May 2nd, 2008 |
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So, you may have heard that postage rates will be going up on May 12th. You may also have heard that the post office has a new little Forever Stamp that’s good for one first class letter, or what currently costs 41 cents (it will be going up to 42 cents). What this means is that you can buy a Forever Stamp now for 41 cents, use it after May 12th, and save your a penny. This begs the question, should you stockpile forever stamps and perhaps use it to fund your retirement?
Probably not. 
Historically, USPS postage rates have increased at or lower than the rate of inflation, making it a pretty poor investment. However, at those fringe periods, like right before rate hikes, it makes sense to purchase a few stamps and save yourself some cents.
I wouldn’t be saving too many of those though, just enough for several months of mailings (which can be very little if you go paperless personal finance). Put the rest in an index fund.
April 25th, 2008 |
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A Certified Financial Planner, or CFP, is someone who meets the qualifications specified by the Certified Financial Planner Board of Standards, Inc., and those qualifications are:
- Pass an Exam: They must complete the CFP Board’s certification examination.
- Years of Experience: They must have 3-5 years of financial planning-related experience.
- Adherence to Ethics: They must voluntarily ascribe to the Code of Ethics and suffer disciplinary action if they violate those rules.
- Continuing Education: They must get 30 hours of continuing education every two years in body of knowledge related to financial planning.
You can check if someone is a CFP by using the CFP Board’s searching function. If they do not appear, they simply may not be in the system. If they do appear, you can be reasonably assured they are certified. You can also use that search form to locate a CFP in your area.
Okay, after all that mumbo jumbo, you now know what it means for someone to have that CFP designation next to their name. But what does it actually mean for someone to be a CFP? A CFP has to be education in numerous financial areas, such as in estate issues, retirement, investment, tax issues, and varieties of insurance. You can turn to a CFP if you’re looking for planning advice. What insurance should you get? What retirement accounts should you consider?
Get a fee-only CFP. Some CFPs are paid a commission on certain products so they are inherently biased, even if they say they aren’t. The solution is to seek out fee-only planners, those planners that are paid by you for their time, rather than a sales commission. Fee only is the only reasonable way to guarantee that you get unbiased advice. This is not to say that commission based CFPs are biased, it’s just that you can see where the confusion lies.
March 25th, 2008 |
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If you’re like me, you’ve probably taken a look at your retirement assets and wondered if now is the time to re-balance your portfolio given all the blood-letting the stock market has done. I mean the name of the game is to buy low and sell high right? Stock market has gotten pretty low, with some recovery in recent weeks, so now should be a good time to re-balance or plow some more funds into the lower assets right?
Wrong.
Yes, I was very tempted to change things, but I stopped myself because it wasn’t part of the plan. I usually rebalance my retirement assets once a year, in the middle of the summer (my first employer’s benefits package was a July 1st to June 30th year), and make all my decisions then. Since it’s only March, to start the re-balancing early would be falling into the trap of trying to time the market.
However, sometimes you do need to be agile and make course corrections mid-year and a “once a year” analysis is simply too slow, right? Yes, I totally agree, you do need to have some agility in your plans but my retirement assets are composed entirely of mutual funds and not individual companies. If I owned individual companies, and I do in regular taxable brokerage accounts, I don’t make decisions annually, I make decisions as they come up. However, with retirement assets, assets I can’t touch for 40 years, tucked away into broader mutual funds, I say once a year is plenty.
January 14th, 2008 |
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In the next few months you’ll probably get your tax done and one of the things that might tempt you is something called a refund anticipation loan. It’s so simple, you do your taxes, the preparer looks at your return, and offers you a loan in return for a signature. There’s no waiting period, few checks (the return is practically guaranteed), and all you really have to give up is a little bit of a fee for the paperwork and you’re walking out with money.
Beware these refund loans. Be wary of them because they generally carry exorbitant interest rates and you get the funds only slightly faster than if you were to file the claim and wait. That’s right, when you file your claim, you can generally get the funds deposited into a bank account in a matter of a couple weeks. E-file today, request the amount be deposited into a bank account, and within a few weeks you will see the funds appear.
Here’s an article last year on Bankrate that discusses these loans and how bad they are for you.
January 11th, 2008 |
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If you are 65 or older, did you know that the extra standard deduction amount you get to add went up by $50 in 2007? It’s pegged to inflation so instead of an additional $1,250 on top of the standard deduction, you will be able to tack on $1,300 (for single filers). For those that are married filers, you get $1,050 instead of the $1,000 you had on 2006 returns. Enjoy the extra deduction!
December 18th, 2007 |
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Money has a great article out today in which they highlight the fact that recent stock market turmoil is opening up a great opportunity for near-retirees looking for some high yielding dividend companies. Falling stock prices are enough to make anyone a little wary of going into the market but seeing blue chip stocks fall should be welcomed by near-retirees because it allows you to bolster up your portfolio with solid stocks paying hefty dividends, dividends in the 4% range. 4% is a magic number because that’s the rule of thumb many financial planners use when estimating how much of your next egg to draw upon each year.
What’s nice about the 4% dividend is that it’ll be inflation adjusted, because it’s tied to the stock price, which is an advantage over bonds, which are fixed income. But what about the risk of a recession or a bear market? Well, in the case of financial unrest, people tend to go back to the blue chippers as a foundation and so you’ll be nicely positioned to take advantage of the influx of funds to your newly acquired companies.
Still not convinced? Here’s a hard case example:
Ned Davis Research recently crunched the numbers for Money and found that a high-yielding portfolio launched at the worst time in the past 40 years - before the 1973-74 bear market - not only would have kept your income growing at the pace of inflation but would have increased in value eightfold (assuming an initial withdrawal rate of 4.5 percent).
An S&P 500 portfolio, on the other hand, would have been used up by now. Over time, high-paying stocks also generate more income than government bonds. That’s because while bond income is fixed, dividends aren’t.
So, dividend yielding blue chippers… something to think about.
December 3rd, 2007 |
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If you give someone a gift of over $12,000 dollars a year, you are required by law to pay the tax on that gift over the gift tax amount. The gift giver is responsible, not the gift recipient, which seems to go contrary with one’s expectations.
What is a gift? A gift is anytime there is a transfer of property from one person to another. Another condition of a gift is where the giver is receiving less than the full value of the property in return, in many cases the giver is receiving nothing. What this also means is that the tax is supposed to be paid even if it’s not considered a gift.
For example, let’s say you sell your car to your son or daughter for $1. The market value of the car is worth $2,000, you’ve effectively given a gift of $1,999 to your son or daughter and if your total gift is over $12,000 that year, you owe a tax.
In addition to the annual limit, there is a lifetime gift limit of $2M and this is including anything in your estate that you may pass on. So, if you’re planning on giving any large gifts this year, remember to do so before December 31st and it’ll count for this year.
November 7th, 2007 |
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When you’re “retired,” you’re generally going to be on a pretty fixed income. You might take some odd jobs here or there to supplement your income and pass the time, you might try out paid volunteerism to put polished skills to work, but in general your income is going to be fixed. For that very reason, you want to keep your debt expenses as low as possible because it’s likely that your variable expenses, things like food, gas, etc., are going to increase as the years go on because of inflation.
So, unless you can truly afford it, looking years down the road, avoid taking on unnecessary debt because it can tap out your fixed income very quickly and force you back to working - something you likely wish to avoid when you’re officially retired.
October 9th, 2007 |
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My Retirement Blog is honored to host this week’s Festival of Frugality as the 95th edition finds its home here for the first time. Without much ado, here is the festival:
Gems of the Week
Food, Groceries, Couponing
In The Household
Everything Else
Next week the Festival of Frugality moves to FIRE Finance so submit your entries early and often!
October 4th, 2007 |
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Some banks offer special bank offers for seniors such as reduced costs, increased interest rates, and favorable fee structures that may or may not be better than traditional offers. For example, the most basic “senior account” is a simple checking account that has no monthly maintenance fee. It’s a way for banks to court the funds of seniors while being cognizant of their biggest concern, reducing costs. However, as Smart Money has noticed, it’s often not that much better than typical alternatives. Their prime example is that the senior account at U.S. Bank, Silver Elite Checking, has an interest rate that’s 0.01% better of their regular Free Checking - not that great. The real benefit comes in things like free checks, cheaper fees on deposit boxes, traveler’s checks, and other services you may find yourself using.
While Smart Money reviews a bunch of banks, I thought Bank of America’s Advantage for Seniors seemed like it had the best deal. The benefits include free checks (worth $17 per order), cashier’s checks ( worth $10 each), traveler’s checks (worth $2.50 each), as well as a free standard-size safety deposit box ($44 annually).
Source: Smart Money
