How Interest Rate Changes Affect You


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


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


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


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


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


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
Read the rest

Careful Estate Planning Is as Important as Ever


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


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?


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

A Win-Win With Charitable Giving


We’ve all heard the saying: it’s better to give than to receive. While this is true, when you make a charitable gift to a nonprofit organization you are not only giving to a good cause, but also putting yourself in a situation to receive several tax advantages as well.

The exact tax advantages you receive actually depend on the type of gift you make and the organization to which you give. For example, if you give $10,000 in cash to a charitable group this year, you could deduct $10,000 from your taxes on your 2005 tax return. And while there’s … Read the rest

Plan Ahead to Reduce Next Year’s Taxes


The key to reducing your income taxes is to plan ahead. Far too often, individuals wait until it is time to file their tax return, and by then it is too late for many of the tax-reducing strategies. A little organization and planning can lead to significant savings on your income taxes. Listed below are three options to consider when planning your tax reductions.

Retirement Planning

If your company offers a retirement plan, such as a 401(k), and you are not taking advantage of it by contributing, you are losing out on a significant tax savings opportunity. Any contributions you … Read the rest

Invest Time in Reading Your Retirement Account Statement


If you’ve been participating in your company’s 401(k) plan, chances are you recently received a retirement account statement in the mail. Federal law requires your employer to send you a 401(k) account statement at least once a year, but whether you receive yours annually or quarterly, do you really know how to read it?

Many statements are designed in a way that allows you to review and evaluate your account assets, current activity and investment information. Basically, they should show a summary of your account at the beginning and end of the quarter (or year).

The first thing you should … Read the rest

Proposed Roth 401(k): Coming Soon to a Retirement Plan Near You


We all have seen the statistics that people are living longer. Experts are predicting that Americans who turned 65 in 2000 are expected to live another 18 years, on average. Unfortunately, many are finding themselves financially unprepared for the length of their retirement, and are being forced to return to the workforce well into their golden years.

In an effort to help individuals save more for a retirement that will likely be longer and more costly than ever, a new employer-sponsored retirement vehicle is set to debut in early 2006. It’s called the Roth 401(k) and, as it sounds, combines … Read the rest

Converting Wealth to Income: The Importance of Creating a Comprehensive Retirement Plan


Saving for retirement is a priority for many, but no matter how much you’re saving, chances are you haven’t thought about the broad range of factors that could affect your ability to make those savings last through your retirement years.

As the first of the baby boomers officially become eligible for retirement, there is potential for strain on the health care and Social Security systems, as well as the investment landscape. Therefore, it is increasingly important for individuals to not only have a plan in place to continue accumulating wealth, but also one for generating a steady income stream that … Read the rest