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Showing posts from 2014

How Women Are Planning Their Financial Futures

From assorted survey data, an interesting snapshot emerges. Women are taking action to approach retirement with greater confidence. Some recent, intriguing survey data indicates that women are planning their financial futures with some degree of pragmatism, but also with considerable motivation.  One of the key motivations, it seems, is receiving financial advice. Results from a new TIAA-CREF survey (and other studies) bear this out. The retirement services giant polled a random, national sample of 1,000 men and women age 18 and older for its 2014 Advice Matters Survey, and it found that 81% of women who had obtained financial advice were more likely to feel informed about retirement planning and retirement saving than women who hadn’t. Additionally, 63% of women who had received financial advice felt confident that they were saving sufficiently for retirement. 1 What kind of difference does financial advice make? A significant difference, it seems. In the big pictur

IRS Raises Retirement Plan Contribution Limits

Roth & traditional IRAs won’t get 2015 COLAs, but other plans will. A little inflation means a little adjustment . As the Consumer Price Index is up 1.7% over the last 12 months, the federal government is giving Social Security benefits a 1.7% boost for 2015 and lifting annual contribution limits on key pension plans as well. 1 401(k), 403(b), 457 & TSP annual contribution limits increase by $500. You will be able to defer up to $18,000 into these plans in 2015. The catch-up contribution limit will also rise by $500 to $6,000 next year, so if you are 50 or older in 2015 you are eligible to contribute up to $24,000 to these retirement savings vehicles. (The above adjustments do not apply to all 457 plans.) 2 SIMPLE IRAs get a similar COLA . Their base contribution and catch-up contribution limits also go up $500 for 2015. The limit for the base contribution will be $12,500 next year, and the catch-up limit rises to $3,000. 3 Limits also rise for SEP-IRAs and Solo(k)s . Small b

Adjusting to Retirement

If you have saved and invested consistently for retirement, you may find yourself ready to leave work on your terms – with abundant free time, new opportunities, and wonderful adventures ahead of you. The thing to keep in mind is that the reality of your retirement may not always correspond to your conception of retirement. There will inevitably be a degree of difference. Some new retirees are better prepared for that difference than others. They learn things after leaving work that they wished they could have learned about years earlier. So with that in mind, here are a few of the little things people tend to realize after settling into retirement. Your kids may see your retirement differently than you do. Some couples retire and figure on spending more time with kids and grandkids – they hang onto that five-bedroom home even though two people are living in it because they figure on regular family gatherings, or they move to another state to be closer to their kids. Then the

Emerging Markets: Following a Good Recipe & Using Good Ingredients

It is helpful to think of a combination of asset classes--emerging markets, U.S. or international stocks, treasury or corporate bonds, cash, etc.--as a recipe . And think of the individual funds that you own as the ingredients being used in the recipe. Both matter a great deal. And both determine the net investment results from your portfolio and how the food you eat will taste.   Emerging markets as an asset class have been a better performer than either US or international developed markets in 2014. But over the prior three years Emerging Markets had fallen out of favor and an unsophisticated investor may have not had the patience to realize the increased expected returns.   In October 2013 I wrote Emerging Markets and Kenny Rogers' "The Gambler,"     "If anything, one should consider increasing their targeted allocation to emerging markets, precisely because they have had such a bumpy ride recently. After all, price and value are inversely related

Living To 100...How Long Will You Live?

Thomas Perls MD, MPH is the founder and director of the New England Centenarian Study, the largest study of centenarians and their families in the world. Dr. Perls has constructed the "Living to 100 Life Expectancy Calculator," which is available for free. Answers to the calculator questions can be provided to obtain a helpful gauge life expectancy and health-related behaviors. The Living to 100 Life Expectancy Calculator uses the most current and carefully researched medical and scientific data in order to estimate how old you will live to be. Most people score in their late eighties... how about you? The calculator asks you 40 quick questions related to your health and family history, and takes about 10 minutes to complete. At the end, you will be asked to create an account to store your answers.   Click here to go to the calculator. My personal life expectancy per the calculator...99 years. Grandpa Kroskey turned 98 in June. Need to put some more money in the

Being a Cynic of Active Stock Picking

Active management has been the traditional way consumers invest their money. This traditional method says through research, an investor may discover a stock trading at a discount to it's true value. This 'informed investor' may then profit at the expense of the 'uninformed investor' who is willing to sell the stock below it's true value. Yet a drastic shift has occurred over the last decade with more dollars going into index or index-like strategies. Traditional investors have been disappointed with active-management results and have migrated to lower-cost, indexing strategies.   Scott Burns at Morningstar recently spoke with AQR Capital Management's founder Cliff Asness -- a well-respected academic turned money manager whose strategies are based on empirical studies.  Asness said, "I tend to be on the cynical side when it comes to stock-picking." Asness points out that as more dollars chase market inefficiencies (aka mispricings), it becomes h

Mutual Fund Performance Report Card - The Grades

As a new parent, I'm already gauging my child's development for rolling over, sitting up, speaking her first word -- 'dadas' just last week! -- and more against guidelines in the plethora of parenting books I have. This relative comparison gives my wife and I feedback as to how our little bundle of joy is doing. Later, we'll get this relative comparison and feedback from her school grades and achievement tests among other sources.   Investors however tend to be more simplistic in their feedback mechanisms. They often define success as "My account went up last month. That's great!" Or conversely, "My account went down. It was a bad month." What's missing from this is a relative comparison asking the question, "Did my account go up or down as much as it should have given how much risk I am taking?" This involves a relative comparison against a representative benchmark.   The S&P Indices Versus Active (SPIVA®) report m

Women, Longevity Risk & Retirement Saving

Will you live to be 100? If you’re a woman, your odds of becoming a centenarian are seemingly better than those of men. In the 2010 U.S. Census, over 80% of Americans aged 100 or older were women. 1   Will you eventually live alone? According to the Administration on Aging (a division of the federal government’s Department of Health & Human Services), about 47% of women aged 75 or older lived alone in 2010. If that prospect seems troubling, there is another statistic that also may: while 6.7% of men age 65 and older lived in poverty in 2010, 10.7% of women in that age demographic did. 2,3   Statistics like these carry a message: women need to pay themselves first. A phrase has emerged to describe all this: longevity risk. As so many women outlive their spouses by several years or more, a woman may need several years more worth of retirement income. So there is a need to consider income sources – and investment strategies – for the years after a spouse passes away.   

The Stock Market is Rigged?

You may have heard about the 60 Minutes interview with author Michael Lewis, a former Wall Street broker, author of "Liar's Poker" and "The Big Short," who has just come out with a new book entitled "Flash Boys." Lewis is an eloquent and astute critic of Wall Street's creative and predatory practices, and in his new book (and in the 60 Minutes interview) he offers evidence that the stock market is "rigged" by a cabal of high-frequency traders, abetted by stock exchanges and Wall Street firms. The charge is entirely true. And it is also completely irrelevant to you and anyone else who practices patient investing. Lewis is exposing a secret advantage that a surprisingly large number of professional traders, employed by large brokerage firms, are able to get when they build high-speed fiber optic cable feeds directly into the computers that match buyers and sellers of securities. Some of those traders actually have their trading computer

2014 IRA Deadlines Are Approaching

Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines.   * April 1 is the absolute deadline to take an initial IRA Required Mandatory Distribution (RMD). * April 15 is the deadline for making annual contributions to a traditional or Roth IRA. 1,2,7   Let’s discuss the contribution deadline first, and then the deadline for that first RMD (which affects only those IRA owners who turned 70½ last year).   The earlier you make your annual IRA contribution, the better. You can make a yearly Roth or traditional IRA contribution anytime between January 1 of the current year and April 15 of the next year. For example, you can make your IRA contribution for 2014 anytime from January 1, 2014-April 15, 2015.   The IRA contribution window for 2013 is January 1, 2013- April 15, 2014. 1   So you have more than 15 months to make your IRA contribution for a given year. But why wait? Savvy IRA owners pour new mone

Organizing Your Paperwork for Tax Season

How prepared are you to prepare your 1040? The earlier you compile and organize the relevant paperwork, the easier things may be for you (or the tax preparer working for you). Here are some tips to help you get ready: As a first step, look at your 2012 return. Unless your job, living situation or financial situation has changed notably since you last filed your taxes, chances are you will need the same set of forms, schedules and receipts this year as you did last year. So open that manila folder (or online vault) and make or print a list of the items that accompanied your 2012 return. You should receive the TY 2013 versions of everything you need by early February at the latest. How much documentation is needed? If you don’t freelance or own a business, your list may be short: W-2(s), 1099-INT(s), perhaps 1099-DIVs or 1099-Bs, a Form 1098 if you pay a mortgage, and maybe not much more. Independent contractors need their 1099-MISCs, and the self-employed need to compil