My firm LPL Financial is changing its policies on 403b accounts. This change is in accordance with the new IRS regulations on 403b plans. Whether a client of LPL Financial or not, your 403b may fall under the same policy. You may want to double check with your employer or 403b provider to see how this affects you. [.....]
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To remain financially responsible, everyone must pay bills on a regular basis. These bills include your house payment, Dish Network with the HD package, water bill, Sirius satellite radio and few of the other essentials out there. Unfortunately, many people do not follow the same concept was it comes to investing.
The harsh reality these people may discover is that a steady saving and investing plan is sometimes necessary to help pursue such financial goals as paying for a wedding or new car, buying a house, and funding retirement. Everybody as their own opinion on the right way to generate wealth. One approach that is often seen consistently is called dollar cost averaging (DCA).
Please keep in mind that systematic investing does not ensure consistent market gains. Dollar cost averaging is a strategy that involves continuous investment in securities regardless of fluctuating price levels of such securities, and the investor should consider their financial ability to continue purchasing through periods of low price levels. [.....]
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Q: My dad always preached about keeping a high credit score. Could you explain what criteria are used to calculate credit scores so I can know what I need to do to keep mine high?
A: Five factors are used. The two that are weighted heaviest are your payment history (35%) and outstanding debt (30%). If you make prompt payments and keep your credit card balances down, you have control of 65% of your score. [.....]
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Hopefully, my article title doesn’t start a gender battle of my blog. Hear me out first. On average, women work fewer years and earn less than men, but they also tend to live longer.1 Based on these studies, it makes planning for retirement that much more important for women.
Women Don’t Invest Differently…
Unfortunately, some negative stereotypes still exist about a woman’s ability to manage money, which may cause some women to feel they shouldn’t make their own investment choices. Some leave the decision making to their husbands, which can result in their being ill-equipped to handle their finances if they outlive their spouses.
Despite the stereotypes, studies show that the majority of married women actively participate or take the leading role in managing family finances. Moreover, women outnumber men in participation in investment clubs across America. I was able to visit my first investment club last week and was pleasantly surprised on how the women were current on the market’s happenings. [.....]
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Should I use my in-state 529 College Savings Plan or out of state?
This is quite a common question I get when dealing with a client’s 529 college savings plan for their child. The first thing to keep in mind, is that your child does not have to go to an in state college if you use your state 529 plan. That’s a common misconception and should be noted. For example, my son is actually participating in the state of Virginia’s plan (I’m in Illinois), but he could go to school in Indiana if he so chooses (and he gets a scholarship).
In-State 529 Plans
For in-state 529 plans, the hosting state will usually offer the residents of that state a special incentive, such as reduction of state taxable income for deposits. This may be enough incentive to take advantage of the state plan. To find out the actual specific enticements of your state, you can go to FINAID.org, collegesavings.org, or savingsforcollege.com to find out. [.....]
Read this article →Are you currently contributing to your 403(b) plan at your employer? Have you recently received a letter from your employer in regards to the changing regulations that are occurring in the New Year for 403(b) providers? Did you receive this letter and are now even more confused in regards to your 403(b) going forward? If this is the case for you, don’t worry, you’re not alone. Due to recent change to 403(b) plans facing new regulations, employers are currently scrambling to review their 403(b) options and have until the end of the 2007 calendar year to make these choices.
403b Changes Are Coming
Currently as it stands, the current provider that you are using to defer portions of your salary into your 403(b) may not be available come the New Year. Here recently I had a teacher that was utilizing AIG Valic for her 403(b) provider for the last 20 years. Currently that insurance carrier has come under scrutiny amongst the recent market bailout, and the client no longer feels comfortable keeping her investments with them. Do you blame her? Trying to find a solution for her to transfer out the money from her current provider to a new one was a daunting one.
Transferring a 403b? Not like It Used to be
The way it worked in the past was if you wanted to switch 403b providers, you would just fill out the forms and initiate a 90-24 transfer. It was almost simple as doing a 401k rollover. Unfortunately, today that was not the case. First, I started with the current providers that were approved through the school district (each school district has their own providers that they have allowed into the system). Of those, I only found a few that would even accept transfers. Many of the others were getting out of the 403b business.
Confused yet? I was
This is where it got really confusing. To transfer to the new company, they either had to be on the approved list or have an information sharing agreement signed. What made things even more difficult is that the school district still had not made a decision on what direction they were going for the new year, so they had little help in offering what their employee could do. Upon several phone calls and many conflicting answers, we finally were able to make transfer complete.
5 Steps to Transfer Your 403b
If you are in the current situation with your 403b provider and are looking to transfer out follow these steps:
- Contact your school district head office and get a list of the current 403b providers.
- Contact those providers and see if they will accept 90-24 transfers.
- Double check with the school district that they will be using that provider going forward
- Fill out paperwork properly (Double check this because one mistake will delay the transfer for weeks)
- Make a copy of the paperwork for your records.
Good Luck! You will need it.
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Are you a retiree or soon to be retiree and are you concerned about the rising costs of medical care? If you’re not, you should be. When meeting with clients that are either in retirement or approaching retirement, one of the most unexciting things to talk about is the rising cost of medical care. But for obvious reasons, this is a discussion that must be brought up; otherwise we will not have planned for what could potentially be the demise of our retirement portfolio.
Health Care Costs During Working Years
In your working years, the cost of health care is usually an afterthought. If you’ve got a good employer with decent insurance, routine visits to the doctor are taken care of just by paying simple co-pay. In fact, when either my wife or I go to the doctor, we are only required to pay a $15 co-pay for what is called a wellness visit. But upon retirement, things change. [.....]
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Is it time to go green in your office? On average Americans produce 4.5 pounds of waste per-person per-day in the year 2000, for an annual total of 232 million tons of municipal solid waste according to a report done by the Environmental Protection Agency in 2000. Since then that number has greatly increased. Are you contributing to this? If so, what are some things that you can do to give back to Mother Earth? Businesses are just as guilty as homeowners at contributing to this tonnage of waste. Here are 10 things that your office can do to go green and help give back:
1. Use compact florescent light bulbs.
Fluorescent bulbs can increase your lighting efficiency & is one way to decrease your energy bills. Despite an initial higher cost, florescent light bulbs use less electricity and last longer.
2. Recycle all of your paper.
You don’t recycling paper makes a difference? Back in the late 90′s when recycling became popular, there have been 64 million tons of waste that has been deposited into our landfills. How much paper does your office go through a day? You can make a difference.
3. Print and copy on both sides of paper.
How easy is this? How many times do we print report, directions, to do list, etc. on just one side of paper? Think how many trees we would save by utilizing the back side of the paper. [.....]
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This is another guest post from Joe Plemon from Plemon Financial Coaching. Joe is the Money Columnist for The Southern Illinoisan.
Q: We are expecting our first child in six months and are wondering if we can afford for my wife to quit work and be a stay at home mom. Can you help us think through this decision?
A: You are wise to be considering the financial ramifications of this change. Failure to do so could create huge debt and huge problems for you. Here’s what you need to do:
1. Prepare a Working Budget
The first thing you will need to do is prepare a working budget with life as it is today. Then, subtract her salary to see if you can continue your current lifestyle on your salary alone. If you are like most couples, you won’t be able to. However, don’t despair. Once you know how much your negative shortfall is, you will also know exactly what you need to do to make it on one salary. Here are some tips: [.....]
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Starting in 2009, retirees will get a well deserved raise in their Social Security Benefits Older Americans are slated to receive a 5.8% increase on their Social Security benefits starting in the next year. According to AARP, this will be the large hike of those benefits in over 26 years.
Highest Raise in over 26 years
At 5.8 percent, the 2009 cost of living adjustment is the highest since 1982. The reason for this, AARP says, is rising inflation. On a more positive note, the standard Medicare premium for 2009 will remain unchanged from $96.40. Premiums will rise only for single people earning more than $85,000 annually, or for couples earning more than $170,000.
Is Social Security Raise Enough?
The raise couldn’t have come at a better time as retirees have seen their retirement nest eggs cracked in the past year. Many feel that that the raise has come too late. In a study by the Senior Citizens League, individuals 65 and over have lost 51 percent of their buying power since 2000. Hopefully, with the decrease in oil prices, that should help costs at the pump.
About 50 million Americans collect Social Security benefits. This year marks the first year baby boomers will collect on those benefits. Currently, the average monthly payment for retirees is $1,090. In January it will rise to $1,153.
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Over the weekend while attending my town’s Friday night football game, I struck up a conversation with an acquaintance of mine, and we started talking about the market. The fellow I was talking about was a believer in the market, and knew that the current crisis that we are in would eventually pass, and the market would continue to strive as it usually does. What he found most peculiar was with some of the sediments of his fellow co-workers, who were participating in the 401k. His co-worker’s belief was that with the market being as bad as they were, they were going to no longer defer to their 401k, and refrain from taking advantage of the pre-tax contributions into their retirement plan. They were giving up free money! He was stunned by his co-worker’s remarks, and as equally as I, and compared that to a conversation that I had, with some other workers from another local employer. It prompted me to write this blog in regards in to things you should not do when it comes to your 401k.
1. Do not stop contributing to your 401k no matter what.
Just because the markets are down does not mean you should not contribute. In fact if there was a time ever to contribute, this would be the time. The simplest reasons is that right now despite the market’s turmoils, currently the market is at a discount, and what that means is that there are a lot of great companies that exist out there, that are currently “on sale”. This is a time to buy stocks, at a cheap price in hopes to benefit from the appreciation in later years. This strategy can also be called dollar cost averaging, which means as long as you are contributing on a consistent or periodic basis, you’ll take advantage of buying shares at a lower price in down markets, and compare that to buying shares at a higher price in up markets, which should then all balance out for a dollar cost average.
If the market has you completely terrified, then consider changing all future contributions to short or intermediate bonds. At least that way you’re money is making a little interest while the market tries to figure itself out.
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IRA Recharacterization Rules
As the stock market continues its roller coaster of 2009, many are seeking for positive news. While I’m sure that there are many good buys out there, one thing that is certain are that we can look to benefit from tax savings. How, you ask? Well, in down times, one thing that investors can look forward to is to take advantage of things such as tax loss harvesting in taxable investment accounts, which involves selling depreciated holdings to take advantage of losses that can offset other income. Not only in taxable accounts, but we may also be able to take advantage of retirement accounts as well. This is what’s called IRA Recharacterization. Some of the issues can be complex; but with a little bit of information, we can try to make sense and explain the rules.
The Roth IRA Conversion
As you may or may not know, Roth and traditional IRAs are retirement vehicles that allow you to shelter income from taxes. In a Roth IRA, withdrawals can be tax-free and as an investor, you are not required to take distributions at the age of 70 ½ as you would with a traditional IRA. The trade-off, of course, is that with the Roth IRA there is no tax deduction like you would get with a traditional IRA or a 401(k).
In a market as such, some investors may have done what’s called a conversion where they have converted their traditional IRA to a Roth IRA. This could be advantageous for some that are looking to take advantage of the tax-free withdrawals in the Roth IRA. The one drawback by converting is that when you do convert from a Roth IRA to a traditional IRA, the entire amount is treated as ordinary income, which means we will have to claim that amount on your income taxes for the year and pay the appropriate income tax. For those that had converted for 2007, the value that was converted then, if invested in the stock market, most likely is worth less now. As an example, if you had $20,000 in your traditional IRA that you converted last year that value may be worth only $15,000 today. [.....]
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