Don't Sabotage Your Retirement to Pay for College

It's quite normal that parent's desire to pay for college expenses for their children. However, doing so often is a competing objective against becoming financially independent and funding one's retirement. Emotions aside, remember there's only one chance at retirement, but your children will still have a lifetime of opportunity whether you pay for all, part, or none of their college.

Christine Benz from Morningstar recently wrote on the topic, saying:

"But by multitasking as so many parents do--saving for college and their own retirement at the same time--they run the risk of coming up light on the retirement front with no way to make up for the shortfall, except for working longer. The old saying about this topic is dead-on: Your child can get a loan to pay for his or her college education, but no one will give you a loan to pay for retirement if it turns out you haven't saved enough. Given increasing rates of longevity, rising health-care costs, and what many expect will be only so-so returns from the stock and bond markets in the decades ahead, can anyone ever really be sure they'll have enough money on which to retire?"

Click here to read the full article: http://news.morningstar.com/articlenet/article.aspx?id=558929

If your retirement planning works out well, you can always help your children pay their loans off and do so with the benefit of hindsight rather than putting your own well-being at risk up-front.

Diversification: Disciplinarian of Disciplinarians

Disciplined diversification works when you do and even when you don't want it to. Diversification in effect forces you to sell the thing that has been doing so well in your portfolio and to buy the thing that hasn't. While this makes rational sense, it is emotionally difficult to execute. Think back to the tail end of 2008--were you selling bonds and cash to buy stocks? Most likely you weren't unless your advisor or some sort of automatic trigger did it for you. Carl Richards of www.behaviorgap.com provided a good reminder of how diversification works in a recent NY Times blog post. The diversification he discusses here is more so related to equity asset-class diversification but also touches on the three basic building blocks--equities, bonds, and cash. He doesn't discuss alternative asset classes -- an asset class that doesn't fit neatly into the three basic categories -- being used to further diversification, but that's a detailed topic for another day. ...

What Does $100 Buy You in Your Home State?

A new map released by the Tax Foundation shows exactly how far $100 would go in all 50 states. Using recently released data from the Bureau of Economic Analysis, the Tax Foundation was able to show how the varying prices of goods, housing and income taxes in each state can impact consumers’ purchasing power. Southerners and Midwesterners have a serious edge over those along the East and West Coasts. A hundred bucks goes the furthest in Mississippi, where $100 will buy you what would cost $115.74 in another state that's closer to the national average. The next low-price states are Arkansas, Missouri, and Alabama. Ohio comes in at an encouraging $112.11 Meanwhile, $100 would only be worth $84.60 in the District of Columbia, the priciest state, $85.32 in Hawaii and $86.66 in New York. http://finance.yahoo.com/news/how-much--100-is-worth-in-your-state-152310027.html Click the Map Read More

2013 Key Tax Proposals

On February 13, President Obama's Fiscal Year 2013 budget was released. Follow this link to get a full copy of the 2013 Budget . The Treasury's Green Book containing general explanations of the Administration's revenue proposals can be found here. Robert Keebler, a leading professional in the area of tax and estate planning, highlighted some of the key proposals potentially affecting taxpayers below: Extend Bush tax cuts for all but the top two brackets. The only change would be to have the 33% and 35% rates go back to their pre-2001 levels of 36% and 39.6%. Taxpayers in the top two marginal brackets would still benefit from reduced rates on the portion of their income taxed in the lower brackets. Raise the long-term capital gains rate to 20% for single taxpayers making more than $200,000 per year, $250,000 for married taxpayers filing jointly and $125,000 for married taxpayers filing separately. Tax rate on qualified dividends would revert to ordinary income t...

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