Even if you have years before you qualify, why focus on Medicare and Medigap now? Because as big changes happen in our healthcare system, those who understand the programs and products ahead of time will not only be better equipped to plan for their post-retirement healthcare options, but they’ll have a better understanding of these critical federal programs change over time.

A visit with a CERTIFIED FINANCIAL PLANNER^TM professional, like the ones at MHB Financial Group, can give a broader view of what the federal government will and won’t pay and how you should plan your coverage going forward.

Here’s a summary:

Who is eligible for Medicare? More people than you might think believe Medicare is available to anyone over the age of 65 who is a U.S. citizen or a permanent legal resident for five continuous years. Yet people under the age of 65 qualify under certain circumstances, including: If they are permanently disabled and have received Social Security disability payments for the last two years, or if they need a kidney transplant, are under dialysis for permanent kidney failure or have Amyotrophic Lateral Sclerosis, also known as Lou Gehrig’s disease.

How does Medicare cover expenses? Medicare coverage is divided into three primary parts: Part A, Part B and Part D. And yes, there is a Part C. Here’s what each part covers:

• Part A is the segment of the program most associated with hospital care. It covers hospital inpatient care, a limited amount of care at some skilled nursing facilities, some specific home health care alternatives and hospice care. Most people are enrolled automatically in Part A when they reach 65 and they get this coverage for free. What’s important is that Medicare doesn’t cover long-term nursing home expenses, so that’s why long-term care planning is necessary for all individuals.  
• Part B is all about outpatient services. This is the part of the plan that covers doctors’ visits, outpatient care and some other medical services that Part A doesn’t cover, such as the services of physical and occupational therapists, and other aspects of home health care. You do have to pay a monthly premium for Part B coverage with a deductible – in 2009, the basic premium is $96.40 per month though it might be higher for some people based on income. By the way, you’ll sometimes hear people refer to Part A and Part B coverage as “Original Medicare.” 
• Part D is Medicare’s prescription drug coverage. Part D is administered by a number of private insurance companies that operate in various areas of the country, so this requires some shopping on your part to make sure you’re getting the right drugs at the right price. Financial assistance might be available if you need it. 
• Part C is actually the Medicare Advantage Plan, which is an optional plan individuals may choose so they receive their Medicare benefits through private health plans. You’ll also hear this plan referred to as Medicare+Choice. These private plans include conventional HMOs and PPOs and are required by law to offer benefits that cover everything that Medicare covers, but they don’t have to cover everything exactly as Medicare Part A and B do. There might be some customized options that allow for lower copayments or lower total out-of-pocket expenses. In simplest language, Medicare Advantage plans blend the benefits of Original Medicare and Medigap plans (more on this below). By law, you can’t buy Medigap supplemental insurance if you’ve chosen Medicare Advantage. However, it’s very important to get some expertise on the choice between Original Medicare and Medicare Advantage plans based on your anticipated health needs to make sure the coverage you buy covers what you really need.

What about Medigap? So-called “Medigap” coverage is supplemental coverage that’s available for people who opt to be covered under Original Medicare – Part A and B coverage. You buy Medigap insurance from a private insurer, and your primary goal is to determine whether that supplementary coverage actually pays for the things you know you’ll need that Medicare doesn’t cover. You do have to pay a monthly premium for this coverage. And again, if you choose Medicare Advantage (Part C) coverage, you’re not allowed to buy Medigap coverage. 

To compare Medicare and Medigap coverage, visit the Medicare Personal Plan Finder on the Medicare.gov website.

When do I enroll for Medicare? You have a six-month window to enroll for Medicare that starts three months before your 65^th birthday and ends three months after. As mentioned above, if you’re already receiving Social Security at age 65, you’ll automatically be enrolled in Part A, but if not and you enroll more than three months after your 65^th, you may be subject to a late enrollment penalty.

By the way, what’s Medicaid? This is the name for the federal program – and corresponding state programs – that pick up healthcare costs for indigent children and adults. Unless you’re below the poverty line or you spend out your assets in your senior years, this won’t be part of the discussion.

October 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

As the nation continues to work its way out of recession and investors begin to take stock of what looks like a lost decade in their portfolios, it might make sense to execute some simple ideas now that will give better preparation for possible tough times in the future.  After all, disaster can’t be predicted, but it can be blunted by preparation.  Here are a few ideas to implement as the economy recovers.

Start with expert advice: A fresh financial start should begin with some solid, up-to-the-minute advice. Consider making a trip to talk over your current finances and retirement picture – no matter what state they’re in – with the tax experts and Certified Financial Planner^TM professionals at MHB Financial Group.  Many people feel they’ve made mistakes that they’ll never be able to repair with their money, and the only way that might be certain is if they don’t properly assess what they’ve done and should do in the future. Getting trained, experienced advice is one way to change that.

Pay down your debt: There was once a time when mortgage debt was referred to as “good debt,” but even that perception has changed for many families in recent years.  While mortgage debt has tax advantages, the relatively recent tendency for homeowners to look at their property as a piggy bank looks headed for permanent change. And with new credit card lending rules on the horizon, Americans’ relationship with plastic is bound for big changes as well. Resolve to get a better handle on existing debt and above all things, resolve to pay it off in sensible fashion, attacking the highest-rate and less tax-advantaged balances first.

Reevaluate your career plan: It’s true that many Americans will have to work longer than they planned to assure a healthy retirement given the events of the last decade.  But you shouldn’t stop there in making that assessment. As the country comes out of this economic slump, you should also be considering whether your current career meets your personal as well as your financial needs. A chance to earn extra money would certainly be great, but if you’re unhappy doing what you’re doing or you see your industry going nowhere, then it might be time to retrain or research a change.

Get serious about an emergency fund:  If you suddenly lost your home, your job, or were disabled with limited health or disability benefits, how would you afford a hotel, transportation or medical bills? How would you pay for all that? Credit cards? Okay, but how would you pay off those cards? An emergency fund needs to be three to six months worth of cash at a minimum kept in an easily accessible place-not as accessible as a mattress, but not in a stock fund or some other investment that might fluctuate in value and then be tough to access for a week or more. You need to treat that cash as money that isn’t there unless a disaster occurs.  And try to open it with a high enough balance so you’ll keep it from being eaten away by any account maintenance fees.  Write down a list of things that are potential emergencies and sign it as a personal contract with yourself. That agreement should state that you will not touch the funds except in case of some of the following:

• Loss of employment;
• Medical bills that exceed your insurance payments (if you have insurance);
• Emergency home or car repairs in excess of insurance that are required to make the home livable or the car drivable.

Insure yourself properly: Insurance exists to prevent financial devastation. You owe it to yourself to buy whatever coverage you can afford for risks that affect you directly. Not everyone needs life insurance or particular forms of liability insurance, for example. But most of us need help knowing what coverage to buy, and that’s where the help of a financial adviser might come in handy-there is no one-size-fits all insurance solution. It’s a good time to evaluate whether your coverage in any of the following types of insurance is adequate:

• Health insurance
• Life insurance
• Home or rental insurance
• Disability insurance
• Auto insurance
• Liability insurance related to a particular business or work activity.

Create a worst possible scenario: It’s not the easiest thing in the world to do, but based on your own personal circumstances, what would be the biggest potential risks you might face financially? Some examples: 

• If there was hereditary evidence cancer or heart disease among your closest relatives, how would you pay for treatment if your insurance didn’t fully cover the costs?
• If you live in a flood plain, do you have adequate federal flood insurance?
• If your company has been losing money for the last year, how likely is it you might be laid off?
• Will you need additional training or education to stay in your job going forward?
• If you were disabled, how would you make up your lost salary?

August 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

Summer’s actually a good time to do this task because there’s still enough time to correct lapses in savings, spending or tax planning. Here’s what most people should cover:

Retirement savings: Given the state of the economy, it’s not a bad time to review your retirement funds and your current investment allocation. If you are on schedule to max out your contributions to your company retirement plan this year, great. But don’t forget to check your existing IRAs and other retirement accounts to see if you’ll have enough cash on hand to contribute the maximum in each account by their respective deadlines next year.

Health and health insurance: Increasingly, what we pay for health insurance will be tied to the state of our health. While the weather is good, commit to a plan to walk or hit the gym a specific number of hours a week. Many insurers reset premiums at mid-year in a rising cost environment, so make sure you’re ready to switch plans or negotiate different coverage if necessary during open enrollment in the fall.

Taxes: If you got a sizable refund in April or found it necessary to empty savings to pay Uncle Sam, it’s definitely time to reassess what you’ll owe at tax time next year.  Also, if you think you’ll have some losing stocks in your taxable investment accounts, keep an eye on those in case you’ll need to offset gains in your portfolio at the end of the year.

Spending: Either on your computer or on paper, take the time to figure out where you’re money’s going.  A look at the last six months of spending may reveal opportunities to reduce spending and redirect money toward more necessary goals. Also, take a look at such things as gym memberships, magazines that are piled up and coffee expenses. If you’re not using these things, you can probably live without them. Doing this exercise can identify a surprisingly large amount that’s unaccounted for that can be redirected to debt payment, savings and investments.

Reserve fund: Most financial experts encourage you to have between three and six months of living expenses in an emergency fund.  If you don’t have that minimum, go back to your spending review and see where you can start socking money away.

College savings: If you are saving for your child’s education or your own, check to see if you’re on track with the goals you made for the year. It’s also a good idea to read the latest news on financial aid since schools change their financial aid policies annually.  Even if your kid’s still in grade school, it’s a good idea to learn as much about college financial aid while you’ve got plenty of time to learn.

Special goals: If your car is suddenly looking like it will need to be replaced or if this might be the last year for your furnace, see if you can direct more money into a reserve fund to cover replacement costs or at least a heavy down payment. If there’s a vacation you want to take by the end of the year or a special household purchase you want to make, focus on the cash you’ll set aside to make that happen.  Of course, if you have credit card debt rolling over from one month to the other, maybe that should be your initial focus.

Credit: If you haven’t set a schedule for receiving your three credit reports throughout the year, do it now. You have the right to get all three of your credit reports – from Experian, TransUnion and Equifax – once a year for free. You can do so by ordering them at www.annualcreditreport.com. By staggering receipt each of your credit reports at different points in the year, you’ll get a continuous picture of how your credit picture looks. Also, you’ll have the opportunity to focus on possible errors in a single report, which will give the other two credit agencies time to update their files.

June 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

A business startup requires parallel planning in advance for your business and personal finances. That’s because business owners – even those who are acquiring ongoing businesses or starting their own companies on the cheap – quickly find their business and personal finances are inextricably linked.

That means that before you plan the business, plan your finances first. Here are some basic steps to consider right now:

Get some advice first:

You need not one, but two sets of financial advice when starting a business. The first involves the viability of your business concept. You should understand your business idea inside and out before you launch and what your new company’s immediate and long-term cash needs will be. The second set of advice involves your own finances and how prepared you are for what will surely be a major lifestyle transition. Because new business owners frequently underestimate their new business’s expenses starting out, they can find themselves funding those business needs out-of-pocket. That means less money for day-to-day living expenses as well as long-term planning for retirement. That’s why it’s critical to consult a tax and financial expert, such as the professionals at MHB Financial Group, at the outset.

Get rid of your debts:

With the possible exception of mortgage debt, there’s very little “good debt” in the life of a businessperson. So while you’re researching your business concept and putting together your own financial plan, start cutting back and erasing as much credit card and adjustable-rate debt from your personal life as possible. The credit crisis is making it tough for any business owner – even experienced ones – to borrow money at attractive rates.  You’ll have the most flexibility when you owe as little as possible.

Work on your emergency fund:

While it’s wise for everyone to have 3-6 months of cash set aside for basic living expenses in case they lose their job or face a medical emergency, emergency funds are particularly necessary for new business owners. Startups can be particularly expensive, and most businesses are not profitable from day one. Plan a more extensive emergency fund for yourself and for the business as well.

Start thinking about your legal business structure:

Your personal financial situation and the kind of business you’re starting should determine the legal designation of your company.

Before choosing a business structure, such as a sole proprietorship, S or C corporation, partnership, Limited Liability Partnership (LLP), or Limited Liability Company (LLC), owners should reflect on their business in the context of their overall financial life and ask themselves a series of questions:

• Is the business going to be your primary source of personal wealth and daily cash flow?
• Is it a side business?
• Do you expect the business to pay for your retirement?
• Do you want it to provide other financial benefits?
• Do you want to pass it on to family members or sell it to existing employees or outside buyers?

The answers to these questions figure importantly into the decision, along with other key factors such as what type of business you’re starting, its risk factors, current tax laws, and regulations such as workman’s compensation.

Plan your healthcare and other basic benefits:

Automatic benefits are the plus side of working for someone else. When you’re working for yourself, you become your own HR department and chances are you won’t be able to match your old employer’s buying power. If you support a family with these benefits or if you have particular health concerns, you need to price the out-of-pocket costs of such benefits before starting your own company – depending on the business and the cost of those benefits, you might want to rethink your plans.

Price disability coverage now:

You might have short-term disability coverage as part of your current employee benefits, but that will likely end once you quit your job. You should price long-term disability coverage based on your present working salary so you can qualify for the highest possible benefit. Disability coverage is critical for self-employed people since they’re their own support system.

May 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

Get on the mailing list:

For any possible destination you can think of, go to their Web sites early and get on their mailing list. You might get plenty of endless chatter from the hotels, amusement parks and other destinations you’re interested in, but you might also find coupons to those locations and other linked businesses that could save you money.  Also go to travel magazines to see whether signing up might deliver similar money-saving offers. Most important, go to the tourism Web sites of the states you’re planning to visit to take advantage of coupons and specials – you might also find events and activities to attend that aren’t publicized anywhere else.

Weigh the value of driving vs. flying:

Even though energy prices might not approach the stratospheric levels of 2008 this summer, you might find that driving vacations aren’t necessarily the cheapest alternative. If you haven’t measured the gas mileage lately on your car, do so after your next fill-up and see what it would really cost you to drive to your desired destination – and don’t forget wear and tear on the car (roughly 10 to 20 cents a mile), meals or hotels on the road. If you plan significantly ahead of time, traveling by air might not only get you there faster – but cheaper. At the same time, if you fly and need a rental car, don’t forget to figure in that cost.  Also, go to the Web sites of the airlines you fly the most and sign up to get advance notice of cheap fares.

Make your reservations online:

Tourism businesses save money when you reserve online – that’s one less human they have to pay to handle your call. So chances are good you might get a slight discount for using that option. If you’re not a regular user of the Internet, you should know that airlines and hotels particularly have migrated more of their deals for rooms and meals to their websites because visitors can complete the whole reservation process themselves. That saves airlines, hotels and rental car companies considerable labor cost.

Go for the package deal:

Online travel sites make it easy to combine hotel, airfare and rental car at a cheaper rate. And remember the days and times that are typically cheaper to fly – Tuesdays, Wednesdays and Saturdays if you’re willing to fly early in the morning or late in the evening.

Know when to use travel agents:

A good travel agent can be a great money saver, particularly for lengthy or complex trips.  It’s OK to compare prices yourself, but consult a travel agent if you are going to remote destinations – they’ll know the territory, and if you have to make changes, they might be able to help you do so without paying a lot of extra money.  Don’t be afraid to consult the company travel agent since their corporate status may make them a destination for specific deals that non-affiliated travelers wouldn’t get.

If you’re going abroad:

Do a review of currency rates before you go to see how much money you’ll really have to spend on the trip. Also, see if there are specific ways you can save money for dining, lodging and shopping in that country.  Also, check in with your credit card company before you go – some might charge high currency conversion fees, and you can either negotiate them downward or apply for a card with a lower conversion rate that you’ll use only for this kind of travel.

Make sure phoning home is affordable:

Make sure you can use your cell phone affordably wherever you go. Check with your wireless provider to make sure your destination has adequate network strength for your phone, and particularly check what it will cost to call home or other destinations abroad if you’re overseas. There’s nothing like the shock of a wireless bill with unchecked charges. You might also check with your arriving airport to see if local stores rent cell phones or disposable cell phones at a significant savings.

Check on car insurance:

We’ve all heard how buying rental car insurance is a bad deal, but not so fast. For domestic trips, double check whether your own car insurance policy is likely to pick up the bill if you crash your rental car. For overseas trips, check with your rental agencies as well as your credit card company to see what insurance options you have. Don’t think only in terms of accidents. Think about blown transmissions in small towns with only one mechanic who doesn’t speak English.  Also, if you’re driving to Canada or Latin America in your own car, be very sure you have adequate coverage required in every country. You might have to buy supplemental coverage.

Consider travel insurance:

There is insurance coverage available for travelers who face sudden cancellations as well as medical needs. Trip cancellation can reimburse you for non-refundable costs in the event of things like an illness for you or a family member that causes you to cancel your trip.  Look into what your current health insurance covers at your destination, so that you can understand your risk exposure and weigh it against the cost of supplemental insurance.  It’s important to realize that health insurance issues crop up on domestic trips as well as those overseas – for instance, your health insurer may not cover claims in other parts of the country. Always check. Also, if you’re on a business trip, make sure your company health plan will cover you in an emergency, and if your work takes you to a dangerous country, ask if your employer carries kidnapping and ransom insurance.  Don’t laugh. According to the Insurance Information Institute, kidnapping is on the rise internationally.

Prevent theft at home and abroad:

Photocopy your driver’s license and passports and keep the originals with your valuables in the hotel safe. Also, don’t forget to hold your mail and pay all your bills before leaving town so identity thieves aren’t attracted.

May 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

A visit with a tax expert or a financial adviser such as a the professionals at MHB Finanical Group can help you determine the best ways to use the following provisions that may affect you. It’s also a good idea to get a financial checkup in an uncertain economy for the following reasons:

• As much as it might hurt to look at the performance of your current retirement accounts and other investments, the economy will recover. When an upturn comes, it’s wise to position your holdings to take full advantage of the recovery.
• Your future plans with regard to spending for your home, your family and your education come into sharp focus under the stimulus plan, and making these provisions work for you in the short-term should be part of a long-term plan.
• If you fear your job might be in danger in the coming months or you might be facing pay or benefit cuts, it’s good to talk through your personal finances before your employer makes a move. The best time to prepare for a job loss is while you’re still making a salary. Not only is it a good opportunity to build an emergency fund, but it’s generally easier to look for new opportunities while you still have your current one.

Here’s a quick summary of the stimulus plan provisions that could affect your finances.

Educational provisions:

College student aid: The package awards $15.6 billion to increase maximum individual student Pell grants by $500.

American Opportunity Tax Credit: This credit temporarily provides taxpayers with a new tax credit of up to $2,500 of the cost of tuition and related expenses, though it phases out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).  Forty percent of the available credit is refundable.

529 Plans: The scope of allowable education expenses expands to include computers and computer technology.

Tax credit provisions:

One more cap for the Alternative Minimum Tax (AMT): Lawmakers put one more patch on the AMT to protect a wider number of people from getting hit. This latest break for potential AMT targets increases the exemption amounts to $46,700 ($70,950 for married couples). The bill would also exclude interest on all private activity bonds issued in 2009 and 2010 from the AMT.

“Making Work Pay” Tax Credits:  This is the refundable tax credit of up to $400 for individuals and $800 for families for 2009 and 2010 that would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples).  This isn’t a lump sum payment, but instead is reflected in reduced payroll taxes.

Car Buyers Tax Credit: This allows a deduction for state and local sales and excise taxes paid on the purchase of a new vehicle through 2009. This deduction is phased out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return).

Expanded Child Credit: This increases the eligibility for the refundable child tax credit in 2009 and 2010 by reducing the minimum income for eligibility to $3,000.

Earned Income Tax Credit: This provision will create a temporary tax credit increase for working families with three or more children.

Housing provisions:

Refundable First-Time Homebuyer Credit: First-time buyers can claim a credit worth $8,000 – or 10 percent of the home’s value, whichever is less – on their 2008 or 2009 taxes.  The added bonus is that the credit is refundable, which means that filers will see a refund of the full $8,000 even if their total tax bill was less than that amount.

Unemployment and healthcare-related benefits:

Extension of Unemployment Benefits: The package provides 33 weeks of extended benefits through Dec. 31, 2009.

Unemployment Compensation: The first $2,400 a person receives in unemployment compensation benefits in 2009 won’t be taxed.

Short-Term COBRA Subsidy for Involuntarily Terminated Workers: This provides a 65 percent subsidy for COBRA premiums for up to 9 months, which will put a dent in the considerable cost of COBRA health benefits for the unemployed.

April 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

According to a report last year by benefits consultant Watson Wyatt, nearly half (47 percent) of the 453 large U.S. employers currently offer a consumer-directed health plan (CDHP), a high-deductible plan offered with a personal account that can be used to pay a portion of medical expenses not covered under the plan. In the world of independently purchased health insurance, it’s the same concept as the pairing of a high deductible health plan (HDHP) with a health savings account (HSA).

Also, don’t be surprised if your employer or insurer is going to get tougher about you losing weight, quitting smoking or taking part in a monitored exercise plan.

Here are some ideas to help you take the first step in monitoring these costs:

Change your negative healthcare behavior: Lowering the number on your bathroom scale will not only have immediate health benefits, it will also make your health insurance options and potential out-of-pocket costs more affordable over time. A Stanford University and Rand Corporation study reported that lifetime medical costs related to diabetes, heart disease, high cholesterol, hypertension and stroke among the obese are $10,000 higher than among the non-obese. It added that lifetime medical costs could be reduced by $2,200 to $5,300 following a 10 percent reduction in body weight.

Know what you’re buying: Whether you buy health insurance through an agent or your employer, insist that they explain exactly what you’re getting for your premium, and where deductibles do and don’t apply. That way, you’ll have a baseline when you buy your own coverage. If you’re purchasing your own insurance policy, compare the premium savings from a higher deductible plan with your usage pattern of health services. What you save can often cover your high deductible. The California Medical Association offers a plan comparison checklist on its Web site, www.cmanet.org.

Always research and discuss the potential cost of a diagnosis: If your physician diagnoses a condition that requires tests, prescription drugs, a hospital stay or ongoing therapy, ask polite but detailed questions about what you’ll be charged, from the doctor’s bills to ongoing ancillary costs associated with treatment. Ask the doctor or his office manager if discounts can be negotiated through cash payments or other means. You also need to be careful that you’re not being charged a rate for uninsured patients when you are simply going to paying for all or part of the bill to get to your deductible.  Last, consider asking doctors for generic options and samples of prescription drugs to extend your savings.

Make sure your exact spending is reducing your deductible: Keep a binder or a filing system to monitor how this year’s out-of-pocket spending is reducing your insurance deductible.  Your insurer’s total may not always be accurate or up-to-date. Also, make sure you understand which procedures are offered through your plan that will be paid even though you haven’t paid up your deductible.

Check local pricing resources: In non-emergency situations, you should always compare prices on treatments. Check with local medical boards and state health officials to see if they have online databases on costs for various medical procedures. Also, if there is a support group for your condition, talk to members about what they paid locally for care.

Be smart about emergency and non-emergency health visits: Emergency-room visits tend to cost $300 to $1,000 compared with $150 at an urgent-care center and $35 to $45 at a convenience-care clinic in a drug store or some other location. First, make sure the alternatives to hospital emergency room care are acceptable for your illness. Write yourself a note at some point to check out these options in your community so you understand what they offer, what their hours of business are, and under what conditions you’d choose them. In particular, make sure the facility and the provider are in your health plan’s network so whatever you pay out-of-pocket counts toward your deductible. Also rely on your insurer’s 24-hour advice hotline for guidance on where to go for care. Either tape that call or keep a written record of it in case you have a claim denied.

Talk to a financial advisor about planning for long-term care: If you or a loved one are diagnosed with a chronic illness, that’s a financial issue that requires a plan. As tough as it may be to focus on money issues at a stressful time, make an appointment with the tax and financial professionals at MHB Financial Group to discuss affordability options that will safeguard your assets, including Medical Spending Accounts that can backstop out-of-pocket costs on high-deductible policies.

Take advantage of your company’s flexible spending account: A flexible spending account is a separate, tax-advantaged account where you deposit funds to pay for medical expenses not paid by your insurance. You need to check what your particular company’s FSA allows you to stockpile funds for, and you will need to estimate carefully because you’ll have to spend out these funds by a particular annual date or lose the remainder.  It’s also good to discuss how you’re allocating those expenses with a financial adviser.

April 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

For those with money to invest in real estate, this is an exciting but extremely risky time. Those who consider investing in foreclosure properties should not only understand foreclosure and the importance of cash in the process, but the emotional element unique to this kind of investment.  After all, each foreclosure represents someone who has lost a home.

You’ll hear many advertisements telling you how easy it is to invest in foreclosures and make a fast profit. But those who deal regularly in foreclosures know that making a profit can be tough, and that’s true even for individuals with lots of cash, close ties to lenders and public officials and plenty of experience. Here’s a look at the foreclosure process and how it works.

What is foreclosure? A foreclosure happens when a buyer defaults on their payments and the lender takes formal legal action to seize the property. Foreclosures have accelerated not only due to a downturn in the economy that’s affected home sales, but because many homeowners were tripped up by adjustable-rate mortgages that moved to higher payment levels that they could not afford. State rules govern this process, but generally, when a lender decides to foreclose on a property it files a notice of default or a lis pendens (Latin for “lawsuit pending”). This document is a public record, and for buyers – including other lenders – it’s the first step in locating a property in foreclosure. A buyer looking for foreclosures can look online for lists of properties in default, but it’s particularly important to double-check these listings.

Do all troubled properties have to be in foreclosure to be sold? Actually, no. You will hear about “pre-foreclosure” or “short sale” properties put up for sale by lenders who have entered into agreements with troubled homeowners who elect to give up the property to avoid a foreclosure on their credit report.  You will also hear about such sales being done by intermediaries who claim to deal in these transactions. Some are legitimate, some are not. Check them out.

How do people invest in foreclosure properties? There are three primary ways this happens. First, you will see buyers coming in at the “pre-foreclosure” stage. Second, you will see buyers going after “REO” (real estate owned) properties – literally foreclosed real estate still on the books of a lender. Third, you’ll see foreclosures auctioned off at a local government building or in private auctions, depending on how the lender wants to market such properties to get them off their hands. Each process has its own conventions for inspecting the properties – sometimes prospective buyers get time to inspect what they might buy, other times little or none.  That’s where the risk comes in – it’s not uncommon for owners losing their property to neglect it or damage it on purpose on the way out. Repairs can be costly.

Cash or loan? Borrow to buy a foreclosure property? With today’s credit environment, don’t count on any lender to stake you no matter how attractive your credit rating is. This is risky stuff. There’s also a second reason. While the typical purchase of a home or business property involves mortgage financing that takes weeks to secure due to credit checks and other factors, the sale of foreclosure properties is typically a fast-moving process that requires no-strings financing. Bottom line, a lender marketing foreclosed property likes cash. There’s another good reason to enter this process with cash instead of debt. Even sophisticated foreclosure investors often discover ugly surprises when buying – property with greater damage than they anticipated, for example – and they may not have the flexibility to borrow to fix those unexpected problems after they borrowed to buy in the first place.

Where to learn more? Start with some solid advice about your personal finances and your tax situation. At MHB Financial Group, we can help review your circumstances and how prepared you might be for this risky form of investment. Beyond that, it’s a process of learning how various lenders in your community deal with pre-foreclosure and foreclosure property and how public officials and private auction houses in your area handle the auction process for such property.  Generally, this is knowledge that will take time to obtain since all the parties involved in this process are busy and besieged by many like you who want to learn. Be patient, take the proper time to study the process and don’t spend a dime until you do.

February 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.