Retirement? Spouses Don't Think Alike
You would expect marrying couples in the 50s talk a lot about retirement, but apparently they don't. I have been starting to prepare my wife for the retirement since the 30s :-)
"In all, 502 couples were asked about their plans for retirement. The couples were married 24 years, on average, and were about nine years from retirement. Husbands were 54 years old, on average; wives were 53. Spouses were questioned individually. Partners in 41% of the couples interviewed gave different answers when asked whether at least one spouse will work in retirement. Wives and husbands in more than one-third of the couples (35%) differed when asked about each other's expected retirement ages. (Wives did a better job of identifying when their husbands expected to retire; husbands tended to underestimate when their wives planned to leave the office.) When asked whether their nest egg would allow them to lead a comfortable, or less-than-comfortable, existence, 37% of the ..." Full StorySocial Security Tips and Traps
Social security withdrawal to me is still 30 years aways from me. I'll only pray if most of the tips and traps will still hold true. Nevertheless, Sue Stevens contributed a good article for those in need a few quick doses of Social Security education.
"Tips --When you get your annual estimate of Social Security benefits, check to make sure your earnings history is accurate. Everyone age 25 and older should be receiving an annual statement. If you suspect something is wrong, contact your local Social Security office to correct any inaccuracies. --If both spouses work, each is entitled to a benefit based on his or her own earnings history. However, the spouse with lower benefits is entitled to the greater of 50% of his or her spouse's benefit or his or her own benefit. Traps --If your income is more than $25,000 single (or $32,000 married filing jointly) and you're receiving Social Security benefits, you'll pay income tax on 50% of your Social Security benefits. However, if your income ..." Full StoryThe Fastest Way To Blow Up Your IRA
Do you think the Real Estate IRAs fancy? A misstep and you can destroy all the tax savings you are entitled to in an Individual Retirement Account (IRA). Take this Fairmark Tax Tips to the heart and forget about mixing real estate investment with IRA.
"Prohibited Transactions A prohibited transaction occurs when you interact with your IRA in certain ways. Here are some of the things you aren't allowed to do: You can't sell property to your IRA, or buy property from your IRA. You can't loan money to your IRA, or borrow money from your IRA. You can't use the account, or any part of it, as security for a loan. You can't receive goods or services from your IRA, or provide goods or services to your IRA. You aren't allowed to do any of these things directly or indirectly. That means you can't avoid this rule by having your IRA deal with a company you own, or with a family member. And these are outright prohibitions: they aren't ..." Full StoryNew 401(k) Disclosure Rules May Be Coming
I'm all for more transaparency. Also, I feel we need to radically reform 401(k) and 529 Plans by allowing plan participants to invest in any stocks and mutual funds instead of the few blessed by the plan administrators you don't know in person and cannot influence.
"Under current law, the fees must be fully disclosed to those at companies who decide on 401(k) plans, but not to investors themselves. Investment fees make up the bulk of charges in 401(k) plans. Many plans, however, also charge record-keeping and other administrative or legal costs, as well as fees used to cover the advertising expenses and commissions paid to brokerage firms. In addition, critics say, lawmakers look at potential conflicts of interest that arise because pension consultants are not required to disclose payments they receive from companies that manage 401(k) plan assets. "A large portion of the costs of conventional 401(k) plans relate to services that have little or nothing to do with building and protecting retirement-income security, and hence are excessive," Matthew Hutcheson ..." Full StoryExplainer: Who Owns Our National Debt?
It is quite refreshing to know that foreign governments only own a quarter of our $8.5 trillion national debt.
"The money flows in from all over the place: from individual investors and corporations, pension funds and governments, both in the U.S. and around the world. Basically, anyone with a large amount of cash looking for a safe place to put it is a good candidate for holding U.S. Treasury debt. So just who are these lenders? As of last June (the latest complete breakdown available), the biggest holder of Treasury debt was the U.S. government itself, with about 52 percent of the total $8.5 trillion in paper that's out there. Most of the government’s holdings are massive savings accounts for programs like Social Security and Medicare. Just as you may prefer to keep your Individual Retirement Account in the safe Treasury bonds, the folks ..." Full StoryHow To Manager Your Tax Bracket With IRA Withdrawal
What should you do in a year with low income? Withdraw more from your IRA account so the withdrawal is taxed at a lower rate.
This WSJ article provided some excellent food for thought for long-term tax planning, and actually I'm planning on doing the very similar thing by timing my Roth IRA conversion. If I leave my current job, I'll start converting my 401(k) and traditional IRA accounts to Roth IRA accounts and pay my tax as a favorable rate.
More Money = Better Sex?
At first sight, this survey provides one more reason to become a multi-millionaire. But the average net worth of the survey respondents is a whopping $89 million, making this path toward sex quality almost irrelevant for ordinary Joes.
""In seeking a higher-quality sexual experience the number of well-heeled women that lead more adventurous and exotic sex lives, have had an affair, or joined the mile-high club far outdistances that of men -- and the affluent gender gap in views on sex doesn't end there," Hannah Shaw Grove and Russ Alan Prince, two well-known researchers on the habits of the rich and famous, found. Grove and Prince surveyed people with an average net worth of $89 million, and who make more than $9 million per year. They found that money is an enabler in a number of ways to enhance sexual experiences. "The majority of men and women credit their private wealth with achieving a better sex life. When viewed separately, a larger percentage ..." Full StoryWhen Should You Get Rid of Financial Documents?
Here is a handy reference of when you can shred your financial documents. I'm not sure why one has to keep tax returns for 7 years, though. Isn't it said that IRS cannot bother you for returns that are three years old?
"Bank deposit slips - Once you've reconciled your statement Brokerage statements - Hold until you sell the securities; then with your tax returns for 7 years Canceled checks - After one year (7 years if you need them to support tax filings) Certificates of deposit - Once they mature Check statements - After one year Credit-card statements - After one year (7 years if you need them to support tax filings) Annually renewed insurance premiums - After renewal Term life insurance - Once the term expires Loan documents - Once the loan is repaid Pay stubs - When you get a new one Receipts - When warranty expires (7 years if you need them to support tax filings State and federal tax returns - After ..." Full StoryHow To Survive On $12,000 A Year (And Still Save)
I do admire the author who intends to live on $12,000 a year. Our household probably cannot survive for four times the amount -- I know we have some fat that can be cut in our cost structure, but as long as we can grow the top line and still enjoy life ...
"My 2007 "income," the money I can actually count on, will be $12,084. I know this because it consists of alimony and a portion of a school grant. (I went back to college last year; the grant covers tuition and books with a little left over.) I already know my big-ticket annual costs, too: rent of $6,300 and $1,200 for car insurance. Subtract these from my income and I'm left with $382 a month for food, utilities, clothes, medical deductibles and co-pays, gasoline, renter's and life insurance and any help I give my daughter, who lives on even less than I do. Make no mistake: I'm poor by choice, because I needed to change my life. I chose to leave my marriage, and I chose ..." Full Story5 Biggest 401(k) Mistakes
This article is a must-read for those who are new to the 401(k) game -- any of the five mistakes can cost you dearly.
"The average American commits five big blunders in planning for retirement, and their cumulative effect can turn potential millionaires into permanent paupers. It doesn't take an act of Congress to correct them. It takes the kind of sensible planning you already do to buy a car or, in Peter Lynch's famous example, a refrigerator. That famed stock picker said investors pay less attention to their portfolios than their appliances. The five big mistakes are failing to save hard enough; neglecting to maximize returns while controlling risk; relying too heavily on the stock of their employers; fumbling rollovers; and scalping themselves with heedless borrowing from their own nest egg. Compounded over a lifetime, the smallest mistakes can have life-changing results. Ignoring expenses can clip 10% right ..." Full StoryMoney Market Account Yield Outlook for 2007
Since mid 2006, I have been content with the 5% annual return by parking my cash in high yield money market accounts. Will this savers' party end soon?
"Most economists expect the Federal Reserve to start trimming its target for short-term interest rates -- after a series of 17 increases since mid-2004 -- as part of its effort to engineer an economic "soft landing." Money-fund yields, which move in tandem, would thus fall. And the unusual current situation of yields on money funds and other short-term instruments topping those of bonds "won't last forever," says Mary Miller, director of the fixed-income division at investment manager T. Rowe Price Group in Baltimore. ... Of course, the consensus economic prediction could be wrong. If the economy falls into a recession or inflation surges, the rate outlook changes dramatically. One of the most pessimistic forecasters in the survey, James Smith, of Western Carolina University and Parsec ..." Full StoryOnline Banks Beef Up Security
WSJ reported that banks are required to follow new federal online-security guidelines by December 31 of 2007. No wonder I'm finding out new ways literally everyday that makes online logon harder. More recent examples:
1) Eloan online savings bank requires verification of a pre-determined image at the password screen.
2) Citibank credit card site is collecting security question now.
3) Treasury Direct requires you to click an on-screen keyboard to enter your password.
Roth IRA Income Limit To Rise in 2006
Roth IRA should be the retirement fund vehicle of choice (after company matching in 401(k)-like plans). Unfortunately, even with this round of increase in income limit, my family is still priced out of the market.
"The Roth IRA income limits will increase moderately in 2007, but the contribution amount remains the same. You'll be able to contribute the full $4,000 per year to a Roth only if your adjusted gross income is less than $99,000 if single or $156,000 if married filing jointly (you can contribute up to $5,000 if you are 50 or older). You'll be able to contribute part of that amount if you're single and earning less than $114,000, or $166,000 if married filing jointly, and the amount phases out entirely above that level. Your adjusted gross income still must be below $100,000 to convert a traditional IRA into a Roth, but those rules will change in 2010. At that point, the $100,000 income limit disappears, and ..." Full StoryRule 72(t) and How To Make Withdrawal from IRA Legally
If you don't know yet, IRS actually provides a leeway for you to use what's in your 401(k) or IRA before retirement without penalty. The trick is to do it right. Actually, it is always in my "grand plan" that after I semi-retire, I will tap into my retirement funds before 59 1/2 with considerable less tax payment.
"It's possible to take regular payments from your individual retirement account and avoid paying a 10% penalty for withdrawals before you turn 59½ years old, the magic age for getting unfettered access to your retirement savings. These are called 72(t) payments for the section of the tax code that governs them. There are strict rules: You have to take what the Internal Revenue Service calls "substantially equal" withdrawals for at least five years, or until you turn 59½, whichever period is longer. So, if you start taking withdrawals at age 56, you're on the hook until age 61. It's best to work with a financial adviser, accountant or IRA custodian familiar with 72(t) payments to set up your plan. The payments can be risky: If ..." Full StoryThe Hidden Fees in 401(k) Plans
Good reminder from USA Today that it is too easy to losea couple of points in invisible fees in a 401(k). The problem is, you cannot switch 401(k) plans as you switch 529 plans, and I bet hardly anyone will leave a company just because a mediocre 401(k) plan.
"The fees charged in 401(k) plans are all but invisible to investors who don't know where to look. Making matters more confusing are complex fee arrangements — common in retirement plans — that often lump together administrative and fund-management fees. Regulators are studying whether these arrangements inflate retirement-plan fees by making it hard for you to figure out how much individual services cost. "If employees are paying more (than they need to), they have less money in their account to buy groceries when they get old and can't work any more," says Ward Harris, CEO of The McHenry Group, a financial consulting firm. Because 401(k) accounts are often held for decades, and many people make minimal changes in their fund choices, high fees can drain ..." Full StoryE-Loan's High Yield Savings Account Is Off A Good Start
Yes, at 5.50% APY, there is no wonder many interest-rate-sensitive folks (like me) are moving to E-Loan. On a related note, Eloan also silently reduced its CD rate from 5.75% for terms over 2 years to 5.35% to 5.45%. (Still, the 2-year CD at 5.60% is still a great buy.)
"PLEASANTON, Calif.--E-LOAN, an online consumer direct lender, today announced that since it launched its no fee, high yield online savings and certificates of deposits (CD) offering five weeks ago, it has received more than $754 million in online deposits. As of October 31, 2006, consumers opened 18,132 accounts, allowing them to receive a high rate of return with one of America's most trusted financial services brands. "Beating our year end goal in just four weeks is especially gratifying because it means that now more than 20,000 consumers have been able to enjoy a hassle free way to save money while receiving a high rate of return on their hard earned cash," said Mark Lefanowicz, president of E-LOAN. "The customer response to our fast and easy ..." Full StoryA Sneak Peek Into Citigroup's New 401(k) Plan
Woo, up to 8% of company contribution into 401(k) accounts -- this is probably the highest among major companies. And you can expect that there are many finance-smart folks in Citi.
"Citigroup, the top U.S. bank, said it will end future contributions to the cash balance plan, and redirect the money to a revamped 401(k). Cash balance plans, a middle ground between traditional pensions and 401(k) plans, involve contributions funded entirely by the employer. The new retirement savings plan, which Citigroup described as "greatly enhanced," could represent a major new expense when it takes effect in 2008. "In total, we will invest significantly more in our employees under this improved approach to our retirement savings," Citigroup Chief Executive Charles Prince wrote in a memo to U.S. employees. Among the changes unveiled Friday is a new 401(k) plan that gives most U.S. employees the chance to receive a company contribution of as much as 8% of their ..." Full StoryAn Ownership Society Still Takes Time
WSJ reviews the progress to get more people automatically signed up for defined contribution plans like 401(k). I generally favor the adoption of The Pension Protection Act of 2006, which will increase the awareness of retirement savings in the general public, and force more people to save for the rainy days. And, if there are more money flowing into the stock market, current players in the market should benefit too.
"Milton Ezrati, chief economist at Lord Abbett Funds in Jersey City, N.J., doesn't want to rain on the fund industry's parade. Nevertheless, he has some cloudy words: The pension-reform law passed earlier this year may not result in an immediate tidal wave of assets into 401(k) plans. The Pension Protection Act of 2006, passed in August, is designed to encourage wider participation in defined-contribution plans such as 401(k) retirement-savings programs by encouraging employers to automatically enroll new employees unless they opt out. The mutual-fund industry hopes this provision will lead to lots of new money for it to manage. Previously, the onus was on employees to sign up for their companies' retirement plans. ... While some studies have suggested there would be a "tremendous percentage ..." Full StorySavings Rates Are Getting Lower
WSJ predicts interest rates for savings account and money market accounts will creep down from this point on. I cannot agree with it more. The golden days are probably over, which makes it a wise move to lock in some high yield CDs for now.
"Institutions including Bank of America Corp., Wachovia Corp. and Huntington National Bank, a unit of Huntington Bancshares Inc., have begun cutting rates in a number of major markets on some of their longer-term CDs. In Chicago, for example, J.P. Morgan Chase & Co.'s Chase dropped the annual yield on its five-year CD to 4% from 4.25% earlier this month. Other banks are also starting to cut rates on short-term CDs, with maturities of one year or less, and other more liquid investments. Citigroup Inc.'s Citibank recently lowered to 5.25% the rate on its six-month CD from 5.50% in many of its markets. Among online banks, which have been offering some of the juiciest deals, Emigrant Savings Bank's EmigrantDirect.com and Capital One Financial Corp. recently trimmed ..." Full StoryStable Value Fund May Not Be Safe
My company's 401(k) plan never includes a stable value fund, so I never got the chance to make a decision whether to invest in such funds. However, NY Times reminds us that stable value funds have their fair share of risks too. Some poorly run funds can go bankruptcy, and costing investors a fortune.
"In fact, stable value funds and their close cousins, guaranteed investment contracts, together accounted for 21.3 percent of the assets in such plans in September, making them second in popularity only to company stock, at 21.6 percent, according to Hewitt Associates, an independent provider of 401(k) services. ... A year ago, for example, the Trust Advisors Stable Value Plus fund declared bankruptcy. With investments of $200 million from 1,500 pensions plans nationwide, it was but a small player in the 401(k) market, which Hewitt says has assets of more than $1 trillion. Nevertheless, it provides a cautionary tale. Like other stable value funds in 401(k) plans, it was not a mutual fund but a collective trust. While the Securities and Exchange Commission regulates mutual funds ..." Full Story