How Interest Rate Changes Affect You

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The rise and fall of interest rates is one of the biggest factors influencing the economy and financial markets. It is important to have a basic understanding of how interest rate changes affect your pocketbook and investment portfolio.

Typically the Federal Reserve lowers interest rates to jump-start the economy. Lower interest rates mean consumers may be willing to spend more money and incur more debt. This stimulates the economy in a variety of ways, including increased revenues from products sold to the consumers and taxes generated from those sales. Investors, on the other hand, have a different perspective.

Bond Investors:Read the rest

A Milestone for the IRA

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One of America’s most important retirement vehicles is now more than 30 years old — the Individual Retirement Account (IRA) — a tax-advantaged retirement vehicle for individual investors.

The IRA was first introduced as part of the Employee Retirement Income Security Act (ERISA) of 1974 and has grown to be one of the most popular retirement vehicles in America.

Over the years the importance of this investment vehicle has increased dramatically. Changes in the business landscape have forced individuals to pick up the reins of their retirement destinies, particularly as fixed-benefit pension plans continue to taper off and individual retirement … Read the rest

Healthcare and Retirement

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The rising cost of health care in America has become one of the primary risks to a financially secure retirement.

Health insurance premiums and medical expenses now consume a hefty portion of retiree savings. And the future looks more troubling. Healthcare costs are expected to continue to increase faster than inflation, and many employers are re-evaluating their ability to offer retiree health insurance coverage.

Strategies for Managing Healthcare Expenses in Retirement

So how can you make sure rising healthcare costs don’t wreck your carefully laid retirement income plans?

  • Leverage COBRA coverage.

COBRA, the Consolidated Omnibus Reconciliation Act, is a federal … Read the rest

401(k): You Can Take It With You

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If you contribute to your employer’s 401(k) plan and  leave your job, one of the biggest decisions you will make is what to do with the money in your plan.

Since the federal tax code was changed in 1978 to create 401(k) plans, many individuals have used this type of employer-sponsored defined-contribution plan to save money for retirement in a tax-deferred account. At the end of 2003, these plans had an estimated $1.9 trillion in assets, according to the Employee Benefit Research Institute.

But in our increasingly mobile society, changing jobs is a real possibility. What should you do with … Read the rest

Don’t Overlook Asset Allocation

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During periods of strong stock performance, many investors over‑weight stocks to take advantage of outstanding returns. Risk often seems minimal during these times as people watch their accounts grow. Bonds — with their limited returns — are largely forgotten. Invariably, though, the party ends and, all of a sudden, economic turmoil and a stock-market downturn create the opposite effect as investors abandon equities and run for the cover of fixed-income investments.

We believe investors’ asset allocations, or the division of assets among stocks, bonds and cash, have been influenced by market extremes in recent years. Now is a good time … Read the rest

Building Your Financial Safety Net

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Investing is important for your future.

Investment planners generally recommend these initial strategies be taken before beginning an investment plan:

  • Establish a cash reserve to cover three to six months’ living expenses.
  • Do not spend more than 35% of your income to pay off debt (including your mortgage or rent).
  • Obtain adequate life insurance — generally eight to 10 times your annual family income.

Then your initial steps should be:

  1. Determine your net worth — your total financial assets minus your debts. To do this, add up the current value of all your assets — real estate, vehicles, collectibles, savings
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Careful Estate Planning Is as Important as Ever

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The enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (2001 Tax Act) has many investors confused about estate planning. Because the legislation steadily reduces and eventually temporarily eliminates federal estate taxes, some are under the impression that estate planning is no longer needed. This misunderstanding could prove very costly.

Thanks to the 2001 Tax Act, the amount that may be transferred upon death to a non-spouse without triggering federal estate taxes was $1.5 million in 2005. This exclusion amount has risen to $2 million in 2006 and will rise to $3.5 million in 2009, and an … Read the rest

CDs Are Coming Back in Style

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With the Federal Reserve continuing to raise interest rates, some investors are taking a new look at certificates of deposit (CDs). CDs are time deposits issued by banks and thrifts across the country that are insured up to $100,000 per depositor through the Federal Deposit Insurance Corporation (FDIC).

CDs fell out of favor with many investors when interest rates hit rock bottom, but now, after the Federal Reserve’s series of interest-rate hikes since mid-2004, short-term rates hover around 4.5%, and many investors are once again turning to CDs. According to MSNBC, the amount of money invested in traditional CDs now … Read the rest

The Dow at 11,000: What’s in a Number?

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In January of this year, the Dow Jones industrial average closed above 11,000 for the first time since 2001, causing much optimism among investors. However, as the Dow continues to hover around the 11,000 mark, the words “psychological barrier” seem to be everywhere. So, what exactly does it mean to say the 11,000 mark is more of a psychological milestone than anything else?

As the longest-running major market index, the Dow has a strong symbolic value, and gets a lot of attention from investors, the media and the general public. But as a collection of only 30 blue-chip stocks selected … Read the rest