January 31, 2014

Index Funds Outperform Actively Managed Funds

The latest research confirms what many other studies have demonstrated: that investors should put their money in low cost index funds and skip higher cost actively managed mutual funds.  ETF manager Rick Ferri compared passive (index) funds against 5,000 randomly selected active portfolios using 32 different investing strategies. “The indexing solution won 82.9% of the time on average, and in the small percentage where active funds outperformed the median outperformance was 0.5%.” According to Ferri, “The bottom line is a fee. Fees matter.”  And if taxes were added into the mix, the advantage for indexing over actively managed funds would be even greater. Read a bit or detail or delve into the full study with this link:

5 Simple Investment Rules

 Vanguard Group Inc. founder John Bogle offers some simple rules for investment success.  The Squared Away Blog http://squaredawayblog.bc.edu/squared-away/investment-focus-keep-it-simple/ condensed his list five:
  • Remember reversion to the mean. If a company’s stock or the overall market has had unusually strong performance, it’s unlikely to continue at that pace.
  • Forget the needle and buy the haystack. Invest in a diversified portfolio and eliminate individual company and stock risk.  The odds of finding the next Apple are low.
  • Have realistic expectations. Investment returns – and not speculative, risky plays – are the bread and butter of smart investing.
  • Patience is your friend, impulse is your enemy.  Buying and selling increases your odds of making a mistake.  So buy a diversified portfolio and hold on to it to improve your odds of being rewarded.
  • Minimize the croupier’s take. Look for funds with low fees, such as index funds.  Funds with high fees can significantly reduce your investment returns. 

January 30, 2014

January 31 is Earned Income tax Credit Awareness Day: Do YOU qualify?

"EITC, the Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned. It is a refundable federal income tax credit for low to moderate income working individuals and families." To learn more and find out if you qualify, visit: http://www.irs.gov/Individuals/EITC-Home-Page--It%E2%80%99s-easier-than-ever-to-find-out-if-you-qualify-for-EITC

January 29, 2014

Free Tax Preparation

Top 10 Tips about Free Tax Preparation
(info below quoted from the IRS)
Each year millions of people have their tax returns prepared for free by volunteers. These volunteers are part of the IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs.
Here are the top 10 tips the IRS wants you to know about VITA and TCE:
1. The IRS sponsors both the VITA and TCE programs. They work with local community groups to both train and certify volunteers.
2. The VITA program generally offers free tax return preparation and e-filing to people who earn $52,000 or less.
3. The TCE program offers help mainly to people age 60 or older. Volunteers specialize in tax issues unique to seniors. AARP is part of the TCE program and helps taxpayers with low to moderate incomes.
4. VITA and TCE provide free electronic filing. An e-filed tax return is the safest and most accurate way to file. Using e-file combined with direct deposit is the fastest way to get your refund.
5. Using VITA and TCE may help ensure you get all the tax credits and deductions you’re able to claim. For example, credits that you may qualify for include the Earned Income Tax Credit, the Child Tax Credit and the Credit for the Elderly.
6. Some sites provide bilingual help for people who speak limited English.
7. VITA provides free tax assistance to military members and their families. Volunteers help with tax issues related to the military. These include special rules and tax benefits for those serving in combat zones.
8. At some VITA sites, you can also prepare your own federal and state tax returns using free web-based software. This is an option if you don’t need much help or don’t have a home computer. Volunteers are on site to guide you if you need help. The self-preparation options generally offer free tax return preparation software and e-filing to people who earn $58,000 or less.
9. For more than 40 years, the IRS has partnered with nonprofit and community organizations to offer these vital services. Thousands of VITA and TCE sites around the nation will open in late Jan. and early Feb.
10. Visit IRS.gov to find the nearest VITA site. Search the word ’VITA’ and then click on “Free Tax Return Preparation for You by Volunteers.” Site information is also available by calling the IRS at 800-906-9887. To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669.

January 28, 2014

What Makes a Successful Retirement?

It's NOT just about money! Dr. Michael Finke, Texas Tech University, explains what we know from research to answer this question. "Retirement is an abstract concept until it happens. You develop a routine of driving to work, interacting with coworkers, addressing challenges and finishing projects. Then you drive back home again, have dinner, relax, then wake up and go to work. But what happens when you quit your routine? How easy is it to establish new habits and take on new challenges? What do people actually do when they retire? Financial advisors spend a lot of time helping clients become financially prepared for retirement. But retirement isn’t just about money. It’s about using the money to get the most out of a unique life stage that involves a huge increase in free time that needs to be filled, a greater reliance on social interaction, spending a lot more time with your partner (and, unfortunately, without for those who outlive their spouse) and predictable physical and mental decline." Read the details in this well-written discussion to hellp you prepare: http://www.thinkadvisor.com/2014/01/27/what-makes-a-successful-retirement?t=the-retiree&page_all=1

Earned Income Tax Credit

Earned Income Tax Credit.  Did you work and earn less than $51,567 last year? You could receive EITC as a tax refund if you qualify. Families with qualifying children may be eligible for up to $6,044. Use the EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return and claim it.
Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit. To claim it, you need to file Schedule 8812, Child Tax Credit, with your tax return. (from the IRS)

January 27, 2014

Romance novel touts bliss of financial independence

"Personal-finance tomes aren't usually bodice rippers with breathless sentences like: "She wanted him and couldn't wait to have him, was totally addicted to his touch and couldn't resist him."
But Boca Raton financial planner Kathleen Grace, 46, wanted to explore women's emotions about money and love – and how those feelings can interfere with managing money.
So Grace, who co-founded Excelsior Capital Advisors, hired a romance writer to help her create a modern fairy tale of Cinderella — "Cindi," a fashion designer in South Florida who is afraid to talk about money in fear of displeasing her current heartthrob of a husband."
"Prince Not So Charming: A Romantic Tale of Financial Independence," which is sold on Amazon for $12.06. Read more about the "bodice ripper" from

The Best Personal Finance Resource on the Internet

The Squared Away website is a great resource for many financial topics. Check out  "Square away your finances or deal with a particular issue with tools and information from the Financial Security Project at Boston College." http://squaredaway.bc.edu/

Free Income Tax Preparation

USU has been assigned a specific URL for free online tax preparation.  With this website, individuals/families can file their own federal and state taxes for free as long as their income was less than $58,000 in 2013.  This website was set up specifically to help USU staff, faculty, and students with their taxes, however, anyone that wants to utilize this website is welcome to.  It is available at the USU VITA site, or you can access it on any computer with internet access.  Simply go to:  www.myfreetaxes.com/USU and click on File Now Safe and Secure.

As always, if you are not comfortable filing your own taxes, VITA is available to those with incomes of $52,000 or less: www.UtahTaxHelp.org or call 2-1-1.

Thanks to USU Family Finance graduate
Jodi West
VITA Regional Coordinator/Case Manager
Bear River Association of Governments (BRAG)
170 North Main
Logan, Utah 84321
(435) 713-1431

January 24, 2014

Are You an Ant or a Grasshopper?

"Non-savers... prefer immediate gratification while savers, no surprise, prefer future satisfaction," according to Robert Powell who explains the practical implications of behavioral psychology research. He asks: "why do some people have trouble with self-control and others not so much? And, more important, what can you do if you’re having trouble with self-control — that is, saving for retirement?" Powell translates academic research into easy to understand concepts to help you change your behavior by using "commitment devices" such as “goal clarification, self-evaluation, and deadline setting." Check out these sensible strategies at: http://www.marketwatch.com/story/dont-put-off-saving-for-retirement-2014-01-18?pagenumber=1

Living Modestly and Enjoying Life with Mr. Money Mustache

Lots has been written about frugal living, simplicity, etc. but Mr. Money Mustache (http://www.mrmoneymustache.com/) puts simple living into perspective. Too often frugality is linked to a Scrooge-like perspective on life, but Mr. Money Mustache emphasizes what we know from research- money doesn't make you  happy. Once people reach a certain comfortable level of living, more money doesn't make you happier. Check out this interview with Mr. Money Mustache:

Index Mutual Funds Beat Actively Managed Funds

Numerous research studies over the decades since index funds were first introduced have come to the same conclusion: that indexing beats active management over the long run. Check out the graph in this article on indexing: http://vanguardblog.com/2013/11/06/indexing-why-its-a-great-financial-innovation/

Long Term Care Planning & Information

Thanks to the Squared Away Blog http://squaredawayblog.bc.edu/squared-away/hhs-website-decodes-long-term-care/ for pointing out the great long term care resources at http://longtermcare.gov/. Learn what services are available, costs in your area, various payment options and planning strategies.

January 23, 2014

IRA Rollover Tips

  1. Evaluate your transfer options. 
  2. Minimize taxes by rolling Roth to Roth and traditional to traditional.  
  3. Think twice before you do an indirect rollover. 
  4. Be wary of "Free" or "No Fee" claims. 
  5. Realize that conflicts of interest exist.
  6. Compare investment options and other services. 
  7. Understand fees and expenses. 
  8. Engage in a thoughtful discussion with your financial or tax professional. 
  9. Age matters. 
  10. Assess the tax implications of appreciated company stock. 
“The decision to move your retirement nest egg or stay put is an important one. In many cases, you don't have to act immediately upon switching jobs or retiring. Take the time to assess your options. Ask questions and do your homework to determine what is best for you.” Read the details from FINRA at: http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/RetirementAccounts/P436001?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+FINRAInvestorAlerts+%28FINRA+Investor+Alerts%29

January 22, 2014

More on the Affordable Care Act

The November 2013 “Affordable Care Act” issue of Consumer Action News is more than just an Obamacare primer. Along with explaining the basics of how the Affordable Care Act works, this latest issue of Consumer Action’s quarterly newsletter includes articles on important related topics such as:
  • Your options for paying health insurance premiums
  • How to appeal your insurer’s decision when it denies your claim or cancels your coverage
  • What you need to know about medical debt installment plans

Understanding the Health Insurance Tax Credit

CFP Lon Jeffries explains the Premium Assistance Tax Credit (PATC) which helps pay for health insurance. Mr. Jeffries will be the Financial Planning for Women on speaker on March 5.
“The Premium Assistance Tax Credit (PATC) is designed to help “lower” income individuals and families pay for health insurance plans purchased through the new health care exchange program. However, more people may qualify for government assistance when purchasing health care through the exchange than may realize.”
“People are still familiarizing themselves with the options available within the health care exchange. Many will be surprised by their eligibility for assistance, and the amount of government aid available. Determining whether you qualify for a Premium Assistance Tax Credit will help you evaluate the attractiveness of the program.” For more details see: http://utahfinancialadvisor.blogspot.com/2014/01/purchasing-health-care-thru-exchange.html
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