Fighting Electronic Fraud

By: Lori Eason, CFP(R)

This day in age, technology is a major part of all of our lives. But with the convenience of unlimited data at our fingertips comes an increasing number of opportunities for thieves. If you haven't personally been the victim of online fraud, you probably know someone who has. In our line of work, security is of utmost importance. After all, we manage people's life savings. In a recent survey among financial advisors, 25% said they had received what appeared to be a fraudulent request for funds in the last 12 months, and we can be included in that number (we saw through the fraudulent email). Although we have always been extremely cautious and have many security measures in place, we stay up to date on new risks and look for opportunities to further protect our clients. Just as technology evolves, so do criminals.

As a firm, we combat these evolving threats by investing in a wide array of security devices and software to protect our servers and network. In addition to this electronic security, our equipment is kept behind locked doors and we have strict user policies to prevent security breaches from occurring as the result of unsafe online activity. Our electronic systems are secured in much the same way as most other corporate networks. While no system is impenetrable, servers by nature are pretty safe and are not the problem with most electronic break-ins. The greater risk is individual computers.

In my role here as a financial planner at Alder Financial Group, I am constantly corresponding with clients via email. Sometimes this includes emailing sensitive attachments including account forms, statements and quarterly reports. While I don't worry about the security on my end due to all the layers of protection we have in place here, if one of our client's personal email accounts was hacked, there is a chance that personal information could end up in a thief's hands. We recently started using a secure, electronic filing service called ShareFile. This is one step we are taking to strengthen our security and reduce the risk that one of our clients becomes a victim of fraud. Instead of emailing account sensitive attachments, we plan to upload such documents to ShareFile. Our clients can then securely login and download the documents, and store them there if they so wish.

While we are taking steps to increase our security, there are things you can do as well. First off, it is very important to routinely clean out your email inbox. If you have received emails and attachments with personal information, download and save the ones you need to keep on your computer and then delete the email. Keep in mind that just because you clicked delete does not mean that you have permanently deleted the email. It may be stored in a "trash" or "deleted" folder. You'll need to routinely clean up and delete your sent emails as well. It's also important to be careful when using public Wi-Fi hotspots. It's safest to not transfer personal information over such networks as they may not be legitimate connections. A scammer can easily sit in their car outside a Starbucks and broadcast a fake Wi-Fi network from a laptop.

In a recent article in Financial Planning magazine, I read a scary example that could have ended very badly for a financial advisor and her client. The advisor knew her client was looking for a new house to buy. But she was a little surprised when she received an email from the client asking her to wire money directly to the seller for a closing scheduled for the next day. At first the advisor was annoyed about the short notice. It turns out a thief had hacked the client's email account and read enough emails to learn about what was going on in her life. While the advisor was getting the funds together for the closing, she decided to call the client as things were just moving too fast. Sure enough, the client wasn't closing for several weeks and hadn't sent that email to the advisor.

The internet is a great resource and makes all of us far more productive. You shouldn't let the threat of online fraud prevent your from using this valuable resource. Many people mistakenly think that the biggest risk with corresponding electronically is in the transmission of information over the internet, but in reality, the larger threat is what happens to the information once it reaches its final destination. With a few simple steps of keeping your inbox clean, you can greatly reduce the chance of someone getting their hands on data that could be used to commit crime.

Interest Rates: Should I be worried?

By Alan Gaylor

 

With three months of the year behind us, we thought now would be a good time to reflect on what happened last year and examine how the bond market is expected to fare going forward.

 From a historical perspective, 2013 can be viewed as a transitional year for bonds. Over the last thirty years, we have seen a persistent decline in interest rates. With rare exceptions, these have been great times for bond investors. The falling interest rates have lead to very good risk adjusted returns from most bond-like investments. I am proud to say our clients benefited greatly. As we have written about many times, when the Federal Reserve forced rates to their lowest levels in many generations, we knew it wouldn't last forever. Last year was the first sign we saw that proved that point. Given our experience as bond investors, we watched closely as last summer unfolded and the Federal Reserve began to hint that it would start to slowly remove (taper) its Quantitative Easing policies. Because rates were low and so many investors were expecting rates to increase at some point, the mere mention of the Fed's actions sent rates spiking up during the early summer. Due to those two months of rising rates, 2013 turned out to be the second worst calendar year on record for the Barclay's Aggregate Index, which had a negative return of 2.9%, and only the third negative total return for the index (data going back to 1976). The other negative return years were 1994 and 1999. Unfortunately, amid the 30% gain in the stock market last year, it doesn't seem that many paid attention to how bonds performed. We did. Our whole bond investing thesis has been built around how to generate income when yield is hard to come by. That thought process protected us very well last year. Diversifying our streams of cash flow proved to be the right combination. However, we have to be mindful that the interest rate environment we currently face is, and will continue to be, tricky. We don't need any more evidence than last year to prove that point.

 

What about this year?

 

We think it has been generally acknowledged that the next big movement in rates will occur when the Fed actually begins to tighten interest rates. Fortunately, most indications are for those events to play out in the future rather than now and 2015 seems to be the consensus as to when that may start.

 

Much like the last few years, this year's bond performance will mostly likely depend on the type of bonds you own rather than simply being in the bond market in general. Given that we are poised to have higher rates at some point, it has been advisable to minimize interest rate sensitive bonds, such as treasuries, and focus more on credit sensitive areas, such as investment grade and high yield corporate bonds. While it is still early in the year, credit sensitive areas have indeed performed better than the broader market indexes that are comprised of primarily government (interest rate sensitive) bonds. We currently believe it is prudent to employ bond portfolio strategies that give our clients exposure to many income producing sectors such as corporate bonds, high yield bonds, bank loans, municipal bonds, preferred stocks, and MLPs. The idea is that by diversifying your sources of cash flow, you will lower your overall risk to interest rate changes while still generating income. Another way to lower your interest rate risk is to manage a portfolio's duration risk and try to stay somewhat shorter in maturity.

 

While we do not think the Fed will surprise the market this year with rate increases, we have to be cognizant that the market itself can put upward pressure on rates. We would expect this to occur as our economy continues to show improving performance. Interest rates and economic growth measures go hand and hand. Interest rates generally move in a sequence: the economy improves, interest rates increase, inflation worries materialize, and eventually the Fed will tighten interest policies to fight inflation. This will ultimately happen, but leaves us with the question of when. The Fed policies are very data-dependent at this point. We say just stay tuned.

 

Why bonds?

 

If we are facing an environment of low yields, higher interest rates down the road, and a booming stock market, do we even want to own bonds? The simple answer is, of course you do.

 

Let us remember that the primary purpose of bonds in an investment portfolio is not to solely attempt to generate high returns, but rather more stable, predictable returns and to act as ballast during bad times. We own bonds because we place equal importance on diversification and risk mitigation, in addition to performance considerations. After all, bonds and stocks are completely different animals. Bonds tend to protect against the worst kind of market risk-the times when stocks suddenly, unexpectedly plunge. Prior to 2008 and just before the credit debacle began, U.S. equity markets seemed to be sailing toward another year of gains. At that time, investors were also asking, "why own bonds in an environment like this?" Yet by the end of the year, a mixed portfolio of bonds had achieved a 5.24% positive return, while stocks declined by 37%, meaning bonds outperformed stocks by more than 42 percentage points. That is a classic example of limiting risk. Moreover, in 2000, 2001 and 2002 when stocks dropped 9.11%, 11.89% and 22.10% respectively, bonds rallied to give investors returns of 11.63%, 8.43% and 10.26%. 

 

Bottom line, investing in bonds is still one of the best ways to provide protection against the unpredictability of stock market returns. You just never know whether a 2002 or a 2008 is lurking somewhere around the corner.

A Rough Start

By:  Charles Webb

I think we can all agree that 2014 has gotten off to a pretty inauspicious start in the stock market.  After a fairly flat open through the first half of January, the stocks have dropped almost every day since mid-January.  The Dow Jones Industrial Average has shed over a thousand points in roughly two and a half weeks, often by triple-digit daily declines.  On a percentage basis, a thousand points isn’t what it used to be, but it’s still hard to watch.

The decline has been partially driven by currency volatility in certain global markets, but the real underpinnings of the selloff in the U.S. have been a mediocre fourth quarter earnings season. 

In our most recent market commentary, we noted that stock valuations have become relatively high by historical standards and we felt that the forthcoming earnings announcements would be weak.  This now seems to be the case.  We further noted that based on these factors; there wasn’t a good case for continued strong stock performance this year.  What is currently unfolding is consistent with that hypothesis. 

The Dow Jones Industrial Average has had a rougher start to the year than the S&P 500, declining 7.26% vs. 5.75%.  These percentages are still not large enough to qualify as a market “correction” (defined as a 10% decline), but they’re not that far off and will likely get there in our opinion. So if we saw this coming why, not sell and lock in our profits?  The simple answer is that we feel that this is a short-term situation and still believe we’ll end the year modestly higher.  In the meantime, there isn’t a good investment alternative. 

If interest rates drift higher this year, as we expect, anything but the shortest maturity bonds will see declines in their values.  The yields on very short-term bonds are barely 1%, which means in real terms, you’re losing money.  Conversely, our equity cash flows are still in the 2% range.  Thus, we’re getting better income by remaining invested and riding this stock market volatility out.

The month of December has always had the largest dividend payouts of the year.  Thus, we’ve recently accumulated larger than normal cash reserves in most of our client portfolios.  We aren’t necessarily viewing this as a great buying opportunity, but are taking this selloff as a chance to put some of our cash back into the market.  If stocks do finish 2014 at least flat, the returns on our most recent equity purchases should return north of 9% for the year.  Until then, don’t be surprised to see the Dow drop below 15,000. 

Keeping the Pedal to the Metal

We’d been saying all through 2012 and 2013 that we felt as long as the Federal Reserve kept printing money by the tens of billions every month, stocks would continue to rise. All we can say is that when you’re right, you’re right; although we must admit that even we’ve been surprised by the kind of numbers posted by all the major stock indices in 2013.

 

Based on the underlying conditions in the economy, though, it’s not obvious that these gains in the stock market are justified. Unemployment is still persistently high, GDP has been stuck in neutral for several years and businesses are very skeptical of the political environment. So why is it that the stock market seems to be telling a much rosier story? As we’ve written many times, the answer is found in Fed policies – i.e. QE1, QE2, QE3 and Operation Twist.

 

These policies have now swollen the Fed’s balance sheet (their portfolio of bonds they’ve been buying) to over $4 trillion. In addition, much of the money that they’ve created to make these purchases is now sitting in bank accounts at the Fed as “excess reserves”. Banks are required to keep a certain percentage of their deposits and capital on hand. These reserves are in the form of cash in their vault to manage their day to day customer transactions and at their account at the Fed used for such things as check clearing. Any amount that they hold above their statutory limit is called an excess reserve. Historically, those excess reserves have been near zero. Today total excess reserves stand just over $2 trillion. 

 

Traditionally when a bank would find itself with excess reserves, they would lend them to another bank that needed them – typically to make commercial loans. The Fed sets the rate that the banks can charge each other (Fed Funds rate). Regardless of what that rate was, it was better than zero, which is what they’d get leaving them as reserves. In 2008 this relationship changed. The Fed Funds rate was basically set to zero and the Federal Reserve started paying banks interest on their excess reserves.

 

This has created the unprecedented situation where it is more profitable for banks to sit on their reserves and not lend to each other. This is why we’ve not seen an increase in inflation even though the Fed has increased the money supply by trillions of dollars. Those dollars are stuck in accounts at the Fed.

 

Throughout the recovery, government officials have been critical of the banking sector for not doing enough to stimulate growth by making loans. But here we are with this perverse policy that runs contrary to the publicly stated goals of the government. So what’s going on? The real policy objective here is twofold. First, the Fed wants to drive all interest rates down to make debt more affordable for everyone. Secondly, they need to finance unprecedented levels of deficit spending.

 

Both of these objectives have been met but now the government needs to find a way out as the accumulated balances reach unmanageable levels. Policy makers announced in December that they would begin the process of winding down these programs. The first such change was to reduce their bond buying from $85 billion per month to $75 billion per month – a mere drop in the bucket. It’s expected that they will announce a further reduction to $65 billion per month in January.

 

The pace of this exit strategy will be crucial to both stock performance and investment yields in 2014. The San Francisco Fed President was quoted as saying that the Fed will likely continue on a path of gradual, measured reductions in bond purchases assuming the economy tracks modest improvements. That is likely to mean $10 billion steps until they are out of the bond buying business. That being said, the Fed is likely to keep paying interest on excess bank reserves and maintaining a near zero Fed Funds rate.

 

Assuming a best case scenario where the Fed’s exit strategy unfolds as planned, investors will face many challenges. Through all the QE programs, the Fed has created a significant bubble in the bond market. It’s hard to say where rates should be without the government’s interventions but longer term bonds are likely going to get hit hard through this process. So looking to higher yields in this market is a fool’s game until rates eventually find their natural levels. Who knows how long that will take? It could be two or more years.

 

With the Fed still firmly in control of short-term rates, it’s unlikely we’ll see any meaningful yields on short-term bonds over the next couple of years. Once you factor in inflation, those returns could even be negative in real terms.

 

While neither of these events is new for the bond market, investors have found solace in the stock market. Double digit returns have made up for the lack of yield in bonds and given investors a sense of progress. Looking towards 2014 and 2015, questions remain on how stocks will fare without the government’s support. Earnings and valuations are called into question in the face of higher rates.

 

Corporate earnings are already beginning to trickle in and they aren’t great. Investors are wondering if soft earnings will justify more stock gains. If interest rates negatively affect GDP, earnings will come under even more pressure. By a variety of measures, stocks are already pretty expensive. The S&P 500 currently trades at about 16 times earnings which is already above the recent historical average of 13.

 

We see little reason for stock prices to continue their previous two year gains into 2014. Historically, when stocks reach their tops, trading gets choppy. We think that will be the case this year. But when all is said and done, our guess is that we’ll finish the 2014 with single digit returns. Half of that will probably be in the form of dividends.

 

Our best case for support this year in the stock market is the fact that there still remains nowhere else to go. That’s not much in the way of confidence but it is the reality. The Fed is still going to run the show until the QE’s end and they successfully unwind a substantial part of their $4 trillion portfolio.

MARKET FLASH - October 8, 2013

The Politics of Debt
By Charles Webb

We're now a week into yet another round of Washington dysfunction with no indication as to how the funding impasse is going to get resolved. Clients are starting to call us worried about what they're hearing in the news and wondering what this means to their finances. Clearly, people are worried. But then that's exactly what the politicians want. They want us worried. They want to make the situation seem as scary as possible to pressure the other side to move. It's wrong, immature and probably immoral. It's also classic politics.

As your financial advisor, it's our job to keep our finger on the pulse of world events and try to understand how these various issues may impact your portfolio and ultimately your financial goals. So here's our take on this latest fiasco. As I'm sure most of you know, there are two issues on hand that need to be resolved in Washington. The first is passing legislation that will fund the government's expenditures for this year and the second is passing a bill to allow the government to borrow more money.

The first issue to hit us dealt with funding the government's current expenses. Unlike most businesses, the Federal government's fiscal year runs October 1st thru September 30th. Every year Congress must appropriate funds to pay for its upcoming year's expenses. Without that legislation, come October, it technically doesn't have the funds to pay its bills. It's important to note that this doesn't impact all spending but only some. What we have now is a partial stoppage of one government. I say one government because it is not "the government" but only one of our governments. This has no bearing on state or local government activities where the vast majority of our services come from. In fact, most people would be hard pressed to identify something that the Federal government does for them on a daily basis.

In our opinion, this aspect of the crisis is really a non-event. Legislation has already been passed to see that furloughed workers will get their back pay once this is over. So we're not going to have some big impact on consumer spending because of all these people out of work. Some specific contractors or specific industries will see their revenue cut for the month. Not exactly something to put the markets in a tailspin.

Instead, what we have are a bunch of people whose power comes from spending our money unable to do so and screaming about it. It makes great news and eye catching headlines but has very little to do with our day to day lives. There's no better proof than the extremes the Feds are trying to go to make the regular folks feel their pain. The pettiness is on full display at open air venues where barricades have been paid to be erected and guards paid to keep visitors out in the name of the park being closed.

The second aspect of this crisis dealing with the debt limit is a different story. The implications of not extending our credit limit reach far and wide. Because the prospects of the U.S. not living up to its debt are so ominous, no one is really taking that seriously. If that possibility were in the cards, the bond market would have crashed by now.

The importance of Treasury securities is the byproduct of the U.S. dollar. Treasuries function as a holding place for dollars used in trade and since 1945, most of the world has been on a dollar standard. Today, for emerging markets outside of Europe, the dollar is used for invoicing both exports and imports, it is the intermediary currency used by banks for clearing international payments, and the intervention currency used by governments. To avoid conflict in targeting exchange rates, the rule of the game is that the U.S. remains passive without an exchange-rate objective of its own.

Countries like China that run large trade surpluses with the U.S. find themselves with ever-growing balances of dollars on their hands. They have to do something with this cash and they find themselves with little alternative but buy U.S. Treasuries with those dollars. The lack of alternatives is the key. If there was an alternative, you would see an immediate drop in the number of investors lining up at the Treasury auctions. It is this interdependency that makes the thought of a U.S. default so unimaginable. International chaos would ensue if we were not able to resolve the current dispute. If you're thinking of getting out of the market (any market) to avoid the fallout from a default, good luck. There's nowhere to go.

So we can only conclude that none of the players involved are really going to let the country default but are posturing themselves politically. The President wants his spending priorities unfettered and the Republicans want to limit those priorities. Let's be clear that it is entirely appropriate and necessary to have to debate the debt limit. This is an important check on the various branches of government. As much as all those involved disagree on details, they all agree that the debt limit should be limited by Congress and only expanded by a consensus. There is no greater proof than the fact that both parties, historically, only raise it enough to cover a year or two's worth of borrowing at a time. Otherwise, just set the limit to fifty trillion and be done with it. Even the President, who now seems to detest the idea of debating the debt ceiling, once argued for it. Here's what then Sen. Barack Obama said in 2006, when President Bush sought an increase in the debt ceiling:

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. . . . Increasing America's debt weakens us domestically and internationally. Leadership means that "the buck stops here." Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

Here's what he said last Thursday:

"If the borrowing limit isn't raised, "the whole world will have problems, which is why, generally, nobody's ever thought to actually threaten not to pay our bills,"... "I'm going to repeat it: There will be no negotiations over this,''

The outstanding debt in 2006 was 8.5 trillion. Today it's about 17 trillion.

The difference now is that the outstanding debt balance has become so large so quickly that the consequences of a runaway deficit are much greater than ever. This has led to a much greater philosophical divide on the issue. It's also less likely to be resolved in a timely manner and pushed right up to the deadline as we see today. Unfortunately, this may be the new normal until the government can get back on a sustainable fiscal path - regardless of who is in office. This is yet another reason to get our fiscal house in order.

So here's where we are today. The Dow is off about 800 point's or roughly 5% and still headed lower. With your current investments you really have two choices - get out or ride it out. Our belief is that whatever decline in the stock market prior to a resolution will be reclaimed by the end of the year. If that's the case, it's best to ride it out. The challenge to getting out is trying to figure out when to get back in. Investor fears usually only subside after the recovery. That's usually after the market is higher than where you sold it.

The greater threat to our financial future is for the national debt to continue this path and not a selloff in the stock market lasting a couple of months.

Drawing Social Security - The Age-Old Question

By: Lori Eason, CFP(R)

Social Security Boot Camp

As a financial planner, the most frequently asked question when it comes to retirement planning is when should I start drawing Social Security benefits? And the answer is; it depends. Many factors need to be considered when determining whether to take benefits early at 62 or wait until full retirement age. This is especially true if you are married. There are some complex planning strategies that can really help couples maximize their benefits, but few people even know about them. I recently participated in a Social Security Boot Camp webinar and wanted to share the key topics as I think you'll find them very interesting.

Taking Benefits Early

I'll start out by saying that current government policies are such that it is usually best to wait until your full retirement age to begin collecting Social Security. If you start drawing benefits at age 62, your benefits are reduced 25% or more for the rest of your life.   Also, if you collect benefits before full retirement age and continue to work, you lose $1 in benefits for every $2 over the limit until the year you reach full retirement age. For 2013, the limit is $15,120. The two most obvious reasons for drawing benefits early are poor health or if you really need the money and are no longer working or earn less than the earnings cap.

Waiting Until Full Retirement Age (FRA)

If you wait until full retirement age, you can collect your full retirement benefit even if you continue to work. Below is a chart that shows the FRA by birth year and the benefit reduction for drawing early:

Birth Year	Full Retirement Age	Benefit Reduction at 62
1943-1954	66	25%
1955	66 and 2 months	25.83%
1956	66 and 4 months	26.67%
1957	66 and 6 months	27.5%
1958	66 and 8 months	28.33%
1959	66 and 10 months	29.17%
1960 and later	67	30%

 

Furthermore, every year you defer collecting benefits past your FRA, your benefit increases by 8%/year up to age 70. After 70, there's no benefit to waiting.  For married couples, it usually makes sense for the higher earning spouse to delay benefits as long as possible to lock in the maximum retirement benefit as well as the largest survivor benefit. The survivor benefit is 100% of the worker's benefit if collected at 66 but is reduced if claimed earlier. Creating the largest possible benefit for the surviving spouse should be main goal for most married couples. There is also a spousal benefit which is 50% of the worker's benefit if collected at 66 and less if claimed earlier. This is commonly used when one spouse has little or no Social Security earnings based on his or her own work history.

Widows and Widowers

If you are a widow or widower, you can collect survivor benefits as early as age 60, but your benefit is subject to reductions and the earnings cap if you continue to work. One option is to collect survivor benefits and later switch to your own benefit that continues to grow at 8% until age 70. Another option is to collect your own reduced retirement benefit early and switch to the full survivor benefit at 66.

Exes

As long as you were married at least 10 years and are not currently married, you may be able to collect on your ex-spouse's work history as long as you are both at least 62. I have certainly heard of couples not getting married because they don't want to forfeit their Ex's benefits. Even if your Ex has not yet started to collect Social Security, you can collect spousal benefits as long as you have been divorced for at least 2 years. If your Ex passes away before you, as long as you wait until age 60 to remarry, you can keep the survivor benefits, assuming they are larger than the spousal benefits for the current husband.

Dependent Minors

If you are collecting retirement benefits and have minor dependent children (unmarried children under 18 or 19 and still in high school), they are entitled to benefits, too. I don't really understand why your children qualify for retirement benefits, but it's not like the program is in jeopardy or anything. Each child is entitled to 50% of parent's FRA benefit even if parent collects reduced benefits early, subject to a family max payment (150-180% of parent's full benefit amount). If you starting drawing benefits before FRA and keep working, you are subject to earnings cap and both your benefit and your dependents' could be reduced.

Strategies

Now we get into the little known "magic" of Social Security planning.   The two main strategies are "File and Suspend" and "Restrict Claim to Spousal Benefit Only". File and Suspend triggers benefits for a spouse but allows the worker to delay collecting. Both spouses cannot file and suspend. Restricting the claim to spousal benefit only lets you collect only your spousal benefit while deferring your own retirement and letting your benefit grow. Both spouses cannot file a restricted claim. So here's an example of how to use these strategies if both spouses have earned substantial retirement benefits. One spouse can file and suspend triggering benefits for the other. The other spouse files a restricted claim for spousal benefit only. They both defer claiming their own benefits until 70 but from FRA to age 70, they receive monthly income equal to the spousal benefit.  It's free money.

Alternatively, if one spouse has little or no work history, the main breadwinner can file and suspend at 66 to trigger spousal benefits while deferring his or her own retirement benefits until 70. Ex-spouses can also use these strategies since they are eligible for spousal benefits. If you have dependent minors that are eligible for benefits, you can also file and suspend at FRA to trigger benefits for your spouse and children.

Do-Over

If you change your mid within 12 months of first claiming benefits, you can repay the money received and that of any dependents and restart your benefits at a higher rate later. If you wait until 66, you can voluntarily suspend your benefits (but not repay them) and earn 8%/year in delayed credits up to 70. This would basically put you back at what you would have received had you waited until 66 to start.

In Conclusion

While this article just scratches the surface and doesn't fully explain each subject, I hope it has shed some insight on Social Security planning. If you have any further questions, please don't hesitate to contact me.

 

 

 

 

Looking Out for You

By Charles Webb

By early adulthood most everyone figures out that very few people beyond your family are really looking out for you. In this day and age of economic uncertainty, I can't help but to notice the preponderance of people and institutions that are claiming to be there for us. A lot of them seem to be sales people. A lot of them seem to be selling financial products. I'm convinced that most people who claim to "have my back" are simply there because it's closer to my wallet.

Among all of these folks, the one group that stands proudly at the top of claiming to look out for all of us is the federal government. The fortress of cradle to grave support that is being constructed around us was made poignantly clear to me as I poked around the Health and Human Services website promoting the benefits of the soon to be fully implemented healthcare legislation.

Now I'll freely admit that I'm skeptical about how this whole legislative package is going to get implemented. I was curious when the President was selling insurance on TV and directing people to their new website. Drilling down through a bunch of pages full of pictures of people who looked like they didn't need insurance, I came across a link where I could find out who would qualify for premium assistance. What I found out was that the government will help pay the health insurance premium for a family of four earning over $94,000 a year. Two things struck me about this. First is that government assistance isn't just for the poor anymore and second, this is going to be really expensive. They're taking the concept of looking out for us to a whole new level.

But I wonder if they really are looking out for us? Where is all this free stuff coming from? Is there a price to pay and if so, how much and who's going to pay it? Even with the government's ability to print money, there is a price to pay. That price is the massive debt that the Feds are racking up. That debt in turn is driving the Federal Reserve's monetary policy.

This is the point that needs to be made. Through QE1, QE2, QE3, operation twist, the mortgage back security purchase program and a host of other market interventions, the Fed has been artificially holding down all interest rates for at least five years now. Traditionally, the Fed has exerted direct control over the shortest term rates but all the other rates have been established by market forces. For anyone living off their savings or those like us who are trying to find ways to generate that income, this has become an incredibly challenging time.

Investors now have to look to unfamiliar and riskier places for even modest income. This is a big deal. Based on the current market rates, you would need twice the savings today to generate the same income that you would have had seven years ago. We're now being told that this lost income can be made up by the gains in the stock market but that's far from a sure thing. Stock investors have loved these easy money policies as they've accounted for much of the run up in stock prices over the last few years, but even with the nice gains over the past few years, stocks are only up a few percentage points from 2007.

So if the economy is performing better than it was four or five years ago, why is the Fed still actively manipulating interest rates lower? We're told it's because the economy still needs it and they won't change course until a bunch of data points change their minds. I'm beginning to wonder. Who is really benefiting from these lower rates? Clearly anyone who is carrying a lot of debt is benefiting. And wouldn't you know that the very same folks that are holding rates down happen to also be the largest debtors on the planet - the U.S. Federal Government.

So if you're wondering when savers and those relying on their portfolio income to pay for their retirement are going to get a break, it may be a while. Just one percentage point more that the government has to pay in interest on 17 trillion dollars adds 170 billion in additional expense per year. That's real money even by Washington standards. So who are they really looking out for? The price for all of this government help is looking more and more like our retirement income.