1. THE LINK Newsletter
Provided by Nexus Financial Management
January 2009
Nexus Financial
Management LLC
The Higher Education Opportunity Act
Bryan Dudones
4600 Touchton Road E.
too complicated. To address this problem, the
Building 100, Suite 150 One of the big pieces
Act directs the Department of Education to
Jacksonville, FL 32246 of legislation that
Phone: 904-334-1376 streamline the federal application, the FAFSA,
passed in 2008 was
bryan@nexusfm.com
over the next five years. To support this initia-
the Higher Education
www.nexusfm.com
tive, Spellings announced a revised form that
Opportunity Act (the
has only 27 questions (down from 100), and
Act). Aside from reau-
Hello Everyone,
stated that families will now learn how much
Goodbye 2008!....It was a
thorizing the Higher Education Act of 1965 for
tumultuous year highlighted by
aid they can expect to receive, as opposed to
another six years, the Act includes many other
meltdowns in the financial and
how much they are expected to contribute
real estate sectors. The stock
provisions intended to improve college af-
market experienced its worst
under the current system. The new FAFSA
fordability, access, and accountability. Here
annual declines since the
should be available for the 2009 application
1930's while the global
are some highlights of this new law.
economy fell into a recession.
year.
The S&P 500 finished the year
A new federally run college pricing website
lower by 38.5%, with the DJIA
Expanded Pell Grant and work-study
and Nasdaq down by 33.8% and
In an effort to make it easier for students and
40.5% respectively. Yields on
The Act increases the maximum Pell Grant,
30-year Treasury bonds fell to
their families to compare the cost of colleges
unprecedented levels below 3%.
the federal government's largest financial aid
in an apples-to-apples format, the Act directs
The silver lining was oil prices
program, from $5,800 to $9,000 per academic
falling abruptly from $147 per
the Department of Education to create a new
barrel into the $30's, alleviating
year. The Act also expands the community
website that will list up-to-date cost informa-
$4/gallon gasoline prices.
service opportunities available under the fed-
Looking forward to 2009,
tion on individual colleges, including tuition
numerous challenges remain
eral work-study program.
and fees for the current year, average price of
including a depressed real
estate market, frozen credit
attendance after grant aid, recent price in- Graduate PLUS loans
markets, a rising unemployment
creases, and changes in per-student spend-
rate, and weak consumer
The Act creates a six-month grace period for
spending. I'm cautiously
ing, among other items.
optimistic that we will begin to
repayment of all graduate student PLUS loans
experience a healthier economy
The website will also include calculators that disbursed after July 1, 2008. Under prior law,
and better returns in the stock
families can use to estimate their expected
market, especially later in the
these borrowers had to begin repaying their
year.
college costs loans as soon as they were no longer enrolled
Wishing you a Happy, Healthy
Cost considerations based on income
and Prosperous New Year!
on at least a part-time basis.
Bryan
and family data,
According to a
Other provisions
as well as the
study released by
In this issue:
annual and total
student-loan lender The Act also includes many other provisions:
cost of attending a
The Higher Education Sallie Mae, 40% of
Opportunity Act
particular college. • A requirement that textbook publishers
parents and students
The hope is that sell unbundled versions of textbooks that
said they paid no
Federal Protection for Bank
attention to cost when this information previously may have been bundled with
Deposits
searching for a college. will help students expensive DVDs and CDs
Rethinking Your Retirement
and their families
Game Plan Source: Sallie Mae, • A new scholarship program for active
during the college
August 2008 study duty military personnel and their families
Ask the Experts selection process.
• A requirement that private student loan
A simpler financial aid application
lenders inform students of their less
According to remarks by U.S. Secretary of costly federal borrowing options
Education Margaret Spellings in a speech at
• An expansion of student loan forgiveness
Harvard University in October, 40% of college
for individuals who work in certain public
students--roughly 8 million students--don't
service jobs
apply for federal aid because the process is

2. Page 2
Federal Protection for Bank Deposits
In the wake of turbulence in the financial mar- You can't increase your protection just by
kets and recent legislation, it's worth reviewing opening multiple accounts in your name at the
Business coverage
the legal protections available for assets held same bank (for example, splitting money be-
The $250,000 limit tween a checking and a savings account, or
by banks.
does not necessarily opening accounts at more than one branch).
apply to non-interest What's protected?
bearing deposit What if I have more than $250,000?
Bank deposits are
accounts, such as
protected by the Fed- The simplest approach is to have accounts at
payroll processing
eral Deposit Insur- more than one bank. However, your coverage
accounts used by
ance Corporation at an individual bank depends on how ac-
businesses. The FDIC's
(FDIC), an independ- counts are owned; different types of accounts
Temporary Liquidity
ent agency backed are insured separately. You can exceed the
Guarantee Program,
by the full faith and $250,000 limit as long as the deposits repre-
scheduled to expire at
credit of the U.S. government. FDIC insurance sent different categories of ownership. For
the end of 2009, gives
covers both demand deposits, such as check- example, a joint account qualifies for up to
banks the option of
ing, NOW, savings, and money market de- $250,000 of coverage for each person named
offering unlimited
posit accounts, and time deposits, such as as a joint owner. That coverage is in addition
protection for such
certificates of deposit (CDs). It covers both to the $250,000 maximum coverage for each
accounts. Check with
principal and any interest accrued as of the person's aggregated single-owner accounts at
your bank to find out
date that an insured bank closes. that bank. For example, a married couple with
what it provides.
three accounts at one bank--they each have
FDIC coverage $250,000 in an individual account, and they
does not include also have $200,000 in a joint account--would
How safe is it?
mutual funds, qualify for insurance on the entire $700,000.
According to the FDIC,
stocks, bonds,
no depositor has ever
life insurance The limit on the amount protected in one or
lost a penny of funds
policies, annui- more retirement accounts at one bank also is
that were covered by
ties, or other $250,000; this is separate from the $250,000
FDIC insurance.
securities, even coverage of individual accounts. (Remember,
if they were however, that FDIC insurance applies only to
bought through an FDIC-insured bank. It also deposit accounts, not to any securities held in
does not cover U.S. Treasury securities, an IRA or other retirement account.) An online
though these are backed separately by the full calculator at the FDIC website, www.fdic.gov,
faith and credit of the U.S. Treasury. Finally, can help you estimate the total coverage on
the FDIC does not insure safe-deposit boxes, your deposit accounts.
though if a bank were to fail, the FDIC would
Additional safety nets
typically either arrange for transfer to another
Credit union coverage bank or notify you to retrieve the contents. In some states, a state-chartered savings
The National Credit bank is required to have additional insurance
How much is insured?
Union Share Insurance to cover any losses beyond the FDIC limits.
Fund (NCUSIF) offers The Emergency Economic Stabilization Act of Some banks also may participate in the Cer-
protection, backed by 2008 temporarily increased the amounts that tificate of Deposit Account Registry Service
the full faith and credit are FDIC insured at an individual bank or sav- (CDARS), which enables a bank to spread
of the U.S. Treasury, ings and loan. The legislation states that the large CD deposits among multiple banks while
for credit union increase in standard coverage is effective keeping the amount at each individual bank
accounts. The limits are through December 31, 2009, though there has within FDIC limits. Paying attention to your
similar to those of the been widespread discussion of making the bank balances and account ownership can
FDIC: $250,000 per increased limits permanent. help protect you in a worst case scenario.
individual account per
The previous limit of $100,000 per individual
institution.
per bank was increased to $250,000. The
$250,000 limit applies to single-owner ac-
counts, such as those held in one person's
name, those established for another individual
(e.g., an UTMA or escrow account), sole-
proprietor (quot;DBAquot;) accounts, and accounts
established for the estate of a deceased
person.

3. THE LINK Newsletter Page 3
Rethinking Your Retirement Game Plan
Periodic market downturns may result in sig- What are your options?
nificant investment losses, particularly within
If you're fortunate, even a significant decrease
retirement accounts. If you are faced with this
in savings may not impact your retirement
situation, you may have to reconsider when,
income dramatically. You may have other
or even if, you can retire.
sources of fixed income such as company-
By 2016, the number
sponsored pensions, so you won't need to rely
The effects of a decline
of working people
on your savings to provide much of your in-
Historically, the stock market has had its ups over age 65 is
come. Or you may be able to offset the effect
and downs. How any substantial market expected to increase
of diminished savings by spending less --
change impacts your retirement outlook may by 80%.
forgoing that planned cruise, putting off buying
depend on how close you are to retirement. If Source: U.S. Bureau
that new car, or making smaller gifts to chil-
you plan on working and contributing to your of Labor Statistics
dren and grandchildren, for example. But if
retirement savings for many more years, you you rely on your savings for most of your re-
may have time to recoup losses to your ac- tirement income, considerable investment
counts due to poor investment performance. losses of the magnitude recently experienced
But if you're closing in on retirement or you're can require major lifestyle changes. Here are
already there, a dip in your savings may affect a few ideas to help you cope with the erosion
how much you can safely withdraw and how of your retirement savings.
long your savings can last.
Continue working
To demonstrate, assume you and your spouse
have $1 million in retirement savings, expect You may have to delay the retirement party a
an annual average rate of return of 7%, and little longer. Postponing retirement lets you
estimate that you presently need $100,000 continue to add to your retirement savings,
annual retirement income for both of you to which can offset losses caused by poor in-
live comfortably, of which $30,000 will come vestment performance. Also, working allows
from Social Security. Presuming withdrawals you to delay withdrawing from your savings.
increase by 3% each year to offset the effects That could allow more time for your retirement
of inflation, your savings will last about 22 accounts to recover from investment-related
years, as shown in the chart below losses.
(scenario 1).
Delay taking Social Security
However, a decrease of 14% in the value of
Social Security may be the only source of
your savings in one year shortens the duration
fixed income you'll have in retirement. If you
of your savings by over 4 years (scenario 2).
delay applying for benefits until your full retire-
(This example is hypothetical and does not
ment age, you can get as much as 30% more
reflect a specific investment or strategy.)
in monthly payments compared to taking
benefits early. And, for each year you defer
benefits past your full retirement age (between
$1,000,000
65 and 67, depending on when you were If you delay your
$900,000 born) to age 70, your benefit is increased by Social Security
8%. That could mean an additional $500 or
$800,000 benefit, don't forget to
more in your benefit check each month--and sign up for Medicare
$700,000
that doesn't include annual cost of living in- at age 65.
$600,000
creases.
$500,000
Consider fixed income investments
$400,000
Investments such as single premium immedi-
$300,000
ate annuities (SPIAs) provide an income for
$200,000
the rest of your life, or for the combined lives
$100,000 of you and your spouse. However, while the
income is dependable (subject to the claims-
$0
paying ability of the annuity issuer), you gen-
67 69 71 73 75 77 79 81 83 85 87 89
erally don't have access to the money you
Age
paid for the SPIA and you may not be able to
Scenario 1 Scenario 2
change the amount of income payments or
their duration once you've started.

4. Ask the Experts
Is my brokerage account protected?
requires brokerage and clearing firms to seg-
Most brokerage accounts
regate money and securities in customer ac-
are protected by the Securi-
counts from their own proprietary assets and
ties Investor Protection Cor-
funds. This helps protect customers from be-
poration (SIPC). Unlike the
ing harmed by a firm's own trading activity.
Federal Deposit Insurance
Also, firms are required to maintain a certain
Corporation (FDIC), which protects bank de-
level of capital reserves to enable the firm to
posit accounts, the SIPC is not a government
Nexus Financial return customers' securities and cash in case
agency. Though created by Congress, it is a
Management LLC of a financial failure. Finally, the SEC specifies
nonprofit corporation funded by its member-
Bryan Dudones
that customer claims take precedence over
ship of broker-dealers registered with the Se-
4600 Touchton Road E.
other claims on a firm's assets.
curities and Exchange Commission (SEC).
Building 100, Suite 150
Jacksonville, FL 32246
What if a firm is liquidated instead of sold?
The SIPC helps return customer property,
Phone: 904-334-1376
including securities and cash in brokerage
bryan@nexusfm.com
Securities registered in a customer's name (as
www.nexusfm.com accounts, should a broker-dealer or clearing opposed to being held in quot;street name,quot; the
firm experience bankruptcy, insolvency, or most common method today) are returned to
unauthorized trading in a customer's account.
Nothing in this document should customers first. Assets held in street name
Should a SIPC member become insolvent,
be construed as specific
make up what's known as the quot;fund of cus-
investment advice. For
SIPC would ask a court to appoint a trustee to tomer property.quot; That fund is divided on a pro
investment and tax concerns
oversee transfer of customer securities to rata basis; assets are shared in proportion to
specific to your needs, please
another firm, or act as the trustee itself.
request a personal consultation. the size of claims. Only if securities are still
missing after the pro rata distribution would
SEC regulations also apply
SIPC coverage be applied to make up the
The SEC also has provisions that can help difference, up to the statutory coverage limit.
protect investor assets. For example, the SEC
How much coverage does SIPC provide?
• Accounts held on behalf of a valid trust
SIPC covers a maximum of $500,000 per
created by a written instrument (trust
quot;separate customer,quot; including up to $100,000
accounts are considered separately from
in cash, at a given institution. As with banks,
those of an individual trustee)
total coverage can be higher for multiple ac-
counts at one firm. As long as accounts are Each of your retirement accounts at a given
held by what the SIPC considers quot;separate firm also generally is eligible for up to an addi-
customers,quot; each account qualifies for sepa- tional $500,000 SIPC coverage (including as
rate coverage. For example, a married couple much as $100,000 in cash) if securities are
could have two individual accounts with lost or stolen.
$500,000 of coverage each, plus a joint ac-
In general, SIPC covers notes, stocks, bonds,
count that would bring their aggregated poten-
mutual funds, and other shares in investment
tial coverage for that firm to $1.5 million.
companies. It does not cover investments that
Categories of separate customers include: are not registered with the SEC, such as cer-
tain investment contracts, unregistered limited
• Individual accounts held by someone in
partnerships, fixed annuity contracts, cur-
his or her own name, or by an agent for
rency, gold, silver, commodity futures con-
another individual
tracts, or commodities options. Remember
• Accounts held jointly by two individuals also that SIPC does not protect against mar-
with equal authority over the account ket risk or price fluctuations in securities.
• Accounts held by executors, administra- Additional information and a brochure titled
Prepared by Forefield Inc,
quot;How SIPC Protects Youquot; is available at
tors, and guardians in the name of a de-
Copyright 2009
cedent, an estate, or someone else (for www.sipc.org.
example, a guardian for an UGMA
account)
• Accounts held by a corporation, partner-
ship, or unincorporated association