Category Archives: IRA
Retiring? Better Have $240K for Health Care
By Evann Gastaldo, Newser Staff
Retiring this year? You and your significant other will need $ 240,000 for health care expenses, according to Fidelity Investments’ latest annual projection.
That’s up 4% from last year’s $ 230,000 estimate, which is a typical — and actually fairly modest — increase,
BusinessWeek reports. Since 2002′s $ 160,000 estimate, the annual figure has increased an average of 6% per year.
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Treating Children Equally in Estate Planning Is a Mistake
NEW YORK (TheStreet) — The most common refrain I hear when assisting clients with estate planning is that they want to treat their children equally. It’s a parent’s instinctual, default position. However, it can be a flawed position to lead from. In some cases, you might need to treat your children differently when it comes to gifting and estate planning. Notice I said differently but not unequally.
So what are some examples of treating your adult children differently:
Not naming all of your children as successor executors
Gifting the annual gift exclusion of $ 13,000 outright to some children while putting it in trust for another child
Leaving one child’s inheritance outright while leaving another child’s inheritance in trust
Thinking of your children as equals does not mean you shouldn’t treat them differently in estate planning.
In the first example, naming all your children as co-executors may seem like the right thing to do. However, I recommend selecting the child who is most capable and trust worthy of managing the responsibilities of the estate. Naming multiple co-executors is a recipe for disaster with your adult children behaving like school children. The goal should be to name the person most able to handle your estate affairs expeditiously and effectively. In some families that may mean naming a third party such as a trusted family friend, relative, or professional to be your executor.
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10 Worst-Off State Pension Funds
BOSTON (TheStreet) — Pension reform is a political football that has increasingly pitted state officials against state and municipal workers relying on retirement benefits.
“The confluence of the severe recession and the collapse of the housing bubble dramatically slashed tax revenues,” says a recent study by the Federal Reserve Banks of Cleveland and Atlanta. “The toll has been particularly heavy on public pensions, whose troubles with chronic underfunding predate the financial crisis. By one estimate, the nation’s 126 largest public pensions were underfunded by at least $ 800 billion in 2010. By another, 54% of the country’s state and local plans will have exhausted their funds as early as 2034. It now seems inevitable that sacrifices will be required from current employees, employers, and in some cases, retirees.”
How bad is the funding gap? The study calls it “a matter of debate,” but according to the funding-status measure prescribed by the Government Accounting Standards Board, the nation’s largest 126 pension plans were underfunded by around $ 800 billion in 2010, while critics of GASB’s accounting methods estimate the aggregate pension fund shortfall to be as much as $ 4 trillion.
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401(k) Day Trading Turns a Happy 4
By Richard Schmitt
SAN FRANCISCO (TheStreet) — It seems like only yesterday that my baby retirement savings portfolio came to life. Yet here I am, four years later, looking back fondly at that day in May 2008 when 401(k) day trading started transforming my tiny bundle of joy into a wonderful monster.
I’ll admit that when 401(k) day trading came into my life, I was hesitant about entrusting my wee one to a complete stranger. This newcomer had no track record backing its premise of methodically bringing out my precious baby’s untapped potential in uncertain times.
With no experience to review, I tried 401(k) day trading and observed closely its effect on the beloved source of my constant worry and affection. I quickly found that 401(k) day trading simply called for some give-and-take through daily transfers from one pocket of my retirement savings to another. Then I followed the book to ensure that my daily fund transfers abided by the retirement savings funds’ frequent-trading rules.
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10 Ways Your 401(k) Can Fail You
BOSTON (TheStreet) — A quick way for any website or publication to grab eyeballs is to either predict the demise of 401(k) plans or lament their shortcomings.
The doom and gloom isn’t entirely unwarranted. Intended as an alternative to traditional pensions, 401(k)s have offered both success and failure to investors. Some of those failings are self-inflicted by investors — not saving enough, taking loans and hardship withdrawals. The more than $ 1 trillion lost to the market collapse of 2007-08, however, was an unavoidable disaster, especially for those nearing retirement.
We took a look at some of the ways 401(k)s, by design — though not necessarily intent — can fail you:
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What the Jobs Report Actually Means for Borrowers
NEW YORK (MainStreet) — Last week’s disappointing jobs report has experts scrambling for answers. It looks like hopes for an accelerating economic recovery were a bit premature. Then again, maybe this was just a bump in the road.
What’s it all mean for ordinary folk socking money away for retirement, shopping for mortgages – just trying to make sound financial decisions?
The key takeaway: If you’re generally happy with your financial setup, it probably doesn’t make sense to do anything drastic, at least not until the situation is clearer.
While the experts talk Treasuries, we have the scoop for you on what a lackluster jobs report will mean for the average investor this month.
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Pension Cash Flow? Get Bonds Anyway
LOS ALTOS, Calif. (TheStreet) — In recent years financial planners and investment advisors have written that the cash flow from a defined-benefit pension such as Social Security is mathematically the same as a bond, so a client’s investment allocation must be adjusted for this hypothetical bond ownership.
This is wrong, because when you own a bond you can make a profit when rates go down — because bond prices go up then. When a recession occurs, interest rates drop, making bond prices go up and stock prices go down. During that time the strategy is that you sell your bonds at a high price and use the cash to buy stocks at a low price. This is called rebalancing. You can’t do that with a pension income stream.
The risk of a pension is that inflation can destroy value. Cash flow from a pension simply is not enough.
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Prep Your Portfolio for Disaster With a Stress Test
BOSTON (MainStreet) — In the aftermath of the financial crisis, banks had to perform “stress tests” of their viability and ability to withstand economic shocks.
The same concept has long been a part of professional portfolio reviews, but it’s a process most people either don’t fully understand or simply neglect.
Can your investment choices take a shock to the system? A stress test may help insulate you from shock, just as tests from a doctor can set you on the right path with medication, diet and exercise.
How would your portfolio of investments weather a shock? Is it structured to fend off the asset-eroding potential of triggers such as so-called Black Swan events, Black Monday-level market implosions, interest and inflation rate swings, war or an oil supply disruption? Unchecked, international matters — sovereign debt, an Asian currency crisis or Russian devaluation — can also take a toll.
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What If Ron Paul Really Killed the Fed?
BOSTON (MainStreet) — The most radical proposals to surface during this year’s presidential primaries are Congressman Ron Paul’s dual efforts to abolish the Federal Reserve and return the Unites states to a monetary standard backed by gold.
Should he prevail in November, and make good on his mission, how would that feat be accomplished and, perhaps more importantly, how would it affect average Americans?
Congressman Ron Paul wants to abolish the Federal Reserve and return the Unites states to a monetary standard backed by gold. The outcomes of those actions are in doubt.
It depends on whom you ask.
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8 Questions to Ask Yourself Before Retiring
NEW YORK (MainStreet) — Pulling the trigger on retirement can be a costly mistake if your finances aren’t in good shape.
“It’s a very uncertain time for people,” says Doug Kinsey, a certified financial planner with Artifex Financial Group. Luckily, there are steps you can take to make yourself feel more secure as you approach retirement age. How can you tell if you’re ready to retire the way you imagined? Here’s a checklist of questions every pre-retiree should examine.
Pulling the trigger on retirement can be a costly mistake if your finances aren’t in good shape.
What kind of lifestyle do I want in retirement?
Several studies have tried to pinpoint how much money people should specifically have on hand before they retire. The truth is, though, that this amount is going to vary dramatically depending on what type of lifestyle you’re looking to lead once you’ve left the workforce.
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