Is a Home an Investment?

Posted by on Sep 25, 2017 in 401k, 403b, atuos, Boomers. Millenials, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

From one perspective, the answer is yes; from another, no.   Provided by Frederick Saide, Ph.D.   When you buy a home, are you investing? If you buy it to flip it or buy it as a rental property, the answer is yes. If you buy a home simply to live in it, the answer may be no.   Your home is an expression of your lifestyle, a wonderful setting for your life, and a place you can enjoy in privacy and comfort. As an investment, though, it is essentially illiquid, and its rate of return is no sure thing.     Home values do not automatically increase with time. Buyers learned that lesson in the Great Recession. Simply using the S&P/Case-Shiller home price index as a barometer, house prices today are roughly where they were in 2007 – it has taken the residential real estate market that long to recover from the mortgage meltdown.1   Through the decades, real estate values have risen, and they will probably keep rising for the near term – but perhaps, not as quickly as some buyers hope. Why, exactly?   Home prices are inexorably linked to wages. Over the past year, hourly earnings have grown 2.5%. This has mystified many economists and frustrated others. Normally, when the jobless rate is below 5%, you have much greater wage growth. Six months before the start of the Great Recession (March 2007), the unemployment rate was 4.4% (right where it is now), and wages were growing at 4.2% a year.2,3   Ideally, wage growth keeps pace with rising real estate values. That is not happening now. Across the past year, the 20-city S&P/Case-Shiller home price index has shown home values appreciating at a rate of between 5.5-6% annually. If real estate values continue to climb 6% per year and wages rise just 2.5%, you will soon see buyers priced out of the market – unless, of course, home prices drop because sellers can no longer get the prices they want. That is something prospective sellers (and buyers) ought to keep in mind, plus some other truths.4   The fact is, stocks have appreciated more than real estate in the long run. Through the decades, home values have increased about 4% annually and stocks have increased about 10% annually (albeit with some remarkable year-to-year volatility).1     Stocks do not need upkeep. You will never need to tear out, reroof, or repaint a portfolio. Houses need all kind of repairs with time, and repair costs can eat into your gains. You must also pay property taxes. If you envision your home as an income-producing asset, that means playing landlord on some level. Many homeowners are not ready to...

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Horizon Newsletter September-Fall Edition 2017

Posted by on Sep 17, 2017 in 401k, 403b, bank statements, Boomers. Millenials, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

Frederick Saide, Ph.D. presents: IN THIS ISSUE Going Your Own Way Travel doesn’t need to be traditional. [CLICK TO READ] The Human Cost of Football These medical findings are troubling. [CLICK TO READ] The Market in a Minute A recap of the last three months… in one minute or less. [CLICK TO READ]     FALL 2017   NOTABLE QUOTE: “Self-confidence is the first requisite to great undertakings.”  – Samuel Johnson   QUICK TIP: Regular medical and dental checkups can help you save money in the long run. Without them, you could face larger medical or dental bills down the road.               Going Your Own Way   It’s not unusual for young people to want to experience travel, but recent market research shows that millennials are willing to give their parents and grandparents a run for their money – literally! The firm FutureCast indicates that people born between the 1980s and 2000 spend over $200 billion each year on travel. This means that both solo entrepreneurs and large companies are looking for ways to make your upcoming trip more successful and more comfortable. Clint Johnston, 33, offers the website Triphackr, which combines travel tips (like getting refunds from tight-fisted airlines) with lifestyle inspiration through Instagram. How does he make money? Like many online influencers, Johnston turns endorsements and other connections into a healthy income. Other efforts are less well defined. Air France is promoting a new lifestyle brand for the 18-35 set called “Joon,” which is described as a “lifestyle brand.” But whether this means lower ticket prices or a “no-frills” experience, they aren’t saying. With so much money to be made, it isn’t surprising that there are a number of options out there who talk big, but deliver little. Jeff Fromm of the Barkley ad agency offers a buyer beware warning: “Brands must offer proof on any claims. [If they] try to be something they aren’t, they get caught.”   For those reasons, among others, it’s worth taking the time to plan out a trip and do research online or through travel guides for the best options.1               The Human Cost of Football   A recent study has shown a startling prevalence of chronic traumatic encephalopathy (CTE) in American football players at every level, including high school, college, and NFL players. According to protectthebrain.org, a website created by the Brain Injury Research Institute, CTE “is a progressive degenerative disease which afflicts the brain of people who have suffered repeated concussions and traumatic brain injuries.” While most diagnoses have been post-mortem (the study, published in the Journal of the American Medical Association, covered 202 deceased volunteers), new...

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Avoiding the Cyber Crooks

Posted by on Sep 11, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

How can you protect yourself against ransomware, phishing, and other tactics?   Provided by Frederick Saide, Ph.D.   Imagine finding out that your computer has been hacked. The hackers leave you a message: if you want your data back, you must pay them $300 in bitcoin. This was what happened to hundreds of thousands of PC users in May 2017 when they were attacked by the WannaCry malware, which exploited security flaws in Windows.    How can you plan to avoid cyberattacks and other attempts to take your money over the Internet? Be wary, and if attacked, respond quickly. Phishing. This is when a cybercriminal throws you a hook, line, and sinker in the form of a fake, but convincing, email from a bank, law enforcement agency, or corporation, complete with accurate logos and graphics. The goal is to get you to disclose your personal information – the crooks will either use it or sell it. The best way to avoid phishing emails: stick to a virtual private network (VPN) or extremely reliable Wi-Fi networks when you are online.1 Ransomware. In this scam, online thieves create a mock virus, with an announcement that freezes your monitor. Their message: your files have been kidnapped, and you will need a decryption key to get them back, which you will pay handsomely to receive. In 2016, the FBI fielded 2,673 ransomware attack complaints, by companies and individuals who lost a total of $2.4 million. How can you avoid joining their ranks? Keep your security software and operating system as state of the art as you can. Your anti-virus programs should have the latest set of virus definitions. Your Internet browser and its plug-ins should also be up to date.2 Advance fee scams. A crook contacts you via text message or email, posing as a charity, a handyman, an adult education provider, or even a tax preparer ready to serve you. Oh, wait – before any service can be provided, you need to pay an “authorization fee” or an “application fee.” The crook takes the money and disappears. Common sense is your friend here; avoid succumbing to something that seems too good to be true. I.R.S. impersonations. Cybergangs send out emails to households and small businesses with a warning: you owe money. That money must be paid now to the Internal Revenue Service through a pre-paid debit card or a money transfer. These scams often prey on immigrants, some of whom may not have a great understanding of U.S. tax law or the way the I.R.S. does business. The I.R.S. never emails a taxpayer out of the blue demanding payment; if unpaid taxes are a problem, the agency first sends a bill and...

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Are You Really Saving Enough for Retirement?

Posted by on Sep 4, 2017 in 401k, 403b, Boomers. Millenials, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

Why an early start (and accepting some risk) matters.   Provided by Frederick Saide, Ph.D.   Are you on track to save $1 million or more for retirement? If you are 50 or younger, you may need that much in savings to generate the kind of retirement income you prefer. Personal finance website NerdWallet recently did some math concerning this very objective. What kind of sustained savings effort would a 30-year-old with nothing invested need to make to amass $1 million in retirement savings by age 67, assuming a consistent 6% annual return? (Keep in mind, a tax-advantaged retirement account is not the only potential source of retirement savings.)1 According to NerdWallet’s projection, a 30-year-old earning $40,000 a year would have to set aside 18.3% of each paycheck toward that goal. The percentage drops to 12.2% for a 30-year-old earning $60,000 annually, and 9.2% a year for a 30-year-old with an $80,000 salary.1 Salaries are not frozen across a lifetime of working, of course – but this simple math denotes the initial effort a millennial may want to make. A general rule of thumb is that you should direct 10-15% of each paycheck into retirement savings.1 You must take some risk as you save for the future. Some people are afraid of Wall Street and reluctant to invest in equities; they wish they could just save for retirement through a bank account or in an investment vehicle with minimal risk. For most people, this approach is not realistic. The earlier you start, the more compounding potential you have. Take the hypothetical example of a 25-year-old who starts investing just $200 a month in equities via a tax-advantaged retirement account. The investments earn 8% a year. That 25-year-old is positioned to have $622,000 in that account by age 65. So, even a little invested per month might help a young adult make considerable progress toward a retirement savings objective.2 While some people take too little risk when they invest, others simply invest too little. There are people in their forties and fifties who have very large cash positions – over $100,000 in deposit accounts. Their bank accounts are almost as large as their investment accounts. They are taking another kind of risk: the risk of having too much money on the sidelines. Putting an extra $10,000 – just to throw out a figure – into retirement savings at age 45 or 50 could make a real difference. Just using the Rule of 72 (Google this phrase if it is new to you), at an 8% annual return, that $10,000 would double in just nine years; further growth and compounding would come after that, becoming more dramatic with time.2 Having a...

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