1. October 2009
Ameriprise Financial
Scott D. Serfass, CFP®,
CRPC® Protecting Yourself from Investment Scamsters
Advanced Financial
Advisor Bernie Madoff may have gone to jail, but if split-strike conversion was as long as it sup-
13830 Ballantyne you think we've seen the last of fraudulent posedly produced the returns Madoff prom-
Corporate Pl. ised (people who did understand the strategy
Suite 200 investment schemes,
you could be setting were the first to question whether his returns
Charlotte, NC 28277
(704)916-6897 yourself up to become were real). You don't have to become an in-
(800)234-1130 the next victim. vestment genius to have a fundamental grasp
Scott.D.Serfass@ampf.com Stronger regulations of what you're invested in, how it works, and
are in the works, but what the potential risks and rewards are.
there are some basic Do your homework
steps you can take to help protect yourself
and your family. A recommendation from an acquaintance may
be a good starting point for research, but it
Know where your money is going shouldn't be the sole factor in your decision-
One of the reasons Madoff was able to avoid making process when
exposure for so long was that his firm acted choosing investments or
as both investment advisor and custodian of an investment profes-
his clients' assets. His clients wrote their sional. Being popular or
checks directly to Madoff's firm rather than to well-known doesn't neces-
an independent custodian. As a result, there sarily make someone the
was no outside verification of whether he was right person to handle your finances.
actually making the trades he claimed. Though it might not have red-flagged Madoff,
Checks should generally be written directly to Form ADV can provide background informa-
a custodian firm that also is involved in proc- tion about a registered investment advisor.
essing your account statements. Part 1 of the form can be found at
Know where your money's going, part 2 www.adviserinfo.sec.gov; Part 2 must be sup-
plied directly by the advisor and includes infor-
Don't invest Web resources mation on services, fees, and investment
purely on the strategies. The Financial Industry Regulatory
The FINRA website
basis of returns; Authority (FINRA) website's BrokerCheck
In this issue: (www.finra.org) has two
understand what allows you to confirm broker licensing and
interactive tools to help
Protecting Yourself from you're investing check on any history of disciplinary problems.
you spot potential
Investment Scamsters in. Because Information about insurance professionals is
investing red flags. The
people were so available from the individual states.
Roth IRA Conversions in 2010: Scam Meter asks a
Goodbye, Income Limits! anxious to in-
series of questions Take advantage of multiple resources
vest with Mad-
Homeward Bound: Investing in
about an investment to
off, he was able Madoff used reverse psychology; the more
the American Dream assess whether it might
to deflect ques- difficult he made it for people to invest with
literally be too good to
Should I lay off employees tions about how him, the more they wanted to do so. If you
be true. The Risk
from my small business? he achieved his question or don't understand advice from one
Meter reviews
results (a fairly financial professional, you should feel free to
behaviors and
simple process, consult someone who can help you make
personality traits that
as it turned out-- sense of what's being proposed for your
make some investors
he lied). Most of money. You might also want to consider using
more likely to be
Madoff's inves- multiple investment managers, each of which
victimized.
tors didn't know may specialize in a specific investing style or
or care what a asset class.

2. Page 2
Roth IRA Conversions in 2010: Goodbye, Income Limits!
With the lure of tax-free distributions, Roth Convert now, pay later
IRAs have become popular retirement savings Normally, when you convert a traditional IRA
vehicles since their introduction in 1998. But if to a Roth IRA, you're required to include the
you're a high-income taxpayer, chances are amount converted--minus any nondeductible
you haven't been able to participate in the contributions you've
Roth revolution. Well, that's about to change. made--in your gross in-
What are the current rules? come in the year you
make the conversion.
Regardless of For 2009, if your modified adjusted gross in-
your filing status come (MAGI) is greater than $100,000, you However, to ease the
or how much can't convert a traditional IRA to a Roth IRA. pain of a potentially large
you earn, you'll This $100,000 limit applies whether you're tax hit in 2010, TIPRA
be able to single or married filing jointly. And if you file includes a special rule
convert a your taxes as married filing separately, you for 2010 conversions
traditional IRA to can't make a conversion at all--regardless of only: if you convert your
a Roth IRA your income level. traditional IRA to a Roth
starting in 2010. IRA in 2010, you can
In addition, your ability to make annual contri- report half the income
butions to a Roth IRA depends on your MAGI: from the conversion in 2011, and the other
half in 2012.
If your federal Your Roth IRA You can't For example, assume that in 2010 your sole
filing status is: contribution is contribute to
reduced for a Roth IRA in
traditional IRA is worth $200,000, and you've
2009 if your 2009 if your made $50,000 of nondeductible contributions.
MAGI is: MAGI is: If you convert the entire IRA to a Roth in
2010, $150,000 will be subject to federal in-
Single or head $105,000 but $120,000 or come taxes. If you use the special rule, you
of household less than more
can report half of the taxable amount
$120,000
($75,000) as income in 2011, and the other
half as income in 2012. Alternatively, you can
Married filing $166,000 but $176,000 or report the entire $150,000 as income in 2010.
jointly or less than more (Note: state tax rules may differ.)
qualifying $176,000
widow(er) (Note that a SEP IRA can also be converted
to a Roth IRA, and a SIMPLE IRA can be con-
Married filing More than $0 $10,000 or verted two years after you begin participating
separately but less than more in your employer's SIMPLE IRA plan.)
$10,000
Is a Roth conversion right for you?
What is--and isn't--changing The answer is complicated, and depends on
many factors, including your income tax rate,
In 2006, the Tax Increase Prevention and the length of time you can invest the funds
Reconciliation Act (TIPRA) became law. without withdrawals, your state's tax laws, and
TIPRA repeals the $100,000 income limit for how you'll pay the income taxes due on the
conversions, and allows conversions by tax- conversion.
payers who are married filing separately, be-
ginning in 2010. This means that regardless of Even if you decide to convert, whether it
your filing status or how much you earn, you'll makes sense to use the special 2010 deferral
be able to convert a traditional IRA to a Roth rule depends on your individual situation. It
IRA starting in 2010. may also depend on where you think income
tax rates are headed. If you expect rates to be
Unfortunately, TIPRA does not repeal the in- lower in 2010 than in 2011 and/or 2012, defer-
come limits for annual Roth contributions. ring the tax hit may not be a good idea. Your
However, depending on your circumstances, financial professional can help you run projec-
beginning in 2010 you may be able to make tions to determine if the special rule is
your annual IRA contribution to a traditional appropriate in your particular case.
IRA, and then convert that IRA to a Roth.
Your financial professional can help you de-
termine if this works for you.

3. Page 3
Homeward Bound: Investing in the American Dream
Your home is more will make the same monthly payments over
than a shelter, it's a the term of their mortgage. And mortgages
sanctuary from the have a finite term--you'll eventually own your
world around you. It's home outright and will continue to benefit from
also a daycare cen- the generated rental income thereafter.
Since 1987, when the
ter, restaurant, laun- Of course, equating your home to an income- Case-Shiller index of
dry facility, and enter- producing asset is more complicated than 10 major cities
tainment complex all rolled into one. And for we're describing here. A detailed analysis begins, it's risen from
some, it's a status symbol. But is it an might account for factors like home mainte- an index value of 63
investment? to 151. Annual return:
nance costs and property taxes, as well as tax Just 4.1% per year.
Just a few years ago, with home prices breaks associated with homeownership. During that period,
steadily increasing, the answer might have Potential for appreciation according to the
seemed obvious. But recent double-digit an- Bureau of Labor
nual declines in housing prices have--not sur- When you purchase a home (and you may Statistics, consumer
prisingly--led to a chorus of calls to rethink the own several over the course of a lifetime), prices rose by 3% a
getting the best value for your money is usu- year. Net result: Home
way homeownership is viewed. Your home, prices produced a
you might hear, is just a place to live, not an ally a concern. Although you may not pur- real return of just
investment. The truth is that even if your pri- chase a home with the intent of flipping it for a 1.15% a year over
mary motivation for owning a home isn't finan- profit in the short term, you probably expect inflation over that
cial, your home qualifies as an investment. that your home will appreciate over the long time.
term. The future value of your home is impor- Brett Arends, Is Your
The profit motive tant, whether you hope to sell your home Home a Good
An investment can be defined as a purchase some day, or intend to leave your home to Investment? WSJ,
or an allocation of dollars with the intention of your children. May 27, 2009.
generating income or profit. Certainly, if you In addition to expecting your home to appreci-
purchased your home with the intent of fixing ate in value over the long term, if you have a
it up and "flipping" it, your home would qualify mortgage, you probably anticipate building
as an investment under this definition. Even if wealth through equity as you pay down the
your primary motivation for buying a home is mortgage. With each mortgage payment you
the enjoyment the home provides, however, make, more and more money (equity) is po-
your home has characteristics that make it an tentially available to you to use toward future
investment--it generates current "income" and goals or to serve as a financial safety net in
provides potential profit in the form of long- retirement.
term appreciation.
That's not to say that a home is necessarily
Your home generates income the most efficient way to accumulate wealth.
If you didn't own a home, you would be paying Depending on where you live, and how long
rent. If you own your home outright (i.e., you you intend to reside in your home, you might
don't have a mortgage), the value of what you come out ahead financially by renting and
would otherwise be paying in rent might be investing the dollars you save by doing so.
considered a type of "income" that your home The point is, that as bleak as the current
generates each and every month. housing market is, over the long term, you
probably view your home as a relatively safe
Similarly, if you have a mortgage, each pay- vehicle for wealth accumulation. As with any
ment you make is offset by the value of this investment, that expectation may or may not
generated income. For example, let's say that be reflected in actual performance over time.
each month you make a mortgage payment of
$2,500. If it would cost you $2,000 each The bottom line
month to rent a comparable home, the incre- Your home is likely your single largest invest-
mental cost of buying rather than renting is ment asset, playing a critical role in the overall
$500. In effect, you're paying $2,500 each accumulation of wealth during your lifetime.
month for your home, but receiving an imme- But, as is the case with all investments,
diate income benefit of $2,000 each month. whether owning a home is the most efficient
Another consideration: while rent can increase allocation of your dollars depends in part on
(or decrease) from year to year, most home- your expectations and tolerance for risk.
owners (at least those with fixed mortgages)

4. Ask the Experts
Should I lay off employees from my small business?
With today's troubled eco- Or, you could change your workers' sched-
nomic conditions, more ules, cutting back hours. Now may be a good
employers are facing this time to consider instituting a four-day work
difficult question. Layoffs week or have full-timers become part-timers.
are no fun for anybody. It's Check to see if your state government will
hard for the workers who lose their jobs, it help by offering unemployment benefits to
hurts the morale of remaining workers, and it workers who must go part-time (a few states
Ameriprise Financial do).
Scott D. Serfass, CFP®, can be a financial and emotional hardship for
CRPC® small business owners who typically have If layoffs are necessary, carefully consider
Advanced Financial dedicated resources to develop their workers' your business needs. Some persons may be
Advisor skills, and often have social ties with their vital to the success of your company, and
13830 Ballantyne employees.
Corporate Pl. laying them off may not be a valid option. On
Suite 200 To help answer this question, first determine the other hand, this could be an opportunity
Charlotte, NC 28277 whether cutting payroll expenses is your best for some housecleaning. Make your company
(704)916-6897 course of action. Remember, there is a cost to more efficient by trimming excess staff, or
(800)234-1130 letting go unneeded management and poor
Scott.D.Serfass@ampf.com laying off, rehiring, and training employees.
Perhaps it would be wiser to obtain an infu- performers.
sion of cash from investors, or cut other Before making any terminations or layoffs,
The information contained in this material is
budget items instead, such as employee however, seek legal advice to avoid any po-
being provided for general education purposes
and with the understanding that it is not intended
benefits. tential employee lawsuits. You'll need to com-
to be used or interpreted as specific legal, tax or
investment advice. It does not address or Next, consider other options. For example, it ply with certain federal and state laws, and
account for your individual investor
circumstances. Investment decisions should may be better for both you and your employ- any employment or union contracts.
always be made based on your specific financial
needs and objectives, goals, time horizon and ees if you retain everyone but reduce wages
risk tolerance.
across the board.
The information contained in this communication,
including attachments, may be provided to
support the marketing of a particular product or
service. You cannot rely on this to avoid tax
penalties that may be imposed under the Internal
Revenue Code. Consult your tax advisor or How should I lay off employees from my small business?
attorney regarding tax issues specific to your
circumstances.
Neither Ameriprise Financial Services, Inc. nor Employee layoffs are not easy for any busi- services, ready to go. Be prepared to
any of its employees or representatives are
authorized to give legal or tax advice. You are ness owner. Here are some tips for a answer any questions your workers may
encouraged to seek the guidance of your own
smoother process. have. Being organized, efficient, and thor-
personal legal or tax counsel. Ameriprise
Financial Services, Inc. Member FINRA and ough may ease the sting felt by both out-
SIPC.
Do it right the first time. Letting go all the going and remaining employees.
The information in this document is provided by a
third party and has been obtained from sources appropriate individuals can prevent a
believed to be reliable, but accuracy and potentially traumatic and costly "second Proceed with tact. Deliver the bad news
completeness cannot be guaranteed by
Ameriprise Financial Services, Inc. While the round." with compassion and respect. Express
publisher has been diligent in attempting to
provide accurate information, the accuracy of the regret and concern. Give as much finan-
information cannot be guaranteed. Laws and Get good legal advice. It is imperative
regulations change frequently, and are subject to cial and personal support as your busi-
differing legal interpretations. Accordingly,
neither the publisher nor any of its licensees or
that you understand your workers' rights ness can allow. Provide hope if rehiring
their distributees shall be liable for any loss or
damage caused, or alleged to have been
and fulfill your legal and contractual obli- when things get better is a real possibility.
caused, by the use or reliance upon this service. gations. For example, affected employ- Let workers finish the day or week, if pos-
ees will likely be entitled to state unem- sible. Allow them to pack up and say
ployment benefits and COBRA extended goodbye to colleagues. Show them to the
health benefits, and you may have to give door. Keep in touch. Following the
proper notice under the Worker Adjust- "golden rule" will hopefully soften the
ment and Retraining Notification (WARN) blow for those moving out and boost the
Act. You want to avoid any possible dis- morale of those staying on.
crimination or other lawsuits that might
ensue. Get back to business. Be open about the
event with your remaining workers. Pro-
Prepared by Forefield Inc, Attend to the details ahead of time. Have vide assurances when possible, show
Copyright 2009 all relevant documents and programs, confidence, and lead your company
such as severance packages, letters of forward to a brighter future.
recommendation, and outplacement