Text Box: Newsletter Date: August 2005 Text Box: Volume 2, Issue 2 Text Box: Whitecap Investments Text Box: government actions won’t stop the Corporate retreat from these “defined-benefit” plans. Employees that are at or near retirement and are still eligible for a defined benefit plan have some serious considerations facing them. These individuals must consider the monthly pension amount due to them by their employers, or by the PBGC at perhaps a discounted rate if the employer is unable. Also, consideration must be given to the present cash value of their Text Box: Pension changes will alter retirement savings practices... Text Box: Self Directed IRAs (SDIRA)—Are they right for you? Text Box: The old-fashioned pension that guarantees you the same benefit check every month after you retire is itself being retired by a growing numbers of employers nationally. “The share of workers included in the defined benefit retirement plans has dropped more than 50% since 1980”, according to the Pension Benefits Guarantee Corp. (the federal agency that insures such pensions commonly known as the PBGC). These experts expect even more private employers to abandon traditional pensions. In their place many employers are paying contributions to 401K and other plans that put workers in charge of managing and funding their retirement plans. “Individuals have to take more responsibility for their own retirement, not only contributing their own money but managing how that money is invested. “ said Jim Cheney, chief executive of Evergreen Management Company, a firm that helps people with retirement planning. “The days of working for a company for 40 years and retiring to the beach to collect pension checks are gone. Defined benefit plans can be very expensive for employers and most employers that still have such plans, if they could, would like to Text Box: get rid of them” Further investment losses in the stock market for many plans during 2001 and 2002 left most major corporate plans under-funded last year just as many of the baby boomers are approaching retirement age, according to an analysis of the nation’s biggest pension funds by Wilshire Research. New PBGC figures also indicate the number of pension funds in trouble rose to a record high in 2004. Kiplinger’s recent May 27 , 2005 letter indicates in its opinion, “that only a handful of high risk plans will fail, however, most won’t. Furthermore, even if all the high risk plans failed the PBGC could handle it , although thousands of individuals would get their benefits trimmed.” This year Congress will move to shore up the PBGC to ensure the agency has resources to absorb the failed plans. Annual fees charged to employers will go up, and expect tighter rules for firms that fall behind. In return, more predictability for employers and it is expected that Congress will back a permanent plan based on the higher average corporate bond rate to be used in calculating the cash values of promised pensions, and include tax benefits for making extra contributions. However, these Text Box: A SDIRA can purchase any type of real estate, provided the particular SDIRA sponsor and the particular state or county permit it. For example, many custodians will allow people to buy income properties with their IRA; some don’t allow debt financing or leveraging, although in most cases it is perfectly legal to do so. Many people confuse the prohibition of borrowing Text Box: Many people are confused about the term “self-directed”, thinking such accounts are somehow different from traditional IRAs. “Self-directed” is simply a functional, not a legal term. Self-directed means the individual owner of an IRA makes or directs the investment decisions. not the institution that sponsors the IRA. The SDIRA owner can also work with an advisor or broker , but the institution offering the IRA does not participate in the client’s Text Box: investment decision making. The range of possible investments through such SDIRAs far exceeds traditional choices. In fact , with the exception of S corporations , life insurance contracts, and collectables (such as stamps, art, unique furniture, etc. )there are virtually no restrictions on what an IRA can invest in. Real estate is a popular SDIRA choice because of the long term stability, growth in value, and income potential demonstrated over the last 30 years.

“Pension changes will alter retirement savings practices”  More individual responsibility for retirement savings strategies.

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Self Directed IRAs—Are they right for you? Non-traditional Investments hold potential and pitfalls.

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