Bad Money Habits to Break

Posted by on Feb 17, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, tax returns, taxes, TSA | 0 comments

   Behaviors Worth Changing Provided by Frederick Saide, Ph.D.   Do bad money habits constrain your financial progress? Many people fall into the same financial behavior patterns, year after year. If you sometimes succumb to these financial tendencies, now is as good a time as any to alter your behavior.   #1: Lending money to family & friends. You may know someone who has lent a few thousand to a sister or brother, a few hundred to an old buddy, and so on. Generosity is a virtue, but personal loans can easily transform into personal financial losses for the lender. If you must loan money to a friend or family member, mention that you will charge interest and set a repayment plan with deadlines. Better yet, don’t do it at all. If your friends or relatives can’t learn to budget, why should you bail them out?   #2: Spending more than you make. Living beyond your means, living on margin, or whatever you wish to call it – it is a path toward significant debt. Wealth is seldom made by buying possessions; today’s flashy material items may become the garage sale junk of the future.   #3: Saving little or nothing. Good savers build emergency funds, have money to invest and compound, and leave the stress of living paycheck to paycheck behind. If you are not able to put extra money away, there is another way to get some: a second job. Even working 15-20 hours more per week could make a big difference.   #4: Living without a budget. You may make enough money that you don’t feel you need to budget. In truth, few of us are really that wealthy. In calculating a budget, you may find opportunities for savings and detect wasteful spending.   #5: Frivolous spending. Advertisers can make us feel as if we have sudden needs; needs we must respond to, or ones that can only be met via the purchase of a product. See their ploys for what they are. Think twice before spending impulsively.   #6: Not using cash often enough. No one can deny that the world runs on credit, but that doesn’t mean your household should. Pay with cash as often as your budget allows.   #7: Thinking you’ll win the lottery. When the headlines are filled with news of big lottery jackpots, you might be tempted to throw a few bucks at a lottery ticket. It’s important, though, to be fully aware that the odds in the lottery and other games of chance are against you. A few bucks once in a while is one thing, but a few bucks (or more) every week could possibly lead to financial...

Read More

The Anatomy of an Index

Posted by on Jan 13, 2019 in 401k, 403b, atuos, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, tax returns, taxes, TSA | 0 comments

The S&P 500 represents a large portion of the value of the U.S. equity market   Provided by Frederick Saide, Ph.D.   Did you know that nearly $10 trillion in assets are benchmarked to the Standard & Poor’s 500 Composite Index, including about $3.5 trillion in index assets?1   The S&P 500 is ubiquitous. It is constantly referenced in financial and non-financial media, and we may compare the return of our own investments to its performance. As the index represents approximately 80% of the value of the U.S. equity market (or about 80% of market capitalization), it may be worthwhile to gain a better understanding of its structure and workings.1   Breaking down the benchmark. The S&P 500, as we know it today, was introduced in March 1957. It tracks the market value of about 500 large firms that are listed on the Nasdaq Composite and the New York Stock Exchange. The S&P is structured to include companies from across the sectors of the business community, in an effort to represent the breadth of the U.S. economy.1,2   There are a number of criteria a company must meet to be considered for inclusion in the index. A firm must be a U.S. company publicly listed on a major equity market exchange, have a market capitalization of $6.1 billion or more, and have at least 250,000 of its shares traded in each of the six months prior to its consideration for index membership by Standard & Poor’s. A company must also be financially viable: the ratio of its annual dollar value traded to its float-adjusted market cap must be greater than 1.0.3   The S&P has changed over time. Companies have been gradually removed and added over the past 60-odd years. At the benchmark’s fiftieth anniversary in 2007, just 86 of the original components remained. Subsequent mergers and acquisitions have reduced that number further.3   Right now, about 20% of the weight of the S&P is held in ten companies, and the performance of tech shares influences the benchmark’s return, perhaps more than any other factor.3   The index has been altered through the years in response to changes in the economy. Across several decades, the makeup of the index’s various sectors has differed, along with their weightings. This leads to frequent updates for the equity funds that aim to replicate the index; in order to maintain that replication, they may quickly need to buy or sell shares of corporations that are being added or removed.3   Keep in mind that amounts in mutual funds and ETFs are subject to fluctuation in value and market risk. Shares, when redeemed, may be worth more or less than their original cost. Equity...

Read More

S Some Changes Are Coming For 401(k) Plans

Posted by on Dec 23, 2018 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, social security, tax returns, taxes, TSA | 0 comments

Take note of them for 2019. Provided by Frederick Saide, Ph.D. Some notable developments are about to impact 401(k) plans. They follow a major change that became effective in 2018. Thanks to the Tax Cuts & Jobs Act, workers who borrow from 401(k) accounts and leave their jobs now have until October of the following year to repay plan loans.1 The Internal Revenue Service has eased the rules on 401(k) hardship distributions. Plan participants who arranged such withdrawals in 2018 (and years prior) paid an opportunity cost. The Internal Revenue Code barred these employees from making periodic contributions to their 401(k) accounts for six months after the withdrawal, and it also prevented them from exercising any stock options for that length of time.2 In 2019, some flexibility enters the picture. The Bipartisan Budget Act of 2018 (passed in February) allows plan sponsors to remove both of those restrictions in 2019, if they wish.2 Some fine print worth noting: the BBA also permits plan sponsors to give employees more sources for hardship withdrawals. In 2019, plan participants may take hardship distributions from their 401(k) account earnings, qualified non-elective employer contributions (QNECs), and qualified matching contributions (QMACs) in addition to elective deferral contributions, discretionary employer profit-sharing contributions, regular matching contributions, and earnings on contributions made before December 31, 1988.2 In 2018 and years prior, a plan participant could only take a hardship distribution after taking a loan from his or her 401(k) account. Next year, plan sponsors can waive this requirement, if they choose, and let their employees take hardship withdrawals from 401(k)s without a loan first.2 In addition, plan sponsors may let victims of California wildfires make special hardship withdrawals. An individual who suffered economic losses due to the massive fires in the Golden State (and whose principal residence is in a California wildfire disaster area) may take qualified wildfire distributions of up to $100,000 from a 401(k) through December 31, 2018. The money withdrawn is fully taxable, but the withdrawal is not subject to a 10% early withdrawal penalty. The amount withdrawn can also be recontributed to the plan within three years of the distribution. This type of hardship withdrawal may be permitted immediately; the plan sponsor has until the last day of the first plan year, beginning on or after January 1, 2019, to revise the plan documents to denote the new terms.2 What do these rule changes mean for companies sponsoring 401(k) plans? The message is clear. Review your plan documents and hardship withdrawal guidelines before 2019 begins, and decide whether you want to include these provisions. Lastly, annual contribution limits for 401(k) accounts are rising. An employee can put up to $19,000 into a 401(k) in...

Read More

Tax Scams & Schemes

Posted by on Dec 3, 2018 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

The “dirty dozen” favored by criminals & cheats.   Provided by Frederick Saide, Ph.D.   Year after year, criminals try to scam certain taxpayers. Year after year, certain taxpayers resort to schemes in an effort to put one over on the Internal Revenue Service (I.R.S.). These cons occur year-round, not just during tax season. In response to their frequency, the I.R.S. has listed the 12 biggest offenses – scams that you should recognize, schemes that warrant penalties and/or punishment.   Phishing. If you get an unsolicited email claiming to be from the I.R.S., it is a scam. The I.R.S. never reaches out via email, regardless of the situation. If such an email lands in your inbox, forward it to phishing@irs.gov. You should also be careful with sending personal information, including payroll or other financial information, via an email or website.1,2   Phone scams. Each year, criminals call taxpayers and allege that said taxpayers owe money to the I.R.S. The Treasury Inspector General for Tax Administration says that over the last five years, 12,000 victims have been identified, resulting in a cumulative loss of more than $63 million. Visual tricks can lend authenticity to the ruse: the caller ID may show a toll-free number. The caller may mention a phony I.R.S. employee badge number. New spins are constantly emerging, including threats of arrest, and even deportation.1,2   Identity theft. The I.R.S. warns that identity theft is a constant concern, but not just online. Thieves can steal your mail or rifle through your trash. While the I.R.S. has made headway in terms of identifying such scams when related to tax returns, and plays an active role in identifying lawbreakers, the best defense that remains is caution when your identity and information are concerned.1,2   Return preparer fraud. Almost 60% of American taxpayers use a professional tax preparer. Unfortunately, among the many honest professionals, there are also some con artists out there who aim to rip off personal information and grab phantom refunds, so be careful when making a selection.1,2   Fake charities. Some taxpayers claim that they are gathering funds for hurricane victims, an overseas relief effort, an outreach ministry, and so on. Be on the lookout for organizations that are using phony names to appear as legitimate charities. A specious charity may ask you for cash donations and/or your Social Security Number and banking information before offering a receipt.1,2   Inflated refund claims. In this scenario, the scammers do prepare and file 1040s, but they charge big fees up front or claim an exorbitant portion of your refund. The I.R.S. specifically warns against signing a blank return as well as preparers who charge based on the amount of your tax...

Read More

Staying Out of Debt Once You Get Out of Debt

Posted by on Nov 19, 2018 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Medicare Planning, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, social security, TSA | 0 comments

As you reduce your liabilities, embrace the behaviors that may improve your balance sheet.   Provided by Frederick Saide, Ph.D.     Paying off a major debt produces a sense of relief. You can celebrate a financial milestone; you can “pay yourself first” to greater degree and direct more money toward your dreams and your financial future rather than your creditors.   Once you get out of excessive consumer debt, the last thing you want to do is fall right back in. What steps can you take to reduce that possibility, and what missteps should you avoid making?   Step one: save money. So often, an unexpected event can put you in debt: an auto breakdown, a job loss, a trip to the emergency room or a hospital stay. If you earmark $50 or $100 a month (or even $20 a month) for an emergency fund, you can create a pool of money that may help you deal with the financial impact of such crises. Every dollar you save for these events is a dollar you do not have to borrow through a credit card or a personal loan at burdensome interest rates.      Step two: budget. Think about a 50/30/20 household budget: you assign half of your income for essentials like housing payments and food, 30% to discretionary purchases like shopping, eating out, and entertainment, and 20% to savings and/or paying down whatever minor debts you must incur from month to month.   Step three: buy things with an eye on value. Do you really need a new car that will require financing, one that will rapidly depreciate as soon as you drive it off the lot? A late-model used car might be a much better purchase. Similarly, could you save money by eating in more often or bringing a lunch to work? You could find some very nice goods at very cheap prices by shopping at thrift stores or online used marketplaces. These are all smart consumer steps, net positives for your financial picture.   You should also be aware of some potential missteps that could lead you right back into significant debt, or negatively impact your credit rating. Some of them may be taken consciously, others unconsciously.   Misstep one: spending freely once you are free of debt. If you get rid of consumer debt, but retain the spending mentality that drove you into it, your financial progress may be short-lived. If the experience of getting into (and getting out of) debt does not change that mindset, then you risk racking up serious debt again.   Misstep two: living without adequate health, auto, or disability insurance. Sometimes people are forced to assume large debts as a direct...

Read More

When You Retire Without Enough What Happens?

Posted by on Nov 5, 2018 in 401k, 403b, bank statements, Boomers. Millenials, cars, college planning, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

Start your “second act” with inadequate assets, and your vision of the future may be revised.   Provided by Frederick Saide, Ph.D.     How much have you saved for retirement? Are you on pace to amass a retirement fund of $1 million by age 65? More than a few retirement counselors urge pre-retirees to strive for that goal. If you have $1 million in invested assets when you retire, you can withdraw 4% a year from your retirement funds and receive $40,000 in annual income to go along with Social Security benefits (in ballpark terms, about $30,000 per year for someone retiring from a long career). If your investment portfolio is properly diversified, you may be able to do this for 25-30 years without delving into assets elsewhere.1 Perhaps you are 20-25 years away from retiring. Factoring in inflation and medical costs, maybe you would prefer $80,000 in annual income plus Social Security at the time you retire. Strictly adhering to the 4% rule, you will need to save $2 million in retirement funds to satisfy that preference.1 There are many variables in retirement planning, but there are also two realities that are hard to dismiss. One, retiring with $1 million in invested assets may suffice in 2018, but not in the 2030s or 2040s, given how even moderate inflation whittles away purchasing power over time. Two, most Americans are saving too little for retirement: about 5% of their pay, according to research from the Federal Reserve Bank of St. Louis. Fifteen percent is a better goal.1 Fifteen percent? Really? Yes. Imagine a 30-year-old earning $40,000 annually who starts saving for retirement. She gets 3.8% raises each year until age 67; her investment portfolio earns 6% a year during that time frame. At a 5% savings rate, she would have close to $424,000 in her retirement account 37 years later; at a 15% savings rate, she would have about $1.3 million by age 67. From boosting her savings rate 10%, she ends up with three times as much in retirement assets.1  Now, what if you save too little for retirement? That implies some degree of compromise to your lifestyle, your dreams, or both. You may have seen your parents, grandparents, or neighbors make such compromises. There is the 75-year-old who takes any job he can, no matter how unsatisfying or awkward, because he realizes he is within a few years of outliving his money. There is the small business owner entering her sixties with little or no savings (and no exit strategy) who doggedly resolves to work until she dies. Perhaps you have seen the widow in her seventies who moves in with her son and his spouse out...

Read More