At one point or another all my faithful readers have heard me rant and rave about the untruthful political propaganda that gets passed along as fact. People get their panties all bunched up about something they hear, and without so much as a few seconds to even pause and wonder if it is true, they pass the information along. Grrrr.

Well this New York Times article Too Good To Check is the antithesis to such propaganda. It starts out like this,

"On Nov. 4, Anderson Cooper did the country a favor. He expertly deconstructed on his CNN show the bogus rumor that President Obama's trip to Asia would cost $200 million a day. This was an important "story." It underscored just how far ahead of his time Mark Twain was when he said a century before the Internet, "A lie can travel halfway around the world while the truth is putting on its shoes." But it also showed that there is an antidote to malicious journalism -- and that's good journalism."

I love this piece so much that I established a permanent link to it in my Interpreting the News section.

Next time you hear something you want to pass along pause and ask yourself...true or false? Then take the time to find out before you keep the rumor going.

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Once again I had a client come in and ask me about immediate annuities. They are regular readers of my blog and astutely noticed that I mention annuities frequently in my blog. So, first of all, the longer you expect to live, the more an immediate annuity makes sense. If you think there is reasonable chance you will have a longer than average life span (if you are 55 today that means past 75 for a male, and past 79 for a female), here are the two case situations where I recommend an immediate annuity:

1. It meets your required rate of return.

Suppose you have determined that your investments need to earn a rate of return of 6% a year to provide you with a sufficient amount of inflation-adjusted income for the rest of your life. You get immediate annuity quotes and calculate what is called the internal rate of return of the annuity. If that rate of return prices out to be 6% or higher over your life expectancy than an immediate annuity would be a way you can guarantee your retirement income at the return you require.

2. You spend too much.

Suppose each year you spend more of your investments than you should. You are at risk of running out of money in five to ten years. Protect yourself from yourself. Take some of your assets now and buy an immediate annuity so you if you spend the rest you have at least secured a minimum amount of guaranteed income.

If you meet the facts and circumstances described above, the next question to ask would be "Is it the right time to buy an annuity?" To answer that see 2 Things You Must do When You Buy An Immediate Annuity.

In addition, before you go buying an immediate annuity from an insurance company, consider a social security buy back. If you started social security early, this option allows you to repay what you have received and start benefits over at a higher amount based on your current age. This strategy prices out as a much, much more more attractive option right now than an immediate annuity purchase from an insurance company.

For many, it's hard to say no to the kids. Too hard. Others are more logical about it, taking the time to actually figure out how much would be too much. Here's a tale of two families approaching this decision from opposite extremes.

The first couple was in this week... and their problem? They just can't say no. They are in their mid 70's. Their son is in his late 40's. He is not going through health problems, a divorce, or anything else catastrophic that would lead to extenuating circumstances. No, none of that. He just wanted to start his own business. And so his parents, who we had already determined had limited resources for themselves, started giving him $3,000 a month to cover his living expenses. They've been doing this for a year. They just told us today. They are at risk of running out of money in ten years. We are worried for them.

The other couple is in their mid 60's. Their son-in-law lost his job quite some time ago. As soon as it happened they asked to visit with me and had me run a new financial plan that would show them how much financial assistance they could offer without jeopardizing their own retirement security. This was a smart move. The result showed they could offer assistance for a defined amount of time - about a year - but no longer. They were able to share these numbers with their family, and in the process helped their adult children see the value of planning.

So how much is too much? Better to find out before you say yes.

I'd love to hear your opinion on helping the kids. Please leave a comment and share your thoughts!

A few weeks ago I volunteered for Financial Planning Days. There were about fifteen of us financial planners waiting to answer questions from the public. As we waited, a fellow planner and I got into a heated debate. Everyone in the room was listening to us. The debate was about foreclosure.

We live and practice in Arizona, which is a non-recourse state. At this time if you owe more than your home is worth (assuming it is a personal residence and all your loans were purchase money) you can walk away from your home and the bank cannot come after you with a deficiency judgment, nor will you have to pay income taxes on the amount of the loan that was forgiven.

As a fee-only financial advisor I have a fiduciary (legal) obligation to give clients advice that is in their best interest. When a client owns a home that is severely underwater - let's say for example they currently owe $200,000 more than their home is worth - one viable option for them is to choose not to keep the home. They can try to short sell it, or let it go to foreclosure.

To help them see the impact of their choices we use a spreadsheet that accounts for the tax benefits of deducting mortgage interest, the cost of moving, the future appreciation of real estate and every other factor you can think of. In several cases, when we run the numbers, it is clearly in the homeowner's best interest not to keep the home.

The planner I was debating is adamantly opposed to people letting their homes go. She feels it is morally wrong.

What do I think? I think each homeowner signed a contract with the bank, and legally that contract says they can make their payments or give the home back to the bank. By walking away, they are choosing to exercise one of their legal options that is in the contract.

I also think I have a legal obligation to explain all the choices to my clients. Now, if this was not a non-recourse state, the consequences would certainly be different, and so the advice given may be different.

What about the impact of foreclosure or a short sale to their credit score?  One client intentionally let her condo go to foreclosure a year ago; today her credit score is at 705. She took all the right steps to repair her credit, and as she was newly married, her husband (who had great credit) added her on to many of his cards, which helped her credit score recover quickly.

If you live in the Midwest, you are probably not impacted much by this foreclosure situation. If you, or any of your family, live in Florida, Nevada, California, or Arizona, the foreclosure situation is rampant. If you have family or friends trying to make such a decision, you probably have a strong opinion one way or another, please feel free to share it in What Would You Do?

For a list of recourse or non-recourse states see How Non-Recourse Loan Laws Vary from State to State.