The Forest Lake Times http://forestlaketimes.com The Forest Lake Times covers community news, sports, current events and provides advertising and information for Forest Lake, Minnesota. Mon, 26 Jan 2015 15:50:31 +0000 en-US hourly 1 FL man involved in fatal crash http://forestlaketimes.com/2015/01/26/fl-man-involved-in-fatal-crash/ http://forestlaketimes.com/2015/01/26/fl-man-involved-in-fatal-crash/#comments Mon, 26 Jan 2015 15:12:19 +0000 http://forestlaketimes.com/?p=61212 A 29-year-old Forest Lake man was seriously injured in an accident that killed a McGrath man on Jan. 24.

According to the Minnesota State Patrol, Peter Sarkisyan, of Forest Lake, was driving a Volkswagon Jetta west on State Highway 18, just south of McGrath in Aitkin County. Around 9:30 p.m., he ran the stop sign at the intersection of highways 18 and 65 and broadsided a northbound Ford Fiesta driven by Anthony Sundholm, 47, of McGrath.

The road was dry at the time of the crash. The State Patrol reported that Sarkisyan had alcohol in his system.

Sundholm died at the scene. Sarkisyan was seriously hurt and taken to FirstLight Health System in Mora. Seth Millner, 27, who was a passenger in Sundholm’s car, received non-life threatening injuries and was not hospitalized. Both vehicles were totaled.

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Forest Lake students thrive at DECA districts http://forestlaketimes.com/2015/01/26/forest-lake-students-thrive-at-deca-districts/ http://forestlaketimes.com/2015/01/26/forest-lake-students-thrive-at-deca-districts/#comments Mon, 26 Jan 2015 13:45:43 +0000 http://forestlaketimes.com/?p=61115 Submitted photo Fifty Forest Lake students competed at the DECA District 4 Conference in Plymouth.

Submitted photo
Fifty Forest Lake students competed at the DECA District 4 Conference in Plymouth.

On Jan. 10 through 12, 50 Forest Lake students traveled to the Crown Plaza in Plymouth to compete in the District 4 DECA conference. Fourteen schools are in District 4, and over 600 students came to the conference. Over three days, the students competed in a variety of business competitions, including sales demonstrations, job interviews and entrepreneurship events. In order to advance to the state competition held at the Hyatt Minneapolis on March 8 through 10, the students needed to place in the top 12 of their events. Forty students from Forest Lake High School placed in their events to advance to state.

“This year brought a lot of strong competition from the other schools; our kids did really great!” Forest Lake DECA advisor Kristen Nellis said in a press release. “I am really proud of how they rose to the challenge and were able to get such strong results.”

The top Forest Lake Area High School finishers are as follows:

Tim Brenhoffer: first place, Personal Financial Literacy

Noel Vierra: first place, Entrepreneurship; third place, sales demonstration

Savanna Buck: third place, Entrepreneurship

Danny Chen and Taylor Thomas: third place, Hospitality Team Event

Brendon Ferraro and Justin Grant: third place, Sports and Entertainment Team Event

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Resources available to those new to Medicare http://forestlaketimes.com/2015/01/26/resources-available-to-those-new-to-medicare/ http://forestlaketimes.com/2015/01/26/resources-available-to-those-new-to-medicare/#comments Mon, 26 Jan 2015 13:01:33 +0000 http://forestlaketimes.com/?p=61128 Derrick Knutson

ECM Post Review

There it is in the mail: that card that says, as of age 65, you’re eligible for Medicare.

This designation can raise a number of questions: How does the enrollment process work? Should husbands and wives sign up as a couple, or should each have their own coverage? What are the multiple parts to Medicare? Where can more information about Medicare be found?

Amy Tvedt, senior outreach specialist for the Senior Linkage Line, the Minnesota Board on Aging’s free statewide information and assistance service, answered many frequently asked questions people have about Medicare and provided resources where more information can be obtained during a presentation at Fairview Lakes Medical Center in Wyoming Jan. 7.

She explained that Medicare is divided into four parts, A, B, C and D:

• Part A (hospital insurance) helps cover:

- Inpatient care in hospitals.

- Skilled nursing facility care.

- Hospice care.

- Home health care.

• Part B (medical insurance) helps cover:

- Services from doctors and other health care providers.

- Outpatient care.

- Home health care.

- Durable medical equipment.

- Some preventative services.

• Part C (Medicare Advantage):

- Includes all benefits and services covered under Part A and Part B.

- Usually includes Medicare prescription drug coverage (Part D) as part of the plan.

- Run by Medicare-approved private insurance companies.

- May include extra benefits and services for an extra cost.

• Part D (Medicare prescription drug coverage):

- Helps cover the cost of prescription drugs.

- Run by Medicare-approved private insurance companies.

- May help lower the cost of patients’ prescription drug costs and help protect against higher costs in the future.

Tvedt said people don’t always need to be 65 years or older to be eligible for Medicare.

Those with a certified disability, people of any age with end-stage renal disease (kidney failure) or people of any age with ALS are also qualified to receive Medicare benefits.

She also noted that people should sign up for Medicare as individuals because health care needs and drug prescriptions are often different between a husband and wife.

How enrollment works

Tvedt said anyone receiving Social Security or Railroad Retirement benefits is entitled to Medicare.

“That first month that you turn 65, you don’t need to do anything to enroll,” she said. “A card is just going to be automatically mailed out to you three months before you turn 65. If you are not receiving Social Security or Railroad Retirement benefits, you do need to apply online or visit your local Social Security office.”

Tvedt stressed that Medicare is not free medical coverage; there are costs associated with it.

However, she said, Part A is free, as long as a person has the minimum amount of work credits.

“For Medicare, your Part A premium is free if you’ve worked 40 quarters or work credits, which amounts to about 10 years, or if you are the spouse or ex-spouse of someone (for at least 10 years) with 40 work quarters or credits,” she said. “If you don’t have those work credits, or if you’re not married to someone with those work credits, you can purchase Medicare, and you’d be considered a voluntary enrollee.”

Right now, the enrollment cost for Part B is $104.90 a month for a single person.

“That’s kind of stayed stable for the last couple of years,” Tvedt said. “That does change, at times.”

She said seniors can waive Part B coverage if they feel they have adequate coverage under another plan, but they should think long and hard about that decision.

“If you become eligible for Medicare and you’re thinking about waiving your Part B, please talk to someone about that,” she said, noting that the Senior Linkage Line would be a good organization to call to get advice about the matter. “Just make sure you know what you’re doing and what the consequences will be if you’re thinking of waiving your Part B. It’s a decision that, if you make the wrong one, could affect you for the rest of your life.”

Late enrollment penalties

When a person first becomes eligible for benefits through Medicare, that person might feel like he or she is pretty healthy and doesn’t need the coverage.

But long-term health and late enrollment penalties should be a consideration, Tvedt said. If a person decides not to join a Medicare drug plan when they’re first eligible, there is the possibility that they could pay a penalty for joining later. The same is true with Part B.

“(The penalty) is 10 percent of the Part B premium charge for every 12 months one was late in enrolling,” Tvedt said.

More information

Tvedt noted the aspects of Medicare can be confusing, but there are resources available to anyone who wants to learn more about the health care system.

More information about Medicare can be obtained by taking the following actions:

• Calling the Senior Linkage Line at 800-333-2433.

• Visiting medicare.gov or calling 800 Medicare.

• Visiting ssa.gov or calling 800-772-1213.

• Visiting rrb.gov or calling 877-772-5772.

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Area businessman earns prestigious designation http://forestlaketimes.com/2015/01/26/area-businessman-earns-prestigious-designation/ http://forestlaketimes.com/2015/01/26/area-businessman-earns-prestigious-designation/#comments Mon, 26 Jan 2015 12:54:03 +0000 http://forestlaketimes.com/?p=61091 Purdy

Purdy

Dave Purdy, CEO and Founder of Forest Lake-based Wealth Management Midwest, received the 2015 Five Star Wealth Manager designation in the January 2015 issue of Minneapolis-St. Paul Magazine and Twin Cities Business Magazine. The fewer than 7 percent of wealth managers in the Twin Cities who receive the five star designation are evaluated on customer service, integrity, knowledge for fee charged, meeting of financial objectives and more.

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Power line safety http://forestlaketimes.com/2015/01/26/power-line-safety/ http://forestlaketimes.com/2015/01/26/power-line-safety/#comments Mon, 26 Jan 2015 12:01:12 +0000 http://forestlaketimes.com/?p=61098 Power Line Safety

Members of the Forest Lake Fire Department participated in a power line safety seminar presented by Connexus Energy Jan. 6

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Cut Biz Tax With Life Policies http://forestlaketimes.com/2015/01/23/cut-biz-tax-with-life-policies/ http://forestlaketimes.com/2015/01/23/cut-biz-tax-with-life-policies/#comments Fri, 23 Jan 2015 22:30:05 +0000 http://forestlaketimes.com/?guid=1cc422fa79248b85789a5c8ee730cd98 The world’s most powerful companies use sophisticated strategies to eliminate taxes. If you are a corporate executive, you might be able to take advantage of variations on these strategies – one of them being life and death.

Big money is involved. A recent report from the Center for Effective Government and Institute for Policy Studies shows that of America’s 30 largest corporations, seven paid their chief executive officers more than they paid in federal income taxes in 2013. All of these firms were highly profitable, collectively reporting more than $74 billion in U.S. pre-tax profits – and a combined $1.9 billion in refunds from the Internal Revenue Service.

Insurance is another way to reward top execs without drawing so much from corporate coffers, and also save on taxes. With the insurance stratagem, the policies come with the minimum death benefit you can buy with the maximum amount of cash allowed under IRS guidelines. Section 7702(e) of the tax code provides guidance as to how you borrow earnings out of a life insurance contract using zero-cost loans, which are not taxable events.

Large companies began using entity-owned life insurance – banks (BOLI), corporations (COLI), trusts (TOLI) and capital split dollar policyholders – more than 30 years ago, when E.F. Hutton developed the first versions of what later came to be known as a universal life insurance contract.

Human resources consultancy Aon Hewitt estimates that new COLI (corporate owned life insurance) policies worth at least $1 billion are put in place every year. Most recently, companies used these vehicles primarily to fund employee benefits such as health care, deferred compensation and pensions.

The subject of intensifying regulation and growing litigation in recent years, COLI – aka “dead peasant” or “dead janitor” insurance – now comes with conditions. Policies can only be purchased on the highest-compensated third of employees. Any employee named as the insured on a COLI policy must be notified in writing, before purchase of the policy, of the company’s intent and if the company is a partial or total beneficiary. Failure to give such notice often incurs taxes on eventual payouts.

Nevertheless, the cash inside the insurance begins to perform like an investment with limited downside risk – and you pay no tax on the earnings or growth. Banks and sophisticated investors typically choose investments with principal guarantees offered from long-established insurance companies that provide a platform for such liquidity, safety of principal, rate of return and tax-free access to growth when properly structured.

Instead of paying taxes on their investments, corporations use a portion (approximately one-fourth) of the savings to pay for life policies on key employees – taking advantage of one of life’s only guarantees, death. They fund the contracts using tax-deductible debt, benefiting from deductible contributions, tax-deferred growth and tax-free access.

Among options of such policies, you can:

  • Borrow against the life insurance via zero-cost loans and allow the guaranteed death benefit to pay off the loans when the insured dies.
  • Sell your own death benefit to a pool of investors.
  • Use the death benefit to transfer wealth to selected beneficiaries tax-free.

Almost every penny that goes to pay for the life insurance is recovered – unlike costs of taxes or management fees, which are lost forever. But complexity of tax rules for this kind of investment grows alongside increasing public awareness and scrutiny.

Policy guarantees are based on the claims-paying abilities of the issuing insurance company. Consult a qualified financial advisor for the best guidance.

Follow AdviceIQ on Twitter at @adviceiq.

Scott Thompson is the co-founder of Thompson Wealth Advisors (TWA), a Registered Investment Advisory firm with offices in Statesville and Mooresville, N.C. TWA specializes in helping business owners maximize the value of their business and preserve their personal wealth. Scott holds Series 7, 24, 63 and 65 licenses and is a Certified Specialist in Retirement Planning. Laura Thompson (co-founder) is a Certified Public Accountant and Certified Specialist in Estate Planning.

 

Securities offered through Geneos Wealth Management, Inc. Member FINRA/SIPC. Business Exit Planning Services are only offered through Thompson Wealth Advisors, RIA.

 

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

 

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The world’s most powerful companies use sophisticated strategies to eliminate taxes. If you are a corporate executive, you might be able to take advantage of variations on these strategies – one of them being life and death.

Big money is involved. A recent report from the Center for Effective Government and Institute for Policy Studies shows that of America’s 30 largest corporations, seven paid their chief executive officers more than they paid in federal income taxes in 2013. All of these firms were highly profitable, collectively reporting more than $74 billion in U.S. pre-tax profits – and a combined $1.9 billion in refunds from the Internal Revenue Service.

Insurance is another way to reward top execs without drawing so much from corporate coffers, and also save on taxes. With the insurance stratagem, the policies come with the minimum death benefit you can buy with the maximum amount of cash allowed under IRS guidelines. Section 7702(e) of the tax code provides guidance as to how you borrow earnings out of a life insurance contract using zero-cost loans, which are not taxable events.

Large companies began using entity-owned life insurance – banks (BOLI), corporations (COLI), trusts (TOLI) and capital split dollar policyholders – more than 30 years ago, when E.F. Hutton developed the first versions of what later came to be known as a universal life insurance contract.

Human resources consultancy Aon Hewitt estimates that new COLI (corporate owned life insurance) policies worth at least $1 billion are put in place every year. Most recently, companies used these vehicles primarily to fund employee benefits such as health care, deferred compensation and pensions.

The subject of intensifying regulation and growing litigation in recent years, COLI – aka “dead peasant” or “dead janitor” insurance – now comes with conditions. Policies can only be purchased on the highest-compensated third of employees. Any employee named as the insured on a COLI policy must be notified in writing, before purchase of the policy, of the company’s intent and if the company is a partial or total beneficiary. Failure to give such notice often incurs taxes on eventual payouts.

Nevertheless, the cash inside the insurance begins to perform like an investment with limited downside risk – and you pay no tax on the earnings or growth. Banks and sophisticated investors typically choose investments with principal guarantees offered from long-established insurance companies that provide a platform for such liquidity, safety of principal, rate of return and tax-free access to growth when properly structured.

Instead of paying taxes on their investments, corporations use a portion (approximately one-fourth) of the savings to pay for life policies on key employees – taking advantage of one of life’s only guarantees, death. They fund the contracts using tax-deductible debt, benefiting from deductible contributions, tax-deferred growth and tax-free access.

Among options of such policies, you can:

  • Borrow against the life insurance via zero-cost loans and allow the guaranteed death benefit to pay off the loans when the insured dies.
  • Sell your own death benefit to a pool of investors.
  • Use the death benefit to transfer wealth to selected beneficiaries tax-free.

Almost every penny that goes to pay for the life insurance is recovered – unlike costs of taxes or management fees, which are lost forever. But complexity of tax rules for this kind of investment grows alongside increasing public awareness and scrutiny.

Policy guarantees are based on the claims-paying abilities of the issuing insurance company. Consult a qualified financial advisor for the best guidance.

Follow AdviceIQ on Twitter at @adviceiq.

Scott Thompson is the co-founder of Thompson Wealth Advisors (TWA), a Registered Investment Advisory firm with offices in Statesville and Mooresville, N.C. TWA specializes in helping business owners maximize the value of their business and preserve their personal wealth. Scott holds Series 7, 24, 63 and 65 licenses and is a Certified Specialist in Retirement Planning. Laura Thompson (co-founder) is a Certified Public Accountant and Certified Specialist in Estate Planning.

 

Securities offered through Geneos Wealth Management, Inc. Member FINRA/SIPC. Business Exit Planning Services are only offered through Thompson Wealth Advisors, RIA.

 

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

 

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Retire Early With $1M? (Pt. 2) http://forestlaketimes.com/2015/01/23/retire-early-with-1m-pt-2/ http://forestlaketimes.com/2015/01/23/retire-early-with-1m-pt-2/#comments Fri, 23 Jan 2015 18:00:16 +0000 http://forestlaketimes.com/?guid=10b5f3c41058afb443bd3a9df34ccfd6 Our first article looked at how a 50-something husband and wife stood nearly a 92% chance of retiring comfortably – and early. An optimistic financial plan for long golden years started with such basics as the couple’s income, travel plans and investments. Where to go from there?

Using planning software, we entered their assets, liabilities, investment strategy and income to run 1,000 different simulations that take into account market fluctuations, interest rates and other factors. Based on those simulations and the data, this couple (my clients, ages 56 and 57) has a 92% chance of successfully funding an early retirement.

What does a 92% chance really mean? For one, I typically tell clients that the 80% to 85% range is pretty good. Anything greater than 85% – especially 90% – and I’m that much more confident.

Simulations showed that this couple has, specifically, a 91.6% chance of not running out of money before age 90. In the 8.4% of negative simulations, the average age of shortfall was 71.

Interesting: Most spending occurs in the first years of early retirement, often on traveling. An average shortfall at 71, typically when retirement spending already started to decrease, upped the probability of success for my clients.

Here’s how this couple made early retirement work financially:

A good amount of savings. Even though $1 million isn’t what it was 10 years ago, it’s still $1 million – and this couple had it socked away. They did benefit from a very cushy pension but also regularly put money into a 401(k) and held other investment accounts outside of work.

No debt. This is huge. Their home was paid off; they had no car payments and zero credit card balances. In addition to enjoying healthy credit histories, the couple wasn’t forced to spend cash paying off high-interest loans.

Spending smart. Any couple who carries no debt while approaching retirement must be smart spenders. While this couple enjoys spending time with family and traveling, they do so frugally – not eating out a lot, not wearing designer clothes and not driving new cars.

Additional income sources. The couple’s 401(k), pension and outside investments didn’t open the door of early retirement alone. The husband held a side job consulting while still working full-time. I stressed the importance of making certain that he was able to continue consulting for at least four years into retirement.

Other assets besides the 401(k). Beyond a pension, this couple also owned rental property – another big contributing factor. Even though the property generates no cash flow now, it likely will once the couple pays off the mortgage.

These additional assets gave these clients many more options for stopping work in the late 50s.

They planned. Failing to plan is planning to fail, as the saying goes. I see no way you can ever retire early without sitting down with some kind of financial planner. My clients and I took a comprehensive look at their entire situation and desired lifestyle and ran several scenarios to see what moves made the most sense.

You worked hard and you deserve some extra post-career years. But remember: You rarely get to retire early twice.

Follow AdviceIQ on Twitter at @adviceiq.

Jeff Rose, CFP, is the founder of Alliance Wealth Management in Carbondale, Ill., and also is the founder of the website Good Financial Cents and Life Insurance by Jeff.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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Our first article looked at how a 50-something husband and wife stood nearly a 92% chance of retiring comfortably – and early. An optimistic financial plan for long golden years started with such basics as the couple’s income, travel plans and investments. Where to go from there?

Using planning software, we entered their assets, liabilities, investment strategy and income to run 1,000 different simulations that take into account market fluctuations, interest rates and other factors. Based on those simulations and the data, this couple (my clients, ages 56 and 57) has a 92% chance of successfully funding an early retirement.

What does a 92% chance really mean? For one, I typically tell clients that the 80% to 85% range is pretty good. Anything greater than 85% – especially 90% – and I’m that much more confident.

Simulations showed that this couple has, specifically, a 91.6% chance of not running out of money before age 90. In the 8.4% of negative simulations, the average age of shortfall was 71.

Interesting: Most spending occurs in the first years of early retirement, often on traveling. An average shortfall at 71, typically when retirement spending already started to decrease, upped the probability of success for my clients.

Here’s how this couple made early retirement work financially:

A good amount of savings. Even though $1 million isn’t what it was 10 years ago, it’s still $1 million – and this couple had it socked away. They did benefit from a very cushy pension but also regularly put money into a 401(k) and held other investment accounts outside of work.

No debt. This is huge. Their home was paid off; they had no car payments and zero credit card balances. In addition to enjoying healthy credit histories, the couple wasn’t forced to spend cash paying off high-interest loans.

Spending smart. Any couple who carries no debt while approaching retirement must be smart spenders. While this couple enjoys spending time with family and traveling, they do so frugally – not eating out a lot, not wearing designer clothes and not driving new cars.

Additional income sources. The couple’s 401(k), pension and outside investments didn’t open the door of early retirement alone. The husband held a side job consulting while still working full-time. I stressed the importance of making certain that he was able to continue consulting for at least four years into retirement.

Other assets besides the 401(k). Beyond a pension, this couple also owned rental property – another big contributing factor. Even though the property generates no cash flow now, it likely will once the couple pays off the mortgage.

These additional assets gave these clients many more options for stopping work in the late 50s.

They planned. Failing to plan is planning to fail, as the saying goes. I see no way you can ever retire early without sitting down with some kind of financial planner. My clients and I took a comprehensive look at their entire situation and desired lifestyle and ran several scenarios to see what moves made the most sense.

You worked hard and you deserve some extra post-career years. But remember: You rarely get to retire early twice.

Follow AdviceIQ on Twitter at @adviceiq.

Jeff Rose, CFP, is the founder of Alliance Wealth Management in Carbondale, Ill., and also is the founder of the website Good Financial Cents and Life Insurance by Jeff.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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Real Estate’s Bum Rap http://forestlaketimes.com/2015/01/23/real-estates-bum-rap/ http://forestlaketimes.com/2015/01/23/real-estates-bum-rap/#comments Fri, 23 Jan 2015 16:30:30 +0000 http://forestlaketimes.com/?guid=b28eab91fef2c4c61cce27b2706a942f What’s the best way to hold commercial real estate in a retirement portfolio? For many investors, the answer seems to be “not at all.” The reason is that real estate investments have burned people in the past and that stocks get more attention. That’s too bad.

Avoiding real estate is not a good idea. This asset class, appropriately owned, can help support you well in retirement.

Unlike stocks, which trade on a highly efficient and liquid exchange, trading real estate is inefficient and illiquid. The ease of buying and selling stocks is one of the major reasons the asset class is over-represented in most portfolios.

Based on the fascination of the financial press with the stock market, it’s easy to get the impression that stocks comprise the largest financial asset class. According to Matthew Yglesias, author of The Rent Is Too Damn High, the total value of commercial real estate in the U.S. as of December 2013 was $20 trillion. This equals the value of publicly traded stock. (The largest asset class is bonds with $37 trillion.)

While one could make a strong argument for owning equal amounts of real estate and stocks in most retirement portfolios, what’s striking is that very few hold any real estate at all. Certainly, there are good ways and bad ways to own property investments.

Probably the worst way to hold real estate is to own it directly. The only popular retirement plan that allows direct ownership of real estate is the self-directed individual retirement account. Unfortunately, the government discourages holding real estate this way by taxing it unfavorably. As I wrote previously, it’s not a good idea.

Registered limited partnerships were a popular way to own real estate in the 1980s. While someone made money on these investments, I don’t think it was the investors. I don’t know an investor who made a dime, but I do know some distributors and promoters who got very rich with them. The problem wasn’t the real estate but the lack of transparency inherent in a limited partnership. This allowed promoters and distributors to hide high fees and commissions that didn’t give the investors a chance of profiting.

Gradually, the real estate investment trust gained popularity as a better investment vehicle for owning real estate. Most REITs hold investment properties, such as office buildings, hotels and apartments. Their income comes from the rent. (Some trusts are collections of mortgages.)

A publicly traded REIT is similar to an exchange-traded fund, a form of a mutual fund. It trades on the major exchanges and invests directly in real estate. REITs receive beneficial tax breaks, must pass through 90% of their cash flow to investors, have a high degree of transparency and are highly liquid (meaning easy to buy and sell). But they also tend to specialize in vulnerable types of real estate, which can dip in value when hard times arrive. Office rentals, for instance, suffered during the Great Recession. So rather than hold REITs individually, I prefer to own a mutual fund that owns a diversified assortment.

Typically, REITs pay high dividends, averaging 4.1% yearly, double what a 10-year Treasury yields. Lately, REITs have done well for investors. According to the FTSE NAREIT All REITs Index, the category booked a total return (investment gains plus dividends) of 27.2% in 2014, versus 13.7% for the Standard & Poor’s 500 stock index.

The fees and commissions associated with REITs are very low, which helps make them a good choice for investment portfolios. It is also another reason they don’t often show up there, since most financial vehicles are sold, not bought. Mutual funds, annuities and cash value insurance pay much higher commissions to sales reps than exchange-traded REITs.

Wall Street solved that problem by creating the non-traded REIT, which does not trade on a securities exchange and therefore is highly illiquid. The benefits touted by salespeople are the potential for higher dividends, plus lower volatility than publicly traded REITs.

Here’s the downside: Their lower volatility is an illusion that their high illiquidity creates. They also lack transparency, which gives cover to charging high fees and commissions. The non-traded REIT is scarily like its older cousin of the 1980s, the registered limited partnership.

Including real estate in a retirement portfolio can be a good idea as long as the ownership is properly structured. A mutual fund that holds a broad diversification of publicly traded REITS is one way to help you build a strong foundation for retirement.

Follow AdviceIQ on Twitter at @adviceiq

Rick Kahler, MSFP, ChFC, CFP, is a fee-only planner and author. He is president of Kahler Financial Group in Rapid City, S.D. Find more information at KahlerFinancial.com. Contact him at Rick@KahlerFinancial.com, or 605-343-1400, ext. 111.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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What’s the best way to hold commercial real estate in a retirement portfolio? For many investors, the answer seems to be “not at all.” The reason is that real estate investments have burned people in the past and that stocks get more attention. That’s too bad.

Avoiding real estate is not a good idea. This asset class, appropriately owned, can help support you well in retirement.

Unlike stocks, which trade on a highly efficient and liquid exchange, trading real estate is inefficient and illiquid. The ease of buying and selling stocks is one of the major reasons the asset class is over-represented in most portfolios.

Based on the fascination of the financial press with the stock market, it’s easy to get the impression that stocks comprise the largest financial asset class. According to Matthew Yglesias, author of The Rent Is Too Damn High, the total value of commercial real estate in the U.S. as of December 2013 was $20 trillion. This equals the value of publicly traded stock. (The largest asset class is bonds with $37 trillion.)

While one could make a strong argument for owning equal amounts of real estate and stocks in most retirement portfolios, what’s striking is that very few hold any real estate at all. Certainly, there are good ways and bad ways to own property investments.

Probably the worst way to hold real estate is to own it directly. The only popular retirement plan that allows direct ownership of real estate is the self-directed individual retirement account. Unfortunately, the government discourages holding real estate this way by taxing it unfavorably. As I wrote previously, it’s not a good idea.

Registered limited partnerships were a popular way to own real estate in the 1980s. While someone made money on these investments, I don’t think it was the investors. I don’t know an investor who made a dime, but I do know some distributors and promoters who got very rich with them. The problem wasn’t the real estate but the lack of transparency inherent in a limited partnership. This allowed promoters and distributors to hide high fees and commissions that didn’t give the investors a chance of profiting.

Gradually, the real estate investment trust gained popularity as a better investment vehicle for owning real estate. Most REITs hold investment properties, such as office buildings, hotels and apartments. Their income comes from the rent. (Some trusts are collections of mortgages.)

A publicly traded REIT is similar to an exchange-traded fund, a form of a mutual fund. It trades on the major exchanges and invests directly in real estate. REITs receive beneficial tax breaks, must pass through 90% of their cash flow to investors, have a high degree of transparency and are highly liquid (meaning easy to buy and sell). But they also tend to specialize in vulnerable types of real estate, which can dip in value when hard times arrive. Office rentals, for instance, suffered during the Great Recession. So rather than hold REITs individually, I prefer to own a mutual fund that owns a diversified assortment.

Typically, REITs pay high dividends, averaging 4.1% yearly, double what a 10-year Treasury yields. Lately, REITs have done well for investors. According to the FTSE NAREIT All REITs Index, the category booked a total return (investment gains plus dividends) of 27.2% in 2014, versus 13.7% for the Standard & Poor’s 500 stock index.

The fees and commissions associated with REITs are very low, which helps make them a good choice for investment portfolios. It is also another reason they don’t often show up there, since most financial vehicles are sold, not bought. Mutual funds, annuities and cash value insurance pay much higher commissions to sales reps than exchange-traded REITs.

Wall Street solved that problem by creating the non-traded REIT, which does not trade on a securities exchange and therefore is highly illiquid. The benefits touted by salespeople are the potential for higher dividends, plus lower volatility than publicly traded REITs.

Here’s the downside: Their lower volatility is an illusion that their high illiquidity creates. They also lack transparency, which gives cover to charging high fees and commissions. The non-traded REIT is scarily like its older cousin of the 1980s, the registered limited partnership.

Including real estate in a retirement portfolio can be a good idea as long as the ownership is properly structured. A mutual fund that holds a broad diversification of publicly traded REITS is one way to help you build a strong foundation for retirement.

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Rick Kahler, MSFP, ChFC, CFP, is a fee-only planner and author. He is president of Kahler Financial Group in Rapid City, S.D. Find more information at KahlerFinancial.com. Contact him at Rick@KahlerFinancial.com, or 605-343-1400, ext. 111.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.

 

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School board sets bond referendum amount, pushes back vote to November http://forestlaketimes.com/2015/01/23/school-board-sets-bond-referendum-amount-pushes-back-vote-to-november/ http://forestlaketimes.com/2015/01/23/school-board-sets-bond-referendum-amount-pushes-back-vote-to-november/#comments Fri, 23 Jan 2015 14:51:20 +0000 http://forestlaketimes.com/?p=61198 Voters will be faced with two questions in the upcoming school facilities bond referendum after the Forest Lake Area School Board approved the recommendations of its facilities task force on Jan. 22. The board also voted 5-2 in favor of bringing the referendum to voters in November instead of May.

Question one can be passed on its own, but question two is contingent upon the passing of question one. Question one will include $73.32 million in deferred maintenance for all schools and $69.68 million in new construction, for a total of $143 million. Question two will cover $18 million in upgrades to the arts and athletic facilities.

Director of business services Larry Martini broke down the tax effects for the first two years of each question based on a median home value of $200,000. The $143 million question one would see the owner of a $200,000 home get a $71 property tax increase in 2016 and an additional increase of $106 more in 2017, for a total increase of $177 over two years. The $18 million second question would show no additional increase in 2016, a $21 increase paid in 2017, and an additional $7 increase paid in 2018. The school plans to soon release figures identifying the full tax effect for 2018 and beyond.

The school board members were given a chance to weigh in on the issue before it went to a vote. Member Julie Corcoran stated that she believed the proposal to be reasonable and easily explainable. Member Karen Morehead was pleased with the clear structure of the new proposal and found it easy to understand. She said that she really hoped the referendum would pass because the issues don’t go away and they don’t get any cheaper. Member Luke Odegaard praised Martini and the staff of the financial services company Springsted for their work in making the proposal and the tax effect easy to understand. Member Jill Olson hoped that the parents in the district will see that their concerns about the May 2014 referendum were addressed and that the board had listened to them. Member Dan Kieger praised the work of the task force and said he believes that the existence of two separate questions will give the referendum a better chance at passing Member Gail Theisen said that the messaging with the new proposal was very simplified and that she was excited and thrilled to be able to get out and get the referendum passed. She also mentioned that she had always been in favor of two questions as she believed any more than that would only serve to add confusion. Member Rob Raphael praised the task force for doing a great job at completing what he believed to be a nearly impossible task. He said that this bond is the core of what needs to be done to keep this district successful.

On the question of whether to bring the referendum to voters in May or November, there were two decidedly opposing voices. Luke Odegaard and Karen Morehead both gave passionate pleas, he for November and she for May. Odegaard requested time to build what he called a “communication campaign.”

“This proposal is much easier to understand than the first one we brought back in May 2014, but that doesn’t mean it is simple,” he said. “We all want this to pass, and I believe to get that result we need time to talk to people. May is too soon for us to be able to get all the information out there.”

Morehead worried about other districts bringing referendums forward in May and wondered how that would affect Forest Lake.
“We keep talking about how easy this is to understand and how this is such a nice package, and now were saying we want to wait a full 10 months before bringing it to the people,” she argued. “Stillwater is going in May, and if they pass, I am not sure what that will mean for us in November. My thought is that if, heaven forbid, we fail in May, we can come back for another try in November.”

Ultimately Morehead and Gail Theisen voted in favor of May, and Luke Odegaard, Jill Olson, Rob Raphael, Dan Kieger, and Julie Corcoran voted in favor of November.

The next step for the district is to put together a vote yes committee. That committee will prepare materials to be mailed to voters’ homes and also coordinate opportunities to be available at community events in order to further promote their message to the public. For more information about the specifics of the referendum please refer to the Jan. 15 edition of the Times or go click here.

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Bus line to Forest Lake? Open houses explore options http://forestlaketimes.com/2015/01/23/bus-line-to-forest-lake-open-houses-explore-options/ http://forestlaketimes.com/2015/01/23/bus-line-to-forest-lake-open-houses-explore-options/#comments Fri, 23 Jan 2015 13:56:27 +0000 http://forestlaketimes.com/?p=61123 Photo by Ryan Howard The 7:55 a.m. Metro Transit express bus to Minneapolis waits to depart from the Forest Lake Transit Center. A study is currently underway to determine possible additional transit routes to and from the Forest Lake area, as well as other parts of the Rush Line Transit Corridor.

Photo by Ryan Howard
The 7:55 a.m. Metro Transit express bus to Minneapolis waits to depart from the Forest Lake Transit Center. A study is currently underway to determine possible additional transit routes to and from the Forest Lake area, as well as other parts of the Rush Line Transit Corridor.

Area residents will have to wait for a while, but Forest Lake might eventually be the northernmost stop on a major public transit line originating in Minneapolis and St. Paul.

The project planners for the proposed Rush Line transit project held three preplanning open houses on the project last week, including a Jan. 13 session in Hugo. At the open houses, project leaders explained where the potential transit line could go, what kind of transportation could be used, and what needs to happen before the project can become a reality. Attendees also had the chance to ask questions and make suggestions.

The Rush Line Transit Corridor is designated by the state as the 80-mile stretch between Hinckley and Union Depot in St. Paul. After a transit alternatives analysis study in 2008 and 2009, a task force made up of representatives of affected municipalities – including council members Ben Winnick from Forest Lake, Jeff Duraine from Columbus and Linda Nanko-Yeager from Wyoming – teamed with the Ramsey County Regional Railroad Authority to begin looking at possible transit options from the Twin Cities to less-served northeast metropolitan cities.

Graphic courtesy of the Ramsey County Regional Railroad Authority Though there are still a variety of possible routes for a Rush Line public transit line starting at Union Depot in St. Paul, two possibilites that have been most discussed are a bus line up Interstate Highway 35E to Forest Lake and a light rail line to White Bear Lake.

Graphic courtesy of the Ramsey County Regional Railroad Authority
Though there are still a variety of possible routes for a Rush Line public transit line starting at Union Depot in St. Paul, two possibilites that have been most discussed are a bus line up Interstate Highway 35E to Forest Lake and a light rail line to White Bear Lake.

There are still many options on the table, but the two most discussed are a light rail line along RCRRA corridor land through Maplewood and Gem Lake, ending in White Bear Lake, and a bus rapid transit route up Interstate Highway 35E, ending in Forest Lake. Though those are the two most prominent options, said Project Manager Mike Rogers, other alternatives are still under consideration. The exact routes are nowhere near finalized, and Rogers said many residents made a variety of different suggestions, including extending light rail further north, using streetcars, or increasing or decreasing the number of stops for speed and/or accessibility.

“It could be bus or rail, really with the exception of 35E, which is a bus route,” he said. “We’re still really early on in this.”

Currently, the Forest Lake area’s lone Metro Transit connections are two express bus routes that run every weekday. A seven-stop route goes into St. Paul three times in the morning, and an eight-route stop goes into Minneapolis seven times in the morning. The routes then take riders back to Forest Lake in the evening. Both routes begin at the Forest Lake Transit Center and include a stop at the Running Aces park-and-ride in Columbus. Express buses differ from local buses in that they make fewer stops and cover more ground faster. They are primarily used as commuter buses, while local buses also allow riders to make short trips to other locations.

Forest Lake Zoning Administrator Donovan Hart attended the Jan. 13 work session. He said that increased public transit options to and from Forest Lake makes the city and the surrounding area more attractive for would-be employers, employees and residents, as the transit options make the area more accessible.

“We want to promote Forest Lake as a north metro destination for employment and … for new residents,” he said, remarking that the new City Council listed the attraction of good jobs to the city as a primary goal in its Jan. 12 meeting.

“Transit is a great attractor,” he added.

Rogers said the study and the transit line, if ultimately approved, are all about improving mobility in the places that need it most. In the Rush Line Transit Corridor, the numbers of elderly residents and people living below the poverty line increased in the corridor, while households without a car rose particularly in the corridor’s northern end. These people are all prime candidates to take advantage of public transit, Rogers said.

He noted that increased public transit is also being considered in the corridor because of Metropolitan Council projections for increased employment and residents. Out of all municipalities in the corridor, Forest Lake is No. 3 in projections for most residents gained between 2010 and 2040 at 9,923 residents, as well as No. 4 for projected jobs increases at 3,251.

That being said, Rogers added that there are some residents who harbor reservations about increasing public transit in the corridor, due to concerns about nuisance, the crowding and rerouting of recreational trails that currently exist in the RCRRA corridor, and project cost.

The project has no price tag attached to it right now because none of the details are set in stone – up to and including whether the project will focus on a bus line or a rail line. Metro Transit’s Blue Line light rail system, which runs 12 miles from downtown Minneapolis to the Mall of America in Bloomington, cost $715.3 million to build. The Green Line, which runs 11 miles between the Minneapolis and St. Paul business districts, cost $957 million.

Rogers said a Rush Line transit route is by no means assured. Part of the study, he said, is asking the question, “If we don’t do anything, what happens compared to if we do something?”

Hart said Forest Lake is encouraged by some of the possibilities discussed in the Rush Line study, including extending bus service into downtown Forest Lake, rather than stopping at the Forest Lake Transit Center on Forest Road North.

“The changes they made to create a more robust express bus service, the city supports, and what we’d like to see in the short term is the two-way express bus service,” Hart said, noting that a bus service that takes people north to Forest Lake in the morning rather than just in the evening would promote the town as a job center. However, he said, the demand for that service doesn’t appear to exist yet.

Moving forward, the task force will collect all of the different route options in February and spend the next few months researching which ones are feasible and which ones have “a fatal flaw,” according to Rogers. Then, in June, the task force will present all of the feasible solutions and begin narrowing down which ones would work best. If all goes according to schedule, the task force’s pre-project development would be about three-quarters completed by the end of 2015. Following that, about two years would be spent developing a final project, followed by engineering planning and ultimately construction. If construction is approved, Rogers said, it wouldn’t get going until after 2020.

“These things take about a decade if everything falls into place,” he remarked.

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