Fourth Quarter 2008
F I NA N C I A L S T R AT E G I E S F O R D I S C U S S I O N SM
Thank you for your choosing our team as your trusted advi-
sors. You are among our most valued clients and we delight
in providing you with personalized service as we help you
to meet your financial goals. We welcome your input on
how we can be a greater assistance to you.
THE PERIMETER GROUP Rethinking Risk in Retirement
AT SMITH BARNEY
Today, experts agree that longevity is the name of the game in retirement planning
S. Adam Thomas
First Vice President-Wealth Management
and investing, as life spans in the U.S. hit highs unprecedented in human history.
Portfolio Management Director According to AARP, actuaries now say that if a married couple is healthy at age
65, there’s a 50 – 50 chance one of them may live to age 92.
K. Michael Hennessy Conventional wisdom says that as you near retirement, you should dial down
Second Vice President-Wealth Management
portfolio risk and shift into bonds, known traditionally for their safety and
dependability. But there’s a consequence to that action: Tilting too far toward
Brandon D. Brown conservative holdings around age 65 may actually increase the risk of outliving
Second Vice President-Wealth Management your assets.
We’re being challenged to adopt a new attitude toward asset allocation. The
effect of this overall mix could be greater than, say, market timing or which com-
pany’s stocks you choose—research published in 2000 by Yale finance profes-
Second Vice President-Wealth Management
Financial Advisor sor Roger Ibbotson found that asset allocation could be responsible for up to
90% of a portfolio’s returns over the long term.
Betty P. Silvan Despite recent market volatility, long-term trends suggest that a sufficient allo-
Senior Client Service Associate
cation to equities is the best way, over the decades, to outpace inflation and
keep up with the rising costs of living longer. Depending on your life expectancy,
tilting the balance toward conservative bonds and cash equivalents may need to
Adam Thomas begin closer to age 75 than age 50.
3455 Peachtree Rd NE, Suite 1400 We can help you determine how the assets in your portfolio should be allocated
Atlanta, GA 30326 to help meet your specific needs and goals. How you deploy your funds is one of
the most important decisions in your financial life—and quite possibly, one of
the key factors to having your money last as long as you need it to.
Diversification does not ensure against loss. Bonds are affected by a number of risks, including
fluctuations in interest rates, credit risk and prepayment risk.In general, as prevailing interest
email@example.com rates rise, fixed income securities prices will fall.Bonds face credit risk if a decline in an issuer's
www.fa.smithbarney.com/perimetergroup credit rating, or creditworthiness, causes a bond's price to decline. High yield bonds are subject
to additional risks such as increased risk of default and greater volatility because of the lower
credit quality of the issues.Finally, bonds can be subject to prepayment risk. When interest rates
fall, an issuer may choose to borrow money at a lower interest rate, while paying off its previous-
ly issued bonds. As a consequence, underlying bonds will lose the interest payments from the
investment and will be forced to reinvest in a market where prevailing interest rates are lower
than when the initial investment was made.
By the Smith Barney Division of Citigroup Global Markets Inc.
INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A BANK DEPOSIT • MAY LOSE VALUE
Smith Barney Family AssistSM Continuity Strategy
Helping Surviving Family Members Maintain Financial Independence
The death of a loved one can be a deeply emotional into motion the paperwork needed to generate a cash flow by
and difficult experience. On a practical level, applying for the benefits that are yours and your children’s
if the deceased was the primary or secondary through any insurance policies and from Social Security. The
wage earner, surviving family members are next step is to establish or retitle an account where you can
suddenly confronted with making immediate write checks to pay daily bills and where you can hold additional
funds until you decide what your future course of action will be.
and longer-term decisions involving their finan-
cial future. Did you have joint financial accounts? If you had a joint bank
account, you usually will have to bring a certified copy of your
In addition to the challenge of coping with everyday affairs, spouse’s death certificate to the bank in order to retitle the
you also face the possibility of having to revise financial and account in your name only. If you don’t have your own
estate plans to reflect new issues and concerns. account, you will have to establish one. Ask to speak with a
Smith Barney Family AssistSM Continuity Strategy is designed bank officer and explain your situation, or consider having a
to help you and your family through some of the financial trusted person accompany you to the bank to help you.
issues you may face during this difficult period. These strategies Some brokerage accounts may offer check writing and debit
analyze your new situation and explore ways to help you card features.
meet your future financial and estate planning goals. Unlike If you wish, these services can be added to an account you
traditional financial planning, you may not have the luxury of have or to one that you are opening or retitling.
postponing that planning to some future date. You may have
At the same time, you should make arrangements to take an
to make immediate decisions to maintain your family’s cash
inventory of any safe deposit boxes. Here you may find the
flow and to preserve financial assets for future use.
paperwork you need to continue processing your spouse’s or
Smith Barney Family Assist • Short-term focus on issues you loved one’s financial accounts and estate. You will need certified
Continuity Strategy is based on may confront during the copies of your spouse’s death certificate in order to cash in
the three stages of financial estate administration period, any insurance policies on your spouse’s life or to retitle or
planning that one encounters such as the distribution, close any financial accounts, such as bank and brokerage
after the loss of a spouse, family retitling and sale of assets accounts and credit cards as well. The funeral director is the
member or loved one: person in charge of giving you the death certificates at the
• Longer-term financial and
• Immediate cash flow estate-planning issues time of death. However, if you find you need additional copies
concerns, such as how to concerning your family’s later on, you will likely have to order them for a fee from the
apply for insurance and future local government agency in charge of these records. To make
government benefits the transition of accounts easier, be sure to order a generous
supply initially from the funeral director.
What type of insurance benefits did your spouse or loved one
Where to Begin have? The first place to start, of course, would be your
You should take the time to inventory and record the location spouse’s or loved one’s place of employment. If the deceased
of all-important documents that will be needed to settle an was a member of any club, association or had served in the
estate. These documents may include financial statements military, you should check with these entities to determine if
and important identification papers, such as birth and any insurance policies were in place. If the death was due to
marriage certificates, deeds to property, vehicle registrations, an accident, some credit cards may have insurance policies
military records, Social Security and naturalization cards, and attached to them, which may pay off the balance. Look
insurance policies. Of course, copies of any existing estate through any files at home or through the checkbook register
planning documents, such as your wills, irrevocable trusts and credit card receipts to determine if policies existed or
and business agreements, should be included. A very helpful premiums were being paid.
form called a “Document Locator” serves as a convenient list
of the location of your family’s important paperwork. Social Security
The sooner you apply for Social Security benefits, the sooner
Insurance Policies, Social Security Benefits you will receive any payments due to you. When most people
and Financial Accounts hear the term “Social Security,” retirement immediately comes
Your first step toward achieving your financial goals is to put to mind. However, Social Security benefits are paid to more
DIALOGUES | 2
people than just those who have retired. In some cases, Social to ask a spouse about these final wishes instead of trying to
Security benefits are available to the spouse and children of guess about what may have been desired. Prepaying for
deceased individuals. Family survivors may also qualify for a funeral expenses is also desirable because the cost may be
small lump-sum payment to help with immediate living or deductible as an estate expense.
Who May Receive Social Security Survivor’s Benefits? In order to make the estate administration go smoothly, you
Social Security Survivor’s Benefits can be paid to: should seek the advice of an estate planning attorney. If you
do not have an attorney who specializes in estate planning,
• A widow or widower with full benefits at age 65 or older (if
you should contact an attorney with whom you may have had
born before 1937) or reduced benefits as early as age 62
business previously, perhaps when you bought your home or
• A disabled widow or widower as early as age 50 settled some other legal matter. If your spouse had an attorney,
• A widow or widower at any age if he or she takes care of the determine if you feel at ease hiring this person to assist you
deceased’s child who is under age 16 or who is disabled and whether or not there would be any conflicts of interest in
and receiving Social Security benefits representing you as well as your spouse’s estate. Ask about
the attorney’s experience in probate, and ask for a referral if
• Unmarried children under 18, or up to age 19 if they you feel there is someone else who would be better qualified
are attending high school full time. Under certain to handle estate settlement. Your local Bar Association
circumstances, benefits can be paid to stepchildren, should be helpful if you need a referral or you can go to the
grandchildren or adopted children American Bar Association website at www.abanet.org and
• Children at any age who were disabled before age 22 use their Lawyer Locator system. Be sure to discuss any
and remain disabled fees, and whether charges will be billed by the hour or as a
flat percentage of the estate.
• Dependent parents age 62 or older
When an individual passes away, the estate must be settled
Tier Two by the Executor named in the individual’s will. (In some states
What You Have to Do From a Legal and Financial the title given to the Executor is “Personal Representative.”)
Standpoint to Settle the Estate When the estate is settled, the Executor then distributes the
Putting the financial affairs of an estate in order depends on assets to the beneficiaries. If the deceased had no will, the
the answers to several questions, including the following: courts will appoint a Personal Representative.
• Is there a will?
What You Can Expect an Executor to Do
• Are there prepaid funeral arrangements or instructions for
• Safeguard estate assets • File individual income tax
returns and estate tax returns
• Take an inventory of the
• Who is the executor or administrator of the estate? and pay any income and
estate taxes owed from the
• Who is (are) the beneficiary(ies) of certain accounts
• Notify creditors of the death assets of the estate
• Pay, from the assets of the • Distribute property according
• How is property titled? Joint ownership? Single ownership?
estate, any outstanding debts to the will and/or state laws
• Did your spouse have any outstanding financial liabilities? that were solely your spouse’s
or loved one’s responsibility
The process of transferring estate assets to those entitled to
them is typically referred to as estate administration. Post-
death asset ownership is governed by documents such as
a will, contract or by beneficiary designations that were Distribution of Assets
established before death. The laws of your spouse’s or loved In addition to a will, the deceased may have left a letter of
one’s state of residence also govern property ownership. instruction that spelled out his or her wishes as to what
should be done with particular assets (generally personal
Prepaying Funeral Arrangements items) upon death. In some cases, items with sentimental
If the deceased has taken care of prepaying funeral arrange- value to particular friends or family members may be passed
ments, it’s important to find that paperwork and contact the on to these people. You should speak to your attorney about
funeral parlor and/or cemetery. Ideally, you may at least want handling these final wishes.
DIALOGUES | 3
Federal Estate Tax Exclusion Retitling of Hard Assets
Any individual is entitled at death to transfer, free of estate You will have to change the title on property owned by the
tax, assets worth $2 million—the Federal Estate Tax deceased, either solely or in joint ownership.
Exclusion—in 2006 and this amount is increasing
incrementally to $3.5 million by 2009. Any portion of the
If you and your spouse owned a home together, you will have
$1 million Federal Gift Tax Exclusion used during their lifetime
to contact the bank or mortgage company holding any
will reduce the Federal Estate Tax Exclusion available at
outstanding mortgage on the property. The mortgage will
that individual’s death. If a deceased spouse has left
now be your sole responsibility, but be sure to check if there
everything to the surviving spouse tax-free, the deceased
was any mortgage insurance on the loan, which will take care
spouse’s Federal Estate Tax Exclusion has effectively been
of the payments upon the death of your spouse. You will also
lost. If your spouse’s estate is large, be sure to seek the
have to change the name on your home insurance. Your
advice of an estate-planning attorney to see if this issue
attorney will take care of registering the mortgage and
can be addressed in a tax-efficient manner during the
ownership of the home in your name only with the necessary
administration of your spouse’s estate.
local government agencies.
You will need to retitle the ownership of any automobiles
owned by the deceased. Contact your state motor vehicle
agency. Don’t forget to change the name on your automobile
insurance, too, if the policy was issued in the name of the
If your family owns a closely held business, oftentimes this is
the most valuable asset a family will have and the one that
requires specialized professional advice on how to transfer
someone’s share of this business in the case of death.
Insurance, gifting techniques and trusts can all be combined
to establish a workable estate plan that includes a family-
owned business. Spouse survivors should look for a share-
holder’s agreement, business insurance policies and shares.
Upon death of a spouse, the surviving spouse should contact
the attorney or financial advisors who may have set up
business succession plans so that a smooth transfer with
little or no interruption in the running of the business may
If your family owns a closely held business, oftentimes
this is the most valuable asset a family will have and
the one that requires specialized professional advice on
how to transfer someone’s share of this business in the
case of death.
DIALOGUES | 4
Working with Professionals professionals should be handle another. Just because Make sure your spouse’s advi-
charged with the business of you are satisfied with how a sors know that your needs and
After you find your spouse’s
managing your spouse’s professional handled one those of your surviving family
financial records, you will no
assets: aspect of your spouse’s estate members may not be the same
doubt get offers from the finan-
does not mean that person is as your spouse’s. You may have
cial companies you contact to Determine what you can do on
qualified to handle everything more or fewer assets to invest.
help you manage these assets. your own and where you need
else. Seek out those with You may have to pay for child-
Well-intentioned friends and assistance. You will likely need
experience and knowledge care arrangements and house-
relatives may also step forward the help of an attorney to in the tasks you need help in hold tasks that your spouse
to help with this task. The administer your spouse’s managing. had handled. Staying with the
assets you inherit from some- estate. You will also rely on a
Time is on your side...take as professionals who have taken
one who has passed away are tax preparer or accountant to
much of it as you need. If you care of your family up to this
finite in that these funds can- help you put together financial
are feeling pressured to make a point may have its advantages.
not be replaced if they are lost records. While there may be
decision, take your time until Just be sure to openly discuss
or mismanaged. For this rea- some tasks you can do on your
you feel comfortable. Once you your present situation and your
son, you should be sure that own, be aware of the limits of
take care of creating a cash goals. Then, use their knowl-
you make the proper decisions your own experience and your
flow and establishing a tempo- edge of your family and weigh
for financial management right time, and don’t be afraid to ask
rary place for these funds, very the trust your spouse placed in
from the beginning. for help if you need it.
few other financial decisions these people when deciding
Here are some guidelines that The person who handles one must be made immediately what your next course of action
may help you decide which task may not be the person to after a death. will be.
Plan for Your Future and That of Your Children
If administering an estate left you with one thought, it should
be that the process would have gone smoothly if accurate
and orderly records of assets and documents were kept in a
readily accessible place. Also, you now realize the value of
protecting your family and assets.
Be sure to give attention to the following:
• Locate and organize your important documents and
financial records...and tell someone where they can
• Update your will, beneficiary forms and any trust
agreements. Arrange for guardianship of your children
and of their assets, if something should happen to you.
• If your spouse was the one who paid monthly bills, become
familiar with who your creditors are and when they must be
paid. This would include mortgage payments, utility companies,
and homeowner and car insurance coverage. Be sure This is especially critical for health insurance, but be
to look into any automatic debits from your checking sure to inquire about dental, vision, life and long-term
account and determine if you still want to continue with care insurance coverage.
these programs. • Your life insurance needs may have changed, especially
• Were your insurance benefits provided through your if you have children who depend on you. You will want to
spouse’s employer? Be sure to contact the human review your insurance to be sure you are adequately
resources or benefits department to find out what you covered. Be sure to compare the insurance policy terms
have to do to begin paying the premiums on your own. and prices from several vendors.
DIALOGUES | 5
Everyone’s life, and death, brings with it unique
circumstances. Organization and prioritization are
the keys to taking care of your present needs and
making plans for what you will do in the future.
Start with a New Financial Plan • Estate Planning. One task of critical importance after the
Your life has changed, and with these changes you now have death of a spouse is to create a new estate plan for yourself
to formulate new goals and new ways to save and invest to and your children. The Smith Barney Estate Planning
meet these goals. I offer you a complimentary financial analysis Analysis can help you set priorities for the use of your
on where you stand and how you may meet goals in the assets and develop strategies for reducing taxes and
following areas: preserving your estate for your heirs.
• Net Worth Analysis. This analysis takes inventory of assets • Insurance Planning. Should today be that proverbial “rainy
and liabilities, determines current net worth, current struc- day,” will you, your family and your assets be protected?
ture of debt, and other items that impact your personal bal- I can customize an Insurance Analysis to help you determine
ance sheet to establish where you stand financially at any your needs and create strategies for protecting your assets in
particular moment. the event of death, disability or long-term care.
• Retirement Planning. Whether you are retired or are For those clients with larger estates, Smith Barney can offer
anticipating a comfortable retirement, the Smith Barney the services of our Wealth Planning Centers. At these centers,
Retirement Analysis will consider how much you have trust and estate attorneys will work with you, myself and your
saved and how much you may need to save to provide tax and legal advisors to design an integrated plan tailored to
adequate cash flow during your retirement years. Another your unique circumstances. These attorneys may also confer
analysis can help you determine tax-advantaged ways to with a team of specialists in a variety of areas including
take retirement plan distributions. lending trusts, insurance and philanthropy to help you
accomplish your goals for estate planning and wealth transfer,
• Education Planning. Will you still be able to provide your
business succession planning, charitable giving and liquidity.
children or grandchildren with the education you envision?
The Smith Barney Education Funding Analysis will evaluate Final Thoughts
your current investments and the projected cost of your Everyone’s life, and death, brings with it unique circum-
children’s education. You will receive a report detailing how stances. Organization and prioritization are the keys to taking
much you may need to save to meet your goals and in what care of your present needs and making plans for what you
types of accounts. will do in the future. Access the resources of one of the
• Asset Allocation. Your investment strategy will be based on world’s most highly regarded financial institutions available
your goals, risk tolerance and investment time horizon. to help ease the planning challenges that can arise during
Smith Barney’s Asset Allocation Analysis can provide an emotionally difficult times.
asset allocation recommendation and suggest portfolio
Smith Barney Family AssistSM Continuity Strategy is a service mark of Citigroup
adjustments based on the changes in your financial situation. Global Markets Inc.
DIALOGUES | 6
Year-End Wealth Planning Checklist
Here is a summary of some planning strategies R If you are age 701/2 or older and taking RMDs from a
to consider before year-end: Traditional IRA, you have one last opportunity to donate
up to $100,000 from your IRA tax-free. The funds must
R Have your tax advisor estimate your adjusted gross
be transferred directly from your IRA to a qualified
income and tax rate and determine now if you have an
charity by December 31, so act now to allow time for
AMT liability for 2007.
R Ask for help rebalancing your portfolio to remain in line
R Consider gifting up to $12,000 per child to a 529
with your goals, time horizon and risk tolerance.
College Savings Plan. If you have UGMA or UTMA
R Ask about losses on securities you may want to sell and accounts set up for a child, find out how you can trans-
how to comply with wash sale rules if you intend to fer these funds to a 529 account for more tax benefits.
repurchase the same or substantially identical security
R If you own a business, establish a qualified retirement
plan by December 31, 2007 to be eligible for a contribu-
R Ask about matching up the sales of any securities that tion for this year.
have losses to potentially offset some of the capital
R Develop a borrowing plan to cover your tax obligations—
gains you may owe.
one that unlocks value in the assets you own, without
R Fully fund your retirement accounts as soon as possi- liquidating those assets or using cash.*
ble. Take advantage of the complimentary retirement
R Ask your tax advisor about deductible expenses for
analysis offered by Smith Barney.
2008 and whether it would be advantageous for you to
R Check with your company’s benefits department about prepay these in 2007.
when you have to use any flexible spending funds
R Complete any gift transfers by year-end to reduce your
estate—and to feel good. You are entitled to transfer up
R If you are age 701/2 or older, don’t forget about taking a to $12,000 per person in 2007 without incurring any
required minimum distribution (RMD) from your federal gift tax, while spouses together may donate up
Traditional, SEP or SIMPLE IRA for 2007. (If you have to $24,000. These annual gifts may be in addition to
these retirement accounts at Smith Barney, your IRA any direct tuition or medical payments made on behalf
statement will show the amount you need to withdraw.) of another person.
* When used wisely, borrowing can be beneficial to your total
R If you want to use appreciated stock to make your char- wealth management.
itable donation, do so as soon as possible so the stock
transfer can be made by year-end. You can also arrange
to contribute appreciated stock to a donoradvised fund,
which may allow you to take a deduction in 2007 while
you have the ability to distribute your donations at a
DIALOGUES | 7
Could a Populist Presidency
Affect Your Investments?
Among the many compelling issues that have However you define it, populism promises to remain a
emerged from the presidential nomination political force beyond 2008. Whether it’s in the area of
process is how both the Democratic and taxes and fiscal policy, health care, globalization and
Republican nominees, to varying degrees, protectionism, or energy policy and climate change, a
have embraced populist platforms. populist presidency has potential implications for your
Populism espouses government by “the common people,” To learn more about this political dynamic and some of the
in contrast to elitism or plutocracy, both of which involve potential effects, call us today to request a complimentary
government by a small, privileged group above the masses. copy of our in-depth research report, A Populist
Importantly, populism implies that the “common people” Presidency? Potential Investment Implications of Populist
are distinct from the elite “at the top” and the poor “at Platforms. Forward-thinking analyses like this are just one
the bottom.” way we at Smith Barney find smart ways to put your wealth
to work for you as times change.
Unless you are otherwise advised in writing, Smith Barney is acting as a broker-dealer and not as an investment advisor.
Citigroup Inc. and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and
cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer’s particular
circumstances from an independent tax advisor.
© 2008 Citigroup Global Markets Inc. Member SIPC. Securities are offered through Citigroup Global Markets Inc. Smith Barney is a division and service mark of Citigroup
Global Markets Inc. and is used and registered throughout the world. Citi and Citi with Arc Design are trademarks and service marks of Citigroup Inc. and its affiliates, and are
used and registered throughout the world. Working WealthSM is a registered service mark of Citigroup Global Markets Inc. Citigroup Global Markets Inc. and Citibank are affili-
ated companies under the common control of Citigroup Inc.