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Alzheimer's Disease, Long-Term Care and More: Plan for the Unexpected in November

For you trivia lovers, November is:

  • Alzheimer's Disease Awareness Month
  • Long-Term Care Awareness Month
  • National Family Caregivers Month

Certainly, no one really wants to dwell on Alzheimer's disease, long-term care or family caregiving, especially around the holidays. Unfortunately, while we don't want to think about these topics, we should.

You or someone you know may have had personal experience with one or more of these issues. These tough situations involve both financial and psychological considerations. Hurricane Sandy should remind us that advance planning is always beneficial and no planning at all leaves people most at risk.

So ask yourself:

  • Have you and your siblings had a discussion about who would help take care of Mom or Dad if they develop Alzheimer's disease?
  • Can you identify the most common early symptoms of Alzheimer's disease?
  • Have you had discussions with your parents about how they would like to be cared for if and when the day comes when they can't live independently?
  • Have you educated yourself about long-term care insurance? Do you know how benefits are triggered, what services are covered and what the costs are?
  • Whether or not you choose to buy insurance, do you know the local care providers that you could call when you need advice?
  • If you have a family member or friend who is a caregiver, is there anything you can do to help?

While we would rather feast on turkey and watch football at Thanksgiving, starting a conversation while the family is together may make you all more thankful in the long run.

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Presidential Election Holds Scant Impact on Private Business Views of 2013

The Cincinnati Enquirer recently published the results of the Deloitte Cincinnati USA 100 Top Privately Held Businesses Survey.

Many positive elements were identified in the survey. Most importantly, sales and employment levels both hit records in 2011, signaling a recovery from the Great Recession.

Private business owners reveal rising optimism for 2013:

  • Nearly 80% expect gross sales/revenues to increase.
  • Nearly 70% expect pre-tax profit to increase.
  • Over 65% expect their number of employees to increase and less than 10% forecast a decrease in the number of employees.

The November election was the focus of specific questions in the survey. The responses show that the election is clearly not a dominant factor in the business outlook.

Owners of the Top 100 businesses were asked to answer "agree," "disagree" or "neither" to the following questions:

  • "In terms of demand for our products, the outcome of the election will have little or no effect." Nearly 60% answered "agreed" or "neither."
  • "Regardless of the winner, the U.S. economy will probably improve after the uncertainty surrounding the election ends." Nearly 70% answered "agreed" or "neither."
  • "Clarity and certainty are more important than which party captures the White House." Nearly 70% answered "agreed" or "neither."
  • "We are putting off significant business decisions until after the election." Only 25% agreed.

This optimism is important because, even though private businesses are not included in public stock market valuations, they are major drivers of employment and economic activity.

The next time you think there isn't any good news in the economy, stop and think again!

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

In October, Think Fire Prevention

October is upon us and Fire Prevention Week is October 7 to 13.

Why is a financial planner writing about Fire Prevention Week? Consistent with our theme of "let's manage what we can control, not what we can't control," there are basic preventative steps to take for fire prevention and safety.

"Have Two Ways Out" is the Fire Prevention Week theme for 2012, which should be easy for Cincinnatians to remember with our three-way, four-way and five-way chili! If you accomplish only one thing this year, have two ways out of every room in your house. This may include having a foldable escape ladder for the second floor of your house.

Here are a few other basic fire safety tips:

  • Change your smoke detector batteries when you change your clock for the end of daylight savings time.
  • Replace your smoke detectors when they are 10 years old. The detection sensitivity drops with age, even if they still function.
  • Kitchen fires are a high-risk source in your home. Have a fire extinguisher in your kitchen and know how to use it.
  • Clean your dryer vent at least once a year, all the way from the dryer to the exit source.
  • Have an outside meeting spot for your family, such as the mailbox if it is by the street or a neighbor's tree.
  • If you do only one thing to improve fire safety this year, it will be a step in the right direction. Don't let a fire be an opportunity to test your healthcare power of attorney form or last will and testament. See, there is always a financial planning connection!

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

International Investing: The Big Picture

The face of international investing is changing.

There is no connection between where a company is headquartered and where it makes its money.

Using an example cited in The Wall Street Journal, Novartis AG is headquartered in Switzerland and Johnson & Johnson is based in the U.S., but they're both global healthcare companies. Johnson & Johnson generates 52% of its sales outside the United States. Novartis generates 67% of its sales outside the United States.

Most U.S. companies make the majority of their profits on foreign soil. According to Ned Davis Research, as of December 31, 2011, 52.6% of pretax profits for companies in the Standard & Poor's 500 index came from outside the U.S.

Of the roughly 14,000 companies that went public over the past decade, more than 90% of them are outside the United States.

Conclusion: We live in an increasingly global world where one cannot be insulated from international economic events. The best growth opportunities exist on a truly global basis. As with all investment themes, a long-term perspective and patience is required for success.

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

How Does Your 401(k) Compare?

Do you ever wonder how the balance in your 401(k) and how much you are contributing to your retirement accounts compares to the rest of the working world?

According to Fidelity Investments, the nation's largest 401(k) administrator:

  • The average balance among its nearly 12 million shareholders was $72,800 at the end of June 2012.
  • The average employee contribution for the latest quarter was $1,660, up $30.
  • The average employer contribution was $950, also up $30.
  • The average employee contribution in Fidelity-administered 401(k) plans has remained steady at around 8% of annual pay for the past three years.

In the latest quarter, about twice as many participants increased their contributions as decreased them.

Over the past 10 years, about two thirds of annual increases in 401(k) account balances have come from workers' contributions and company matches, with one third the result of investment returns.

What the moral of the story?

The amount you contribute matters more than the investment returns.

Your contribution probably needs to be larger than the percentage matched by your employer.

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Tax Talk, Trash Talk: Facts About the Top Taxpayers

As the Presidential election heats up, it is important to separate the facts from the fiction. Not all top taxpayers are employers or billionaires. Both political parties are guilty of skewing the facts.

By definition, the top 2% of U.S. taxpayers are individuals with taxable income of more than $200,000 a year and married couples with taxable income of more than $250,000 a year.

According to Bloomberg News, the top 2% of taxpayers are:

  • Two-earner professional couples living on the East and West Coasts.
  • Doctors, lawyers, engineers and Wall Street executives.
  • Most are not employers.

According to 2005 income tax data:

  • Engineers, architects and information technology workers make up 9.6% of the top 5% of taxpayers.
  • Over 75% of the high-income households were dual-income households with both spouses working.

A 2011 Treasury Department analysis found that, depending on the definition of small business:

  • Only about one-third of small business income is subject to the top two income tax rates.
  • Among taxpayers subject to the top two income tax rates, only 25% are small business owners and employers.

As always, learn the facts before you cast your vote.

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Communicating Financial Values

Summer time, with family vacations and kids home from school, can provide a special opportunity to pass on financial values from generation to generation and encourage children to develop their own financial values and priorities.

Depending on your stage of life and the ages of your children or grandchildren, consider discussing the following with your family this summer:

  • Your early childhood experiences and the role that money played in your family life
  • Your experience when you started making your own saving and spending decisions
  • Financial lessons you learned in your high school and college days
  • Financial mistakes you made along the way and what you learned from them
  • The role of education in preparing one for more than just a job

Remember that the most effective communication is not lecturing, but rather telling stories in a personal, meaningful way that is not condescending. We are all tired of hearing the "I grew up in the depression" stories (don't blame me for being born at the wrong time), but stories and lessons about simplicity and frugality are important to convey.

You should recognize that it is a different world today and that we live in the digital era where financial transactions are processed differently (young people write few, if any, checks by hand), but the principles of earning an income, spending wisely, making charitable gifts, and saving and investing for personal goals are important fundamental values that transcend generations.

Enjoy these final days of summer!

About Bruce J. Berno, CFP®
Bruce J. Berno, CFP® is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com.

Sell in May and Go Away? Not So Fast!

There is a famous old saying that essentially goes, "October is one of the worst months for stock market investors. The others are January, February, March, April, May, June, July, August, September, November and December." So much for market forecasting!

Another popular stock market quote is, "Sell in May and go away," implying that May and the rest of the summer are bad investing months and stock traders are better off spending the season at the beach. While there is a historical pattern that six-month returns from May 1 to October 31 are lower than six month returns from November 1 to April 30, a more detailed review of monthly returns proves that investment return patterns cannot be simplified so easily.

What are the worst investing months of the year? Historically, since 1926, the only month with an average return of a loss is September.

Lowest return months:
-0.72% September
+0.21% October
+0.46% February
+0.53% May
Highest return months:
+1.73% December
+1.52% July
+1.50% November
+1.48% January

As you can see, there is no clear seasonal pattern. Furthermore, remember that these are long-term averages. Who is to say that 2012 and 2013 will be the same?

Clearly, there are many factors that contribute to short-term performance in the stock market. Seasonality is not one that I would bet your portfolio on! Investing is a contrarian process that takes discipline. There is no single easy formula for success.

About Bruce J. Berno, CFP®

Bruce J. Berno, CFP®is the founder of Berno Financial Management, Inc. a fee-only comprehensive personal financial planning and investment advisory firm headquartered in Cincinnati, Ohio. Since 1993, Berno Financial Management has been helping individuals and families achieve financial peace of mind. For more information about Berno Financial Management, visit http://www.bernofinmgt.com/.