Give Me One Good Reason

admin — Mon, 16 May 2011 15:08:36 +0000

Over and over again we hear how important it is to roll over an old 401k. Less often we hear the why. Does it make a difference if you leave your money with your old employer or not? There are arguments for and against. Below are three reasons we think it makes sense to take control of those funds.

Bankruptcy – I have worked with clients who have left their employer and later found out that the company had filed bankruptcy. Even though there are laws that protect 401k assets when a firm declares bankruptcy it can still take quite a bit of work to rollover the 401k funds. The amount of time that it can take to obtain your funds can be lengthy and requires diligence and persistence.
Investment choices: If you are heavily weighted in company stock it may be akin to putting all of your eggs in one basket. Additionally, the investment choices in the plan may be limited to a select group of investments. Unless you have a financial advisor associated with your 401k plan that is providing great service and understands your risk tolerance, financial goals and objectives it may make sense to seek out an advisor to assist you in rolling over your plan and that can develop an individual investment strategy that will help you to work toward reaching your goals.
Costs – According to a recent AARP study about 80% of 401k participants do not know how much they pay for their plan. Many of the costs associated with a 401K plan are hard to determine and can negatively affect the diligent savings efforts of participants. The good news is that starting in 2011; all 401k providers will be required to disclose all fees. Managing retirement assets with a financial advisor may provide you with not only lower investment costs but lower on-going maintenance fees.

Compliance Tracking #728399

I am a Tracker, Are You?

admin — Wed, 27 Apr 2011 15:49:05 +0000

Recently I was discussing with some friends the need to track things. I track my exercise, the food I eat (trying to lose some weight), movies watched and books read. This is in addition to financial tracking. Needless to say, they think that I am a bit over the top. But if you are a tracker too, we share the comfort of knowing where you have been and where you are going. So what tools can help you with tracking?

Mileage:

In the past I have used an excel spreadsheet to track my odometer readings and mileage for business and nonprofit activities. With my IPhone, I now use a handy little app that tracks mileage using the GPS function on the phone – DayTracker. There are other apps with different options that also track mileage – Trip Cubby and Milebug. Most of these will allow you to download and email reports making documentation easier to maintain than with a spreadsheet.

Portfolio:

Bloomberg Mobile is a free app to track investments and to explore current company reports and market trends. There are also apps you can pay for to monitor specific portions of your portfolio such as Fund Watch which tracks funds and unit investment trusts. Depending on your needs, one or two apps should give you enough information for a quick update.

Budget Tracking:

For a simple way to track budget items, I like mint.com. It is not perfect and can be frustrating in some of the program’s limitations but it is easy to learn and currently free; they now have an IPhone app as well. iXpenseIT and Pocket Money are two apps that provide for more comprehensive financial tracking – they each have their own features so it is best to compare and see which fits your exact needs. Additionally, these two apps are great for expense tracking if you need to file reports or are claiming business related deductions at the end of the year.

Compliance Tracking #719627

Looking for Scholarships?

admin — Tue, 15 Mar 2011 20:40:58 +0000

The college planning process can seem overwhelming and outside of SAT preparation, college applications and campus visits, the financial piece is another layer that can cause stress for busy families. Below are some tips to keep in mind:

Set up a family calendar – many scholarship and other financial aid opportunities are based on a timely response. Use either a paper or an electronic calendar that everyone can access easily.
Access free, reputable online resources such as CollegeBoard and FastWeb that allow applicants to narrow down a search to areas of interest, academic pursuits and affiliations.
Be wary of any scholarship or service that asks you to pay a fee upfront. The whole idea behind giving scholarships is to lessen the economic burden on the family and student.
Spend some time compiling information about the student – it is always easier to remember extracurricular and academic activities when you are not under the pressure of a deadline. Some schools have their students fill out a ‘brag sheet’ listing all of their achievements. A quick Google search brings up different formats that can be adapted for your own use. Keeping a copy of this sheet for teacher recommendations also makes the process easier for the person who is doing the writing.
Connect with guidance counselors – usually they are the best resources for local scholarship opportunities.
Taking a gap year is a good choice for a young person who wants to have some time to look around and decide what field may be of interest. A way to take this time off and get some funding for school is to enroll in a program such as AmeriCorps which offers an educational grant in exchange for a year of service.

Compliance Tracking #710762

Welcome to the Tax Season

admin — Tue, 22 Feb 2011 14:09:44 +0000

First the good news, this year the IRS has announced an extension to the tax filing deadline of April 15th for individuals who itemize deductions on Form 1040 Schedule A and other qualified tax payers. To see if the extension of April 18th to file applies to your situation, check the IRS website at www.IRS.gov, call their toll-free number[1] or visit a taxpayer assistance center. Outside of the extension, another major change this year is in cost basis reporting; provisions enacted through the Emergency Economic Stabilization Act of 2008.

What is Cost Basis? Basically cost basis is how much you paid to acquire an investment. Your total cost basis takes into account any dividends and capital gains that are credited to your account. This information is critical to understanding whether you have a gain or a loss when you sell. In the past, the IRS could not accurately track whether or not any losses or gains that you reported were indeed accurate. Reporting changes start this year for any stock acquired after December 31, 2010 – a 1099B will now be required. [2]

Maintaining your own records: Even though this tax season will remain the same for cost basis reporting, ensure that you have a system to provide you with a complete record of your transactions going forward. This is particularly true if you are an active trader or transfer an account this year. Although cost basis should transfer with your account, a good practice is to ensure that information is correct.

Expanding coverage: This year the new cost basis rules will cover stock acquired. In 2012 the new rules will extend to mutual funds, most exchange-traded funds, and shares acquired through dividend reinvestment programs. Starting in 2013 the rules will extend to fixed income investments.

Finally, speak with your advisor about the new cost basis rules as it is important that you consider any tax implications when placing equity trades. For example, unless you communicate otherwise most often your shares will be sold on a First-In, First-Out basis (FIFO), meaning that the oldest shares you acquired will be sold first and used to calculate any gain or loss on the transaction. However, if you would like to choose another method, look to your advisor to help you specify the particular shares to be sold. This requires timely action as any method outside of the default FIFO must be communicated by you no later than the settlement date of your trade.

Please consult your tax advisor prior to making any decisions.

Compliance Tracking #699419

[1] http://www.irs.gov/newsroom/article/0,,id=103554,00.html

[2] http://www.irs.gov/pub/irs-pdf/f1099b.pdf

Take 10 – Tasks to Organize Your Finances

admin — Tue, 25 Jan 2011 16:56:30 +0000

With daily demands pulling each of us in a different direction, streamlining our finances oftentimes get the least amount of attention. Allocating small increments of time on a consistent basis to this task helps make organizing less overwhelming. There is a popular approach to breaking down larger tasks into more manageable pieces: The Swiss Cheese Technique. This technique takes a large task and breaks it up into smaller projects that take at most, 5-10 minutes of your time. This approach is a great way to get some momentum going while putting holes (like Swiss cheese) in larger projects. Below are ten tasks that should take no more than 10 minutes each to help get you started:

Write down your top 5 financial critical ‘to do’s’ and give them each a deadline i.e.

Rollover 401k by March 1

Check beneficiary designations by June 1

Schedule an appointment from your list of ‘to do’s’ i.e. Attorney to create or update will
Sign up for paperless/electronic billing for all of your recurring bills: cell, cable, credit card, etc.
Choose three financial folders and purge what you no longer need.
Take your most important documents (birth certificates, will, etc.) and scan them into your computer – back up this data on an external hard drive.
List all your accounts: bank, credit, brokerage, retirement and place the list in a secure location.
Consolidate like accounts: checking, brokerage, etc.
Set up payment due dates through a paper or electronic calendar and set reminders
Place three baskets near your front door and label them for incoming mail: Junk/Recycle, To Do and Shred
Have a 10 minute shredding party.

This is for informational purposes only and is not intended to provide specific advice. Please talk to a financial advisor for advice on your specific situation.

Compliance Tracking #699115

Steps to Negotiate Down Monthly Bills

admin — Tue, 18 Jan 2011 15:03:21 +0000

If you feel like you have budgeted adequately for recurring expenses and still feel surprised by monthly charges or balances there may be another option – debt negotiation. This is not the debt negotiation that is often marketed as ‘debt relief’ where firms may offer to reduce credit card, mortgage and other debt. These services are scrutinized by the Federal Trade Commission.[1] Negotiating down your bills is examining your service providers (cable, cell phone and car/home insurance) to see if they offer discounts or lowered monthly payments.

Some specific ways you can go about this are:

- Just Ask: Although it might be difficult, just calling in a request with a pleasant tone could reap some beneficial financial rewards. It generally only takes a few minutes of time; let the customer representative know that you are looking to cut costs and are exploring options.

- Act in a timely fashion – for example if you open your cell phone bill and notice that you have gone over in minutes, call immediately to see if you can either upgrade your plan to cover those minutes or if the overages can be waived.

- Be friendly – most customer service representatives are working very hard to ensure that your experience is a good one. Getting angry will immediately put them on the defensive and increase their resistance to assist you in any way. Be pleasant and take down their name and the time/date of your call. If you are successful, make sure to ask that any adjustments sent to you via email or through a paper confirmation.

- Specials or alternate plans – Call your providers to see if they have any specials or research on your own ways to lower your costs. For example with a cell phone you can see if you are covered by a corporate plan or investigate and compare whether a pre-paid plan might work better for you. For car/homeowners insurance ask if you are taking advantage of any options that may reduce your premium. For example, if you have a student driver, many companies will offer a discount for good grades combined with a safe driving record.

There are also some websites that are helpful in comparing and contrasting your current plans to help you save.

Billshrink.com – a free service that analyzes your current usage to find the best options. You can utilize BillShrink for credit cards, cell phone service and even gas at the pump.

Validas. com – a low cost approach to analyzing your phone bill and determining whether there are hidden savings. You do have to upload your bill before the analysis can take place.

Finally, myrateplan.com allows consumers to compare a variety of services including cell service and provides a side-by-side comparison.

This is for informational purposes only and is not intended to provide specific advice. Please talk to a financial advisor for advice on your specific situation.

[1] http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm

Compliance Tracking #695953

The Psychology of Budgeting

admin — Thu, 13 Jan 2011 15:35:55 +0000

One of your resolutions this year may be to create a budget to help you organize and manage your finances. How many of us have committed to finally (!) organizing all of our financial records and sticking to a budget? But why does it become a resolution each year? There are different tests available that can help identify your money personality and there is growing research that suggests our genes may even play a role in how we handle money.¹ This personality and gene interplay may suggest why “budgeting” is so difficult for some.

Some of the most common pitfalls when budgeting include trying to be perfect and failing to include a significant other in the process. The idea of having a perfect budget or spending plan is a myth and that is okay. And going it alone when there are two individuals in a household is almost impossible.

So how can the average person take all this information and adapt it to their finances? Below are a couple of budgeting approaches that you can use and modify to suit your style. After reviewing each, choose one that appeals the most to you. If a budgeting process is one that fits with your style then it is more likely that you will stick to the plan. Having a plan as a guide is better than none at all as FINRA recently released a study that found 55% of Americans report spending more than or about equal to their household income.² Try working within a budget framework for a few weeks and don’t be too hard on yourself if you slip a bit. Like with any lifestyle adjustment, it becomes easier with time.

Zero end budgeting: This type of budgeting basically results in having a zero balance at the end of the month. The ultimate goal in creating this type of budget is to take all of your income and match it to expenses so that at the end of each month you have a zero balance. This type of budget is great for someone who wants complete control over their finances and needs to know where every dollar down to the last penny is being spent. Once all expenses are allocated to income you may (hopefully) find that you have some extra money left over. This money can then be used to pay down debt, create an emergency fund or add to a retirement or college savings plan.

Goal-setting Budgeting: For those who are less rigid and want more of a guideline, a goal-setting budget may work well. With this type of budgeting begin by defining your goals for the year. For example it may be to create an emergency or a college fund. After determining financial goals, decide how much money you can reasonably set aside each month for each goal. Rather than trying to remember to send a check or schedule a payment, make reaching your goals easier with automatic contributions.

In either case, there are plenty of helpful tools to keep you on track during the year. Credit unions, banks and investment firms all have on-line access to allow you to monitor progress and plot your successes. There are also free electronic resources that allow for simple but usable tracking such as mint.com and wesabe.com.

This is for informational purposes only and is not intended to provide specific advice. Please talk to a financial advisor for advice on your specific situation.

[1]“Nature or Nurture: What Determines Investor Behavior?” http://finance.wharton.upenn.edu/~rlwctr/Cronqvist.pdf

[2] http://www.finra.org/Newsroom/NewsReleases/2010/P122538

Compliance Tracking #695676

Declutter, Donate and Deduct

admin — Thu, 06 Jan 2011 17:54:02 +0000

December is a great time for sorting through your items for donation before new gifts come in the door. However, ensure that your items are in “good used condition” as specified by the IRS. You cannot take a deduction for household goods unless they are in good used condition or better. There is an exception to this rule however in that you can take a deduction of clothing or household item that is not in good used condition or better, if you include a qualified appraisal[1]

If you are in the midst of a remodel, you can donate kitchen cabinets and other gently used household fixtures.

If you have recently moved in with a roommate, think about consolidating household items and donate what you don’t need.

Moreover, in keeping with the holiday spirit, you can donate money and stock to your favorite charity.

If you donated money for the relief of victims of the January 2010 earthquake in Haiti, you can choose to deduct certain charitable contributions of money on your 2009 return rather than your 2010 return. The IRS specifies that the donations must have been made after January 11, 2010 and before March 1, 2010. The new law was enacted after the 2009 tax forms and guides had already been printed. [2] Please check the irs.gov site for more information.

The deduction for charitable contributions generally is limited to 50% of your adjusted gross income (AGI). There are some exceptions to this rule. See IRS Publication 526 for more information.

Ensure that you always get a receipt with the value of your donation from the agency whether you drop off or have it picked up. There are some on-line guides to help you determine value including at the Salvation Army and Goodwill sites: www.salvationarmyusa.org or www.goodwill.org

Please consult your tax advisor prior to making any decisions.

[1] http://www.irs.gov/publications/p561/ar02.html
[2] http://www.irs.gov/pub/irs-pdf/p526.pdf

Required Minimum Distributions are Back Again in 2010

admin — Tue, 28 Dec 2010 16:44:15 +0000

A survey was conducted by Fidelity Investments in 2010 which found that almost one in five people 70 or older who own an IRA weren’t aware that Required Minimum Distributions are required once again in 2010 after being suspended in 2009 for account owners and beneficiaries. Congress passed legislation in December 2008 that suspended RMDs for one year to give retirement accounts impacted during the financial crisis a chance to recover. Now the rules have switched back making 2010 a confusing year for many.

What are Required Minimum Distributions (RMDs)?
Funds in an IRA cannot be kept indefinitely; eventually they must be distributed. Required Minimum Distributions (RMDs) are generally the minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ½, regardless of whether he or she is retired

RMD’s apply to almost all retirement accounts except for the ROTH IRA if the owner is still living.

For 2010:
If you’re 70 1/2 or older and you have an IRA, you must withdraw the annual minimum for 2010 by the end of December, if you haven’t done so already. For example, if you turned 70 ½ in August of 2009, you did not have to take the RMD in 2009 but are required to do so by December 31, 2010. You have a bit more flexibility if you turned 70 1/2 in 2010, you can put off taking your first RMD until April 1st of 2011. If you do choose this option, you will still be required to take an RMD for next year by December 31, 2011.

Calculating an RMD:
Generally the account balance taken at the close of the business day on December 31 is divided by a life expectancy factor the IRS publishes in three separate tables. Usually your plan administrator, trustee, custodian or financial advisor will calculate the RMD amount you must take for the year. However, the responsibility ultimately lies with the owner of the account to ensure that the RMD has been calculated and taken. RMDs must be calculated for each IRA but once you have those amounts, you can total them and take it from one IRA account.

If you do not take the RMD, take too little of an RMD or miss the deadline for a withdrawal, the amount that is not withdrawn will incur a 50% excise tax. Ensure that you plan for 2011 as distributions can be spaced over the year rather than taken in a lump sum as long as they total the minimum required amount.

Estimating your distribution in 2011 can help with financial decisions during the year and prevent the possibility of taking two distributions in one year which could potentially push you into a higher tax bracket.

Finally, the Insured Retirement Institute has a handy RMD checklist that can provide guidance in determining your RMD. It can be found at: https://www.myirionline.org/ under ‘Resources”.

Consult with your tax professional prior to making any financial decisions.

[1] http://www.fidelity.com/inside-fidelity/news-center/news-media

[2] http://www.irs.gov/retirement/article/0,,id=96989,00.html#3

[3] http://www.irs.gov/pub/irs-pdf/p590.pdf#page=59

Three Tips to Help Lower Prescription Costs

admin — Mon, 13 Dec 2010 17:35:11 +0000

A new study by Harvard, Brigham and Women’s Hospital and CVS Caremark researchers has found a direct correlation between the amount of a patient’s out-of-pocket co-pay and the likely abandonment of the prescription, with patients having a co-pay of $50 almost four times more likely to abandon a prescription at a pharmacy than those paying $10. The study also found that e-prescriptions (computer generated prescriptions that are sent directly to your pharmacy) are 65 percent more likely to be left abandoned at a retail pharmacy by patients than are hand-written prescriptions.¹ With sticker shock clearly impacting how medications are utilized by patients, how can consumers and particularly those on a fixed income, stretch their medication dollars?

Below are three tips to help lower those costs.

1. Be prepared for Medicare Enrollment: This year’s enrollment period for 2011 Medicare coverage goes from November 15 through the end of the year. However, before enrolling get a good sense of what your specific medication needs will be and how much you can afford to spend on insurance coverage. The online Medicare Plan Finder at medicare.gov is an excellent tool for helping to compare coverage options in the area in which you live.²

Also keep in mind that premiums should not be the only criteria you use when choosing a drug plan, namely because not all plans cover all drugs nor do they reimburse for them equally. Medicare provides a toll-free number: 1-800-MEDICARE (1-800-633-4227) for free assistance with this process.

2. Compare prices: Pharmacychecker.com is a leading independent resource for information on online pharmacies. The site displays drug prices, standard shipping costs, and ordering information from dozens of online pharmacies side-by-side and even ranks their reputability. In addition, you can set price alerts on items you purchase frequently. The site also categorizes whether the online pharmacy has a policy to protect personal information that is used to order prescriptions.

3. Shop Discount Pharmacies: Costco.com has a Member Prescription Program which allows members to purchase prescription medicine at a discount. One drawback is that the program is not open to anyone who has Medicare and Medicaid, is covered under a commercial health insurance policy, or has health coverage through their employer. Sam’s Club allows members and non-members to purchase prescription medications from their stores. Each Sam’s Club Pharmacy location stocks more than 300 of the most commonly prescribed medications for just $4.

Note: There is an email link embedded within this post, please visit this post to email it.

1 http://investor.cvs.com/phoenix.zhtml?c=99533&p=irol-newsArticle&id=1497114
2 https://www.medicare.gov/