Why It Is Beneficial to Hire San Diego Internet Marketing Companies

imsdSan Diego is home to several companies that provide internet marketing services to all kinds of businesses. San Diego Internet marketing companies have been responsible for the rising popularity of several businesses in San Diego. These include a fitness facility, a sports club, an insurance company, and a computer store.

There are several reasons why using internet marketing services  is highly beneficial. First, these companies are well-equipped in terms of manpower to provide the best internet marketing services to clients. They utilize bulk email campaigns that can reach millions of potential clients as well as social media marketing, which is now considered to be very effective. These companies employ the best people in the field of internet advertising and product promotions. Through their efforts, their clients have become known both offline and online and they have brought more potential customers to their clients. Second, these companies have established their names in the field of internet marketing as evidenced by the testimonials of their clients whose visibility in the internet and customer database have increased. Last, clients are given a free consultation so that the internet marketing services provider will know what advertising strategy to use. With the help of SEO companies like this, business owners can concentrate on making their business grow.

Search Engine Optimization Companies Are Developing Content Marketing

While some countries in the world are still studying search engine optimization and are trying to implement its principles in developing their internet marketing, the San Diego search engine optimization companies are already reaching their peak in this field of industry. Some even say that SEO is becoming old and that new things need to be done when it comes to content marketing, but the experts who are better experienced say that search engine optimization will exist for long time. As long as there is Google, Bing and other search engines, companies that offer SEO services do not have to be afraid that they will lose clients.

Indeed, the term content marketing is changing and the meaning of search engine optimization does not mean the same as it meant five or even more years ago. Nowadays this term means also social networking and blogging, because that is all part of SEO. Each San Diego search engine optimization company will tell you that and if someone does not recommend you being active on Twitter or Facebook, you should think twice before hiring that person. Modern SEO combines many activities, but customer does not have to think about that if the SEO company is thorough and agrees to take care for each part of SEO.

Search Engine Marketing Enables You Advertise Your Business Easily

The most and important rule in marketing is consistency and in order to attain this constant repetition must be one of your marketing strategy so you must be diligent in making follow up since single short marketing never work except if you are lucky enough. Search engine marketing enables you advertise every time, in building a brand you need repetition. For a product to acquire more and more customers, it must be visible all the time meaning that you must be persistent in advertising, a follow up reinforces the efficiency of your market strategy. Like others, search engine marketing San Diego helps you ensure your products are present for customer viewing so that they can take time to test you products and services due to consistent presence of the product customers can give it a try.

Your first piece can only go up when there is a next one pushing it upwards, the more pieces you put beneath the first one, the deeper the real marketing message travels into your prospective customers. By setting repetition in motion and start sending direct mail pieces and other follow-up marketing pieces, you will find the odds gradually transforming into solid opportunities. This is the important tool in marketing that you will never successes without being put in place. Many successful businesses use the same tool to make their products and services known to the potential customers and the community.

Planning Your Pension: Be Smart And Stay Flush

pypbsDefined benefit plans — more commonly called pensions — are typically available automatically to any employee who meets the minimum requirements. Because the employer usually contributes the money to fund the plan, it is usually the administrator — not the individual employee — that is responsible for investing the funds. However, the employee may have representation through a union or through the employer on a committee that makes investment and plan structure decisions.

Unlike defined benefit plans, defined contribution plans are funded by the employee (although, in some cases, the employer contributes matching funds). Most public sector employers offer a 457 or deferred compensation plan, but they also use plans — 403 (b), 401(k) or 401(a) — from other IRS code sections.

The issues to watch in the two plan types are quite different. In defined benefit plans, it is critical to pay attention to the length of service and the average salary amount, which will determine the amount of the benefit. In a defined contribution plan, however, level of contribution, the length of time money will be invested and how it will be invested are important.


The most important distinction between the two tools supporting retirement is the level of employee involvement that each demands. Because the employer typically manages a defined benefit plan, an individual’s decisions are normally limited to age of retirement and timing of benefit withdrawal. In contrast, a defined contribution plan creates several important decisions for employees throughout their careers that can have a dramatic effect on the value received.

First, employees must decide whether to participate at all. Despite the long-term benefit, some employees do not participate in defined contribution plans. They might not appreciate the plan’s value, or they may have more immediate needs. For instance, car payments or mortgages may overwhelm their budget’s margin for savings.

Secondly, employees must make investment decisions. That involves more than simply picking a mutual fund. Employees need to think about their financial goals, their level of risk tolerance and the amount of time they have to save. The best-administered plans include educational material that guides participants in understanding each of those dynamics.

Finally, employees need to have a sense of their withdrawal strategy — at what point will they begin drawing on their defined contribution plan and how aggressively? In particular, many public sector plans have special distribution rules that are different from those for private plans.


Communication with employees is essential for retirement plan participation and success. Employees should know why plan participation matters, be comfortable with their investment options and understand withdrawal options.

It is no accident that San Jose has more than 70 percent participation in its defined contribution plan. The city offers numerous brown bag lunch sessions at which employees learn about the plan, in addition to 15 sessions annually that focus solely on investments.

“The initial questions are always, `Can I lose my money’ and `What should I do?’” Mathus says. “They get polarized sometimes between the different options and want us to tell them what to do. Our answer is to explain their options and give them ownership of the plan.”

An employee can look to either type of plan to help meet his retirement goal, but knowing that goal — the level of income he will need to retire — is the step that participants in all types of plans tend to miss. Last year, 53 percent of American workers said that they have tried to calculate how much they will need to retire, according the Washington, D.C.-based Employee Benefits Research Institute’s Retirement Confidence Survey. That percentage has grown from just 35 percent in 1993.

With either type of plan, employees need financial education and open communication to understand what they have. The value they find in their retirement plan is often defined by how much they know about what the plan achieves.


Both plan types are going through important changes. For example, some defined benefit plans are evolving so that benefits accrue more steadily over time, instead of accumulating largely in the last 10 years before an employee’s retirement.

In some circumstances, an employee leaving an organization with a defined benefit plan can get a lump sum payment in lieu of a benefit at retirement. In part, the portability of benefits reflects the interests of young workers who expect to change jobs more frequently than older workers.

With defined contribution plans, the percentage of income that can be deferred to the plans has grown with new tax laws. The plans are relatively young — only about 20 years old — and continue to move in a direction that encourages active saving. Proposals being actively debated now in Congress could further change the landscape significantly, especially with regard to contribution limits and the ability to move money between retirement vehicles.


Plenty of technical detail associated with both defined benefit and defined contribution plans exists. Benefit calculation specific to defined benefit plans can be highly complex. On the defined contribution side, investment and withdrawal strategies require decisions and educated assumptions. But participants in either type of plan need not get lost in the details. Their retirement goals provide the framework for decisions in either case.

The individual decisions that matter with each plan type are different. Length of service is the core concern in defined benefit plans. Length, level and manner of investment are central in defined contribution plans. When participants know those basics and have thought about retirement goals, they likely can succeed with either plan or a combination of both.

How Stone County takes advantage of NACo plan

Since 1992, Stone County, Mo., has participated in a deferred compensation plan that has allowed county employees to set aside pre-tax earnings in a retirement fund. The county adopted the plan, created by the National Association of Counties, at a time when it had no other means of offering a retirement program to its employees.

NACo instituted the plan, underwritten by Columbus, Ohio-based Nationwide Life Insurance and administered by Columbus-based Nationwide Retirement Services (NRS), to provide deferred compensation benefits to counties that could not otherwise afford them. More than 380,000 county employees from approximately 1,900 counties currently participate in the plan. NACo offers the program at no cost to the counties.

The Stone County Commission voted to join the deferred compensation program in August 1992. “It was the feeling of the county commission at the time, as it is today, that this was an opportunity for our employees to set aside funds for the future,” says County Administrator Ron Housman.

The program offers employees several investment options, including two fixed annuity options and a variable annuity of differing investment styles and risk levels. As part of the program, NRS provides marketing, record-keeping, customer support and account management, as well as a regular enrollment and education seminars for employees. Employees also may enroll individually through NACo. An advisory committee, composed of county officials from participating counties nationwide and supervised by NACo, monitors the program’s investments, communications and policies.

County personnel may contribute up to 25 percent of their salaries, with a cap of $8,500, to the plan each year. “We have employees that set aside $10 to $20 a pay period, and others contribute much more,” Housman says. “No matter what the amount is, it allows them to set something aside and start planning for their futures.

“The results have been wonderful,” he notes. “[The program] allows them to defer any tax ramifications until a future date, and, in the interim, those dollars are earning dollars for them. It has been a tremendous benefit for our employees.”

Staying Strong Through A Downturn

sstaRemember that cash reserve you’re supposed to have for an emergency? The money you always meant to save but never did? For tens of thousands of us, the emergency may be at hand. In the current business downturn, you or your spouse may be laid off. You may lose overtime you’d counted on. Your company may increase the cost of your health benefits or reduce your bonus. You may have to help a child who is suddenly out of work.

Fortunately, the slowdown isn’t expected to be severe. But this uncertain time should serve as a wake-up call for any families living at the edge of their incomes or beyond. Here are some ways to keep yourself safe:

* Watch your spending It’s only human to buy more stuff when you’re doing well. But when the economy starts flashing yellow, pare your shopping list to things you need right now. Every postponed purchase adds to the money you can save. Also, watch the little things. For example, I do a lot of Internet and catalog shopping because it’s easy and quick. But shipping costs are high, and you don’t find the range of sales that you do in stores. Lately, I’ve figured out I save money by building a multimonth shopping list, then spending a couple of intense hours at the mall.

* Build your cash savings If you haven’t been putting money aside, start now. Ideally, your cash reserve should get you through at least three months without pay. In real life, beginners should aim for a one-month cushion. After that, use your money to pay off debt.

* Reduce high-cost debt This means credit cards. If you’re postponing purchases, your debt shouldn’t increase, and you’ll have enough cash to double or triple each month’s payment. To lower your interest costs, consolidate debt on a low-rate card or home-equity loan.

* Try to lower your mortgage payments An economic slowdown means lower interest rates, and since May, fixed mortgage rates have dropped by about 1.5 percentage points. If you have a fixed-rate loan and plan to stay in your house for several more years, this might be a good time to refinance. Check out the closing costs and compare them with the amount you’ll save each month. Refinancing is worth it if you can make up the closing costs in two or three years.

You also might consider an adjustable-rate mortgage, whose rate changes once a year. Many borrowers avoid ARMs because they hate the uncertainty. If you’d taken an adjustable loan in 1999, your rate would have risen about one half to one and a half percentage points. Still, over that period you’d generally have paid less than people who took fixed-rate loans.

* Don’t sacrifice retirement savings In fact, bump them up. If you’re contributing, say, 3 percent of your pay to a 401(k), try for 4 or 6 percent. The more you put in, the more you might get from your employer in matching funds. If you leave a job, don’t liquidate your 401(k) even if the amount is small. Keep the money in the company plan or roll it into an individual retirement account at a bank or in a mutual fund. Tap the account only if you really need the money to pay bills.

* Rethink your investment strategy In recent years, it’s been “cool” to trade individual stocks, especially tech stocks and dot-coms. It seemed easy to pick ones that then went up. Even after last year’s tech wreck, you might still expect stocks to soar again. Maybe they will. But the next stocks to soar may not be techs. In 2000, investors made pots of money in natural gas stocks, HMOs, drugs, and retailers, to name a few, while the techs came crashing down. Surprises like this are reason to keep your serious, life-changing money in well-diversified mutual funds-not tech funds, but funds that buy all kinds of different stocks. Over the long run, diversification wins.

Will that dot-com be there tomorrow?

With Internet companies dropping like flies, think hard about the firm you’re dealing with online. What protection do you have if the dot-com fails? For example, a three-year-old site called StockPower (which maintained dividend-reinvestment plans for some 30,000 online accounts) closed suddenly, late last year. The stocks were safe, but for a couple of days investors could handle their accounts only by mail or phone. I see two morals here: 1. Before opening any kind of online account, find out who’s holding your money and what would happen to it if the Web site failed. 2. Trust major companies, with real locations, over those that exist solely online. That includes merchants as well as financial dot-coms. You don’t want your Me-store to fail while you’re waiting for your purchase.

Financial Education, Military Style

femsWhat are you doing about personal financial issues in your EAP? Are employee financial problems very significant in your workplace? Are they even recorded? What are the symptoms? Does your payroll department report any employees using garnishment as a form of debt management?

Our experience with the U.S. Navy’s equivalent of a civilian EAP suggests that for every financial problem we see in our Fleet and Family Services Center (FFSC) in Hampton Roads, Va., there are nine more we do not see. Eventually, these nine will make their presence known, often in ways that affect work performance and productivity.

We all know intuitively (and too often from experience) that financial wellness is clearly related to mental, emotional, and physical health. The violent tragedy in Wakefield, Mass., apparently over garnishment issues, is only the most recent brutal reminder of the powerful connection between money and health.

But what is the cost of promoting financial wellness and avoiding employee financial problems? The answer to this question depends on how personal finance issues play out in the average EAP. The bottom line seems to be whether personal finances surface as a primary or underlying issue and whether employees can get appropriate professional assistance before their problems escalate.

Teachable Moments

The need for personal financial education in the workplace, whether in the Navy community the military in general, or the civilian population, is really not in doubt, though it is vastly underestimated and frequently ignored. It is the proverbial elephant in the living room. For many the subject of personal finances is still taboo, perhaps because it is too personal and too close to home.

The level of discussion about personal finances is probably similar to the level of discussion about sex in the 1950s, but at least we are beginning to talk. As one warrant officer aboard the aircraft carrier John Fitzgerald Kennedy explained to a visiting White House official who asked why regularly paid sailors have problems with money management, “Ma’am, first you might want to look at the pay scales. Also, when it comes to discussing personal matters, sailors are more likely to talk about their sex lives than their money, and have been known to stretch the truth on that.”

Navy-wide community needs surveys (Hayes, 1995; Caliber, 1996) have found that personal finance and related issues dominate the top 10 issues for Navy “employees” and their families, and this year personal finance was the top issue in a Navy leadership survey Nearly a third of Navy families have difficulty making ends meet every other month (Caliber, 1996), though that alarming figure is no worse (and often is better) than the comparable statistic for the civilian population, partly because Uncle Sam provides a steady paycheck to service members.

So compelling is the perceived need for financial education that the comptroller of the Navy announced a multimillion-dollar commitment in November 2000 to build the current highly-regarded personal financial management program into a truly life-cycle preventive education program. The other armed services are following suit.

Just how does the Navy educate its service members about personal finance? The first Fleet and Family Services Center was created in Norfolk in 1979 in response to the hard personnel lessons of the Vietnam era. The program development process for FFSCs has been characterized by almost constant internal growth and expanded services to meet the unique and difficult challenges of the Navy lifestyle. That development process is dynamic and continues today

Retention and recruitment are, and always have been, at the core of the FFSC’s mission. The truism, “a sailor enlists, but a family re-enlists or leaves,” has tremendous validity Deployments, relocations (frequently to overseas locations), and low levels of pay are the working realities of Navy employees and their families. Families will stay in the Navy as long as the quality of family life is acceptable. What the FFSC provides is central to the Navy’s mission of operational readiness, not an employer fringe benefit.

The modern FFSC provides specialized support services not anticipated even by its visionary founders. For instance, special teams of clinicians and educators board ships and ride with sailors as they complete the last legs of their deployments. The role of these “return and reunion” teams is to seize the “teachable moment” and help facilitate the transition back to everyday life. The programs they deliver are designed to help sailors prepare to successfully reintegrate into their families and society and include single-sailor programs, returning-to-children sessions, and the consistently popular pieces on money management and car-buying strategies.

Natural Entry

We know from these “teachable moment” experiences that personal financial concerns are a natural entry into the world of other support services and programs for our employees and their families. EAPs in the civilian world likely would find this to be true as well. The reality is that most people are naturally very interested in taking control of their personal finances, so financial education programs are attractive to them.

Once the civilian population has stabilized its behavioral risk management procedures for substance abuse, and perhaps even before, personal finance probably will emerge as a major corporate concern, as it did in the armed services. In a test of basic economic principles, adults scored only 57 percent, while high school students scored even worse at 48 percent (Brenner, 1999). Your new employees and our new service members will come from these populations.

The bottom line for the Navy is operational readiness through personnel support at a reasonable cost. I suspect that with expanded Navy support for financial education and a concomitant community response to reduce the costly fallout from sailors at risk due to personal financial problems, there will be increased emphasis on examining the cost avoidance/investment ratios in preventive financial education efforts.

Your sisters, brothers, sons, and daughters who choose to risk their lives for our freedoms deserve the best employee assistance services available to help keep them focused on their jobs. In the Navy, that includes financial education services in the workplace.

Getting Employees to Own Their Finances

My first introduction to the Navy’s Alcohol Rehabilitation Comm and (as it was called at the time) was part of my orientation as a financial educator in Norfolk, Virginia, home of the U.S. Atlantic Fleet. My mentor was a retired senior chief who had invited me to see how he conducted business.

I took a seat in the back of the classroom as he set up on the center stage, a 12-step poster behind him and a white board to the side for illustrating key points. Five minutes before the training session was to begin, only a few students were present, and dozens of plastic chairs were stacked around the room. Within the next four minutes, more than 50 uniformed students wearing hand-written nametags crowded into the room. What followed was as much a lesson for me as an overview of practical personal financial concepts for recovering substance addiction patients.

The instructor explained that he had a prepared script for developing a personal budget, but that he was really there to answer questions and challenge attendees to think about their money, their habits, and what they were going to do differently. This approach made it “their” program, and anything they wanted to know about money (or wished they had known before joining the Navy) was fair game. What followed was a lively discussion, with questions ranging from “What qualifies you to tell us what to do with our money?” to “How do I ‘fix’ my credit?” to “How do I ‘fix’ for bankruptcy?” In the background, murmurs of I don’t have any money” were heard over and over.

The connection between substance abuse and personal finance has been reinforced regularly in my 12 years of revisiting the renamed Navy Addictions Rehabilitation Detachment. Over the years we have continued to present one session per group, for 15 to 20 groups per year. While the outcomes have not been measured by quantitative research, I am confident that if only half of those who ask for specific community referrals follow through, some significant first steps are being taken to gain control of personal finances.

The core presentation, “Developing Your Spending Plan,” while basic, often reveals a lot about the surfacing concerns of service members (it is an all-services facility) as they go through treatment. Their questions–ranging from “How do I get out of debt?” to “How do I talk to creditors?” to “How do I invest?”–clearly show what employees want in terms of professional guidance on basic money matters. Many times they approach us after presentations and tell us poignantly, “I wish I had this 17 years ago when I first joined the Navy,” or “Everyone should get this lecture!”

Thanks to persistent efforts in providing these and related financial education services and alerting leadership to the clear need for (and related benefits of) preventive financial education, the Navy is now funding a comprehensive life-cycle approach to personal financial management. The Navy’s structured education, training, and counseling program might provide some lessons for the civilian EAP community as it charts new strategies, partnerships, and service delivery opportunities for the new century.

Budgeting In College: Some Tips

bicstPlanning for college is about making choices, and those choices go way beyond choosing your school. Deciding how to manage your money is a choice you’ll want to handle early and with care.

This is a lesson some students learn too late. Take Jen’s friend Jason, who lived down the hall from her at Boston College. With a new credit card in his wallet and newfound independence, Jason charged $500 worth of pizzas during the first month of school. “He used to ask everyone in our hallway if they wanted some,” Jen recalls. Now, six years later, “he’s probably still paying it off!”

If Jason had thought about a budget before getting to school, he would have realized that topping off most days with a pizza was more than he could afford.

Obvious? Most people would think so. But there are lots of hidden expenses at college. Most students end up feeling overwhelmed by all the costs. Moira, a recent graduate of Southern Connecticut State University, warns, “Don’t underestimate how broke you’ll be.”

Learn to make smart money choices. It’s never too early to start estimating your college budget. Step into Budgeting 101, where class is in session.

Lesson 1: How Much Will You Have?

Creating a budget requires knowing how much money you have–your income–for the things you want or need to buy. The first step is estimating what your income will be while you’re in college.

Possible sources of income are scholarships, loans, summer job savings, parents, and money from a job at school. Most of this money may be going toward tuition, fees, and room and board. These are usually paid at the beginning of each semester. When estimating income for your personal budget, focus on the money you will manage yourself during the semester.

Once you have estimated your total income, divide it by either the number of weeks or months you’ll be at school. A monthly budget can help you plan for monthly bills, such as your phone bill or a birthday gift. A weekly budget may be better for keeping track of daily expenses, such as snacks and entertainment.

Recent college grads recommend getting a part-time job on or near campus for extra spending money. Keep in mind that on-campus jobs, especially the good ones, fill up fast. So apply as soon as you get to campus. Be sure that any job you take is flexible enough so you can concentrate on your classes and social life.

Lesson 2: Where Will It Go?

Once you have estimated your income, make a list of what you will spend it on–your expenses. There are two types of expenses: fixed, which come regularly and are the same amount each time (examples include Internet access and your car payment); and flexible, which may vary in frequency and amount (examples include entertainment, clothing, transportation, and long-distance phone charges).

“There are always more expenses than you plan for, and sometimes they sneak up on you,” says Dr. Mallary Tytel, president and CEO of Education and Training Programs, Inc., creators of the Power of Plastic, an educational program for students on responsible credit card use.

Here are some often-forgotten expenses: haircuts, shampoo and other personal products, trips with friends, gifts for holidays and birthdays, bank fees, and extra supplies. Dr. Tytel suggests budgeting a certain amount each week for these “phantom expenses,” which can quickly add up. Also, overestimate what you’ll spend on entertainment.

To find the amount you can spend, take your total income and subtract your total expenses. If the expenses are higher than your total income, you’ll have to make some adjustments to your flexible expenses.

Lesson 3: Starting Out on Your Own

Your college years are independent years, especially with your finances. According to one recent survey, 47 percent of high school and college students said they rarely or never discussed budgeting with their parents before they went to college.

Parents can be a big help in getting you settled financially. Ask them to help you set up a checking account at a bank near your college. Learn how to balance your checkbook monthly. If you’re getting a credit card, apply early so you’re familiar with the billing statements.

Once you get to school, begin recording every penny you spend, so you’ll know right away if you’re going over your budget. Simply being aware of where your money goes is often enough to help you want to spend less. Adjust your budget to match your income and expenses.

Lesson 4: Sticking to Your Budget

One common budget pitfall is trying to keep up with your friends. Remember that each person has a unique budget, and you may have less spending money than someone else. “It is OK not to have the latest in computer or fashion accessories,” says Dr. Tytel. “Being different and independent and unique really is its own reward.” So pat yourself on the back for knowing what your means are and living within them.

If you do go over your spending limit one week, try to make up for it by spending less the following week. Then you won’t find yourself short on cash at semester’s end.

Here are some other tips from recent grads:

* Stick to your meal plan for food.

* Look for free entertainment on campus.

* Always buy used books.

* Track your ATM use to avoid extra fees.

* If your parents are sending you money, ask them to send it in small, regular amounts instead of in one lump sum.

* Make long-distance phone calls during off-peak hours, such as late evenings and Sundays.

Success in school depends partly on how well you manage your money. Put creating a budget on your to-do list, and you will find college much easier to manage.

Will Your Savings Run Out: A British Case Study

wysroAccording to recent research undertaken for the Department of Social Security, about half of people of working age are not making any contributions to a non-state pension at the moment. Nearly half of these were not working at the time of the interviews, but the rest were — either as employees or, less commonly, self-employed.

This, and the “ageing” of the British population, has prompted the Labour government to launch its stakeholder pension. What exactly is it? Will it appeal to people with inadequate provision for their old age? Will pension providers want to offer it? In short, will it help to combat financial and social exclusion among tomorrow’s pensioners?

The stakeholder pension is an oddity. It is a financial product whose detail has been designed by government, but it will be supplied by the private sector. This is both its strength and a potential weakness. It has been designed to meet the needs of people with incomes of between [pound]10,000 and [pound]20,000, although anyone can take one out if they wish. Like other personal pensions it is a funded investment, with individuals building up their own pension fund, which they will invest in an annuity to bring them a regular income in old age. But there the similarities end. Two of the key differences between personal and stakeholder pensions are charges and flexibility.

Charges on stakeholder pensions are not only capped at 1 per cent but that percentage is based on the total value of the fund. So someone who can afford to save [pound]100 a month into a stakeholder pension will pay [pound]12 in charges in the first year, with the amount increasing as the fund builds up. This is a far cry from the front-loading of charges on personal pensions, where many people find themselves contributing for some time before much of that money finds its way into their investment fund. Moreover, all stakeholder pension schemes must set their minimum monthly contribution no higher than [pound]20 (they may choose to set a lower minimum). So people with only modest amounts to invest will not be excluded.

Stakeholder pensions are also designed to be flexible, so fundholders can start and stop their payments without incurring extra charges; they can also increase or decrease their contributions. In other words, it can accommodate the work patterns of people such as Jane, who spend longish periods out of the labour market, Pete, with his fluctuating income, and Tom in insecure work. It has been estimated that one in ten people of working age fall within the target income range for a stakeholder pension and do not pay into a non-state pension.

Jane, Pete and Tom may qualify, but will they want a stakeholder pension? All the evidence suggests that, although awareness is low, people in the target income group do like the design of the product. They particularly like the flexibility because it matches the instability in their lives, according to research carried out separately for Pearl Assurance and the DSS. Women in particular liked being able to make small contributions, although men doubted whether it would be worthwhile in the long run if their contributions were too low. Costs were much less of an issue, but only because they couldn’t see why there would be any costs in the first place, let alone understand how they are usually calculated.

So far, so good. But the Pearl research showed that the stakeholder pension still has some significant shortcomings. People want a clear projection of the income they would get in their old age. And, in the light of past mis-selling of pensions and endowments, they want a guaranteed minimum income from their investment. They also want to be able to get access to their money should an emergency arise before they reach retirement age.

The DSS survey revealed that only four in ten of those in the target income group said they were likely to take out a stakeholder pension. Women tended to be more interested than men; employees more than the self-employed, and the under-40s more than older people.

Among the reasons given for this reluctance to take out a pension, the easiest to tackle is lack of information, cited by a quarter of people in the DSS research. Other barriers will be much more difficult. A third of people say they are happy with the arrangements they have for their old age, even though they are not contributing to a non-state pension. Focus groups show that a significant proportion of people, especially men, either do not expect to reach retirement age or to live for long if they do. They have seen relatives die young, and say that a life of hard work and, in many cases, of smoking is not a recipe for long life. Some think the state pension will be adequate as their needs will be far fewer in old age, while some self-employed people intend to continue working for as long as possible. Finally, a minority expect their retirement to be comfortable financially, but have given no thought at all to how this might be attained.

The other main reason why people do not expect to take out a stakeholder pension has to do with affordability, linked to short-term horizons. But the reasons for this differ across the age groups. Young people below the age of 30 prefer to spend their money on other things. Later, people begin to recognise the importance of pensions, but have other calls on their money. This is when people on moderate incomes are taking out a mortgage and having to meet children’s needs — often on reduced household incomes because the wife is working part-time or not at all. Most are only too aware that they have inadequate pension provision, but they put it to the back of their minds. By the time the children have left home and the proportion of income eaten up by mortgage payments has fallen, it is too late to start a pension. Contributions are unaffordably high and, in any case, people fear that they are at greater risk of redundancy in their fifties. In other words, people are too young, too hard up, or too old.

Pension providers are all too aware that most investment products have to be sold; they do not walk off the shelves. And here is the nub of the problem with the stakeholder pension. With charges fixed at no more than 1 per cent of the value of the fund, pension providers will make little or no money from people who make modest contributions. Indeed, one pension provider has calculated that the administrative costs on a stakeholder pension would be in the region of [pound]25, so they would make a loss in the first year on anyone paying in less than [pound]200 a month. And this makes no allowance for the up-front costs of selling the pension in the first place. Moreover, several big-name companies that have traditionally sold products to people on low and moderate incomes have recently cut their home sales forces.

Offering stakeholder pensions through the workplace will reduce costs and overcome some of the marketing difficulties, and is an attractive proposition for many employees in the target income group. But this has its limitations: enterprises with fewer than five employees are exempt from the need to offer a stakeholder scheme. So Jane could miss out. Nor do workplace pensions help the self-employed such as Pete. Tom may be luckier, but his unstable work history makes it unlikely that he will choose to set money aside for a pension. Experience has taught him that he needs to save all he can while he is working at the shipyard to tide him over the periods when he is not. In any case, he would need to build up a pension fund of [pound]60,000 or more to be any better off than he would be if he relied on the state pension and associated benefits.

So where does that leave the stakeholder pension? In many respects it is a perfectly designed product from the consumer’s point of view. But it highlights all too clearly a more general dilemma in tackling financial exclusion, which is the net cost of delivering financial services to people on low or moderate incomes through the private sector. Companies might be coerced into making appropriate products available but they will inevitably choose to sell them to the customer from whom they will make the biggest returns.

More people on moderate incomes will make provision for their old age as a result of the stakeholder pension, just as more of them have taken out IS As than took out either Tessas or PEPs. But like these savings products, the main beneficiaries of stakeholder pensions could well be those on higher incomes. After all, why pay more for an inflexible personal pension?

QTIP, Sheltering Estate Taxes And You

qtipSuppose each of your clients has a will that provides that the survivor will receive property that will qualify for the marital deduction only to the extent necessary to bring down to zero the estate tax owed by the estate of the first to die. In that case, any property that does not qualify for the marital deduction will not be subject to estate tax in the estate of the survivor.

* Preventing property from qualifying for the marital deduction. Here are a few ways to prevent property from qualifying for the marital deduction.

1. Leave part of the estate to someone other than the surviving spouse. This can be done outright or in trust for the benefit of the beneficiary or beneficiaries.

2. Leave part of the estate in a trust that gives discretion to the trustee (who is not the surviving spouse) to allocate income among the surviving spouse and other individuals, e.g., children of the deceased spouse.

3. Leave part of the estate in a trust that provides that all the income from the trust will be paid to the surviving spouse at least annually, and specifies how the principal of the trust is to be distributed on the surviving spouse’s death. As long as the surviving spouse does not have a general power to appoint the principal of the trust during either her life or by will, the property left to the trust by the deceased spouse will not automatically qualify for the marital deduction.

However, if the trust provides that no person has the power to appoint any part of the property to any person other than the surviving spouse during the surviving spouse’s lifetime, this trust will also qualify as a qualified terminable interest property trust, or QTIP.

To the extent that the executor or other fiduciary of the deceased spouse elects, all or part of the property that is left to the trust will qualify for the marital deduction. To the extent that the election is not made, the trust will qualify as a credit shelter trust. The advantage of a QTIP trust is that it gives the executor a second chance to determine what needs to be done to minimize estate taxes to the maximum extent possible.

Example: Your client’s wife died on Nov. 15, 2000, leaving an estate of $2 million after deducting necessary administration expenses. She had never made any taxable gifts, so there are no gifts that have to be taken into account when determining the estate tax or the amount of the available unified credit. She made bequests worth $300,000 to her only son, and $200,000 represented her interest in jointly held property with your client that passed to him by operation of law and that which qualified for the marital deduction. The balance of her estate of $1.5 million was left in a QTIP-credit shelter trust.

For decedents dying in 2000, the unified credit exemption equivalent amount (i.e., the amount of the taxable estate that will yield an estate tax equal to the unified credit) is $675,000. Thus, to reduce the taxable estate to $675,000, the marital deduction will have to be increased from $200,000 to $1,325,000. This can be done by having the executor make the QTIP election with respect to 75 percent of the property left to the trust ($1,125,000). The balance of the property left to the trust ($375,000) will be treated as being in a credit shelter trust, and will not be subject to estate tax when your client dies.

Observation: To the extent that part of the property in a QTIP trust is treated as being in a credit shelter trust, any increase in the value of the trust will not be taxed in the surviving spouse’s estate. Thus, in the previous example, if the value of the trust doubles to $3 million by the time your client dies, $750,000 (25 percent of the total trust value) will not be taxable to her estate, and $2,250,000 (75 percent of the total trust value) will be taxable. On the other hand, If the value of the trust declines to $1 million, $250,000 of the amount in the trust will be excluded from taxation, and $750,000 will be taxable.

Observation: Though QTIP trusts and credit shelter trusts are usually designed to bring down to zero the estate taxes on the estate of the first spouse to die, there may be situations where it will be beneficial to have part of that spouse’s estate subject to tax. This would be the case where the surviving spouse is not expected to live long or will be in a higher estate tax bracket than the first spouse to die.

In that case, a rigid formula in the will of the first spouse to die that would bring the estate tax down to zero may cause more taxes to have to be paid than would otherwise be the case. The use of a QTIP credit shelter trust would enable the executor to make a decision regarding how much to qualify for the marital deduction given the facts and circumstances after the death of the first spouse.

* Combining a qualified disclaimer with a QTIP credit shelter trust. In some situations, spouses may prefer to leave as much property as possible outright to the survivor. One way to do this, while at the same time seeking to minimize estate taxes, is to have each spouse leave all or most of his or her assets to the surviving spouse. At the same time, have the will set up a QTIP credit shelter trust to take any assets that the surviving spouse disclaims. If the surviving spouse disclaims his or her interest within nine months of the death of the other spouse, the disclaimer will be a qualified disclaimer and the interest will be treated as going directly from the deceased spouse to the trust. Thus, no gift tax will be due from the survivor as a result of the disclaimer.

In effect, this offers two separate looks after the death of the first spouse. The surviving spouse will normally disclaim just enough, so that the amount that goes into the QTIP credit shelter trust will reduce the marital deduction by an amount that will still leave the estate taxes owed at zero or such other amount as is desired.

Normally, the election to treat part of the amount in the trust as subject to the marital deduction will not be made since the surviving spouse would only put property in the trust that was not intended to qualify for the marital deduction.

On the other hand, if a mistake was made, and too much property was disclaimed, the executor can still elect to treat part of the property in the trust as marital deduction property in order to increase the marital deduction to the required amount. Also, if the surviving spouse’s health has declined, he or she may prefer to have more of the property administered by a trustee. In that case, the QTIP election will have to be made to reduce the estate taxes to the required level.

Example: Your client’s wife died on Dec. 1, 2000, leaving an estate worth $1 million after deducting debts and administration expenses. She leaves her entire estate outright to her husband, but her will provides that if her husband disclaims any part of her estate, the part disclaimed will pass to a QTIP credit shelter trust.

After her death, her husband decides that he’d prefer to have most of the property that he inherited administered by a trustee. Accordingly, he disclaims his interest in all the property he inherited except for some tangible personal property, such as jewelry, furniture, paintings, etc., worth $100,000. The $100,000 qualifies for the marital deduction. The remainder of the estate of $900,000 is treated as having passed directly from your client’s wife to the QTIP credit shelter trust.

To get the value of the marital deduction up to $325,000 (the amount necessary to bring the exemption equivalent amount down to $675,000), the executor will have to elect to treat 25 percent of the trust ($225,000) as marital deduction property. If the election is made, the balance of the trust ($675,000) will be treated as a credit shelter trust.

Couple In Profile: What We’d Do

cipwwCombined, the couple’s household income is a little more than $72,000. Andrea, a registered nurse with Meridian Medical Group in Smyrna, Georgia, has about $10,300 in savings and investments, including a Roth IRA, company 401(k) plan, savings bonds, and certificates of deposit. Andrea is disappointed her company doesn’t match her 401(k) contributions. For this reason, she is only putting $25 per paycheck toward the plan, preferring instead to contribute $50 per month to her IRA and another $50 to a mutual fund account.

Reginald has gotten off to a slower start in terms of investing. In January, he started a new job as a computer technician with Think Resources in Atlanta, and he won’t be eligible to participate in the company’s 401(k) plan until June.

Whereas many couples sink further into debt because of wedding extravaganzas, the Coles each worked two jobs and saved the additional monies to pay for their nuptials. However, Andrea is $5,000 in debt from a student loan; she also has $7,000 in credit card debt. But her biggest liability is the $23,000 she has left to pay on an auto loan. Reginald has approximately $10,000 in student loan debt, but his car is paid for and any items he charges, he pays off the balance the following month.

“I like to pay cash. So, I save up until I can afford to buy what I want,” says Reginald, who attributes that life lesson to his mother. Andrea’s money style is quite the opposite. “I like to see more money in my bank account, so I tend to charge things and set up a schedule to pay them off,” she says.

“We talk about our financial goals almost on a daily basis,” says Reginald.


Money problems can–and have been–the end of many a happy marriage. To help the Coles get a jump-start on their new life together, BE had them consult with Les Netter, a financial consultant in the Atlanta perimeter office of Salomon Smith Barney Inc..

* Consolidate financial resources. The Coles need to come together as one mind and manage their finances jointly. Right now, they have about $5,050 in five separate accounts: two savings, two checking, and one money market. They need to consolidate their money into one joint money market account. This way they will get a higher rate of interest and eliminate all the extra paperwork associated with maintaining records for those different accounts. As a new dual-income household, they need to do a cash flow analysis statement, which will show them how much money is coming in and going out on a monthly basis. The purpose is not just to see what their expenses are but to determine their discretionary income in order to increase the amounts they are currently contributing to their retirement funds.

* Reduce debt and eliminate credit card use. Going forward, the Coles need to make prudent decisions when it comes to consumer purchases. Right away, they need to take some major steps to reduce debt. The current rate on their credit cards–around 18% and 19%–is much too high. They should apply for cards offering low introductory rates, between 6% and 9%, and then transfer their existing balances. While such low rates are typically only good for the first six months, they generally don’t go up as high as 19%. At the same time, the couple should close their old accounts and pay more than the minimum monthly amounts due on the new cards. They also need to avoid using their credit cards except for emergencies.

* Contribute to Roth IRAs. The Coles should take $1,000 each of their contest winnings and open up two Roth IRA accounts. They should contribute $2,000 each per year (the maximum allowed) and invest the money in growth mutual funds. Even though Andrea has a 401(k) at work, a Roth IRA should take priority, since she isn’t getting a company match on her 401(k). The benefit is that the money that comes out of a Roth after retirement age is tax-free. Given the annual limit on the Roth IRA, she should continue to contribute to her 401(k); the maximum allowed is $10,500 a year. Also, the investments in her plan lean more toward moderate-to-conservative vehicles. Because this money is for retirement and she is only 28, she needs to be more aggressive. She should invest in growth funds and contribute more than $25 per pay period.

In addition to managing their finances, the Coles need to sit down and review their health benefits and life insurance polices to make sure they have adequate coverage.

Protect Yourself From Corporate ID Theft!

pyfcitCompanies gather huge volumes of personalised data from us all at the point of sale, through surveys and by buying it from other information-gatherers. Through the use of increasingly sophisticated data-matching techniques, particular pieces of information that you may have supplied to one company on an anonymous basis can be pieced back together with your personal identity by another organisation.

Businesses use databanks of this kind to target new customers, tailor new services for existing ones and decide which categories are not profitable to serve at all. The spectre here is that information technology may be used as an engine of social exclusion.

It is entirely rational that businesses, from airlines to retailers, should want to take advantage of electronic tools allowing them to make finely tuned decisions about which customers represent the best long-term revenue streams; and to weed Out or charge higher rates to others who are “bad risks”.

The flip side of this coin is that data systems may be accurate enough to target the worst-off customers and heavily market services that worsen their position. There has already been a series of exposes of some companies in the “sub-prime” lending market that use sophisticated data analysis in order to persuade people on low incomes to take forms of debt, including mortgages, consumer credit and certain forms of insurance, that are extremely expensive.

As the mainstream banks begin to stake their interest in the sub-prime market by offering products with much higher price tags, they argue that they are providing opportunities for excluded people to join or rejoin the mainstream credit system and reduce their dependence on loan sharks. But if for individuals the financial price of overcoming their bad risk rating is too high, then the cumulative effect is still persistent exclusion. What may be actuarially fair for a particular business can look far less desirable for a whole society.

Consider, for example, the recent announcement by some of the British high-street retail banks that they intend to set interest rates for overdrafts and credit cards on an individual basis. The information on which they will make these decisions will, for the most part, be true and relevant. However, higher interest rates will relate to higher risk customers who, in practice, will be on low and irregular incomes.

The problem goes beyond a legitimate attempt to identify which individuals will default on loans or cost businesses money. It is that many people’s custom, especially in banking and financial services, is just not that profitable. Up to now, however, it has been hard for companies to predict which customers were going to make money for them. Thus the profits from the most lucrative transactions have had to subsidise other consumer relationships with little value. Information technology allows companies to change this, and to argue that customers who are “good risks” should be able to benefit from lower interest rates or charges rather than paying the price for this subsidy.

In itself, matching interest rates to risk is not unfair. But in the short-term, it increases the cost of servicing debt, and people’s credit profiles will retain these decisions for the rest of their lives.

Thus the new forms of risk profiling threaten the ability of an individual, a household or even a neighbourhood to improve their lot. In a world in which nothing is ever erased from one’s data profile — there is no legal equivalent of a “spent offence” in personal finance — it becomes very difficult for a transgressor to clear their name and be rehabilitated into the mainstream.

Although banking and the financial industries provide the most graphic illustrations of how risk is becoming individualised, the same process is happening in many other areas, from allocation of job opportunities to university entry. More and more, organisations make decisions about individuals based on personal “merit”. In practice, merit means the best available personal information that an organisation can access about the risks individuals represent.

If the broad effect is to create or consolidate exclusion, then the trend to a more meritocratic society may end up hindering social mobility. This conclusion runs counter to conventional wisdom and directly against the government’s recent claim that meritocracy should be society’s central goal. A society that organises itself exclusively on the meritocratic principle offers little or no protection to those whose characteristics as customers — not all of which are within their control — do not enable them to qualify. Qualification for a range of basic services and opportunities is arguably part of a decent quality of life.

Although more of us than ever before have bank accounts, the poorest people are clearly not profitable customers. Banks privately admit that roughly 20 per cent of their customers generate 80 per cent of profits, and that at any point a majority of customers may be loss-making. In future, as banks get closer to predicting accurately which customers fall within the profitable 20 per cent, they can target their products far more closely. As mainstream banks and insurers retreat, the bottom end of the commercial market, serviced only by the least scrupulous sub-prime lenders, could grow steadily.

So should the responsibility for ensuring a basic standard of living for “bad risks” fall to the state? For 30 years the trend among governments has been to target social spending, restricting universal entitlements and using means testing and time limits to contain pressure on the public purse. By consensus, this strategy has been seen as the best way to make social spending both affordable and legitimate among taxpayers.

The argument outlined here could make the continuation of such an approach very difficult. Harnessing the power of personalised electronic information, market forces will add continuously to the numbers (and unmet needs) of those citizens classified as bad risks — because it makes straightforward business sense to do so. The state could find it less and less viable, not to mention politically dangerous, to continue to take final responsibility for offering services and opportunities to the excluded.

We urgently need a public debate about the social implications of the personal information economy. Over the next ten years, reconciling increased corporate efficiency with a wider sense of fairness could become a hugely significant political dilemma.