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  Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Francis Vayalumkal

If you can no longer make your mortgage payments and your home is now worth less than you owe on it, foreclosure may not be your only option.

A "short sale," in real-estate terms, is a sale of a house in which the sale price is less than what the owner still owes on the mortgage. It is a procedure sometimes agreed to by lenders, who often would rather take a small loss than go through the lengthy and costly foreclosure process, in which the lender allows the sale of a home for less than it is worth and forgives the rest of the note.

While there are some significant negative consequences to a short sale, an ever-increasing number of properties are being advertised with that label.

The beauty of short sales is that they can be a win-win-win situation for seller, buyer and lender. Here's how:

The seller gets out of the mortgage liability without facing bankruptcy.

The buyer gets the home at a reduced price.

The lender agrees to a loss it considers minimal without going through a foreclosure and being saddled with an unsalable property.

While it may seem surprising that lenders would agree to accept less than what they are owed, they benefit from the process, too. The lender benefits by not having to go through the protracted process of foreclosing on the borrower and then having to put the property on the market and go through the whole marketing process.

A market saturated with foreclosures can cost lenders billions -- and as much as $50,000 per foreclosure -- according to a study released earlier this year by the congressional Joint Economic Committee.

For a buyer, a short sale is a boon since he or she is getting a property at a reduced price. However, the process of waiting for a lender to decide whether to agree to a short sale could make a lengthy home-buying process longer and more arduous.

Buyers should work with an agent who is experienced in short sales while dealing with these type of deals. Buyers looking to negotiate a short-sale deal come armed with enough documentation to convince the lender that settling for the lower price is the best option.

Lenders are most concerned with the financial situations of the seller when they ultimately make their decisions. If a seller can handle the mortgage payment, there's no motivation for the lender to let the seller out of the mortgage at a lower price. A lot of lenders aren't even going to consider a short sale unless it seems like the homeowner is in financial distress.

Also, if the home has a second mortgage with another institution, a short sale is less likely to be approved since that second institution would have to agree to forfeit all or part of the money it's owed.

Francis Vayalumkal is a mortgage banker with Regions Bank and can be reached at (813) 719-0303

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Nitesh Patel

Take a minute to fast-forward to your retirement and envision your own American Dream. If you’re like most Americans, your dream entails a financially comfortable “worry-free” retreat with an abundance of free-time and available assets to spend on things you really love doing.

Now, rewind back to today. What specific action steps are you taking now to attain your retirement goals? How much money have you saved – and how much should you save in the future to support a worry-free retirement?

If you struggled answering these questions, your financial behavior – or lack of action – may be sabotaging your retirement plans.

An ongoing study of America’s financial behaviors, Money Maladies, highlights the fact that most Americans come up short when it comes to their knowledge of financial matters and a strategy to achieve their financial goals. The 2006 study, commissioned by Northwestern Mutual, asked a cross-section of Americans about their financial dreams and goals, and examined whether they were taking necessary actions to achieve them. The study found a well-defined chasm between respondents’ goals and behaviors – a disconnect that most don’t even realize. (Northwestern Mutual, Money Maladies Financial Matters Study, March 2006)

For example, the study found that, in general, most respondents anticipate retiring at age 62. However, the actions taken by most people aren’t conducive with those expectations: According to the study, only 6 in 10 have an employer-sponsored retirement account such as a 401(k) or 403(b). And, while a large majority have a savings account, fewer than half own an IRA, stocks or mutual funds. (Northwestern Mutual, Money Maladies Financial Matters Study, March 2006)

Americans also are missing the boat on saving for college education. Half have children they would like to send to college and most expect to pay for at least some of that cost; but only a small share have a goal of how much they would like to save. While most estimate college will cost about $100,000, the majority have saved less than $20,000. (Northwestern Mutual, Money Maladies Financial Matters Study, March 2006)

Another study by the Employee Benefit Research Institute (EBRI) in 2006 underscores the finding that Americans have a false sense of security about being prepared for retirement and underestimate how much money they’ll actually need. (Employee Benefit Research Institute (EBRI), “Annual Retirement Confidence Survey,” April 2006) The EBRI study found that two-thirds of workers say they’re confident they’ll have enough money for retirement, despite the following eye-opening realities:

More than two-thirds of workers – and more than half of those 55 or older – have less than $50,000 saved for retirement.

Seventy percent of workers say they or their spouses have saved for retirement, though only 64 percent are actually saving.

Only 42 percent of workers say they or their spouses have taken time to calculate their financial needs during retirement.

Behavior modification

Clearly, Americans need to put their money where their mouths are when it comes to preparing for retirement. The key is aligning financial behavior with goals and aspirations. Here are a few ideas to get your financial behavior in order:

Set realistic goals and crunch the numbers. Start by figuring out how much money you’ll need in retirement. Experts generally estimate that most need 70-80 percent of their pre-retirement income. Be honest about how you want to live in retirement and how much it will cost. Then calculate how much you must save to supplement Social Security and other sources of retirement income. Use Web sites, such as the Learning Center at, to utilize financial calculators and help the process.

Create your strategy. Having a financial strategy in place – complete with objectives and action steps – will help put your future into clear focus. You might consider working with a qualified financial professional to help you put together a strategy to achieve your individual goals.

Build your knowledge. The more you know about spending, saving and investing, the farther your knowledge will take you in attaining your aspirations. Take time to read financial publications, such as The Wall Street Journal, attend seminars, and research online resources to build your financial knowledge. Incidentally, the 2006 Money Maladies study showed that the majority failed to correctly answer 60 percent of the study’s questions pertaining to financial knowledge. (Northwestern Mutual, Money Maladies Financial Matters Study, March 2006) It may be eye-opening to gauge your own financial knowledge and see how you match up by taking the same test at

Use the power of investing. The sooner you begin saving, the more time your money has to grow. Gains build yearly thanks to compounding – a good strategy for accumulating wealth. Also, contributing money to retirement accounts, such as a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and often a matching contribution from your company.

While there’s no rule of thumb when it comes to securing a financially comfortable retirement, there is one common thread for everyone to follow: Taking action now will help keep your financial goals on track and make a positive difference in your financial future.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

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Kamlesh Patel
CRUNCHING ‘EM NUMBERS: Mark These Tax Deadlines In Red


Circle these dates on your 2008 calendar if any of the following upcoming tax deadlines apply to you or your business.

Feb. 28 — Payers must file information returns (such as 1099s) with the IRS. (March 31 is the deadline if filing electronically.)

Feb. 29 — Employers must send W-2 copies to the Social Security Administration. (March 31 is the deadline if filing electronically.)

March 3 — Farmers and fishermen who did not make 2007 estimated tax payments must file 2007 tax returns and pay taxes in full.

March 17 — 2007 calendar-year corporation income tax returns are due.

April 15 — Individual income tax returns for 2007 are due unless you file for an automatic extension. Taxes owed are due regardless of extension.

April 15 — 2007 partnership returns are due.

April 15 — 2007 annual gift tax returns are due.

April 15 — Deadline for making your 2007 IRA and education savings account contributions.

April 15 — First installment of 2008 individual estimated tax is due.

June 16 — Second installment of 2008 individual estimated tax is due.

Sept. 15 — Third installment of 2008 individual estimated tax is due.

Oct. 15 — Deadline for filing your 2007 individual tax return if you filed for an extension of the April 15 deadline.

use updated numbers for your 2008 tax planning

Take these tax law changes and inflation adjustments into account as you begin your 2008 tax planning.

The standard mileage rate for business driving increased from 48.5¢ to 50.5¢ per mile.
The rate for medical and moving mileage decreased from 20¢ to 19¢ per mile.
The rate for charitable mileage remains at 14¢ per mile.

The first-year expensing limit for the purchase of business equipment increased from $125,000 to $128,000.

The expensing election phases out once total purchases for 2008 exceed $510,000.

The maximum earnings subject to Social Security tax increases from $97,500 to $102,000.

The “nanny tax” threshold increased to $1,600 for 2008. If you pay household workers more than this amount during the year, you’re responsible for payroll taxes. The “kiddie tax” threshold increased to $1,800. If your child under age 19 (or under age 24 if a full-time student) has more than $1,800 of unearned income in 2008 (e.g., dividends and interest income), the excess will be taxed at your highest rate.

The maximum individual retirement account (IRA) contribution you can make in 2008 increased to $5,000, and if you are 50 or older, the maximum contribution you can make is up to $6,000.

The maximum amount of wages employees can put into a 401(k) plan remains at $15,500. The maximum allowed for SIMPLE plans remains at $10,500. If you are 50 or older, you can contribute up to $20,500 to a 401(k) and $13,000 to a SIMPLE plan.

The estate tax exemption remains at $2 million, and the top estate tax rate remains at 45 percent for 2008. The annual gift tax exclusion remains at $12,000.


If you’re a business owner with no employees, you probably have considered the 401(k) plan an unsuitable retirement plan for a small company such as yours. However, it may be time to give the 401(k) another look. A solo 401(k) retirement plan can offer a profitable one-person business larger contributions and tax deductions than other traditional retirement and profit-sharing plans.

For example, other one-person plans allow one contribution, either a percentage of adjusted self-employment income for sole proprietors or a percentage of owner’s compensation when the owner is an employee of his corporation.

The solo 401(k) plan allows two different contributions, the elective deferral contribution and the employer contribution. The elective deferral contribution amount for 2008 allows a one-person employee-owner to contribute up to $15,500 of adjusted self-employment or compensation income to a solo 401(k) plan. The limit is $20,500 if the owner is age 50 or older.

The employer contribution can be up to 20 percent of adjusted self-employment income for the sole proprietor or up to 25 percent of owner’s compensation for the corporation. The sole proprietor is considered to be his or her own employer for purposes of this tax deduction. The corporation makes the deductible contribution for the owner-employee of a one-person corporation.

Although traditional retirement plans and the solo 401(k) have similar maximum contribution limits, using the two contributions under the solo 401(k) plan may generate a larger deduction on less income than with other plans. Age, timing, your future business plans, and the amount of your adjusted self-employment income or employee compensation are all important factors affecting retirement planning.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

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Satya Shaw

A successful retirement does not just happen; you have got to plan for it. The long ramp toward retirement focuses on saving and investing, but once retirement starts emphasis shifts to spending and safeguarding. Even though the greatest challenge in retirement, and probably your greatest fear, is outliving your money, most people spend less time planning their retirement than they do planning a vacation.

What does retirement planning involve? Here are the steps: First, determine what you would ideally like to do in retirement, and then discuss it with your spouse and other loved ones. Will you spend your time traveling, enjoying hobbies, helping others, working part time, or what? Second, estimate the retirement income you'll have from savings, Social Security, pension and all other sources. Third, estimate your expenses making sure to take account of inflation, taxes and health care costs, which are likely to be an increasing part of your budget.

Steps two and three should be done for each five-year period of your retirement and then revised annually. Fourth, if you have more income than needed, you only need to safeguard your investments to make sure they're not lost or shrunk by bad decisions. If you have insufficient money for retirement (expenses exceed income), then you'll need to postpone retirement, work part-time or possibly use a Reverse Mortgage to access the equity in your home. Either way, it is highly recommended that you minimize your exposure to loss and maximize the full potential of your financial resources by working with a financial adviser. They can help you determine the risk you can afford, investment options and how to position your money for best results without sacrificing safety. Retirement is going to be long, filled with uncertainties, including emergencies, and going it alone is one of the greatest risks you can take.

Be realistic in your planning. For example, be aware that for a couple age 65, there is a 50 percent probability that one will live beyond age 90. Acknowledge that even a low rate of inflation can make a big difference in prices over the 20 to 30 years you'll be in retirement. For example, average inflation of 3 percent means $1 today will be worth only 55 cents in 20 years and 41 cents in 30 years. Since 78 million boomers are entering retirement over the next two decades, the price of everything related to retirement, especially health care, is likely to rise faster than overall inflation. Inflation is a cruel tax for those on fixed incomes, and chances are your income in retirement will increase a lot slower than prices.

The boomer explosion is going to overwhelm government-provided services and benefits. This means that the relative benefits of Social Security and Medicare are going to shrink under the pressure of increased retirees. There will simply be more people receiving entitlement benefits than workers paying the bills. Every study, government and private, indicates there will be a shortage of money to support these programs. To pay for this shortfall, the government must raise taxes of all types. The increased taxes, inflation, relative decrease of benefits combined with escalating medical care costs will be especially burdensome for those in retirement without rising incomes from wages and salaries.

If you haven't evaluated it yet, investigate the risk you're taking with your retirement money. Would you have a loss if the stock market lost ground? You might if your money is still in your ex-employers 401(k) plan, or if you own securities, even mutual funds, whose value is determined by the market. Generally, investments in stock have done well long term, but you may need your money before a long time. From November 1973 to October 1974, the S&P stock market index fell 48 percent, and it took over six years to recover. The last bust in the stock market was 2000-2002, and we have yet to fully recover. In the meantime, inflation marches forward with the shrinking dollar purchasing less. Much of your income in retirement is likely to be derived from your savings and investments, and you simply can not afford risk of loss and the compounding of inflation. If you lose some or all of your retirement money to bad investments, you'll increase dramatically your chances of realizing your greatest fear: outliving your money.

How do you safeguard against the challenge of too many years and not enough money? Like law and medicine, financial planning is best left to professionals. Your job in retirement is to enjoy life free of investment worries.

Satya B. Shaw, CPA, can be reached at (813) 842-0345.

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