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Renting vs. Buying: Which is Cheaper for You?

  • May 14, 2015/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Personal Finance

The decision to rent or buy a home depends on where you live, and also on your mortgage rate, tax bracket, how long you’ll stay put—and whether you’ll need to pay homeowners’ association fees. ‘Cause in some markets, this added cost makes renting cheaper than buying.

Click for an interactive graphic.

rent-vs-buy

Source: Trulia


How to be a 401(k) Millionaire

  • May 7, 2015/
  • Posted By : admin/
  • 0 comments /
  • Under : 401(k), Behavior, Best Practices

5thingsFidelity Investments, one of the largest retirement account administrators in the U.S., published a study that analyzed the characteristics of their 401(k) account  holders who have amassed more than $1 million but make less than $150,000.

Here are 5 key lessons:

#1 — Start saving early
Beyond the obvious fact that the longer you save, the more you’ll potentially accumulate, contributing steadily over 30 to 40 years is especially beneficial in a tax-advantaged workplace retirement savings plan.

#2 — Contribute a minimum of 10% to 15%
Contributing 10% to 15% might sound like a lot, but that amount is meant to include contributions from your employer—such as your company match or profit sharing.

#3 — Meet your employer match
You’ve probably heard it many times, but it bears repeating that failing to contribute up to the full amount of a company match is like turning down “free” money.

#4 — Consider mutual funds that invest in stocks
Historical data suggests that a diversified portfolio of stocks can deliver higher returns than bonds or other fixed income investments over time.

#5 — Don’t cash out when changing jobs
Taking a distribution from your 401(k) account when you change jobs is hardly ever a good idea. It could trigger significant tax liability and early withdrawal penalties. When you take money out of your 401(k), you lose the opportunity for it to grow.

Source: Fidelity


Why the big broker behind your financial adviser might be working against you

  • April 2, 2015/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Fiduciary, Scams & Schemes

fingers-crossed

A report released last week by the Public Investors Arbitration Bar Association (PIABA) pointed out nine big brokerages for advertising as if they are fiduciaries, but denying that standard and renouncing any requirement to avoid conflicted advice in private arbitration hearings.

Those nine brokerages are: Merrill Lynch, Fidelity Investments, Ameriprise, Wells Fargo, Morgan Stanley, Allstate, UBS, Berthel Fisher, and Charles Schwab.

Fiduciaries have a legal requirement to put client interests ahead of all others.

The report includes samples of misleading advertising from major brokerage firms AND the firms’ legal repudiations when their brokers are sued for losses caused by misconduct.

Allstate
Their advertisements say: “Your’e in good hands.”
Their lawyers say: “Allstate Financial Services owed no fiduciary duty to Claimants, and, therefore, no such duty was breached.”

UBS
Their advertisements say: “Until my client knows she comes first. Until I understand what drives her. And what slows her down. Until I know what makes her leap out of bed in the morning. And what keeps her awake at night. Until she understands that I’m always thinking about her investment. (Even if she isn’t.) Not at the office. But at the opera. At a barbecue. In a traffic jam. Until her ambitions feel like my ambitions. Until then. We will not rest. UBS.”
Their lawyers say: “[A] broker does not owe a fiduciary duty to his customer in a non-discretionary account.”

Merrill Lynch
Their advertisements say: “It’s time for a financial strategy that puts your needs and priorities front and center.”
Their lawyers say: “Respondents did not stand in a fiduciary relationship with Claimants.”

Morgan Stanley
Their advertisements say: “Having an intimate knowledge of blue chips and small caps is important. But even more important is an intimate knowledge of you and your goals. Get connected to a Morgan Stanley Financial Advisor and get a more personalized plan for achieving success.”
Their lawyers say: “Claimant’s claim seeks to impose ‘fiduciary’ obligations and duties on Respondents that only arise in very limited circumstances that do not exist here, i.e. where Respondents are given discretionary trading authority over Claimant’s accounts.”

The report succinctly summarizes this disparity:
“On one hand, the firms boast that they offer unconflicted, trustworthy advice while, on the other hand, those same firms argue they are little more than salesmen with a single duty: to execute trades in customers’ accounts.”

Sources:
MarketWatch
USN


Simple, Bedrock Rules on Personal Finance

  • February 12, 2015/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices

rulesFinancial columnist Brett Arends’ final piece for the Wall Street Journal is absolutely foundational!

Ignore economic and financial forecasts. Their purpose is to keep forecasters employed. Most professional economists were blindsided in 2008 by the biggest financial collapse in 70 years—and by the stock market’s recovery.

Ignore “expert” stock picks. The stocks that Wall Street experts like most generally fare no better than those they like least—or stocks picked at random.

Keep it simple. Complicated financial strategies and investments are mostly designed to enrich managers and salesmen.

Buy individual stocks only as a gamble. Never buy fashionable investments.

Put most of your long-term portfolio into equities. While equities are volatile, they generally produce the best long-term returns—typically about 4% to 5% a year above inflation. But remember to hang on when they plummet.

Invest globally, not just in the U.S. Foreign stock markets, in the aggregate, are no riskier than U.S. markets and offer terrific diversification.

Buy Treasurys, too: In addition to stocks, own some long-term Treasury bonds and some Treasury inflation-protected securities. These are likely to hold their value, or even go up, when stocks crash.

Save early, save often. Time and patience are the investor’s best friends.

Use those free shelters. Contribute as much as possible to your company’s 401(k) plan or equivalent (such as 403(b) or 457), and at least enough to get the company match. If you can, contribute to individual retirement accounts for yourself, and a nonworking spouse, as well.

Plan for a long life. A third of your adult life could come after you’re 65. Try to pay off your mortgage, and save at least 10 times your annual salary, by the time you retire. Delay taking Social Security for as long as you can up to the age of 70, to maximize each monthly check.

Beware of buying your employer’s stock. Your job there is probably financial exposure enough.

Protect your nest egg. Don’t drain your retirement savings to pay for your child’s college education. Likewise, don’t empty your 401(k) or IRAs to start a business. You will be taxed and penalized on the withdrawals even if you lose the money.

Teach your children about money. Teach them early and often. No one else will, and they will have to make their own way.


Don’t Drop the Ball…on your New Year’s financial resolutions

  • February 5, 2015/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Uncategorised

balldropIt’s early February and “crunch time” for those of us trying to keep our New Year’s resolutions.

If you made a financial resolution to ring in 2015 then you’re not alone! 31% of Americans set financial objectives this year.  There are powerful reasons to make and keep such resolutions:

  • For those who made a resolution in 2014, 74% say they succeeded in getting at least halfway to their goal
  • 51% of people who made a financial resolution at the start of 2014 feel that they are now in a better financial situation
  • 42% of those surveyed say sticking to financial resolution is easier than sticking to other popular resolutions
  • For those who made a resolution for 2014, 29% say there were completely successful in reaching their goal
  • 64% say being encouraged by the progress made is the #1 motivator to stick with financial resolutions

Mandi Woodruff posted the interesting chart below on the leading New Year’s financial resolutions for the past few years. Encouragingly, “develop a plan to reach longer-term goals” is a popular choice, increasing to 14 percent. This is a more than twofold increase since 2011, when it was at a single-digit low of 6 percent.

Need help keeping and tracking your resolutions? Contact us!

Don’t Drop the Ball on Your 2015 Financial Resolutions

 

Savings-Money


Investing Priorities

  • January 15, 2015/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Uncategorised

keep-calm-and-set-your-prioritiesThe general rule of thumb for investing priorities is:

  1. Invest in your company 401(k) plan up to the match
  2. Pay off short-term, non-tax-deductible debt (e.g., credit card, car loan)
  3. Establish an emergency fund; 6-12 months of living expenses is a good guidepost
  4. Put the maximum allowable amount in a Roth IRA (if eligible)
  5. Put the maximum allowable amount in your company 401(k)
  6. Invest the remainder in taxable accounts
  7. Pay down tax-deductible debt (e.g., home mortgage)

 

Source: Vanguard


Top 10 Mistakes Made with Beneficiary Designations

  • December 4, 2014/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Retirement

beneficiary form#1 — Not Naming a Beneficiary
By not naming a beneficiary you have most likely guaranteed that the asset will go through probate upon your death.

#2 — Not Designating Contingent Beneficiaries
If your primary beneficiary predeceases or dies at the same time as you, you’re subject to the same consequences as #1

#3 — Failing to Keep Beneficiary Designations Up-to-Date
If you get divorced, it’s essential you immediately review and update all beneficiary designations.

#4 — Naming Minors as Direct Beneficiaries
Trusts are often established to delay the time a survivor receives an asset until they are old enough to make good money decisions.  However, if you designate a minor child as an account’s beneficiary and there’s also a testamentary trust, the designation trumps the trust and the child will receive the assets immediately.

#5 — Naming Special Needs Individuals as Direct Beneficiaries
Naming a “special needs” individual as the direct beneficiary could unintentionally disqualify that individual from receiving his or her valuable governmental benefits.

#6 — Naming Financially Irresponsible Beneficiaries
Often it’s better to create a lifetime “spendthrift trust” to hold the inheritance for the benefit of the individual for his or her lifetime while protecting the assets from creditors.

#7 — Naming Direct Beneficiaries on All Assets Other than Real Estate
Very often real estate will need to go through probate even if there’s a will in place.  This process can take a year or longer during which the estate is responsible for paying for maintenance, taxes, etc.  It’s generally advisable to allow your cash accounts and/or life insurance proceeds to go through probate so the estate will have sufficient funds to support the real estate during probate.

#8 — Naming Multiple Beneficiaries on a Transfer on Death Deed
Avoid doing because all beneficiaries must agree on the realtor, sale price, and maintenance costs until the property is sold.  Getting that type of agreement is very difficult.

#9 — Naming a Child as Co-Owner of a Deposit or Investment Account
Aging parents will sometimes add a trusted adult child as the co-owner of his or her bank account.  Avoid this because it can create complicated issues around gifting, creditor issues,  and final expenses.

#10 — Naming One Child as the Sole Beneficiary of a Life Insurance Policy or Deposit Account
A parent with multiple adult children should avoid doing this because it can create a situation very similar to #9.

Source: AAII


Higher Income Earners Got Better Investing Advice

  • October 27, 2014/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Seeking Prudent Advice

selling-outThe Wall Street Journal reported this week that only the top 10% of income-earning households were able to hold onto their stock portfolios and ride the big rally over the past few years.  As a consequence, the wealth gap increased as the bottom 90% had no skin in the game as the market turned positive.

According to the Wall Street Journal:

The Fed’s Survey of Consumer Finances shows that among the bottom 90% of households by wealth, families bailed out of the stock market between 2007 and 2010—the central bank’s study is conducted every three years—and between 2010 and 2013. The total share with stockholdings declined by 4.4 percentage points. That’s the equivalent of 5.4 million households selling stocks, even as the market rebounded. Only households in the top 10% have been increasingly likely to own stocks.
This is strong evidence that the top 10% benefited from the power of having financial advisors while the bottom 90% went largely without.  Wealthy investors get better advice and are more likely to endure the pain of holding onto their stocks through down markets.

Chasing Past Performance is Expensive

  • September 18, 2014/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Mutual Funds, Performance, Seeking Prudent Advice

vanguard-chasingA new study demonstrates that chasing the hot mutual fund is an inferior investing strategy compared to good, old-fashioned buy and hold.

Vanguard analyzed a decade of data ending December 31, 2013 across nine asset classes.  In every case the investor would have been significantly better off just sticking with the index.  On average the indexes generated 50% higher returns than the performance-chasing strategy!

Buy and hold may not be perfect, but it can be a lot better than flitting from mutual fund to mutual fund.

 


Credit Card Comparison Sites are NOT unbiased

  • August 28, 2014/
  • Posted By : admin/
  • 0 comments /
  • Under : Best Practices, Personal Finance

cardsIf you google “credit card comparison” you’ll get a long list of review websites.  These sites purportedly provide an objective, unbiased analysis for consumers looking for a good credit card.   But if you dig into the fine print, you’ll discovered that very often lenders pay to advertise on those sites!  If fact, credit card providers take a heavy hand in dictating how their cards show up on these sites.

These six websites’ credit card comparison tools show only cards from lenders that pay to advertise:

  • Credit.com
  • CreditDonkey.com
  • CreditSeasame.com
  • FindTheBest.com
  • Mint.com
  • MyRatePlan.com

Many others show mostly advertiser cards and those credit cards receive preferential treatment.

Usually, the card-comparison sites get paid only if consumers start the card application process on the site and the lender approves them for a card.

Buyer (or credit card carrier) be ware!

Source: WSJ


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