Contact Us
Mental Health
Financial advice
Youth Matters
Techno Corner
Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Francis Vayalumkal

With the New Year, several things are changing in our lives. Whether it’s in our personal life, social life, career or in financial plans, it’s important we take a look at what kind of adjustments to make and what our strategies should be. Since mortgage is one of the biggest payments for most people, here are some tips on how to handle your new or current mortgage this year.

Take a look at the mortgage. Does it still fit your circumstances? As I have mentioned in my previous articles, each of us have unique scenarios when we look for mortgages and these scenarios change as time goes by. Interest rates change, children are born and grow up, sometimes you need to fix up the house and other times, you need to move on. Life events can trigger changes in the way you pay for your house. See what’s coming up in the year ahead and see if any of the events ahead require you to go mortgage shopping. Sometimes, the reason for a change in mortgage is something that has already happened in the past year.

If you see that refinancing to a lower interest rate can save money, make sure you won't get zapped with a prepayment penalty, either when you refinance or sell the house. Calculate the cumulative monthly savings to see if they decisively outweigh the closing costs. If not, keep the current loan.

Ask a real estate agent who is active in your neighborhood what your house is worth. It's a good way to introduce yourself to the person who might someday help you sell the house. For a quicker, but less-accurate estimate, consult

If you got an adjustable rate mortgage few years ago, see if its time for the rate adjustment (reset) to happen. Depending on the type of mortgage you got, the rate adjustment could be as much as 5 percentage points. That would be a drastic change in your payments whether you have an interest only loan or a fully amortizing loan.

In the recent past, you could have taken out and option adjustable-rate mortgage (ARM), which lets you decide how much you pay each month. You can make a payment that's big enough to pay off the mortgage in 15 years or in 30 years, or you can pay only the interest, or you can make a minimum payment that doesn't necessarily even cover that month's interest. In many cases, when you make the minimum payment on an option ARM, you owe more on your house the next month. These also are called a negative amortization loan and if this is what you have, make sure you don’t pay just the minimum required payment.

Shop around when you are looking for a mortgage. Many of you already might start shopping for mortgages on the Web, but be careful with that and also when it is time to make the loan application, look for a local lender. You will surely appreciate the difference and the ability to go and meet with person who is dealing with one of the biggest financial transactions you might ever make.

Put down an extra payment on your mortgage. If you make 13 mortgage payments every year, you will pay off a 30-year, fixed-rate mortgage in less than 25 years.

Last month, I wrote about how your mortgage insurance is now tax deductible. If you are looking for a new mortgage, consider getting mortgage insurance instead of a piggyback loan. If you buy a house in 2007, and you make a down payment of less than 20 percent, you'll either have to buy mortgage insurance or get a piggyback loan -- a primary mortgage for 80 percent of the home's value and a second mortgage for the rest that you owe.

For a long time, piggyback loans were almost always a better deal because the interest on both loans was tax-deductible and mortgage insurance wasn't deductible. But that changed with a change in the tax law. For loans originated in 2007, the mortgage insurance premiums will be deductible from federal income tax. This is an important change because it means that mortgage insurance will be cheaper in the long run for a lot of home buyers, especially those who live in their homes for five or more years and keep the same mortgage.

Be skeptical and consult with a trusted mortgage professional before you sign up for your next mortgage. Lot of people who got mortgages at 1.25 percent from several lenders are surprised when the rates started rising abruptly just a year later. They find out that there was no such thing as 1.25 percent mortgage rate and what they have is an option ARM loan. They are facing huge facing penalties to get out of these loans.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 971-7555 or via e-mail at

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Nitesh Patel

As millions of Americans face retirement, many are starting to grasp the real possibility of outliving their retirement income. With only 42 percent of workers taking the time to figure out how much money they will need in retirement, it’s no surprise that most say they are behind schedule in saving for retirement (2005 Retirement Confidence Survey, Employee Benefit Research Institute).

Unfortunately, this blasé attitude toward retirement planning has led to more than half of retirees wishing they had done more to prepare during their working years (Fidelity Investments Retirement Transitions Study, Released March 8, 2005). When you consider the fact you will probably need your retirement nest egg to last 30 years or more (Northwestern Mutual Data: Survival Probabilities, best issue class, non-tobacco/premier-issue 2006), it might be to your advantage to check out the benefits of a variable annuity.

A variable annuity is a personal retirement account that allows you to accumulate assets by investing tax-deferred in a variety of investment portfolios. Variable annuities guarantee a payment, usually at retirement, which will vary based on the amount invested as well as the performance of the underlying investment portfolios you choose. At retirement, you determine how you will receive payments by selecting from a range of payout plan options, including a lifetime income option. (Based on overall soundness of issuing insurance company. The investment return and principal value of a variable fund will fluctuate so that the accumulation value at maturity or surrender may be more or less than the original cost. Withdrawals for deferred annuities may be subject to ordinary income tax and may be subject to a 10 percent IRS early withdrawal penalty if taken before age 59 1/2).

With the ability to guarantee an income you can’t outlive, variable annuities are growing in popularity as a retirement investment option. However, the key to selecting the right one for your specific retirement savings objectives is asking the right questions. Here are five to get you started:

1. How do the expenses of one variable annuity compare with other variable annuities offering the same types of funds and benefits?

Charges for a variable annuity can include:

* a management fee for costs associated with running the separate account investments;
* a charge to cover the costs for distribution, administration and insurance risks called the mortality and expense fee;
* a contract fee that is typically waived when the contract attains a minimum size and;
* an upfront sales charge, depending on the type of variable annuity.

If you pay a sales charge at the time of purchase, the mortality and expense fees will probably be lower than if there were no sales charge. Lower expenses mean more money in your account.

Few companies that offer variable annuities provide a choice of both front- and back-end purchase options, and some also offer a no-load design, which charges a relatively higher asset-based fee every year instead of deducting up-front sales charges. Advantages of a “front-end” design (where you pay the sales charge up front) include lower annual expenses and access to your funds without withdrawal charges. A “back-end” design allows you to put 100 percent of your money to work immediately with no front-end sales charge, although withdrawals may be limited and could be subject to charges.

2. What options are available that will allow you to get at your money without having to pay contractual surrender charges or IRS tax penalties?

An annuity with a front-end design allows you access to your funds without surrender charges (minimum investments are often required). A back-end design contract has surrender charges that usually decrease each year until they eventually expire. Some contracts allow for a surrender charge-free corridor that allows the owner to take out a portion of the money without a surrender charge. Many variable annuity contracts sold today are issued with a terminal illness and/or nursing home provision under which surrender charges are waived for amounts taken out of the contract due to terminal illness or confinement to a nursing home.

Withdrawals from deferred annuities may be subject to ordinary income tax and an additional 10 percent IRS early withdrawal penalty on earnings taken out prior to age 59½. Under current IRS laws, owners are permitted to take substantially equal periodic payments without tax penalties although these withdrawals may still incur contractual charges.

Also find out if the issuer can provide substantially equally periodic payment or required minimum distribution calculation services. Required minimum distributions are amounts that must be taken from IRAs each year to comply with IRS regulations. This withdrawal must begin by April 1 of the year one reaches age 70 ½.

3. Does the tax-deferral go away when the annuitant dies?

Most non-tax qualified variable annuity contracts issued today offer a contingent annuitant feature. This feature provides that if the annuitant/owner dies before the contract is put into an income plan, the beneficiary has the option of becoming the annuitant, allowing the tax deferral to continue beyond the original annuitant’s lifetime. An individual should only consider passing on current annuity assets to a beneficiary if those assets are not required for retirement planning.

4. Why should an individual put a tax-deferred investment into a tax-qualified account – (such as an annuity in an IRA)?

One of the most basic elements of evaluating a sound investment choice is its net performance after expenses. Any investment held inside a qualified plan is deferred from tax, so the key issue may be one of cost. Look for an annuity product that ranks among the low cost leaders.

Additionally, variable annuities may offer several features not available with other investments, such as:

* automatic portfolio rebalancing;
* options for guaranteed stream of lifetime income;
* a guaranteed benefit at death (based on overall soundness of issuing insurance company), which pays the beneficiary the greater of the current market value or the amount paid onto the contract (minus withdrawals) when the annuitant dies;
* the ability to transfer among investment choices without triggering a taxable event (annuities not held in tax-qualified accounts).

5. What are the issuing company’s financial strength ratings from the four major rating agencies?

The ratings an issuer receives from the third-party rating agencies are an important indicator of the insurance company’s financial strength. There are four major rating agencies: Moody’s Investor Services, Standard & Poor’s, Fitch and A.M. Best Company. Look for companies that earn top ratings from each of these agencies. Financial strength ratings are important because payments in an annuity income plan are solely backed by the issuer, but it’s important to note that ratings have no impact on investment return or principal value of the separate account.

The combined benefits of tax-deferred growth, guaranteed death benefit, and guaranteed lifetime income options offered by a variable annuity provide unique advantages as an investment option. An important source of retirement income for many Americans, variable annuities may play an important role in helping you reach your retirement goals.

EDITOR’S NOTE: This is the second article in a two-part series discussing the benefits of using variable annuities in retirement planning.

1 Based on overall soundness of issuing insurance company. The investment return and principal value of a variable fund will fluctuate so that the accumulation value at maturity or surrender may be more or less than the original cost.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Kamlesh Patel
CRUNCHING ‘EM NUMBERS: circle these tax deadlines on your 2007 calendar


If any of the following upcoming tax deadlines apply to you or your business, mark them in red on your 2007 calendar.

* February 28 — Payers must file information returns (such as 1099s) with the IRS. (April 2 is the deadline if filing electronically.)
* February 28 — Employers must send W-2 copies to the Social Security Administration. (April 2 is the deadline if filing electronically.)
* March 1 — Farmers and fishermen who did not make 2006 estimated tax payments must file 2006 tax returns and pay taxes in full.
* March 15 — 2006 calendar-year corporation income tax returns are due.
* April 16 — Individual income tax returns for 2006 are due unless you file for an automatic extension. Taxes owed are due regardless of extension.
* April 16 — 2006 partnership returns are due.
* April 16 — 2006 annual gift tax returns are due.
* April 16 — Deadline for making your 2006 IRA and education savings account contributions.
* April 16 — First installment of 2007 individual estimated tax is due.
* June 15 — Second installment of 2007 individual estimated tax is due.
* September 17 — Third installment of 2006 individual estimated tax is due.
* October 15 — Deadline for filing your 2006 individual tax return if you filed for an extension of the April 16 deadline.

you can now split the deposit of your tax refund

The IRS now allows taxpayers to deposit tax refunds into as many as three separate accounts at three different financial institutions. In addition, courtesy of the Pension Protection Act of 2006, deposits can now be directed to individual retirement accounts (IRAs).

Of course, you can still direct the IRS to mail your refund check or have the refund deposited electronically to a single bank account. But by splitting your tax refund into separate accounts, you may be able to get more bang for your buck. For example, you could direct some of your refund to a checking account for immediate needs and send the rest to a savings account for future use. Because you aren’t required to distribute the refund in equal amounts, you can direct the deposits as dictated by your personal needs.

If you decide to split your refund into separate accounts, you’ll need to fill out a new form (IRS Form 8888, Direct Deposit of Refund). Fill it out accurately! Check and recheck the bank account and bank routing numbers. If those numbers are wrong, the IRS will send you a paper check or, worse, your refund could end up in someone else’s account. Also, make sure your financial institution accepts direct deposits for the type of account you designate. For example, some banks will accept direct deposit to savings accounts, but won’t accept similar deposits to an IRA.

Something else to keep in mind with direct deposits to an IRA account: the tax refund won’t indicate a contribution year. So you’ll need to notify your IRA trustee of the intended year for the deposit.

Should you direct the IRS to deposit your tax refund into separate accounts? Of course it depends on your situation. But this new option can help you manage that once-a-year refund. If you need more information or assistance, give us a call.

supporting a parent could cut your taxes

If you helped support your parents or other adult relatives in 2006, check out the tax breaks that could lower your taxes. Possible benefits include claiming your relative as a dependent, generating extra medical deductions, and being taxed at lower rates.

First, determine if the relative qualifies as your dependent. An adult dependent’s gross income must be less than the exemption amount for 2006 ($3,300), but some income, such as Social Security, isn’t counted for this purpose.

You also must contribute more than half of your relative’s support. Social Security does count as support for this test. However, if you and others together provide more than half of a person’s support, you can claim the exemption if the others are willing to sign a document called a “multiple support agreement.”

If a relative could be your dependent except for having too much income, you still might be able to deduct any medical expenses you paid for him or her in 2006. To do so, you must pay the bills directly as part of the individual’s support, and your total unreimbursed medical expenses must exceed 7.5 percent of your adjusted gross income.

If you’re single and helping to support a parent, you may be able to file as head of household. Head of household tax rates are lower than those for single people, although higher than those for married couples filing jointly. To qualify, you must maintain your parent’s principal home, and your parent must be your dependent. The parent need not live with you, although adult dependents other than parents would have to live with you for head of household status to be available.

Kamlesh H. Patel, CPA, can be reached at (813) 289-5512 or (813) 846-5687 or e-mail or

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Satya Shaw

A successful retirement does not just happen; you have got to plan for it. The long ramp toward retirement focuses on saving and investing, but once retirement starts emphasis shifts to spending and safeguarding. Even though the greatest challenge in retirement, and probably your greatest fear, is outliving your money, most people spend less time planning their retirement than they do planning a vacation.

What does retirement planning involve? Here are the steps: First, determine what you would ideally like to do in retirement, and then discuss it with your spouse and other loved ones. Will you spend your time traveling, enjoying hobbies, helping others, working part time, or what? Second, estimate the retirement income you'll have from savings, Social Security, pension and all other sources. Third, estimate your expenses making sure to take account of inflation, taxes and health care costs, which are likely to be an increasing part of your budget.

Steps two and three should be done for each five-year period of your retirement and then revised annually. Fourth, if you have more income than needed, you only need to safeguard your investments to make sure they're not lost or shrunk by bad decisions. If you have insufficient money for retirement (expenses exceed income), then you'll need to postpone retirement, work part-time or possibly use a Reverse Mortgage to access the equity in your home. Either way, it is highly recommended that you minimize your exposure to loss and maximize the full potential of your financial resources by working with a financial adviser. They can help you determine the risk you can afford, investment options and how to position your money for best results without sacrificing safety. Retirement is going to be long, filled with uncertainties, including emergencies, and going it alone is one of the greatest risks you can take.

Be realistic in your planning. For example, be aware that for a couple age 65, there is a 50 percent probability that one will live beyond age 90. Acknowledge that even a low rate of inflation can make a big difference in prices over the 20 to 30 years you'll be in retirement. For example, average inflation of 3 percent means $1 today will be worth only 55 cents in 20 years and 41 cents in 30 years. Since 78 million boomers are entering retirement over the next two decades, the price of everything related to retirement, especially health care, is likely to rise faster than overall inflation. Inflation is a cruel tax for those on fixed incomes, and chances are your income in retirement will increase a lot slower than prices.

The boomer explosion is going to overwhelm government-provided services and benefits. This means that the relative benefits of Social Security and Medicare are going to shrink under the pressure of increased retirees. There will simply be more people receiving entitlement benefits than workers paying the bills. Every study, government and private, indicates there will be a shortage of money to support these programs. To pay for this shortfall, the government must raise taxes of all types. The increased taxes, inflation, relative decrease of benefits combined with escalating medical care costs will be especially burdensome for those in retirement without rising incomes from wages and salaries.

If you haven't evaluated it yet, investigate the risk you're taking with your retirement money. Would you have a loss if the stock market lost ground? You might if your money is still in your ex-employers 401(k) plan, or if you own securities, even mutual funds, whose value is determined by the market. Generally, investments in stock have done well long term, but you may need your money before a long time. From November 1973 to October 1974, the S&P stock market index fell 48 percent, and it took over six years to recover. The last bust in the stock market was 2000-2002, and we have yet to fully recover. In the meantime, inflation marches forward with the shrinking dollar purchasing less. Much of your income in retirement is likely to be derived from your savings and investments, and you simply can not afford risk of loss and the compounding of inflation. If you lose some or all of your retirement money to bad investments, you'll increase dramatically your chances of realizing your greatest fear: outliving your money.

How do you safeguard against the challenge of too many years and not enough money? Like law and medicine, financial planning is best left to professionals. Your job in retirement is to enjoy life free of investment worries.

Satya B. Shaw, CPA, can be reached at (813) 842-0345.

Contact Information
The Editor:
Send mail to with questions or comments about this web site. Copyright © 2004 Khaas Baat.

Anything that appears in Khaas Baat cannot be reproduced, whether wholly or in part, without permission. Opinions expressed by Khaas Baat contributors are their own and do not reflect the publisher's opinion.

Khaas Baat reserves the right to edit and/or reject any advertising. Khaas Baat is not responsible for errors in advertising or for the validity of any claims made by its advertisers. Khaas Baat is published by Khaas Baat Communications.