [email protected].
Jean Keener
Keener Financial Planning

Keener Financial Planning provides hourly, as-needed financial planning and advice on a commission-free basis to people at all financial levels.