The October Edition of my Monthly Newsletter - Enjoy!

1. October 2010
Abel Financial Strategies
Augustus W. Abel, CFP®
Financial Advisor Medicare Annual Enrollment Season Is Here
3775 Attucks Dr.
Powell, OH 43065 If you're currently enrolled in What's new?
614-389-2075 Medicare, you've probably begun
This year, it's especially important to carefully
Cell 614-499-1201 receiving information about your
aw@awabelfinancial.com review your coverage, because legislation
coverage. That's because the
www.awabelfinancial.com passed in 2010 will affect your Medicare
annual enrollment period for
coverage next year. Some costs and coverages
Medicare runs from November
will be different. For example, starting in 2011,
Can you believe the summer is 15 through December 31. During
if you're enrolled in original Medicare, you'll be
over and we are rapidly heading this period, you can make
to the end of the year.
entitled to a free annual physical and wellness
changes to your Medicare coverage that will be
plan, and other preventive care services will be
effective on January 1, 2011. Even if you like
I am adding a focus to my fully covered. If you have a Medicare
practice - "Financial Planning for the Medicare coverage you already have, it's a
prescription drug plan, and you have
families with Special Needs". It good time to explore your options, especially if
turns out that a lot of families
prescription costs high enough to put you into
your health or financial circumstances have
with members who have a the coverage gap known as "the donut hole,"
changed.
disability of one type or another you'll receive a 50% discount on brand-name
don't know where to get advice. Reviewing your Medicare plan drugs and a small discount on generic drugs.
I've worked with families with
Special Needs in the past and Your Medicare plan sends you two important Medicare Advantage plans will be affected too.
have recently added another documents every year. The first, called the The open enrollment period that used to be
resource to increase my abilities
in these cases. Please call Evidence of Coverage, gives you information available each year from January 1 through
or pass my name to a family you about what your plan covers, and its cost. The March 31 is changing; starting next year, this
know who may need help in this second, called the Annual Notice of Change, period will run from January 1 through February
area. lists changes to your plan for the upcoming 15. If you're enrolled in a Medicare Advantage
Thank you to the many clients year (these will take effect in January). You can plan, the only option you'll have during this
who have shared me with their use these documents to evaluate your current period is to disenroll from your plan and switch
family and friends already! plan and decide if you need different coverage. back to original Medicare (formerly you could
If you haven't already gotten one, you should switch to a different Medicare Advantage plan
God Bless,
soon receive a copy of Medicare & You 2011, during this time). However, if you return to
A.W. the official government Medicare handbook. It original Medicare and lose drug coverage
contains detailed information about Medicare provided by your Medicare Advantage plan,
that should help you decide if your current plan you'll also be able to enroll in a Medicare
is right for you. prescription drug plan.
In this issue:
Here are a few points to consider as you review What if you want to keep your current plan?
Medicare Annual Enrollment your coverage:
Season Is Here If you're happy with your current coverage, you
• Will your current plan cover all the services don't need to switch plans. You can keep the
They're Baaack: RMDs for
2010 you need and the health-care providers you plan you have if it still meets your needs.
need to see next year?
Year-End Investment Planning
If you have any questions or concerns about
Is More Challenging in 2010 • Does your current plan cost more or less than your coverage or need help comparing your
other options? Make sure you consider options, call 1-800-Medicare. Or, you can find a
What does a stronger dollar premiums, deductibles, and other tool on the official Medicare website,
mean for my portfolio? out-of-pocket costs you pay such as www.medicare.gov, that compares Medicare
co-payments or coinsurance costs, and plans, Medigap plans, and Medicare
determine if any of these costs are changing. prescription drug plans available in your area.
• Do you need to join a Medicare drug plan?
When comparing plans, consider the cost of
drugs under each plan, and make sure the
drugs you take will still be covered next year.

2. Page 2
They're Baaack: RMDs for 2010
Required minimum distributions, often referred following the year of the account owner's death.
to as RMDs, are amounts the federal Alternatively, you may elect, or your plan may
government requires you to withdraw annually require, that you withdraw the entire account by
from traditional IRAs and employer-sponsored December 31 of the calendar year containing
retirement plans after you reach age 70½ (or, in the 5th anniversary of the account owner's
some cases, after you retire). RMDs are also death ("five-year" rule).
required if you inherit an IRA (traditional or
• Per the WRERA, if you inherited an IRA or
Roth) or employer plan account. You can
employer account, and you were using the life
always withdraw more than the minimum
expectancy payout rule, then your RMD for
amount from your IRA or plan in any year, but if
the 2009 calendar year was waived. You must
you withdraw less than the required minimum,
take an RMD for the 2010 calendar year no
you'll be subject to a federal penalty tax equal
later than December 31, 2010.
to 50% of the shortfall.
• If you inherited an IRA or employer account,
In response to deteriorating economic and you were using the five-year rule for
conditions in 2008, Congress (as part of the RMDs, you ignore 2009 when determining
Worker, Retiree, and Employer Recovery Act of when your five-year period ends. So, for
2008, or "WRERA") waived RMDs from IRAs example, if your original five-year deadline
and defined contribution employer plans for the was December 31, 2009, you ignore 2009 and
2009 calendar year. This allowed individuals to you now have until December 31, 2010, to
avoid having to deplete retirement plan assets complete withdrawals from the account.
while the value of those assets was suddenly Similarly, if your original five-year deadline
depressed. But RMDs are back for 2010. was December 31, 2013, your new deadline,
Here's how the rules apply. ignoring 2009, is December 31, 2014.
IRA owners and employer plan participants • If you inherited an employer plan account, you
If you turned 70½ before 2009, your RMD for may have been given the right to elect
the 2009 calendar year, which was due by whether to use the five-year rule or the
December 31, 2009, was waived. You must lifetime expectancy payout rule for taking
now resume taking RMDs. Your next RMD RMDs. This election is generally required no
(based on your December 31, 2009, account later than December 31 of the year following
balance) must be taken no later than December the year of the account owner's death. Per
31, 2010. IRS Notice 2009-82, if your deadline for
making the election was December 31, 2009,
If you turned 70½ in 2009, your first RMD (for you now have until December 31, 2010, to
As you can see, the
the 2009 calendar year) was due by April 1, make that election.
2009 waiver
2010. This RMD was waived. You must now
significantly
take your first RMD (for the 2010 calendar year, • If you inherited an employer account from
complicates the RMD someone other than your spouse, and the
based on your account value as of December
landscape for 2010. If five-year rule applies to your benefit, you
31, 2009) no later than December 31, 2010.
you're taking RMDs generally have until December 31 of the year
You'll need to take your second RMD from the
from an IRA or following the year of the account owner's
account (for the 2011 calendar year) no later
employer-sponsored death to make a direct rollover of the account
than December 31, 2011.
retirement plan, you to an inherited IRA, and use the lifetime
may want to consider If you turned 70½ in 2010, your RMDs are not expectancy payout rule for distributions from
reviewing your situation impacted by the 2009 waiver at all. Your first the IRA. If the account owner died in 2008,
with your financial RMD (for the 2010 calendar year) is due by you generally would have needed to complete
professional. April 1, 2011, and is based on the value of your your rollover by December 31, 2009. Per
account on December 31, 2009. You'll need to Notice 2009-82, you have until December 31,
take a second RMD from the account no later 2010, to complete the rollover.
than December 31, 2011.
As you can see, the 2009 waiver significantly
Inherited accounts complicates the RMD landscape for 2010. If
In general, if you inherit an IRA (traditional or you're taking RMDs from an IRA or
Roth) or employer-plan account, you must employer-sponsored retirement plan, you may
begin taking RMDs over your life expectancy want to consider reviewing your situation with
("life expectancy" rule) starting with the year your financial professional.

3. Page 3
Year-End Investment Planning Is More Challenging in 2010
If you don't normally review your investments at gains in 2010. That's because you're able to
the end of each year, 2010 might be a good report the taxable ordinary income from the
time to start. And if year-end investment conversion on either your 2010 return or in the
planning is already part of your routine, you 2011 and 2012 tax years (half of the income in
might want to pay special attention this year. each year). Your decision about when you will
Why? Because significant changes in the tax account for the taxable income that results from
code that are scheduled to go into effect in a Roth conversion may affect your decision
2011 could substantially alter the taxation of about the timing of investment sales, or vice
your portfolio next year. That could in turn affect versa. If you choose to report the income
your investment strategy. And since many resulting from your Roth conversion on your
expect additional changes that will affect next 2010 return, consider whether it makes sense
year's tax landscape, it's even more important to realize sizable capital gains this year. If you
than usual to think about whether your portfolio feel it's to your advantage to sell assets and
needs fine-tuning. pay the capital gains tax in 2010, you may want
to consider opting to postpone payment of the
Begin planning before December 31
taxes owed on the Roth conversion until 2011
If you plan to sell a profitable investment at and 2012. That would mean the total taxes
some point, you'll want to assess whether you owed would be spread over three years rather
should sell before the end of the year. That's than one (though as noted above, your future
especially true if you're in a low tax bracket or tax bracket also should be factored into the
you have investments that have appreciated calculation).
substantially. Investors in the 10% and 15% tax
Consider the tax status of dividends
brackets currently owe no capital gains taxes
on long-term capital gains. That is scheduled to Qualifying dividends are scheduled once again
change in 2011, when the long-term capital to be taxed next year as ordinary income, as
gains rate at this level is scheduled to increase they were before 2003, rather than at long-term
from 0 to 10%. If you're in the 25% bracket or capital gains rates, which are typically lower. If
higher this year, you'll also need to think about you'll be in the 15% tax bracket, that represents
this issue, though the scheduled increase from an increase of 15%. And if you'll be in the 28%
the current 15% to 20% isn't quite as dramatic tax bracket or higher next year, the change in
as the leap from 0 to 10% that those in the the tax status of dividend payments could also
lower income brackets will face. (Special, have an impact; the higher your tax bracket in
slightly lower rates for investments held for 2011, the greater the impact.
more than five years will apply beginning in
Don't forget the usual suspects Federal tax brackets
2011.)
In addition to staying on top of the tax issues for ordinary income
Also, the tax brackets themselves are are scheduled to
that complicate this year's investment planning
scheduled to change next year (see sidebar). If change in 2011 as
efforts, there are some tasks that are useful
you plan to harvest a tax loss and think you follows:
every year. A portfolio review can tell you
may be in a higher tax bracket next year, it
whether it's time to adjust your holdings to 10% becomes 15%
might make sense to first determine whether
maintain an appropriate asset allocation. Also,
the loss would be more valuable later. Though 15% remains 15%
if you have losses, you may be able to harvest
tax considerations shouldn't be the sole factor
those losing positions to offset some or all of 25% becomes 28%
in a decision to buy or sell, they shouldn't be
any capital gains. Be sure to consider how long
ignored, either--especially this year. 28% becomes 31%
you've owned the asset; assets held a year or
Complicating your decisions, of course, is the less generate short-term capital gains and are 33% becomes 36%
uncertainty about whether the scheduled taxed as ordinary income.
changes will undergo further revision before the 35% becomes 39.6%
If you're selling an investment but intend to
end of the year. One possibility is to have a
repurchase it later, be careful not to buy within
game plan based on the current scenario, and
30 days before or after a sale of the same
adjust it as warranted. It may seem like a
security. Doing so would constitute a violation
burden, but for those in higher tax brackets, the
of the "wash sale" rule, and the tax loss would
extra effort could pay off come tax time.
be disallowed. Finally, if you're considering the
Think about your overall tax burden purchase of a mutual fund outside of a
tax-advantaged account, find out when the fund
If you converted an IRA to a Roth IRA this year
will distribute dividends or capital gains, and
or are thinking about doing so before the end of
consider postponing action until after that date
the year, you may need to take that into
to avoid owing tax on that distribution.
account when deciding whether to book capital

4. Ask the Experts
What does a stronger dollar mean for my portfolio?
In the summer of 2008, and other derivatives to try to limit the impact of
investors were watching the that fluctuation on the fund's value. Others do
dollar shrink. Because not, hoping that any dollar weakness will
interest rates here were still increase the fund's value for U.S. investors.
relatively low, investors
Before investing in an international fund, check
favored riskier investments
its prospectus, which is available from the fund.
that offered higher returns. The euro's value
In addition to carefully considering its
climbed to a record of almost $1.60 at one
Abel Financial Strategies investment objectives, risks, fees, and
point. But with autumn came the crisis that
Augustus W. Abel, CFP® expenses, don't forget the special risks of
shook the global financial system. Panicked
Financial Advisor global investments, including political risks,
investors suddenly decided that
3775 Attucks Dr. currency risks, and different accounting
Powell, OH 43065 dollar-denominated assets such as U.S.
standards; all of these can vary considerably by
614-389-2075 Treasury bonds didn't look so wimpy after all.
country and region. Also, find out whether the
Cell 614-499-1201 Within three months, a euro was worth 30 cents
fund is hedged or unhedged. A falling dollar can
aw@awabelfinancial.com less. Worries about the European debt crisis
www.awabelfinancial.com enhance the returns of an unhedged fund, but
and whether the euro would even survive as a
the lack of a hedge leaves it unprotected if the
currency has kept the dollar at roughly the
dollar strengthens.
Securities offered through First same level or better for much of 2010.
Heartland Capital®, Inc. A stronger dollar can affect your portfolio even
Member FINRA/SIPC. Advisory
What does that mean for your portfolio? The
if you don't think you own any foreign
Services offered through First most obvious impact of a stronger dollar is on
investments. Many U.S.-based multinationals
Heartland ® Consultants, Inc. the value of overseas investments; the value of
(Abel Financial Strategies is not get a substantial percentage of their revenues
holdings denominated in a foreign currency will
affiliated with First Heartland overseas. A stronger dollar can cut into those
Capital®, Inc.)
fluctuate with the exchange rate between that
revenues as U.S. exports become more
currency and the dollar. Some mutual funds
expensive for overseas consumers. Also, many
that invest overseas attempt to hedge their
broad-based mutual funds include a percentage
currency exposure, using currency futures
of overseas holdings among their assets.
Why should I care about Europe's debt problems?
When it became apparent more capital, worried that they might need
last spring that Greece might those reserves to cover any losses on their
be unable to make sovereign debt holdings. Global investors worry
scheduled payments on its that tighter credit could slow a fragile global
government bonds, equities economic recovery or cause it to grind to a halt.
plunged around the world. European businesses and consumers that
How is it possible for the debt of one country to aren't able to buy U.S. exports could become a
have such a profound impact on investments in problem for U.S. corporations, many of which
a 401(k) plan a continent away? earn a substantial percentage of their revenues
overseas.
Investors were worried that Greece's problems
with its budget deficit and level of sovereign Another concern is the stability of the euro
debt (bonds issued by the national government) itself. If stronger European economies lose the
were emblematic of issues plaguing other will to help bail out weaker countries, or if highly
eurozone countries--issues that could create indebted countries are unable to make drastic
global problems in economies with more global and unpopular budget cuts, investors worry that
impact, such as Spain. For Europe, sovereign the euro could be in peril. Equities hate
debt is the potential equivalent of the subprime uncertainty wherever it is, and the specter of
mortgage market in the United States--the first chaos in the global financial system can affect
domino that could spark major shocks to the markets worldwide. To combat these problems,
banking industry and, by extension, the global European leaders have adopted many of the
financial system. same steps taken in the United States during
the 2008 financial crisis, such as establishing a
Concerns about the level of sovereign debt and
Prepared by Forefield Inc, massive lending facility and subjecting large
the potential for default or restructuring of
Copyright 2010 banks to stress tests to determine their ability to
payments have already affected credit
withstand financial shocks.
availability internationally; banks are conserving