Are You as Dumb as Ben Bernanke?

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Posted on May 4, 2012 by jmh

“Stupid is as stupid does” is not often the description used for economics professors at Princeton; but listening to the majority of media rhetoric on where not to invest, it would appear that guilty is the verdict for Ben Bernanke. Despite being perhaps the single most influential human on earth when it comes to money, our own Helicopter Ben must be fairly dimwitted when it comes to his personal investments — or so it appears according to many pundits and “experts” in financial matters.

How could a man who earns well over $1 million annually from royalties in textbooks alone, be so ill-advised putting his own money to work? What is it that Professor Bernanke has done with his own moola that is so perplexing?

In annual reports from the central bank, the Fed Chief and its governors must report their personal investments and holdings. And would you believe that Ben Bernanke’s two largest personal investments are in fixed and variable annuities? That’s right, variable annuities (crickets chirping). It’s a fact: The most powerful financial authority owns both variable and fixed annuities as part of his retirement accounts.

GASP!? Why would Ben want to own allegedly more expensive tax-deferred vehicles inside an already tax-deferred account? Can he really be that ignorant?

Consider this: maybe it’s not all about the tax deferral benefit offered in annuities, but about the guarantees provided to retirement nest eggs. Surely, in addition to his own experience and intellect, Ben has access to extremely experienced and competent financial advisors he could bounce his investment ideas off of…

According to the FED’s annual reports, Ben owns bonds and mutual funds and other stuff; but his biggest holdings are annuities. So maybe Ben knows something the pundits and bloggers and self-proclaimed experts do not understand. Dave Ramsey is certainly not a fan of the investment product Big Ben prefers to own. Most often annuities are “perceived” to have higher cost than other types of investments and that gets the “guru’s” on radio and television to cackling. But when investing real money, It’s actually not about cost, it’s about what you earn on for your money (net, after all expenses) that matters most. Heavy hitters in the millionaire/billionaire club figured out a long time ago that it’s not what you spend, it’s what you earn; and if one cannot muster the courage to accept and manage a little risk, one is destined for personal financial Armageddon in the long run.

Annuities in general help remove the typical types of risk that scare the bejesus out of us when we invest our retirement money in IRA’s and 401k’s.

Who is truly wiser; the financial experts who write about money or the mover, shaker and policy maker? Our money is on Bernanke and other highly successful people who see the value of an institution (such as an insurance company) standing behind their investments and protecting their money from ultimate losses, whether living or dying. Who knows, maybe Ben is dumb … like a fox?

* Information and data quoted from Bloomberg: Ben Bernanke personal net worth takes a hit 7/15/11.

Apple of your Eye?

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Posted on March 20, 2012 by jmh

The cherry on top of Apple occurred today when the mega successful Apple computer company announced it will begin to pay a quarterly dividend to its shareholders. Steve Jobs and your local financial advisor would love this news and so will your budget… if your investment planner or you were wise enough to have purchased shares. If only one had a crystal ball ten years ago during a national real estate boom; declining interest rates and a volatile stock market made owning a bigger, better home the investment du jour. Poor advice looking back now. How to make a fortune 101 has not been easy for Baby Boomers.

But imagine if instead of your house, you purchased Apple stock in 2002. Can you fathom that you’d be worth $10 million today? And what if those shares were owned in your IRA or even better, ROTH IRA? Takes your breath away doesn’t it? Noted stock jock Jon Najarian looked back at various common assets purchased the past 10 years (e.g., a house), and priced them in Apple share price terms.

The typical American home cost $228,000 in 2002 (according to U.S. census data). With that money, you could have bought 18,704 shares of Apple at their price a decade ago of $12.19 a share. Today, that home is worth nearly $280,000, but that hypothetcial Apple purchase is worth $10 million!

Other examples Najarian used in his Apple exercise were on energy costs and tuition. Filling your tank for a year in 2002 cost $840 on average, (according to the U.S. Energy Information Administration). “But had you taken the bus” as Najarian put it, and purchased 68 shares of Apple ($840/$12.19) instead, you would now own $36,244 worth of the iPhone/iPad maker today… a nice $35,000 profit and enough to buy new walking shoes for life.

Paying for college for junior? Annual room and board plus tuition for a private college was $31,000 in 2002. If you’d allowed junior to pay his own way and instead bought 2,543 shares of Apple, that stock investment would now be worth $1.36 million today, according to Najarian’s calculations. Tuition now costs $39,000 on average. Now that’s an impressive amount and blew away all 529 college saving plans.

“This extreme exercise is not to show people how ‘dumb’ they were, but rather to illustrate how people put too much into their home a decade ago and that maybe they should have diversified their wealth over more asset classes,” said Najarian. “Right now we should be asking ourselves, ‘What will be the most inflationary asset of the next decade? And how much money should I put toward it.’ ”

Good Point Mr. Najarian and with the stock market and popular companies like Apple, Whole Foods and even Tiffany blowing the roof off their stock prices, you may need to consider protected growth investments such as annuities. Sure they carry slightly higher fees than unprotected wealth accumulation products; however, you do get 100% principal protection. In some variants, an annual increase or bonus up to 10% is available. Most annuities annual bonuses will range between 5-6% but even that’s not too shabby since CD’s and 10 year treasury bonds currently offer less than 2% annually.

What was “hot” yesterday will be tomorrows “dog.” And in general the stock markets have gone basically nowhere the past 10 to 12 years. Considering that short-term interest rates yield virtually zero percent, eventually they will rise and inflation will rear its head like an angry dragon. Owning long term bonds or even some “fixed annuities” may get slaughtered when that era begins. Bill Gross, the manager of the largest amount of bonds in the entire world, concurs. Seek information on index or some low cost, no-load variable annuities that offer inflation protection and hedges. If you have children you may also consider a super cool tax free hybrid called universal indexed life or if you want to take more risk for potentially more return, universal variable life could be your “quasi-lotto” winner for retirement.

Never invest prior to reading the “fine print” and seek out local professional investment or financial planners to walk you through the maze of options and choices. Your IRA and 401k or 403b may be a Baby Boomers best asset over the next 10-15 years… Know how to invest it wisely and how to invest it now.

Dumbest Investment

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Posted on February 23, 2012 by jmh

Spring like weather is here and the economy and the stock market are seemingly back on track. Just since October our USA stock market has risen 22%; and the stock market is flirting around levels not seen since May 2008. This is the first time the stock market has been roaring in a long time, and guess what?

We are going to get greedy, again. Even though we soon forget about past bad investments (Bear Stearns, General Motors, Washington Mutual and Pets.com… remember the sock puppet), fear and greed dictate most investment decisions. For many years our 401k’s have effectively been 201k’s but now we are basically “back to even” and again ready turbo charge our retirement plans. And while there are plenty of stupid investment bets we may make, the dumbest mistake is the easiest one of all to make.

Putting money inside 401k’s or other company sponsored retirement plan into Company Stock, is the Idiot’s plan for riches.

You’d think after Enron and FannieMae we would learn from horrendous past examples and heed sound financial advice… but sadly, no. Only four out of ten 401k’s offer their company’s stock as an investment option but of those plans that do, on average 1/3 of the employees equity investments are in their own companies stock. And who is there to help or guide these 401k participants, especially locally?

The majority of these employees are baby boomers nearing retirement; so why do these “boomers” retrace poor investment steps and lack financial planning? Often it’s because the big wigs in the company have tons of company stock and the workers figure if it’s good enough for the CEO, then it must be good for me too. And “owning” a piece of the franchise that employs you (ESOP), “hypothetically” is a great motivator for the worker bee. This type of “rationalization” can be financially terminal. How the wealthy officers of a company invest their money has no relationship to average Joe Employee and putting more assets into the company breaks…

Investing rule #1; diversification.

According to Vickers Stock Research, (which follows executive company stock trades), over time, the amount of stock sold by U.S. executives outweighs the amount bought by more than two to one. Do you think they know something?

Relying on your company to pay your salary and benefits such as health insurance is enough exposure in one asset for almost anyone; why invest more by purchasing their stock. One argument used by the employee is we “get to buy company’s stock at a discount.” A discount to what? Ask former employees of WorldCom, Lehman Brothers and even companies that didn’t go bankrupt like Bank of America but has lost billions in share price declines, if they would buy company stock at any price, discounted or not?

Owning equities in a long term portfolio is a great idea; but short term the risks must be mitigated not extrapolated by doubling down in your company. Imagine how much you may already depend on, and how much of your net worth is associated with your employer/company already.

Open your eyes to how much exposure you already have with your employer. Invest all you can up to any amount the company might “match” in your 401k plan (this is literally “free” money) but look to other less risky investments or strategies for the non-matched amounts. Here is where you can benefit from a local insurance agent or investment advisor to make a difference for your budget and retirement goals.

We still have in the USA, “real unemployment” rates in double digits (according to DOL) and National Debt above $15.3 trillion. With no resolution in sight for the “shadow home inventory” foreclosures… look into annuities, low cost index life insurance and other ways to protect your money when investing. New rules for IRA’s and 401k and 403b plan rollovers change often. Seek help and advice for your financial road trip… it’s totally free. Don’t be fooled; social security is an annuity and for lifetime monthly income, an annuity that has “low cost” and low expenses may be ideal for you to consider.

Not that she is the expert on such topics, but even Suzy Orman writes and expounds on the benefits of both immediate and indexed annuities. And Dave Ramsey disciples preach the benefits of having a personal budget. Knowledge and information delivered to you by a local professional advisor about safe products with lifetime income benefits and assisted care riders are answers to the questions you may have.

And for those who understand the potential of equity or “stock” ownership long term; would likely love learning what are ”variable” annuities. Many variable annuities are available with similar 100% principal protection offered by fixed or indexed annuities. It’s easy to find help, just ask around or contact us. Start a conversation with a local professional, plant your seed of “knowledge” and then wait for your retirement plan garden to bloom.

Married and Bored or Single and Lonely?

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Posted on February 9, 2012 by jmh

Which do you prefer? It’s Valentine’s time of year yet more and more people are finding themselves still single; or maybe single “again.” The holidays and the super bowl are behind us and spring is months away; so now is the time to focus on finally finding the romantic relationship of your dreams. But then the reality of the drag of dating, the time consumption, the dead beats, losers and emotional wrecks “out there” slap you in the face.

Hey we are all getting older and maturing. It’s not a simple task to find a reason to get out of your routine to go out on a date. And if your’re a Baby Boomer and the last time you were dating Cher still loved Sonny, William Shatner had a waistline, go-go boots were all the rage and you could actually hear yourself talk in a bar, you’re in for quite a ride and awakening in 2012. You can’t fix the other person but you can be the best “You” can be by following three simple steps:

The Uniform: don’t fool yourself; think of dating as an activity or even a “sport.” It takes not only time but “equipment.” Things like a nice outfit or shirt, new jeans or skirt and a new hair cut (and maybe color?). You must be ready to present the best “you” possible. And the mental resources must be ready to go as well. You know, have the high energy, bubbly personality and quick wit replies off the cuff to keep it interesting. Be willing to put the time into writing cute intriguing emails for Internet dating, etc. You need to be the type of person “you’d” want to hang out with… and you’ll need a little extra cash to be able to pay your share of the movie tickets or dinner (guys be prepared to foot 100% of the bill and gals, if you want to impress a guy, occasionally pick up the tab but neither never blow your personal budget). Personal financial or investment advice helps here as well.

Be the Ball: forget the past, it doesn’t matter what happened to you last week or last year, no one really cares. Everyone has their story of hurt and betrayal (blah, blah, blah); you need to be the fresh start person. Who cares that the “ex” got you mother’s china in the divorce, or Aunt Sally’s serving platter, get over it. Make sure you are over the past relationship(s) before you set the course for another one. Ask your friends what they think and if they believe you are ready to date. Or seek out local professional advice, or support groups for help.
Balanced Budget makes life content

Practice makes perfect: Okay so you have a life and don’t really “need” anyone else. It’s hard to remember what “you” were like pre-marriage and before divorce and how much your wants/needs/must haves were blurred and modified over the years to suit your ex. Now that you’re single, you don’t have to answer to any bell or whistle; you can lounge around all day in your underwear or spend the entire day without make up or not shaving. And good for you if you’re digging that laid back all-about-me scene. But that bird won’t fly and that dog won’t hunt in the dating game. Make certain you are prepared to give back a little and throttle back on the strident attitude of been-there-done-that routine. Cut the other person a little slack. And while you do not want to fall in love with a walking financial mess, wait a while before prying into their investment history or finding out if they have an IRA, 401k or life insurance!

You’re single, you’re a parent and most of all, you’re busy. And if you’re even a tad bit sociable, then you’ve got a full plate. But you’ll have to make time for the new person in your world. Again, be sure you’re ready for this. After all when you’re single and decide to treat yourself to a new golf club, shoes or purse, there’s no partner throwing a wet towel on your idea or to wag a disapproving finger. If you want to stay up all night watching TV and eating snacks, no one is there to nag. There’s a lot to be said for the single life, and if that’s how you’re feeling, then this may not be the right time to start dating again. Eventually you want to build for yourself a romance “annuity,” one that pays you emotional dividends for the rest of your life.

But since it’s Valentines time again, having a partner in your life can be enriching, motivating, thrilling, rewarding and downright fun. Eventually you’ll weigh the benefits of being someone’s “significant other” against those of being solo. Factor in also the benefits of a partner when it comes time for the annuity of social security and other financial aspects benefiting a “couple.” An local advisor can help you and provide best advice on this issue. When you’re not really looking is when your mate will appear; and you’ll know in your heart that it’s time to leave your “single” comfort zone.

And just so you know, you are special….

Secrets of Social Security: Real Life Changer

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Posted on January 26, 2012 by jmh

Geece and the problems with Greek austerity mandates may be a foreboding insight for the USA. Today many Seniors and Baby Boomers are planning on working much later in life due to many reasons, with “need” being the most common. The past twleve years has not been easy or kind to retirment plans; 401ks and IRAs have been decimated. Seeking local help and advice for boosting your personal budget and income is where My Money Track excels; Hope is not an investment plan. Vision without action is a dream and action without direction or vision is a waste of time; especially in planning for future income. However; using a combination of little known tricks in maximizing your social security retirement income benefit along with tax free income alternatives will net you more money now and later. What are they; the double dip and file and suspend strategy. Here’s how it may work if you’re married:

The longer one delays filing to take their own Social security benefit, the larger it will be in the future. At age 70 the amount of income will max out; thus no need to wait past this age. Assuming that you and your spouse are both at least “full retirement age,” (aka FRA) and both work but one spouse earns more. One spouse that has worked enough to earn their own social security benefit may still be allowed to choose between taking their own benefit or take instead an amount equal to half of their spouses benefit. For simplicity let’s assume that both spouses are the same age (high school sweethearts perhaps) and each of their monthly social security income benefit today at age 66 is $2,000 but by waiting until age 70, their individual benefit increases to $2,700 monthly.

The extra $700 per month by delaying is an extra $8,400 per year for them! That’s a lot of extra money but one must consider the “lost monthly” income from social security for the past four years while waiting. The Secret is you can have you cake and eat it too!

One spouse will file for social security benefits and then immediately the other spouse files for the spousal benefit. Waiting for one month, the first filer will then “suspend” their social security payments and the clock for increasing the benefit later until age 70 begins again.

Even though both spouses are still working (full or part time) an “extra” free check is now coming monthly from social security. If you spouse earns much more than the other, the higher earning spouse should be the one to file and then suspend. This is a no brainer. Even better, if for some reason this strategy doesn’t suit you, you are allowed up to 12 months to re-pay the money received and get a completely free “100% DO OVER!”

Few times in life are we given a “Free Look” or opportunity to use the systems and its rules to our advantage and have a guaranteed out to reverse our decision if our circumstances change. The key to turbo charging or catching up in your retirement plan by continuing to work into what was once the “classic” rocking chair years, and taking full advantage of the “double dip” combined with the file and suspend strategy. To figure out what your full retirement age is, go to this link at social security: http://socialsecurity.gov/pubs/ageincrease.htm and be sure to check back her on our blogs for more ways to save money, plan your investments and learn more about annuities, index annuities and life insurance.

Contact us to help you determine the most approriate time for you to begin receiving your social security retirement income benefit.

How to Avoid Burdening Your Children in Retirement

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Posted on December 6, 2010 by admin

A happy and peaceful retired life is something everyone dreams of, as we approach the end of our career. But unfortunately, only by the end of our service do we realize the importance of effective planning for the future. By then, it will be too late to do anything about it. Those who haven’t made enough money to generate a steady and regular income for their life after retirement will have no choice but to burden their children by moving in with them and seeking financial and emotional support. Neither of these choices guarantee a pleasant future in the long run. However, equipped with the proper financial knowledge and planning, you can take control of your retirement. Here some tips to keep in mind:

Do the math: Calculate the amount of money you would need to live a decent life after retirement. And while you do the math, don’t forget to consider the improvement in our life span and increase in medical expenses due to developments in modern technology. This means you will need more money to keep yourself physically fit and enjoy a longer life span. You just can’t afford to let your retirement savings stop earning for you after 10 or 20 years of retirement. So before you plan your retirement, you should have a clear idea of how much money you should save. Even if you have to put in some extra years or some extra cash into your savings, you will, of course, find it worthwhile in your later years. Don’t forget to plan for long-term care expenses: During your retired life more than 70 percent of people need long-term care plans after the age of 65.

Take care of your health: It is absolutely necessary to prepare yourself mentally and physically for a healthy retired life. This will help you stay fit and reduce your medical bills in the future. As you grow old, your body and immunity get weaker and even relatively small sicknesses can impact you much more than while you were young. You can start your retired life afresh by adopting a healthier lifestyle with proper diet and exercise and quitting some unhealthy habits like smoking and alcohol.

Develop a social network of friends and family: Being retired from service also means having more time to spend on yourself and your loved ones. Take this opportunity to develop a strong social network with your family, friends, ex-colleagues and so on. Socializing will keep you from feeling lonely and help you form strong ties with the people around you. You can be sure to have someone at your side when you need them most.

Share your retirement plans with family: Your family should know that you are retiring and it is important to share your retirement strategy with them. Be open to suggestions from your well-wishers. Let them know that you are putting in all your efforts to make sure that you lead your retirement life independently. Be frank and tell them that you don’t intent to be a burden on them in the future. This is only going to make them happy to help you if the need arises in the years to come. Keep these points in mind, plan well and live a long and happy retired life.

Investing is often confusing for baby boomers and seniors. Money management was something that wasn’t taught in school or college. Don’t feel like you’re the only “dummy.” When you need the best local financial advice or budget help available, contact My Money Track to help you get your life back on track. Your IRA or rollover is just too important of an investment to ignore. Local professional advisors are willing and able to help.

Be Happy, Live Longer

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Posted on December 28, 2010 by admin

Nearly a dozen studies show that happier people live longer. They’re also less likely to suffer heart attacks, strokes, and pain from conditions like rheumatoid arthritis. While some people may be born with sunny dispositions, happiness isn’t necessarily based on genes or luck. Psychologists now believe it’s a learned skill, almost like knitting. Here are some helpful tips to get happy, live longer, and improve your overall quality of life:

1. Smile. Research shows that the physical act of smiling can actually improve your mood and overall mental state.
2. Keep only cheerful friends. The grouches pull you down and the added stress is bad for your health.
3. Keep learning. Learn more about the computer, crafts, gardening, or whatever. Never let the mind idle. ‘An idle mind is the devil’s workshop.’ And the devil is Alzheimer’s.
4. Enjoy the simple things. Watch the sunrise, savor the taste of a well cooked meal, or just take in the silence while surrounding yourself with those you love.
5. Laugh often, long, and loud. Laugh until you gasp for breath. Laughter is contagious. Help spread joy to those around you.

6. Let the tears happen. Endure, grieve, and move on. The only person who is with us our entire lives is ourselves. Be ALIVE while you are alive.
7. Understand your finances. Money is the number one cause of stress to many individuals. Know what you have available to spend and live within your means.
8. Cherish your health. If it is good, preserve it. If it is unstable, improve it. If it is beyond what you can improve, get help.
9. Don’t take guilt trips. Take a trip to the mall, to a friend’s house, or to another country! But not to where the guilt is…
10. Make a gratitude visit. Deliver a thank-you note to someone who’s been especially kind or helpful but never properly appreciated. When you feel thankful, you get pleasure from remembering a positive life event. Plus, you’ll strengthen a relationship that may bring you future happiness.

The “Sandwich Generation” and the Changing Family Dynamic

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Posted on May 3, 2011 by admin

The “Sandwich Generation” is becoming a more commonly used term as more and more individuals begin caring for not only their aging parents, but their children as well, all the while planning for their own personal retirement. According to an April 2010 Merrill Lynch Affluent Insights Quarterly survey, more than one-third of affluent Americans financially support their children and parents while trying to maintain and build upon what they have set aside for retirement. According to the Pew Research Center, 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance. The US Census Bureau statistics indicate that the number of older Americans aged 65 or older will double by the year 2030, to over 70 million.

With the complex equation of most individuals within the sandwich generation being baby boomers, added to the intricate family dynamics, financial advisors are finding themselves advising over three generations. What is the family dynamic like? Many boomers work full time jobs while raising a family or supporting children in college, in addition to serving as the primary caregiver to one or both parents. How do these families cope with the changing dynamic? Most consider trade-offs, such as significantly cutting back on personal luxuries, making lifestyle sacrifices to support their family’s needs, and even cutting back on their own personal retirement.

So, what kind of help can advisors give to those facing the pending or already existent sandwich generation? First and foremost, ease the stress of competing demands by identifying core values and priorities to find balance in life. Always keep open lines of communication – of course it’s difficult to discuss the financial impact of diminishing health and the eventual loss of a loved one, but putting off that conversation can leave you unprepared for the consequences. Implementing a plan of affairs for aging parents can off-set the negative consequences of a life-changing event. Be sure to know where your family members keep important financial and medical documents, as well as the contact information of doctors, lawyers and advisors. Always know the type of long term care, and how much it will cost.

When it comes to financing children’s education, only 12% of the sandwich generation said they were cutting back on contributions. What’s the biggest tip for parents? Start saving early. Teach your children early on the skills necessary to embrace financial independence, budgeting, and the importance of credit and planning for retirement. You can even bring your kids with you to an advisor meeting to discuss all these great education finance tips.

I’m sure you’re thinking: but what about me? Get with an advisor and review your investment strategy, as well as home financing, asset allocation, insurance, securities, your portfolio, and your general retirement strategy in general. This way, advisors can help shift financial securities based on the family’s specific dynamic. According to the survey, 54% of the members of the sandwich generation work with an adviser, and among them, 32% wish that they had started working with one sooner. Among the remaining 46% who don’t work with an adviser, 83% think that they would benefit from such a relationship.

The True Cost of an Education

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Posted on August 9, 2011 by admin

I hear Pomp and Circumstance being played by the band; I see mortarboards being thrown in the air. I feel the excitement of my two college aged boys. Then reality smacks me dab in the face and I realize to make this happen it is going to cost about $150,000 per kid for a college education. This sum isn’t from the Ivy League Colleges and Universities.

We refuse to take out student loans have selected state universities and even enrolled in a community college for a year to avoid the “tuition scam” (more on this to follow later) perpetrated upon on youth and their parents. Sure, we would like to give our kids the best of everything but the cost have just gotten out of control and too high. But parents and students are still biting off way more than they will ever be able to chew or hope to digest.

It’s not about a cost differential of a designer purse or pair of sneakers over a generic product, it’s about a life charting detour if taken too lightly.

A college degree is a very valuable thing and of utmost importance. This is especially true today but at what cost? We have become really good consumers when it comes to almost everything else… but not so much when we think the purchase is a necessity for our kiddos. The result? Students today are graduating with literally hundreds of thousands of dollars in debt with a degree that is not very marketable in a vile economy and a drudge job market. How did this happen?

We bought into the dream that a college degree was paramount but we didn’t factor in the marketing genius most universities have deployed the past 25 years. As much money on campuses goes into stadiums, student recreational facilities and gyms that entice enrollment than money invested into the faculty or curriculums. And when our children ask for something we will at best provide it for them or at least encourage them to obtain it without taking an unemotional, detached view or assessment of the alternatives. It is TYPICAL today for a university student to graduate with the equivalent amount of debt that could have easily purchased their first home!

Then the student cannot pay the debt and the net results are horrible credit ratings and even bankruptcies of the student and often their parents. It is a perfect storm. Or better stated a disaster. Facts support that many students cannot even make the first payment on their student loan debt post graduation. The interest rates on these loans are typically very low compared to other forms of consumer debt (eg. Credit cards) and are hyped and marketed, rarely with adequate disclosure and lack of guidance or counseling. Geez, these are teenagers after all that are signing up for this debilitating debt load.

And while the hype of higher lifetime earnings can be higher for a college degree employee, it often is not enough or comes soon enough to pay off the loans required to get the degree. Sounds sort of like a scam, no? The scam part is that the cost of college and tuition has way exceeded the rate of inflation by as much as 10% per year in some areas. And the default rate on student loans last year was 7% in the first year! This does not include private student loans or those that are behind on their payments… imagining the debacle looming?

Collection calls and threatening letters make life miserable and can literally ruin and destroy ones future. Suicides have been attributed to debt overload. Why are we allowing ourselves and our children to do this? Don’t we love our children?

A single old neglected student loan of just $2,000 from 20 years ago can be as much as $30,000 today due to fees and interest. They do not just go away. Learn about Forbearance or deferment or forgiveness but seek the advice and guidance of a professional and/or a CPA as serious income tax implications can result in almost every decision when a loan default occurs. There are also government agencies that can assist with counseling and guidance. Trust me; it’s less scary to face this issue head on than to keep ignoring it.

And for those of you who’ve not had to face this decision yet for your children, congrats! Do not take the route of loans over prudent affordable college choice. Tough love today is much less tough than a foreclosure or bankruptcy or worse, in the future. What hurts your kids hurts you much worse.

Losing Even When You’re Correct 75% of the Time? The Dave Ramsey Myth…

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Posted on August 22, 2011 by admin

So we met a person who about eleven years ago, was finally at a place in her life where she had some extra money that she could invest for her retirement. She also did a ton of homework and internet research on what to buy, which got her to eventually buy into the philosophy that over the long haul, stocks and stock mutual funds outperformed almost all other places to invest your money. But with one huge caveat, it would only come true if she would use a “buy and hold” strategy. Simply put, not try to time the stock markets by buying and selling her stocks or mutual funds when she felt things were either good or bad.

Up until the last decade, this old idea of not selling investments, but only buy and add to them, was a very wise investing advice. But then things changed and the economy in general entered a different type of phase than it had been in previously. As of now (August 2011) the stock market illustrated by using the S&P 500 index has had zero capital appreciation over the last 10 years. Worse news (if there can be worse) only 75 percent of the S&P 500 benchmark’s stocks pay a dividend, down from 90 percent in the 1980s, according to Bank of America/Merrill Lynch.

Instead of the norm in the market generally rising each year, it began a tortuous sideways, whip saw type of path. Our economy the past decade is one where investments make nice returns for a year or two but then violently reverses, taking back all that was earned. Sometimes taking back even more than she had earned, causing a loss of her actual principal.

When we talked, she was so frustrated with her money that she was ready to bury it in the yard versus endure the headache and heartbreak of worrying and experiencing a loss in value of her investments. But, whether or not anyone decides to invest or save money for the future, every day the dollar will lose a little bit of its value due to inflation (the price of things we eat, consume or use goes up slightly every day).

This means that you must figure out a way to allow your money to grow but without keeping you awake and worrying about losses. The surest way to accomplish this is to understand your personal level of risk (how much you could see evaporate from your monthly statements without freaking out). And really be honest with yourself on this risk thing. Next, do not try and earn too much on your investments. Play it ultra safe for a while.

Check out this example: Dave Ramsey says you should expect to make almost 12% investing in the stock market. If you could be lucky enough to find an investment that could earn 12% every year and did so automatically 3 years in a row, but then in the fourth year lost 12%… guess how much your overall average growth per year would be? Would you guess 9% or suspect maybe half or 6%? Would you believe only about 4.5%?

Why take the risk of making potentially more money on something that is not protected, even if its earning a whopping 12%; to be lucky and accurate three out of four years (75% of the time) just to end up exactly where you would have been by accepting a lower (but protected) less risky growth or interest or crediting rate? When the economy goes back into a cycle of expansion and growth, it may be okay to take on less secure investments. But for now, life has enough challenges and distractions without creating more for yourself by investing too aggressively.

Be kind to yourself. Don’t worry too much about the future and money. What will be, will be and everything has its’ season. Now is the time to hunker down, don’t go backwards in your investments and spend less money wherever you are able. To learn more about how “investors” made money compared to an “investment” return, click on this link:

The study looks at the 20-year period that ended Dec. 31, 2009: Average equity investment return = 8.2% while Average equity investor return = 3.17%

Ramsey’s Wrong, and it Could Hurt You More than You Think – Part I

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Posted on August 29, 2011 by admin

Come on Dave, we know you are a well publicized personal financial self proclaimed guru, and your basic mantra of spend less, pay off debt, be happy is marvelous. However, it would be ideal if you stopped giving investment advice and leave that to those other self proclaimed guru’s. Why should Dave stop offering specific financial investment advice? Because it is very unlikely that anyone now or in the foreseeable future will earn almost 12% annually in the stock market. Yet this is the return the Ramsey method and his website promote.

One size rarely fits all in dealing with personal investment advice. For example, the old school, 1980 -2000 philosophy of “buy and hold” hasn’t worked in the past eleven years and won’t work again until a Teutonic shift in the economy, national debt level and consumer confidence are all corrected.

What works in one type of economy (cycle) often doesn’t work in a different type of cycle. Using history is a great teacher because it can repeat itself. In fact, history and the general stock markets are repeating a cycle the nation went through between 1965 and 1982. It took seventeen years for the buy and hold method to break even back then.

Granted over a very long time the general idea of owning stock in great companies that pay dividends is ideal. But the first rule of getting out of debt and moving forward is NEVER GO BACKWARDS financially. And the risk of doing exactly that today is too great, even with companies that pay a sweet, relatively fat dividend.

Don’t be a fool! Anyone who implies, or worse (in Ramsey’s case on his website) that you should expect to earn 12% on average every year on your stock market investments are terribly misleading you. It is a fact that if you invested in the stock market back in 1926 and were still invested today, then yes Virginia, you would have earned an average of nearly 12% each year (including dividends reinvested).

But we are not in the 1920’s and it is a very different world now in the investment markets. The most recent 20-year period is vastly different than the previous 20 years before that. Nobody can tell you a great mix for your investments without a very involved and detailed look into many facets of your finances. And possibly the most important thing to know about “you” when charting your money plan is not financially related at all – it is how you deal with money, its rewards and setbacks, emotionally. Generally, it is emotions and not cerebral activity controlling most investment decisions.

People tend to buy and sell investments when it feels good and thus typically do so at precisely the wrong time.

What’s your next step? Ask your friends – people who seem to be happy and content in their life – how they manage their money. Seek out a professional you can relate to and see yourself working with on your own personal plan. Forget labels, certifications, degrees and pompous education credentials. That entire minutia is meaningless if you cannot communicate and trust completely in the advisor you select. Seek experience, someone who has survived crashes and financial tumult. Look for a personality fit as well as open, solid communication skills.

In the end, it’s your money and you get to decide how you want to manage it.

Suze Orman is Wrong too, but about What?

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Posted on September 29, 2011 by admin

A few days ago ABC national news asked the infamous Suze Orman, (another self-proclaimed financial guru) whether a home owner who owes more than 20% over what their home is currently worth should just pack their stuff and walk away (basically telling the bank to shove it). What do you guess Madam Orman answered? Suze said take a hike – walk away from your underwater mortgage. But is that ethical or morally correct advice?

How can that be sound personal financial planning?

The world and especially Europe seemingly coming apart at the seams proclaims a new era and philosophy in personal budgeting and financial advice. Apparently (and according to an ABC News study), almost 12 million Americans are upside-down or underwater on their mortgages being valued at more than the homes they hold as collateral. And while billions of dollars were earmarked for assistance for mortgage modifications and mortgage renegotiations, only a small fraction of those funds have been allocated or lent out by the banks.

What will happen when homeowners begin learning that some of their neighbors aren’t paying and in most cases, haven’t paid their mortgage payments for months and in some places, years? The real estate and mortgage industry’s house of cards may just come crashing down. You can’t fault Peter for not paying on his upside-down underwater home mortgage if his neighbor Paul isn’t paying.

The process of home mortgage refinancing or loan modification is daunting, horrible, cumbersome, confusing, embarrassing and overall broken. The number of homeowners who barely hanging on but are still paying their mortgage payments along with those home owners that have not made payments but the bank hasn’t yet posted for foreclosure are the “shadow inventory” that is becoming a huge concern for law makers and Bankers alike. When there is an oversupply of anything, common sense dictates that the price will decline to get rid of excess inventory.

Over the past five years, home prices have fallen between 25% – 50% all across the country, and one in four homes is worth less than the mortgage on them! Plus, getting a loan or mortgage to buy a home is reportedly tricky and difficult for all except the Kardashians these days. So what does taking a hike from your mortgage mean to you and your credit rating? Certainly not a good thing for you credit wise but it gets frustrating to watch the big fish get federally funded financial “do over’s” while the tiny minnow consumer home owner personally suffers the humiliation and the financial Armageddon like set back.

Fact is that it’s much cheaper to rent than own a home these days than to own your home and pay a mortgage. Property taxes and cost of repairs and materials are at all time highs. If you’re in the ‘undecided but need to figure it out’ group, consider that you should at least go through the motions of working out a deal with your mortgage bank. And if you can’t see how or why you can make ends meet without a “bail out” or loan modification, here’s the first steps:

Call your bank or mortgage company and tell them your plight and ask for their loan modification package. Also, tell them that you will not be able to make any more payments on your loan until something can be worked out with them. (Note: unfortunately lenders seldom if ever begin to negotiate with you until you are way past due on your payments. So be prepared to not make payments to your mortgage company but as a safety net, make payments to an escrow type account to indicate “good faith” on your part later in case the bank plays hardball)

Send a certified letter to your bank stating what was said in item #1, and reference the time and date of your phone call made to them previously. (Keep those saved payments in your quasi escrow account as your cash reserve to use for rent deposit and possibly needing to pay for several months rent up front if you do vacate your home)

Contact a realtor in your area and ask them if they would list your home pending a short sale scenario. There are lots of realtors that actually specialize in this process and will work directly with your bank. (This is important too, even if the current market value is thousands below what you owe on your mortgage, it shows good faith on your part to work out of this bad situation)

Contact a professional debt advice source or consumer credit counseling service. (This is where www.mymoneytrack.com or similar service will assist you in getting your ducks in a row financially; once you default on your mortgage, it is likely that your credit cards will be severely limited or cancelled)

Forewarned, this will crater your credit score and rating by hundreds of points, and you’ll likely not be able to get reasonably affordable credit for up to 5 years. Chances are that if you’ve maxed out your credit cards and have loans on everything such as cars, boats and motorcycles your likelihood of getting more new credit is nil in this market anyway. But with savvy personal financial planning and use of protected assets such as IRA’s, insurance, retirement plans such as 401k’s and annuities you may be able to come out ahead in the long run. You must plan ahead and not just decide one day to pack it in and leave.

The bank took a risk and was compensated for their risk in the form of the interest they charged and you paid. Business deals go awry all the time – don’t beat yourself up too much over it. Major corporations run by Ivy League MBA graduates have needed US Government financial assistance.

Marriage is about Love but Divorce is about Money

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Posted on October 6, 2011 by admin

His wife met his girlfriend, so she filed for divorce. He apologized, they reconciled and wife took him back on condition that her husband put half their money in her name solely. He promised he would. Two years later and the promise is still unfulfilled. Worse still, is that the wife supported him while he earned his degree and licenses to practice and now she finds herself with three grown children and left out in the cold, at least financially.

But now, some states consider those licenses as perks earned during the marriage as marital assets and common property, which you are entitled to a portion. Regardless, love hurts. More than half of all marriages will end in divorce. Sad but true, and yet no one wants to spend their life alone. When the I do’s become the I don’ts, (or I didn’t and I won’t), it’s time to prepare yourself financially and brace for impact. Lacking a budget or retirement game plan going into the deal stinks. When leaving the marriage one must have a plan and personal budget and execute it faithfully (even if nothing else was faithful in your marriage).

Many successful men (and women) are controlling “A” types, assertive and do not like being asked a bunch of questions about “his” business or “our” money. This strong personality is what helped achieve their success but now it’s an obstacle you need to circumvent. No need to even try and butt heads or play legal hard ball – it typically won’t work out for either party. Playing nice and non-confrontational will be your best bet, until you get the decree signed.

You can search the internet for free software and a budget checklist for divorce. There are budget spreadsheet programs for looming divorces. Maybe you’ll reconcile but you still need to prep yourself in case the gig doesn’t work out and he cheats again later. Here are the big items or the must “do’s” before you take the first big step and separate.

1. Repair your automobile and make home repairs (if you intend to stay in the home), and buy necessary clothes for yourself and your children. This will begin your divorce process with these expenses already paid, rather than arguing with your spouse about who should pay them later. It seems that judges usually enforce the status quo, so establish a precedent now for what you will want to continue after the divorce: go back to school, get braces for the kids, begin medical treatments, etc.

2. You’re going to want a mailing address so that your soon-to-be ex cannot get confidential mail addressed to you out of your home mailbox. Open a post office box and use that to provide a stable mailing address as your life changes. And while you’re at it, start making copies of anything that looks like a statement for any account: credit cards, bank and savings accounts, investment and brokerage accounts, tax information, mortgage or loan statements and even frequent flyer airline miles or bonus points on credit cards that may have cash back or rewards accumulated. Even vacation and sick pay, season tickets, club memberships, timeshares and prepaid insurance all are assets that have value and should be split. Don’t delay gathering financial information, even if you are not sure if you want to divorce. Learning about your finances will make you a better partner if the two of you stay together, and will help you get the best settlement possible if you don’t.

3. Most women seem to focus on keeping the house and although you may be able to afford the mortgage, the other expenses of upkeep and maintenance usually surprise you and will likely exceed the amount you originally budget. Be aware of dirty little tricks the ex may pull such as turning off the utilities if he/she moves out of the home. Call the electric, gas, water and sewer, phone, internet and cable providers, burglar alarm monitoring service (also change the password code on the key pad and the “safe” word code with the company) and get all of these transferred into your name solely.

Do not fret and worry as much of the family laws on things such as child support are pretty much cut and dry and won’t leave much room for arguing over in the long run. Try to keep an open mind and have the goal of getting the process done and over with ASAP. The longer it drags on, it won’t improve your odds of a better deal and it just costs much more in legal fees and stress to you and your family. For help with these or other topics on divorce and budgets, please call or contact www.mymoneytrack.com. Please consult an attorney for specific help as My Money Track is not a legal service provider and does not offer legal advice.

You are not alone…

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Posted on October 21, 2011 by admin

Some of us Baby Boomers fondly remember the TV show of our youth: “Lost in Space.” It was another variation of “Gilligan’s Island,” with a lost or stranded theme which made for great entertaining television. Boomers are infinitely familiar with self improvement, introspection, wondering, wandering and years spent or “lost” in the process.
But enough is enough already.

At an age and time in life when most boomers thought we’d be slowing our pace professionally and transitioning to playing with grandkids, just the opposite has and is occurring.

There is consistently more month than money. Split families, layoffs, corporate downsizing, divorces… just to name a few. Result? Doubled expenses coupled with lower wages and outrageously higher costs. Many Boomers and Gen-Xer’s have not made personal financial planning and expense budgeting a paramount necessity; IRA’s and 401k’s seemed like a luxury instead.
The world both seniors and boomers grew up in; one where it was customary to anticipate our income and wealth to generally rise every year, has somewhat evaporated into the smoke and mirrors of the derivatives created by investment bankers and Wall Street. If the NASDAQ Composite Index (which is an index of over 5,000 stocks used to gauge the general price direction of the overall stock market) were to literally double in value from where it closed recently (10/3/11), the Index would still be 5% lower than it was 11 ½ years ago. Generally speaking, no one has made any real money investing the past ten years.

It gets a little worse. Think about this: those living on a fixed income the past twenty years (1990 – 2010) have suffered a whopping 39% loss in purchasing power of their money. In other words, if your income stream has not risen by nearly 50% over the past two decades, your lifestyle is dramatically “smaller” than back in the 1980’s.

And now that boomers are in their fifties and sixties, there is not as much time, energy, opportunities or resources to tilt this listing financial ship. No financial spreadsheet or software program in the universe can solve this dilemma. You may need to seek professional help to guide, advise and most of all to create and reassure that you have answers for a protected income stream you cannot outlive.
This is the New Lost Decade Boomers are most familiar and lamenting. Lack of real growth in wages, earnings or appreciation of assets has effectively set back expectations and realistic retirement dates by 15 years or more. Some Boomers in professional, non-physically demanding careers, plan to basically never officially retire. And how could they with the looming threat of hyper inflation literally around the corner? There are solutions and personal adviceavailable.

When you need the best local financial advice or budget help available, contact My Money Track to help you get your life back on track. Your IRA or rollover is just too important of an investment to ignore. Local professional advisors are willing and able to help.
Now is the time to pick up the telephone and focus on finding solutions for your financial plan, IRA’s, 401(k)’s and any retirement plan or account. Long term Interest rates are at sixty-year lows and in some cases, short term interest rates are literally at zero percent. Hypothetically, rates can’t go negative; ergo this is a unique time of insight as we can almost be 100% assured interest rates will eventually rise. Knowledge such as this may present money making opportunities for those who know what to do.

What you don’t know about Divorce

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Posted on October 13, 2011 by admin

I don’t have all of your answers; I’m just taking my chances as I see them. Someone get me home, every day I feel a little more alone. I see the looks on their faces and I don’t feel the same… And it’s getting old. Trying to do what I’ve been told, I see it all in front of me now; Waiting on someone to feel the same, waiting for someone who can talk straight and it’s getting late… Let me Out, Let Me Out.

Isn’t it strange how lyrics to a song can often perfectly describe a situation gone awry. Nobody said it would be easy. Divorce sucks, plain and simple. Especially if you have kids. Actually, it really sucks for the kids, but good news: kids are super resilient. The fact is that more kids today are in divorced or blended families. It’s becoming more of the norm than the exception, and that fact sucks too.

Life is hard, and no one can make you happy, other than yourself. There are others to consider besides yourself. But when you’ve concluded that there is no other path for you, you need to get out. Having your personal budget in place financially is a semi-no-brainer; enumerating the cost of living single, figuring out how much to spend or save is just a math problem. We can help you set up your personal budget spreadsheet and teach you how to track and live within your means. But allowing for the emotional cost is much more difficult when transitioning to a single income and living alone or living without spousal support.

And here are a few things about the cost of Divorce you won’t learn or believe until you take the plunge and begin your freedom journey:

Joined Forever. As a parent you will ALWAYS have interaction with your ex spouse. No matter how much you believe you will be totally free from that jerk, you will cross paths with them eternally and their new significant others and their bonus kids. And you best learn how to deal with this otherwise you will completely stress out your kids as they will hate the icy confrontations. Learn to fake or feign friendliness.
Unintended Consequences. Arguing cost more than money; it cost your sanity and worse, your trust not only in others but in yourself. You will become disenchanted with everything for a while. You will not feel comfortable making decisions due to fear of negative outcomes.
Spoiled Kids. Since you have your children every other weekend, both parents will do something extra special to make those weekends fun. Thus, children of divorce get indulged with special weekends every weekend. Also, summer trips are doubled, Christmas or Hanukkah and birthday presents doubled and yep, even allowances seem to get doubled for the children. But most of all, the kids will always have an escape route and will certainly use it to perfection, unless you communicate constantly with the “ex.” (see item #1 above)
Friendships End. It is a Noah’s world out there – everybody is paired up. At first, your married buddies and friends will be so supportive, but that won’t last long. You will not be “set up” as much as you think. And your married friends won’t dig their spouse hanging out with the “free single person” much. They’ll be a little jealous of your new freedom and as hard as you try, the drama of the split will be a novelty at first but it will fade very quickly. And your old friends will not want the guilt, hassle or confrontation of figuring out “which one” to include in social events; ergo you’re both out.
Welcome to Therapy. Therapy not only for you but for your children, and that’s not cheap. And neither your lawyer nor your friends (soon to be former friends, see item #2) are therapists, and both of them will ultimately cost you way more than professional help. As hard as you may try, try even harder to not discuss anything with anybody (other than your paid professional therapist or help group) about your divorce, ex and kid issues. Remember, divorce sucks, no one else wants to hear about it for more than a very brief time and whatever you say, may and will be “used against you” in social situations for years to come.
Crazy Singles. It may seem exciting to fantasize about being free and single at least every other weekend but it’s nutso out there… literally crazy. You’ll go through the nightlife and cool evenings out and meet other “really super cool” divorced people, but it’s get old fast. You’ll miss those random “boring” Tuesday nights of just going home to your spouse and kiddo’s and the comfort of a home, simple dinner and schedule. And those super cool new friends will disappear as suddenly as they appeared when they meet a mate. Note: the first serious relationship post-divorce rarely ever works out.
Imagination Lost. You’ll have to focus very hard to not become jaded and cynical. In the end, imagine a happier future for yourself. It will happen. But it is all up to you.

When you need the best local financial advice or budget help available, contact My Money Track to help you get your life back on track. Your IRA or rollover is just too important of an investment to ignore. Local professional advisors are willing and able to help. Stay positive, get into support groups with other folks going through transitions, divorce or loss. Divorce is similar to a death in the family. Often it may seem like the death of the family, but it’s not. Eventually you will be happier and it will have been worth the pain and effort. Just be prepared and stay strong. We are here to help.

Readjust, Reevaluate and Rejuvenate…

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Posted on December 2, 2011 by admin

The top person and head of the World’s largest single amount of bonds said this week; if you are lucky enough to make 5% on your money for the foreseeable future, then you are likely to be counted as one of the fortunate few. Wow, this comes as quite a shock since it seems that forever we’ve been led and inclined to count on double digit long term returns on our savings money.

Even Dave Ramsey and his throng of followers still believe his website, touting 11% or better forecast for investments. And Dave isn’t a money manager nor licensed to be such, while Bill Gross, the head and fearless leader of PIMCO investment (and the head of more bonds than any other human on the planet), has the motivation and credibility to offer a much rosier outlook. But he doesn’t…

With Europe now hitting the banking crisis we dealt with in the USA back in 2008, it seems that many and mini more financial markets will tumble like dominoes.

The US dollar has become the tallest midget or the cleanest dirty shirt as a perceived safe haven for those wanting to invest or park money until things improve. And surely the banks know this and offer virtually nothing in the form of interest on money in your bank and checking accounts. But today it’s much better to play defense and win by not losing; or staying even and not going backwards in your savings and investment accounts.

Investing is often confusing for baby boomers and seniors. Money management was something that wasn’t taught in school or college. Don’t feel like you’re the only “dummy.”

But until our Nation gets out from under the burgeoning humongous debt now topping $15 trillion, there isn’t much optimism on the horizon for baby boomers or generation X. Readjust your lifestyle now before it’ too late and reevaluate what you need and buy. And there’s no time like the present to begin educating our children to a healthy, less heavy footprint financially. Lead them by your example financially. Be your children’s financial hero and role model.

Burying your resources or money in a coffee can in the backyard or under your mattress is not being a good master or steward either. You do not have to become an expert yourself. Seek out advice and local help on places to stash your cash. With the New Year around the corner, it’s time to get serious about setting up your personal or family budget; and sticking to it. Whether you may need an IRA, add more to your 401K or 403B or start your own retirement plan, there’s no reason to go it all alone.

Learn all you can about simple but elegantly sophisticated ways to employ life insurance to provide a tax free retirement income stream.

Remember that everything goes in a cycle and has a season. In this holiday season be mindful of this and also be thankful for that which you do have. It takes the tough times in life to help make us more appreciate the easier times when they return. Don’t fret about it but instead be relaxed, prepared and content knowing that you and your family will be okay.

Is this simple but costly mistake lurking in your IRA?

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Posted on January 13, 2012 by jmh

They were married for 31 years and managed to raise and educate four children through college. He retired from his first career early due to heart disease and then began a second one as an accountant. Years later she also retired and was ready to enjoy life with her husband, as a homemaker. Unfortunately, he died unexpectedly while doing the job he really loved; suffering a massive heart attack literally at his desk while working with clients.

She was devastated and had the most difficult time coping with this sudden tragedy. Luckily, they had put away some money over time but most of it was acquired through IRA’s (also called Individual Retirement Accounts) established years ago. And their IRA’s had actually grown nicely. One of the great things about IRA’s is that they can easily be transferred to family members without going through a timely and expensive probate process when someone dies. Simply naming a beneficiary and contingent beneficiaries will allow the heirs in your family to legally receive the money saved when another family member passes away.

But this couple never named a beneficiary for their IRA’s. They just assumed that each other would inherit the deceased’s money. The reality of this costly mistake hit home. Unless the spouse or child is named as the beneficiary, the money must go through the probate court. Thus, his IRA’s cannot simply be rolled over into hers. The result? Income taxes are now due on the entire amount instead of being able to defer paying them until much later. And those taxes due now on the entire IRA, will cut dramatically into what she had hoped to receive to help provide income for her grandchildren and her own living expenses.

Investing is often confusing for baby boomers and seniors. Money management was something that wasn’t taught in school or college. Don’t feel like you’re the only “dummy.”

This often happens when parents forget to update their IRA beneficiaries and Wills. Money that could now be inherited with no current taxes due is being snared in the probate process. Parents or grandparents whose bank and IRA accounts still carrying the beneficiary designation of “per stirpes” or left to “the estate” of the deceased will cause headaches and potentially cost hundreds or thousands of dollars unnecessarily. Big mistake!

Few parents would want their children to suffer due to the unnecessary early payment of income taxes on their hard earned savings. Even worse, there are often cases where after a divorce, beneficiary designations are forgotten about… when death occurs; money may actually go to the “ex” and their new spouse instead of the children of the deceased!

And the worse nightmare awaits those who do not have a Will at all. Even if you believe that you do not have much to leave to your children, the State (not your children) will be assigned control over what you do have, unless you have a Will. The solution; talk to you parents and grandparents about who they have named as beneficiaries on their IRA’s, annuities, and bank accounts that are transferable at death (TOD). Ask if they have a current Will and have it reviewed by an attorney. And for divorced or single parents, check who you’ve named as beneficiaries for your money. It’s a simple precaution that will save your heirs major headaches.

Money and Couples

Posted on March 26, 2012 by jmh

In the era of Suzy Orman it’s hard to imagine; but not long ago there was basically no investing education or information tailored for women. It was fifteen years ago that The Women’s Investment Guide was published and at the time, it was the only such book in existence.

Back then, Oppenheimer had just completed a survey on the “difference between male and female investment behavior,” and guess what? Since then, little has changed between the Venusians and Martians. Baby Boomers nearing retirment are are looking for anwers with their personal budget.

As it turns out, men and women both want the same thing… the difference is in how the genders “go about” achieving their desired results. And while this blog may be labeled as “sexist” by some readers, it is what it is… despite what Gloria Steinem may think.

Summing it up; today as it was back then, men are risk takers and women are not. An investment strategy that lacks protection or “air bag” features will not pass muster with most females. Women often control the household finances and are the family’s CFO. And since generally women outlive men, females end up having to deal with all things “financial.” The “last man standing” is most often a woman when dealing with family finances. But as a “couple,” there are vast differences in investment “style.”

Newest data just released by the Spectrum Group from Illinois confirms once again that one out of three men consider themselves to be “Aggressive” in their investment nature compared to just half as many females. Conversely, 23% of women consider themselves to be “Conservative” investors versus just 16% of men. Also, 50% more men than women report they “plan to become more aggressive” in the current market environment. Similarly, men are much more “confident” with their investment prowess than women. Possibly due to general lack of investment confidence, women then are much more likely to use the advice and help of a financial professional than are men. Even more interesting is that very few (1%) of women rely on their friends or family for financial advice. Men are much more likely to refer or defer to their friends for financial information. The local wise advisor will gear their investment spiel to include the female.

Sadly, many males in the insurance and investment industry ignore the woman’s perspective in the proposal for the family wealth plan. Providing a reliable, stable and predictable income stream for the spouse and the children (who are both likely to outlive the husband) is what women want. Low cost Variable, fixed and indexed annuties may provide the income stream needed in retirmenet. Seek local advice on how an IRA or 401k rollover can help accomplish these money goals.

And really, when you think about it; that’s exactly what men want too. Men just seem to take a bit longer figuring that out for ourselves. Communicate openly with your spouse and commit to work through any differences in family finances. For many couples, even low cost life insurance could provide retirement solutions for the future. The more things change, the more they stay the same. Live long and prosper.

Elvis and Social Security

Posted on March 1, 2012 by jmh

Well, it’s one for the money, Two for the show, Three to get ready, Now go, cat, go. But don’t you step on my blue suede shoes.

If Baby Boomers felt it’s been tough financially on your parents and grandparents the past few years, it was nothing compared to the drought following the Great Depression in 1934. More than half of all seniors back then lived in poverty and often went hungry. Our great grand parents had no annuities, little life insurance and few if any truly local financial experts to offer advice or help. In 1935, our Government came to their rescue and adopted social security. In the beginning, social security was a single lump sum payment instead of the lifetime monthly check today. The first ever recipient of social security worked a single day and paid in one nickel; retired the next day and got back $.17 cents!

What people need is a steady, reliable monthly check they cannot outlive. We typically invest and grow our money so that in the future when Baby Boomers are seniors, our money when generate a stream of income; rather from interest or from an annuity. Pensions filled this need for our parents but few companies offer these expensive type of benefit plans any longer. Gen X likely has no recollection of pensions.

The first person to receive lifetime monthly payments from Social Security, was Ida Mae Fuller on 1/31/1940 for her 65^th birthday. Ida Mae had paid into Social Security a total of $24.75 and her first check from Social Security was $22.54… and she lived until age 100. During her lifetime, she collected $22,888.92; that was a pretty good annuity investment for her!

Even Elvis Presley had a social security account. According to Social Security last year, people naming their babies “Elvis” dropped off the top ten most popular names list, thus ending a reign that began in 1955. Today social security is in a precarious position. Without changes immediately, it will not be able to pay out the benefits promised to Baby Boomers or Gen X. It’s not a political problem but a math problem. In 1935 when Social Security began taking F.I.C.A. with-holdings from our paycheck, the average life expectancy for a male was age 60 and age 64 for a female. Yet Social security payments didn’t begin until age 65. Today life expectancies are nearer age 83, yet Social Security begins at age 67 at the very latest. Today, Life Insurance Illustrations are ran up to age 120! (and low cost, cash value, whole life insurance may the best kept secret ever for tax free retirement income)

In addition to Baby Boomers living longer; the work force is changing. In the 1940’s there were 42 “workers” for each “retiree.” During Elvis’s generation of the 1950’s, the ratio of workers had dropped to 16-to-1 and as of 2010, there are less than 3 workers per retiree recipient.

Obviously our friends in Washington are going to be looking to increase F.I.C.A. income taxes (in case you’re wondering, FICA = Friends I Cannot Afford). Making the income tax laws work to your full advantage is very important. The benefits of your having a income tax deferred IRA or 401k or 403b are simply obvious and numerous. Don’t forget about old 401k or 403b plans you may have left behind at a previous place of work or employment. It’s simple and smart to do a “rollover” of your old 401k or 403b into a less expensive, low cost self directed IRA.

If you are uncertain about how and IRA or other retirement plans work, seek a local financial or money expert and get their advice. Tons of good financial planner and investment advisors are in Dallas, for example. Even better is the totally income tax free ROTH IRA. But special and unique rules apply to these investment gems.

Uncertainty creates unique opportunities for you to inform and educate yourself and family about tax advantaged solutions for retirement planning. Lifetime Monthly Income is more desired by Baby Boomers than wealth accumulation. Having an institution such as a bank or an insurance company standing in the breach between financial success and failure is paramount.

Get started today with you and your family’s journey to financial independence and retirement bliss. Get help local help and advice on the financial plan that is pitch perfect for you. Even Elvis would have been proud. Thank you, thank you very much….

Death of the Stretch – IRA

Posted on February 14, 2012 by jmh

What does a highway have to do with your IRA and retirement planning? Please so it isn’t so Joe; but if law makers get their way the super powered IRA called the “Stretch IRA” is doomed. In the latest highway and transportation funding bill, language is buried deep within that would kill the stretch IRA for most non-spouse inheritors.

Translation: the ability to select an option to delay taxes on inheriting your parents IRA or even the ability to “disclaim” the inheritance and pass it down the line to kids and grandkids is severely in jeopardy. If you’re forgotten exactly what the Stretch is or how it works, here is a very brief refresher:

Typically when the owner of an IRA dies, the spouse will hopefully inherit the IRA as a named beneficiary (read previous blog about the horrors of naming the estate as beneficiary of your IRA). And as such, the spouse can either rollover the entire IRA into their own IRA and if much younger than the dead spouse, can push back paying the taxes for many more years. It is also extremely wise to name contingent beneficiaries even if the primary beneficiary is likely to want to inherit the IRA. Naming contingent beneficiaries is just a smart thing to do.

The stretch is so valuable an option because when the children or grandchildren are able to inherit the IRA, their age and current life expectancy will push back paying the taxes for a crazy amount of time. But this is about to all change; unless you contact your Washington delegate and give them a piece of your mind; before they take a piece of your future net worth.

Under the new proposal (you may find the actual law here) and learn that unless the deceased IRA is converted fully to a ROTH, no more stretch, Armstrong. Thus, if your parents or grandparents left an IRA to you, the entire amount of the IRA would have to be received within five years of the death and 100% of the income taxes will be due and payable. This really stinks. Currently most IRA’s are taxed when money is taken out of the IRA wrapper and at age 70 ½ the owner is forced to remove money and thus forced to pay taxes. Pushing back the requirement to take money out of the IRA wrapper is the key to having your money explode to the upside due to the phenomenal power of compounding interest.

No good thing ever last forever and this is one that is slated to end unless the new law is struck down. For more ideas on your IRA or 401k and rollovers, or help, advice and tips for your retirment and local financial planning, please contact My Money Track.

Does Gold Make My Butt Look Big?

Posted on January 19, 2012 by jmh

Gag me with a spoon, bite me, barf me out. Yep, those were the most popular or cool vernacular in 1980. Lots of color in Fashion and big hair along with window pane jeans too. You know what else was super popular in 1980? The video game Pac Man. It was invented in Japan but called Puck Man there (referring to their slang word for “munching” which is what the little hungry video guy did to dots on the screen) but decided to convert to avert potential association with similar “sounding” four letter word(s).

Pac Man was instantly and insanely popular with people of all ages (people even played the video game in Disco’s). Those who could get to level five or six before being consumed by the villains were impressive. As crazy popular as Pac Man was, it took nineteen years for it to be mastered and all 255 levels completed by a 33 year old male (go figure) in a game that took six hours of continuous play!

Simultaneously in 1980, Gold was (as in precious metal) was mania style popular as well. History repeats itself and last year Gold touched an all time high price on 8/22/11, hitting $1,889 per ounce. However, compared to its lofty price in 1980 of $850, that’s “cheap.” Factoring in “inflation,” prices back in 1980 would make Gold’s’ price then equivalent in today’s dollars of $2,472. So while Gold may be gaining more popularity in these nerve racking economic times, it still hasn’t kept up with the basic level of inflation. Think about the cost of the “basics” in 1980; Gallon of Milk = $1.60, Postage Stamp = $.15, gallon of gasoline = $1.30, movie ticket = $3.00, Disneyland Park Pass = $7.50.

Today in 2012, a One Day Pass to Disneyland is $90.53, gallon of milk or gasoline cost nearly $4 bucks, and a ticket to see a 3D Movie in Dallas, Tx will set you back $15. And we needn’t get too depressed over price increases; ergo I’ll avoid mentioning the cost comparisons of education (tuition) healthcare and prescriptions. So while Gold has increased from its price in 1980, its really only doubled compared to its price today. Yet, the cost of food, energy, education, healthcare and entertainment have all increased thrice fold or more since “Valley Girls,” Michael J. Fox and shoulder pads were popular.

Saving and budgeting for retirement income (especially tax free income) then must include protection from eroding purchasing power. Why doesn’t a precious metal such as Gold make a great path to future income? Well, Strike #1; Gold really hasn’t done a great job in this arena and Strike #2; it’s not truly very liquid. And Strike #3; recently buying or selling Gold is on the Feds radar screen for potential money laundering abuses… which is an automatic introduction to your local IRS auditor/agent if their suspicion is triggered.

The solution for “liquid,” reliable and dependable cash flow always seem to bring us back to equities or equity index based investments. Using annuities or other vehicles that pay a monthly stream of income (such as Social Security or a pension; both of these are types or examples of an annuity) is the key or secret to maximizes income in the future for retirement planning.

All that glitters surely is not gold. Timeless security of one’s money is just as popular now as it was in 1980. And be certain not to overlook the importance of tax advantaged or income tax deferred ways to save and invest in such type investments. Learn all that you can about IRA’s and ROTH IRA’s along with alternative ways to have income tax free retirement income. Tread carefully and keep it simple for yourself and seek the help of a CPA and local investment advisor. Waka waka waka…. GAME OVER.

For those of you who are too young to recall the Pacman craze, below is a video of exactly how the mega hit appeared in bars, restaurants and video halls in malls all across the United States…

Valentine’s Idea; Love or Money?

Posted on January 17, 2012 by jmh

Love always begins well but can turn choppy in an instant. With Valentine’s Day less than one month away, does Money help or hurt a relationship? The real key is not how much money one has; instead it’s how much debt.

Geece and the problems with Greek austerity mandates may be a foreboding insight for the USA; and it illustrates how debt is a squall storm that will turn the happiest of couples into miserable, raging people instead of the happy go-lucky smooth sailing “perfect pair.” Romance may temporarily financially blind most, but once they get serious about their relationship, they will open their eyes and assess how well they are going to be able to sail their lives together. Many relationships sink prematurely just because of the financial problems of one or both of the partners. Most people are reluctant to accept the debts of their partners for many reasons. And this very knowledge makes the other person hide their actual financial situation from their loved ones for fear of being “found out” and breaking up.

The culprit in ruining relationships is not debt alone. Trust and a breach of trust is the deal breaker. The strength of your trust is more important than the money you owe creditors. Don’t lie about your financial situation or how much debt or taxes you owe. You needn’t talk about it on your first few dates either. But communication has a major role to play in a healthy relationship. Sooner rather than later, be clear and transparent to one another. Nothing should stop you from disclosing something you want your life partner to know.

Once you live together or get married, there is not much you can hide from each other. One day or the other, he or she will know the truth. So being truthful to each other will save you from an embarrassing moment later in your life. Use the following four secrets to help ensure your successful long term romance:

1. Reviewing Credit Scores and Reports: If you are living together or going steady with someone for quite some time and all of a sudden you come to know that your partner owes a huge sum of money, it could harm your relationship. Although you will not be legally responsible for debts like credit card debt or student’s loans as they are considered the responsibility of that person alone; it still distracts from the joy of romance. Get an updated credit report and a list of assets for both of you and review these together. They are totally free and easy to obtain.

2. Knowing what you owe and own: At the same time, it’s good to know how much the other person owes so that you can avoid unpleasant surprises when you try to get a joint loan for a home or a car. You should know what your partner owns. Sit down and make a simple inventory list of assets and liabilities. This will give you both a clear idea of your present financial circumstances.

3. Get A Budget and Assign Expenses: Talking about finance may not look very romantic while your relationship is in a budding stage. But if both of you have your own sources of income, it’s better to come to an understanding on how you want to spend your earnings way before you take the marriage plunge. In addition to your incomes and earnings you should also discuss sharing bills and expenses. You can either divide equally all the possible expenditure you will have to deal with in future when you start living together or decide on who is going to pay the bills and who will handle the savings for the common necessities like children’s education, down payment for a home, vacations and so on.

4. Get a CPA and Compare income tax returns: Income tax is not just a fine imposed for reckless spending. You two will be filing joint tax returns after you’re married. A CPA can analyze your previous individual tax returns and help create a strategy to minimize your future income taxes. Setting up an IRA or ROTH IRA and fully utilizing 401k or 403b plans available to you through your employer are almost always very wise choices. You never want to get behind with the IRS. And learn about tax free income alternatives.

It also greatly helps if you two can openly discuss your dreams and aspirations, financial ambitions and personal ideas and plans to achieve them. If you’re both unsure, seek out the help of professional financial planners or budget coaches. Search the internet for resources on self help books and support groups. Ask you friends and relatives who they use to help them with their financial planning. It’s usually best to get a local “fee based” professional; as they will tend to be unbiased and not pushy to sell you anything. Then schedule a reoccurring meeting with them; quarterly or even monthly in the beginning will help you get started and stay on track.

Love is blind but you don’t have to be. XOXO

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