My regular readers know how much I despise 12b-1 fees. Those are the fees that mutual fund companies kickback to your broker or investment advisor for putting you into their funds. You never see the charge in your statements but it can be as much as one percent annually if you own a certain class of these funds called “C” shares.

“My broker doesn’t charge me anything,” protested a recent local investor “I just want better performance.”

I’ve heard those words countless times before. I said nothing but took a copy of his statements to review. After analyzing his portfolio, I discovered that not only had he paid that broker $16,000 in sales charges (called loads) but he was also paying $5,000 a year in 12(b)-1 fees. He was dumbfounded, although I quickly explained that many mutual fund investors were in the same set of circumstances.

Mutual fund companies normally have several classes of shares, for example, A, B and C shares. Each category may pay different fees and sales loads depending upon the category. C shares normally charge a 1% fee annually for as long as an investor owns the fund while “A “ shares may charge a 4.75% sales charge up front but a lower 12(b)-1 fee of about 0.25% going forward. The fee structure is intentionally complicated and rarely if ever appears on your statements.

Last week the Securities and Exchange Commission (SEC) announced a proposal to revamp these 12(b)-1 fees and require that these fees be disclosed to the investor. The SEC also suggested that broker-dealers should be able to set their own sales charges for mutual funds. The proposed rule change would cap the amount firms would charge for “marketing and services” (12(b)-1 fees) to 0.25%. Anything above that would be labeled an on-going sales charge and would be limited to the highest fees charged by the fund for shares without a sales charge.

For example, if a fund charged a 4% front-end load to an investor for buying one “A” share of its mutual fund, other classes of the same fund couldn’t charge more than that amount to the buyer over time. Since “C” shares charge investors 1% a year, the new rule would eliminate any 12(b)-1 fee after four years. Separately, the SEC proposal would create a new share class whose pricing would be determined by broker dealers.

This would be another important rule change and one that many broker-dealers don’t like. Most investors fail to realize that sales charges on mutual funds are fixed by the mutual fund companies. That means that brokers can’t compete with each other for your mutual fund business by reducing those charges. In comparison, commissions charged for stocks have been open to competition since the 1980s.

It is understandable, from the financial community’s point of view, why they oppose these changes. Last year 12 (b)-1 fees generated $9.5 billion for fund companies. Put another way, you the individual investor paid that much in addition to what you paid your broker or financial consultant in sales charges, which is several times that amount.

The financial services industry protests that there is already enough competition in the business with 4,600 broker –dealers vying for your business. They argue that if the SEC had it their way, brokers would only sell their clients the fund with the lowest possible price, with performance a secondary concern. Lacking only a sickle and black cowl, lobbyists warn that this would only encourage unscrupulous brokers to exploit their power to control prices and fleece the general public. Others lament that making this all about price devalues the counsel of the financial consultant or wealth manager to his/her clients. Finally, they say it would result in less, not more, competition as price wars developed and small firms would be forced out of business.

These were the same arguments used when the SEC de-regulated fixed commissions on stocks in the early eighties. Sure, some firms did go out of business because they couldn’t survive without gouging their customer base but it actually encouraged dozens of new discount brokers to open their doors. As for the advice of your investment advisor, after the financial crisis very few investors value their advice anyway.

My own experience in reviewing thousands of portfolios is that most advisors/brokers seek to place their clients in the highest fee-generating securities they can find while performance appears to be a secondary consideration. At least from the SEC’s point of view, why pay more when you can pay less for the same crappy funds.

The next time you run out of ideas for that perfect gift, save this column. I am about to give you over 200 one of a kind gift ideas that will cost you only as much as you want to spend and at the same time make anyone happy. Global Giving beats the heck out of giving your old man that gift set of Old Spice or your brother a gift card from Amazon.

Birthdays, Father’s Day, Mother’s Day, Valentine’s Day and maybe a half dozen other holidays a year require that we send someone a gift or at least a card. If you are like me, you’ve been conditioned to give, give, give through billions of dollars worth of marketing and advertising as a way of showing our love and appreciation. We scurry through the stores and catalogues to find a gift, sometimes any gift and gift giving means big money. Almost $10 billion alone, for example, was spent on gifts for fathers in America last month on Father’s Day and it’s not even the biggest gift giving event of the year.

Given that I am a notoriously difficult person to buy a gift for, the message from my daughter that popped up in my e-mail on Father’s Day morning really caught my attention.

“A Global Giving Gift Card for Bill from Jackie,” it read.

Jackie is my daughter so I immediately clicked on this missive and read the following:
“Happy Father’s Day, Dad, in lieu of a tie you won’t wear or a cookbook you probably already have, please use this gift card to support a project. Love, Jackie.”

Intrigued, I clicked on the attached web site—www.globalgiving.com—and was immediately captivated by both the idea and the simplicity of the organization. Global Giving, I discovered, is an online marketplace that connects you, the donor, to a whole host of causes and countries throughout the world.

Scrolling through their list of countries from Afghanistan to Zimbabwe I was immersed in one fascinating project after another. These projects would tug on the heartstrings of even the most callous and cynical observer. Children, animals, climate change, disaster recovery, human rights, health, women and girls, technology; the list of causes goes on and on. My daughter, in her own name, contributed to a project in India which provides clean water for drought-affected families as well as a program to establish and support models schools in Afghanistan.

Each project provides the background of the project, biographies of those who run the projects, where each is located and a wealth of information on the people the project is helping. There are also updates and a running total of contributions to date.

The Global Giving Foundation is a 501(C) 3 registered non-profit corporation founded by two former World Bank executives Mari Kuraishi and Dennis Whittle. The Foundation uses 15% of your tax-deductible contribution to help cover the costs of operating the internet marketplace, finding and researching projects, supporting project leaders in the field, attracting donors and building their website. That is a far lower percentage than most charities spend in covering overhead and administrative expenses.

So what project, you might ask, did I pick for my contribution? Well, I split my gift with the lion’s share going to HeroRATS, a project run by an organization called APOPO, based in Belgium, whose founder and director, Bart Weetjens, lives in Tanzania. As many of my readers are aware, I have a deep attachment to Africa where I have travelled and conducted business for over 25 years.

APOPO trains large rats to sniff out landmines in Mozambique. Twenty-eight HeroRATS and their human partners are deployed in that country’s abandoned and highly treacherous mine fields. The rats can find this deadly ordinance faster, more efficiently and with more far more safety then high-priced mine detectors since the rats are too light to set off the mines as they scurry among them. But that’s not all.

These rats do double duty. In Tanzania (where my wife and I were married) HeroRATS are trained to detect cases of tuberculosis. The rats are trained to sniff samples of sputum from suspected victims of this horrible and highly contagious disease. So far they have identified 905 patients that were missed in traditional screening by local hospitals. Once again the rats beat out modern technology (in this case, technician with microscopes). The humans can screen about 40 patient samples daily while rats can do that many in seven minutes.

As a self-confessed animal lover and a Vietnam Veteran, I gave a donation to help feed 140 orphaned chimpanzees and the final third of my contribution to helping U.S. war vets suffering from Post Traumatic Stress Disorder. They are beginning to heal with the help of shelter dogs who visit with them. My money will go to help feed and shelter some of these animals that would normally be euthanized.

I have picked those projects which have inspired me personally. There are plenty more to choose from among the hundreds of projects Global Giving offers in over 100 countries. As for my Father’s Day present, it was a gift that I will remember for a long, long time and think of my daughter every time I do. So the next time you feel the need to give a gift but don’t know what to get, remember Global Giving. It can turn a sometimes daunting task into something worthwhile and rewarding and its tax deductible as well.

Given the volatility of the stock market over the last few weeks, it is no surprise that annuity and life insurance salesmen, brokers and financial advisors are once again touting the wonderful benefits of fixed and variable annuities. Don’t get sucked into their sales pitch because the facts are that annuities only make sense for a tiny fraction of the population.

A variable annuity is basically a tax-deferred investment vehicle that comes with an insurance contract that is designed to protect you from a loss of capital. Because it is sold under the name “insurance” the earnings inside these annuities grow tax-deferred like an IRA or 401(K), but are not subject to annual contribution limits. Withdrawals after the age of 59 ½ are taxed as income and early withdrawals are subject to an additional 10% penalty just like other tax-deferred accounts.

Many fixed annuities promise a guaranteed rate of return, no matter what the stock market does. Others offer both a guaranteed return (usually lower than the going rate on CDs) while also offering investors a piece of any upside gains in the stock market. Most annuities also come with a death benefit which guarantees that your account will hold a certain value should you die before the annuity payments begin. That means that your beneficiary will at least receive the total amount you invested, even if the account has lost money.

Given all these wonderful attributes, “What’s wrong with annuities?”

Nothing is as simple as it appears. If you have the time, knowledge and perseverance to wade through all the paperwork that accompanies these investment vehicles, you realize that all of them have “gotchas”. “Gotchas” are the fine print, exceptions and caveats that come along with these guarantees and promises.

Be aware that annuities are long term investments, usually 20 years or more. Yet, rarely do investors realize that once in, it is expensive to get out. There are penalties or surrender charges you pay in the event you change your mind and decide to sell. These could be as high as 10% if you sell early within a year or two and gradually drop until most (but not all) annuities allow you to exit after seven to ten years without penalties.

The selling pitch that annuities will go up in value if the market rises but are insured against losses if the stock market falls is compelling. It sounds like a free ride and that’s what should tip you off. Read the fine print. You will usually find that part of the contract will only be honored if the investor dies; otherwise you lose with the rest of us on market down days.

Annuities may do fairly well in protracted periods where both stock markets are down and interest rates are low but those circumstances rarely occur together. They do poorly in times of inflation, especially fixed annuities, or in times of high interest rates or strong stock markets. Overall, annuities’ performance has been sub-par but that’s not what the broker is selling.

In volatile times like these, the financial industry, like sharks in bloody water, will capitalize on the fear investors are experiencing, especially among the elderly or those already in retirement. Never buy an annuity because you are afraid of the financial markets. If the guarantee is what attracts you to the annuity, you should take a hard look at the insurance company behind the product. How healthy is the underwriter? A number of insurance companies have had financial problems and not all of them are pillars of safety even today.

Never buy a tax-deferred annuity in another tax –deferred account such as a Traditional IRA, Roth IRA, 401(K) or other retirement account. In doing so, you are getting no added tax benefit and are adding an insurance expense. It’s like wearing suspenders with a belt.

Finally, readers should understand that annuities generate huge fees for brokers and agents. The commission and fees can be 10% of the amount you invest or higher, far more than commissions paid on stocks and mutual funds. Annuities also provide the broker or advisor with an income stream for years to come, which continues to drain your investment. Naturally, none of these fees are included when the salesmen are touting the annual rate of return of your annuities. The harsh reality is that it will take investors several years just to break even on this investment after fees.

Ask yourself how relevant the annuity is to your financial goals and whether it truly is the best solution to your needs. Chances are it won’t be. Most risk-adverse investors would save a lot more money and be better off by simply buying several certificates of deposit with different maturities. They pay as much as guaranteed fixed annuities; and if you do want some exposure to any potential growth in the stock market simply buy a few mutual funds.

Remember that no matter what that broker says, annuities are not risk-free investments. They are illiquid, subject to interest rate and market risks, counter-party risk as well as burying you under a mountain of fees and expenses.

Every day is Earth Day as far as the government is concerned, at least when it comes to converting America’s homesteads to green power. Energy efficiency makes sense from a bottom line point of view, whether you are a millionaire or just one of us working stiffs. Here’s why.

Both the Federal government and the Massachusetts State government have combined to offer all of us generous tax incentives and tax credits to convert a long list of inefficient energy items from roofs to the boilers in our basements to energy efficiency. Rarely do we get the opportunity to do something that is socially responsible for the environment and at the same time profit from it personally. And I’m not just talking about the tax savings either.

Did you know that 3% of our national energy consumption is used for drinking water and wastewater services? If one out of every 100 American homes retrofitted with water-efficient fixtures, we could save 100 million KWh of electricity per year and avoid adding 80,000 tons of greenhouse gas into the atmosphere.

Energy retrofitting is a much bigger movement than you imagine. By increasing the efficiency of the nation’s homes and businesses we can reduce energy consumption by up to 40% per home and reduce the nation’s energy outlay by $21 billion each year. Just in upgrading heating appliances alone, consumers can save $10 billion and prevent 164 million metric tons of carbon dioxide emissions over 30 years. Just this month the energy department increased standards for a key group of heating appliances including residential water heaters, pool heaters and direct heating equipment such as gas fireplaces. These new standards alone will reduce air pollution equivalent to taking 46 million cars off the road for one year.

Last year’s economic stimulus package revived, expanded and built upon many energy-efficient home improvement tax breaks that expired in 2007. The non-business energy property tax credit, for example, provides a credit of 30% for the cost on new insulation, energy efficient windows, doors, furnaces, air conditioners, appliances, heat pumps, water heaters and boilers, up to a maximum of $1,500. However, you would need to spend at least $5,000 on qualified energy-efficient home improvements to claim the full credit.
There is also the residential energy-efficient property tax credit, which covers more ambitious projects such as solar electricity, water heaters, geothermal heat pumps and wind energy products. This tax credit covers 30% of the cost with no maximum. The credit is good through 2016 as well.

Remember too that these Federal programs are in addition to state and local incentives and Massachusetts is ahead of the curve when it comes to energy efficiency incentives. If you would like to discover what programs are available to you, contact MASS SAVE (massave.com), which is an energy resource organization consisting of the state’s utilities, energy efficiency service providers and state organizations that provide a wide range of services, incentives, training and information to promote energy efficiency.

Even closer to home is the Center for Ecological Technology (CET), the Pittsfield-based, non-profit organization that carries out most of Mass Save’s energy services in western Massachusetts. Besides furnishing you a wealth of information and guiding you through the various incentives, CET conducts energy audits for over 5,000 homes a year in this area, which is something every household should consider as a first step toward going green.

And don’t forget the electric car tax credit which offers taxpayers up to $7,500 towards the purchase of a plug-in electric-drive vehicle. So if you have a hankering to be first on your block to buy one of GM’s Volts when they officially launched this year, the tax credit will help reduce what is expected to be a high price tag for the American-made plug-in.

All in all, the impact of that first Earth Day twenty-five years ago has been truly impressive. I remember attending that celebration in Philadelphia’s Fairmount Park along with 20,000 other early environmentalists back in 1970. Back in the day, we were worrying about the fate of America’s much-polluted Great Lakes and the harmful effects of spraying DDT all over anything that vaguely resembled an insect.

Although some of the more dire predictions of those times, like Life Magazine’s warnings that “By 1985, air pollution will have reduced the amount of sunlight reaching earth by one half” failed to materialize, I believe without this historical event we might not have an Environmental Protect Agency and its equivalent organizations in all of our states. The Great Lakes are still here. The lightning bugs and Bald Eagle are back. And air quality today in the United States is better than ever before with air pollution declines of between 40% and 92 % since 1980, but we still have a long way to go in every area of the environment.
The big difference between then and now is that our government is a willing partner in the Greening of America. It is putting its money on the line and you should too. Celebrate Earth Day this year by arranging for an energy audit of your house and then take advantage of the energy incentives. It’s the most sensible way I know to cut your living costs in these tough times and insure your grandkids still have a planet to live on.

In the financial services industry, most people don’t know the difference between a stock broker, insurance salesman, financial planner, advisor, consultant or wealth manager. That’s not an accident. Wall Street has spent a great deal of money and time confusing you on purpose. I believe in this age of confusion, misinformation and desire for honesty, most people want their advisors to treat them differently. But exactly how they should be different is, for most, difficult to describe.

Until last week, advocates for financial clarity (myself included) had hoped that the upcoming financial reform legislation would establish a standard for all of the above named whiz kids, but the Senate killed that hope. So now that you are once again on your own, I feel obligated to provide some clarity on the matter. In my opinion, the first and most important requirement of any financial provider is that they should act as your fiduciary.

In its simplest terms, fiduciaries are people who put your interest above their own and above their company’s interest. When it comes to your life savings, I believe this is crucial to your financial well being, but what does putting your interest first mean in concrete terms? Here are some examples.

Although the law requires that advisors invest their clients in “suitable” investments, i.e. investments suitable to your investment objectives and financial circumstances, there are thousands of suitable investments to choose from. Many of them have poor performance track records but coincidentally provide your broker or advisor with high fees at your expense. Other investments have very high expenses and good records while a few have low expenses and a great performance history. When you select a fiduciary, he or she takes the suitability rule one step further. They will act as your agent and seek the very best suitable investments for you at the best prices, at all times. They are also required to provide impartial advice and act with skill, care, diligence and good judgment when dealing with you and your investments.

In addition, when you hire a fiduciary, you will always know exactly what you are getting and where you stand since they are obligated to provide full disclosure of all important facts, including compensation from all products and services they provide, as well as fees paid to others on your behalf. If in the course of doing business, conflicts occur, those disputes must always be resolved in your favor.

Now not all fiduciaries are the same. Some may adhere to the letter of the law but operate within a gray area which is not quite legal or illegal. As an example, an investment advisor may say nothing but instead put a written disclosure in its brochure revealing a kick-back from a fund company. Usually, it is in tiny print buried among other financial jargon and legalese similar to the disclosures on the back of your monthly credit card statement. These advisors are counting on the fact that few people read these things.

It is up to you to discover these buried land mines and demand the advisor prove in writing that investing in those funds that provide him a kickback are in your best interest. Once caught, very few of these bad apples will present written evidence (because you can take that to the SEC) and instead try to verbally con you into accepting their arguments.

Some financial advisors are required by the Securities and Exchange Commission to act as fiduciaries, such as registered investment advisors and their representatives. If they violate their fiduciary responsibilities you can report them to the SEC.

Others, like Certified Financial Planners, are required to go through a rigorous two day examination in order to be certified by the Certified Financial Planner’s Board as fiduciaries. That does not preclude other financial service personnel from becoming fiduciaries. However, in practice, the goals and objectives of most other financial services firms are in conflict with these principles and do not want their employees to act as fiduciaries.

It was with this conflict in mind that countless efforts have been made to change the status quo, but Wall Street will have none of it. A fiduciary standard would threaten the very basic premise of their business, which is to make money at any cost, regardless of who must pay. Usually it’s the individual investor. Fortunately, you still have a choice.

So the next time you are shopping for a new broker, money manager or planner, insist that they and their firm sign this “Fiduciary Pledge” written by a Fiduciary columnist, Blain F. Aikin of “Investment News” presented below. If they won’t, run for the hills!

“I, the undersigned, pledge to exercise my best efforts always to act in good faith and in the best interests of my client, [insert client's name here], and will act as a fiduciary. I will provide written disclosure, in advance, of any conflicts of interests that could reasonably compromise the impartiality of my advice. Moreover, in advance, I will disclose any and all compensation I will receive as a result of the products and services I provide you, and all fees I pay to others for referring you to me for the products and services I offer you. I recognize that you rely upon me, and are compensating me, for trustworthy advice; therefore, I acknowledge that this pledge covers all the products and services provided in this engagement.”

This year the tax laws are changing. If you have a Traditional IRA, Roll-Over IRA or another tax deferred plan like a 401 (K), 403 (b) or 457 (b) you can now convert to a Roth IRA, regardless of income level. Better yet, the government is giving you an added incentive to convert by allowing you to pay the taxes due on the conversion over two years. So why are so many investors hesitant to do it?

If this topic sounds familiar, it is, because back in March, 2009 I wrote a column on this opportunity to convert. Unfortunately, at that time it appeared the financial world as we knew it was coming to an end. The stock markets were at their lows, the popular media had us believing we were entering the second Great Depression and converting to a Roth IRA was not high on anyone’s agenda since everyone’s savings were going to be wiped out anyway.

From the avalanche of requests I’ve been getting from clients and readers alike, I thought it advisable to review the pros and cons of conversion now that most people believe we are back on the road to recovery. First, a few basics in the mechanics of both Traditional and Roth IRAs: contributions to a Traditional IRA are tax-deferred, until 70 1/2 years of age. At that time, you are required to take a minimum distribution (RMD) each year at whatever tax rate you are in at the time. If you pull money out of a traditional IRA before 59 ½ years of age, there is a 10% penalty with some exceptions (hardship, a down payment on a home, education, etc.).

In comparison, a Roth contribution is after-tax money that will grow tax free forever. There is no RMD, there are no withdrawal penalties after five years and you can keep contributing until you stop filing a W-2. Up until 2010 there was a salary cap of $100,000 or under to qualify for converting. That cap is gone for this year. For the first time, over 13 million investors will be eligible to convert to a Roth IRA if they want to. Who should convert?

Anyone who isn’t working or who is retired and living on a fixed income generally make good candidates for conversion. The caveat, of course, is that you need to have the extra money available to pay the taxes on the conversion, even if you have until 2012 to pay them. And no, you don’t want to pay the taxes by taking even more money out of your IRA. That would defeat the purpose of the entire exercise. For retirees, there is an added catch. If you are taking social security, the added income you have to report from the conversion may cause more of your social security benefits to be taxed that year.

Future tax rates should also be a consideration for all of us. In my prior column, I pointed out that with the historically high deficits we face; does anyone seriously believe they won’t be paying higher taxes in the future? Income taxes, for example, are scheduled to increase in 2011. The current tax brackets of 25%, 28%, 33% and 35% will revert to their pre-2001 levels, which will mean that regardless of bracket, we will all be paying 3% more in taxes. That’s just for starters. Conceivably, you could be paying higher taxes in retirement than you are paying now as a wage earner if government has their way.

Bottom line: If you expect your income to increase in retirement or if you expect (or want to hedge against) higher future tax rates and if you have enough assets outside your Traditional IRA to pay the additional taxes, then you might want to consider conversion.

If, on the other hand, you are well-off and plan to leave assets to your children then the Roth IRA can be an ideal wealth transfer tool. Since there is no RMD, your Roth can continue to grow and earn unobstructed by mandatory withdrawals. It can be passed on to your beneficiaries who will enjoy the tax-free benefits of the inherited Roth, especially if they reframe from tapping it until they retire.

If you are leaving it to your grandchildren, the benefits could be even greater. Inherited IRAs can be distributed over the beneficiary’s life expectancy. Given the long life expectancy of say, a three year old grandchild, required distributions should be relatively small allowing the bulk of the Roth assets to grow for many decades.

For those above $3.5 million in assets, a Roth conversion is a no brainer in my opinion. Prepaying the tax on a Roth conversion, you can reduce your estate by the amount of the tax. That would reduce your estate tax at the time of death. Given estate tax rates as high as 45%, the potential estate tax savings trumps just about any other consideration.

As you can see, there are a number of variables in this equation that are based on the future—tax rates, your income, the tax code in general—which we can’t possibly know. So converting for one person might make good sense, while for another, it could be a disaster. Your tax accountant should be your first stop in working through some of these areas I’ve mentioned. Once you know the facts as they pertain to you, you can make an educated guess as to your possible outcomes. That’s about all you can expect.

Congratulations, as of this year, women officially control the majority of privately-owned financial assets in this country. Not only is that wealth an awesome responsibility, but it also presents women, especially Baby Boomers aged 45 and over, with an enormous opportunity. Here’s how you can prepare.

Knowing how to handle your finances has become a necessity for all women. The older you are, the more important an understanding of your assets has become. In my last column “Women baby Boomers are at a Crossroads” I laid out my case for why acquiring this financial education was absolutely necessary. But becoming educated and prepared doesn’t have to be difficult. If you apply yourself and at the same time utilize financial professionals that specialize in working with women investors, the process can actually be fun.

In the meantime, get involved in managing your family’s finances. You may already be doing some of that. I don’t mean just paying the bills and keeping the checkbook balanced (although that is important too). I had asked you to get your financial records together. Now I want you to begin the process of understanding what is going on with your family’s investments, estate plans, insurance policies, deferred savings plans and taxes. Know where all your money is and the location of all important financial documents. Understand both your employee benefits and your husband’s benefits, review all bank and investment statements each month and start keeping organized records.

“But that’s my husband’s job,” protested one woman who recently became a client.

“Not anymore,” I explained,” it is a shared responsibility and both parties need to understand it thoroughly. If your husband won’t explain it, I will.”

It turned out that the spouse was actually happy and enthusiastic in his response. He later confided to me that he has often worried about what would happen if he passed away prematurely and his wife was left sorting out his finances. He had a right to be worried since over 75% of women are widowed at an average age of 56 and 1 in 4 of these women are broke within two months of being widowed, according to the National Center for Women and Retirement Research.

As I’ve written in the past, women often do not have their own retirement savings. Mothers who stay home and take care of the kids rarely set aside money for their own savings, depending instead on their husband’s account. Women also go in and out of the work force far more frequently then men and feel that contributing to their company’s retirement plans is simply a waste of money or worse, they use it to rescue their families from financial emergencies or even as a vacation fund. That’s a mistake. I firmly believe that women need to start their own retirement accounts. And speaking of married woman and their future, plan your financial life as if you will be on your own someday. Statistics indicate that is likely to happen since women outlive men by an average of seven years.

As I’ve already mentioned, start managing your finances together, have separate credit cards in your name and make sure that your name appears on all investment accounts accumulated during your marriage. Also think about getting term life insurance coverage that will replace at least 60% of joint earnings.
If you follow the steps I have outlined above, you will soon have a handle on where you are now. Knowing what you have or don’t have in financial assets is an important first step in this educational experience. From there, you can begin to formulate your financial goals.

Knowing what you want will help you get to where you want to be on the road to financial empowerment. Whether it’s learning to make wise investments, saving for retirement, your children’s education or an entirely new career, it starts with a financial goal and a plan to get there. In my next column in this empowerment series, I’ll discuss investment strategies for women designed to achieve your goals. In the meantime, you’ve got a lot to do.

This year women, especially, women in their fifties and up, will control the lion’s share of America’s privately-owned wealth. That should be good news to most boomer women, but good news is sometimes deceiving.
For example, according to the National Center for Women and Retirement Research nine out of ten women will be alone and responsible for their own finances at some point in their lives, and 75% of women will be widowed by age 56. Unfortunately, many middle-aged women are ill-prepared for the financial downside of these circumstances.

Some of the financial challenges women face today are unique to Baby Boomers. There is what is called the “sandwich” dilemma, something I have written about in the past (see “Boomer”). Men and women of my age (I’m 60) face the prospect of supporting children far longer than in the past. Our student children are carrying an increasing amount of college financial debt while at the same time earning less in real wages then we did at their age. As a result, it is taking kids longer and longer to become financially independent and leave the homestead. For single, divorced or widowed women having to face their own retirement issues, this can be an enormous burden.

The flip side of that coin is aging parents: those whose golden years have been marred by the twin catastrophes of failing to save enough for retirement, and health care insurance that is woefully inadequate for their needs. Although taking care of parents is nothing new for middle-aged women, parents live longer today, and keeping them alive is a lot more expensive.

As a result, whether you’re a mom, daughter or both under these circumstances, statistics show it is you who will bear the brunt of support at this critical time; when what you should be concentrating on is saving for your own retirement. Instead, Boomer women find both their financial and emotional resources devoted to their roles as parent and/or child. These additional duties can have a substantial impact on their work lives and careers. They may need to quit their job or work part-time in order to manage their care-giving responsibilities which further reduce their ability to save, an qualify for, health care and other benefits.
And speaking of health care coverage, a middle-aged woman who loses or leaves her job (either because of an aging parent or to join her older husband in retirement) can have a difficult time finding coverage again. Consider too that health insurance in this country is largely employer-based. How many women readers are insured right now by their older husband’s employer? Once he retires at age 65, he’s eligible for Medicare but what about you?

The same situation applies to single women under age 65 who, for whatever reasons, retire early. At the very time your healthcare needs will be increasing, you have no coverage. And as we all know, health care costs are high and still climbing. It is not surprising that, on average, older women spend 20% of their income on medical expenses. Since they normally live longer then men, those costs could bankrupt the female Boomer. It is one of the reasons that 87% of poverty stricken elderly Americans are women.

Women also tend to move in and out of the labor market more than men (marriage, children, aging parents etc.). That means fewer years in the workforce and therefore less time in employer-sponsored retirement plans as well as lower Social Security benefits when you retire. Even when women do hold full-time jobs, they are normally paid less than men. Two out of three working women earn less than $30,000/year and nine out of ten earn less than $50,000. Traditionally, half of all women work in relatively low-paid jobs without pensions and when they do get a pension, women retirees receive, on average, about half the benefits of their male counterparts.

Divorce rates, which are over 50% in this country, and widowhood (which is higher) means losing one out of two Social Security payments each month as well as the loss of pension benefits (in the case of divorce) and health care coverage. Having a husband in America today, according to the Center for Retirement Research at Boston College, is the single most important factor in determining the average woman’s economic status in her later years. At the same time, you better hope your husband lives frugally and does not accumulate a lot of debt because when he passes on that debt is your responsibility. Is it any wonder that one in four women are broke within two months of being widowed?

Now that I have your attention, the good news is there is a growing awareness among Boomer women that they need to radically alter their game plan and do it now. Next month I will begin to outline the steps you need to take to avoid becoming one of these depressing statistics down the road. In the meantime, here’s your homework: I want you to get your family’s financial records together, including expenses, sources of income and assets. You will need them when you read my next column.

New Year resolutions, I suspect, will be quite popular this year, especially in the financial and investment areas. Given the horrible losses most of us sustained last year in our retirement accounts, followed by a pink slip at work for over 10% of us, makes for a bit of soul-searching as 2009 comes to a close.

According to a survey conducted by on-line broker TD Ameritrade Holding Corp., 75% of people plan to make at least one personal financial resolution this year. That’s a high number, but a half dozen other surveys confirm that that there will be a substantial increase in people that have put improving their finances at the top of their resolution list. There has also been a sharp increase, according to these surveys, in our willingness to start to build (or re-build) our tax-deferred 401 (K) and/or IRA plans.

It turns out that young people (ages 18-34), are more likely to make a New Year’s resolution than any other age group. Overall, 63% plan to save more money regardless of age while 48% say they plan to reduce debt. Given these numbers, I thought I would give readers a simple “how to” list in order to achieve these goals.

Start with creating a budget and including your family in this process. For some inexplicable reason, talking about money among most American families has been a taboo subject. We can no longer afford that antiquated misconception. So sit down and figure out where your money is going every month, beginning with non-negotiable bills like mortgage, auto and utility payments. Add in things like tuition, and whatever other bills must be paid. Then, over the next 30 days, calculate your variable costs—food, clothing, gas, video rentals, movies, cigarettes, liquor, etc. Now calculate what’s coming in.

Resolution one: under no circumstances can your cash out-flow exceed your cash in-flow. If it does, cut your variable costs and/or increase your income. That may mean a side job for you or another member of your family or cutting down variable costs that over the years you talked yourself into believing are necessities.

Along those same lines, cut up your credit cards unless you’re paying off your entire credit card balance every month. Credit card debt is one of the worst financial choices anyone can make. If you are in over your head, you may qualify for a modified payment plan with reduced interest rates. Call your credit card company and explore your options.

Resolution two: if you’re lucky or rich enough not to be in debt or at least your debt is manageable, spend less and save more by investing automatically. It has never been easier. Resolve to talk to your employer today about automatically depositing from your paycheck, the maximum amount into your tax-deferred savings plan –401(K), 403(B), Traditional or Roth IRA, SEP IRA, Profit-sharing, among others—next year. Actually, you still have time (until April 15, 2010) to contribute the maximum amount for 2009 into your IRAs. If you can’t afford the maximum (after doing your budget) contribute the most that you can, but do it automatically. Don’t make the mistake of thinking you will have the discipline to take that money out of your paycheck each month and save it. Statistics show that less than 10% of us are disciplined enough to do that.

If you are already doing these things then here are two more suggestions. Start an emergency fund which will cover three-to-six months’ worth of expenses and use it only when the roof caves in, the dog needs an emergency operation; you get laid off or another emergency of a similar nature.

In addition, make sure you have adequate insurance coverage for health, life, auto and home. There is nothing like one of the above, un-insured emergencies to set you back ten years, wipe out all your savings, and send you to the poor house deeply in debt.

Finally, financial resolutions are much harder to make and keep then other personal resolutions so don’t give up just because you can’t execute your resolution perfectly. It’s attitude that counts. Saving ten dollars is better than spending ten dollars you don’t have. Making less than the maximum contribution to your tax-deferred saving plan is still better than not making any contribution at all. I believe that 2010 will be a far more promising year for all of us if we focus on our financial health. It’s long overdue.

On New Year’s morning, Bill and Barbara Schmick will be kicking off 2010 with more on the subject of financial resolutions and how to make them happen.
Tune in Friday to “@theMarket,” a half hour investment radio show co-hosted by Bill and Barbara Schmick, of Berkshire Money Management, located in Pittsfield, MA.
Station Time
WNAW (AM1230) 8:35am
WSBS (FM 94.1/AM 860) 9:35am
WBEC (AM 1420) 11:05am
A recording will also be available on Berkshire Money Management’s website, www.berkshiremm.com, every Friday afternoon.

Over the last two years trillions have been spent to aid and assist Wall Street’s wealthiest bankers, Detroit’s blue collar auto workers, owners of gas-guzzling clunkers, first-time home buyers, thousands of Americans facing foreclosures and maybe another dozen or so programs, that we, the long-suffering, silent majority, will have to pay for. Yesterday, however, Washington finally threw us a crumb. Let’s just hope it will pass a House vote.

Buried within a Wall Street Journal page two story entitled “Senate Alters Taxes for Big Companies”, our lawmakers passed a bill that would allow buyers who have owned their current homes at least five years to be eligible for tax credits of up to $6,500. The first time home buyers $8,000 tax credit will also be extended to April 30, 2010 for closing by June 30, 2010. More than 1.25 million taxpayers have taken advantage of this credit which has cost you and me $8.5 billion so far. Unemployment insurance will also be extended for another 20 months since one million Americans have run out of unemployment insurance. Now, the House must take up the bill.

One of my editors –I won’t mention which publication—sent me an e-mail a few weeks ago. I was writing a column about the cash for clunkers program and she took a few minutes to vent. Like me, and I suspect most of my readers, she is a member of the silent majority.

“… and if I may vent for just a minute, those of us (like me, of course) who could use a new car but already has been (shocker!) driving a fairly efficient vehicle once again misses out. Kinda like those of us (like me, of course) who use credit cards responsibly probably will be hurt with the new credit card law. Don’t get me going on that! I’ve always been politically moderate and fairly friendly to the government, but I’m sick of living my responsible, efficient little life and having jerks who have to drive 10-mpg monster trucks and build up credit card debt (probably buying gas, no doubt), not to mention greedy corporate idiots, get the perks and bailouts. It’s turning me into a government-hater, or at the very least, a Republican … yikes Sorry, just had to vent for a minute. Sensitive topic!
Have a nice day!”

Now I know that all of these programs are intended to save the world from financial collapse, keep unemployment as low as possible and put the country back in recovery mode. But from where I sit, those of us who have tried to do the right thing in life like live within our means as environmentally aware taxpayers, who save for retirement and keep our greed in check have come up on the short end of the stick this time.
Our retirement savings have been decimated. We will be in hock as a nation for the rest of our lives. Our social security will probably be cut in half and most of us will have to continue to work far longer then we expected.

My wife, Barbara and I have been house-hunting in Massachusetts. Before we started, we crunched the numbers, carefully considering whether we could afford it before embarking on this new venture. Granted, a $6,500 tax credit may not seem like much in the grand scheme of things. It is a tiny amount if you compare it to the billions culprits like Morgan Stanley, Bank of America, Merrill Lynch and others responsible for getting us in this mess were given, but to us it’s a lot and we’re grateful nonetheless.

I guess the moral of this tale is that it doesn’t take much to keep us, the silent majority, happy. Maybe our law makers are starting to figure that out.