January 30, 2015

Toxic For-Profit Colleges

With high student loan debt burdens making the news, it's important to distinguish non-profit (whether public or private higher education) from profit-making institutions who exemplify so-called "free enterprise" gone amok which, according to a U.S. Senate report, result in: 

  • Staggering investment of tax dollars
  • Sky-high tuition 
  • Predatory recruiting
  • Too many students leave with debt, but no degree
  • Billions in taxpayer dollars diverted to marketing, executive salaries, and profits
  • Gaming the regulatory system to maximize profits
Read the details in the Harkin report summary:  http://www.help.senate.gov/newsroom/press/release/?id=45c8ca2a-b290-47ab-b452-74d6e6bdb9dd
Borrowing to invest in your human capital to enhance your future earning power (along with making you an educated adult) can make sense. But For-Profit colleges are often a poor choice. Consumer Due Diligence is strongly recommended. For-Profit institutions are often toxic for taxpayers as well as for students.

The Ultimate Retirement Plan

Here's the URP wish list: (thanks to Andy Landis from which the following is quoted)
100% employer match — Everything you put in would be fully matched, dollar for dollar, by your employer--not just a piddly 3% or 5% like a 401(k).
Portability — All contributions, including the employer match, would go with you, hopping from job to job. You're not chained to one employer.
Everyone's in — Let's bring part-timers, temps, and contract workers aboard, not just full-timers. Every job would build retirement security.
Market-proof — Sick of losing money in your 401(k)? Our URP won't ride the stock market roller-coaster.
Automatic — No opt-in, no opt-out, no confusing investments, no convoluted rollovers. It's totally on autopilot. You work, you're in.
Lifetime payouts — When you retire, it never runs dry. It pays forever, your entire life, no matter what. And payments would be tied to inflation, because you plan to live long and prosper.
Family support — Since we're dreaming, let's add extra payments for family members like your spouse or child.
Disaster relief — Too many young people have no long-term disability or life insurance. Let's add'em.
Fair — The CEOs are doing OK. Let's focus URP on the middle class instead of the investor class.
Cheap — Let's get totally ridiculous. Make it cost no more than 6%-7% of pay. Or maybe 7%-8% if health insurance is thrown in. And administrative expenses should be low, low, low.
Ready for a big surprise? You're already on URP, like 94% of workers. It's called Social Security.
Boring old Social Security provides:
  • Immediate 100% employer match, up to $117,000 in pay
  • Full coverage and portability among all private-sector jobs and many public jobs
  • Coverage for part-timers, even with earnings under $1,300 a year
  • Performance unaffected by market swings
  • Automatic, hands-off operation
  • Payouts guaranteed for life for you and your spouse, and to adulthood for your children
  • 100% inflation protection
  • Disability and life insurance for young workers
  • Payouts favoring the middle class
  • Cheap participation (7.65% of pay, including Medicare)
OK, it doesn't pay a ton; nobody gets rich on Social Security. But it is the largest source of retirement income — far bigger than pensions or investments — and it doesn't penalize you for saving more on your own.
Wouldn't it make sense to learn about the awesome retirement program you're already on? Go to my Social Security and sign up for a personal account. Maybe even go crazy and read my book, Social Security: The Inside Story.
And as always, keep on planning.

January 25, 2015

Focus on retirement INCOME rather than the "number"

Rather than fixating on a specific $ goal (aka the "number"), investors nearing retirement (ages 55-64) should focus on the amount of income their investments will be able to generate in retirement based on current inflation, rates, of return . Check out Blackrock's CoRI™ calculator http://www.blackrock.com/cori/cori. It's a simple to use tool that shows how much annual income your investments can generate. While it is limited to the assumption that one retires at age 65 and lives an average lifespan (and most readers of this blog are likely to live longer than average), it is a useful tool. Check it out. 

January 21, 2015

Why Active Management is a Bad Idea

USU employees are being offered the opportunity to have their 403(b) retirement investments actively managed by Fidelity... for a "small" fee. Just say NO to active management! Despite Fidelity's slick marketing campaign, all the research evidence confirms that active management DOES NOT pay off. For evidence on why active management is a costly idea that only enriches the manager and not the investor see: How to Win the Loser's Game, a research-based documentary in 10 short segments that includes interviews with the greatest minds in investing. See:

How to win the loser’s game https://www.youtube.com/watch?v=SwkjqGd8NC4

January 20, 2015

Personal Finance Questions, Realities & Myths

February 26, 12:00 to 1:00 p.m. EST (10-11 am Mountain Time)
This University of Florida Extension Webinar will discuss frequently asked financial questions and expose some urban legends. Register at http://bit.ly/faq2015

Where to Turn for Financial Advice

Where to Turn for Financial Advice
A webinar presented by the University of Florida Extension Service
February 25, 12:00 p.m. to 1:00 p.m. EST (10-11 am Mountain Time)
We will discuss how to evaluate different types of financial professionals, the meaning behind their professional designations, and the ways they arecompensated.  We will also provide resources for free, reliable and non-commercial financial information.  Register at http://bit.ly/finpro2015

Tax Prep Webinar

Personal Income Tax Preparation and Filing
Provided through the University of Florida Extension Service
January  29, 12:00 p.m. to 1:00 p.m. EST (10 am - 11 am Mountain Time)
An IRS representative will discuss options for free tax filing, provide information about tax credits & deductions, and demonstrate IRS tools to help you with your return. Register at http://bit.ly/taxprep1

Send your Utah income tax refund straight to your UESP account

If you, like most Americans overpay your income taxes, when preparing your Utah income tax return, send your refund to your UESP accounts by checking part 5 on the last page. It's a great way to force yourself to save for post-secondary education. For details see: https://uesp.org/pdfs/Inserts/UtahTaxRefund2014.aspx If you aren't already saving for higher education for yourself, your children, or grandchildren... Get With IT! Go to UESP.org and set up an automatic monthly contribution today. For more info just type in "college" in this blog's search box.

How to Tell if Your Retirement Nest Egg Is Big Enough

If you are nearing retirement or already there... "This Calculation Might Prompt You to Take Some Winnings Off the Table—Before It’s Too Late."  William J. Bernstein is a very highly regarded investment expert with an engaging writing style so go ahead and read what he has to say about asset allocation in light of the almost 6 year old bull market: 
"During past bull markets, many Americans nearing retirement fleetingly acquired a nest egg adequate for later life. Then, as quickly as that nest egg came, it went—leaving behind regret, sleepless nights, and in the worst case, panic selling near the bottom that eliminated any possibility of recovery.
This happened in the late 1990s, as the tech-stock bubble produced a blizzard of paper millionaires that melted away faster than a cherry snow cone in August. It happened in the mid-2000s, as Americans grew ever more comfortable with stock-heavy portfolios and with treating their home equity as an ATM, only to be savaged by the worst financial crisis since the Depression.
And it will happen again. In March, the current bull market will be six years old. It might run an additional six years—or end in April. Regardless, the lesson from financial history is clear:
When you’ve won the game, stop playing." Read the full article at:

7 Ways to Trick Yourself into Saving More Money in 2015

Great research-based advice to stay on the right track in 2015:
1. Use Inertia to Your Advantage
2. Keep Your Eye on One Prize
3. Focus on the Future
4. Ignore Raises and Bonuses
5. Make it Contractual
6. Keep Impulses from Undoing Your Budget
7. Force Yourself to Feel Guilty     
Read the details by Susie Popick at: http://time.com/money/3658298/how-to-save-more-money/

The Best Online Tools for Retirement Planning and Living

Wow! This Wall Street Journal article is a real keeper with links to excellent resources for retirement planning all in one place. "Apps and Websites Offer Help With Budgeting, Social Security, Lifestyle Planning and Other Essentials."
What Will You Do in Retirement?  LifePlanningForYou.com, which offers a free series of introspective exercises.
Longevity Forecasting:  Search for “Vitality Compass” in the “Live-Longer” section at Bluezones.com. "In addition to life expectancy, the calculator can forecast healthy-life expectancy, defined as the age someone will reach before being diagnosed with heart disease, diabetes or cancer. As a result, it can provide insight into the number of years a person might pay higher health-care or long-term-care expenses. It also offers tips for living longer."
How Much to Save: "Even with a realistic estimate of life expectancy, it’s virtually impossible to figure out how much to save for retirement or how long a nest egg might last without first knowing how much you’re spending and on what. Several programs, including Mint and Yodlee’s MoneyCenter, can put together a budget for consumers based on their past spending patterns and alert them when they are in danger of exceeding past thresholds."
Retirement Income Planning: "When planning retirement, saving money is half the battle. The other half: figuring out how to generate a steady paycheck throughout retirement."
Social Security Planning: "The tricky part is knowing when is the best time for each individual to start collecting. A growing number of online programs aim to help users peg the optimal claiming strategy." Financial Engines offers a free calculator: http://corp.financialengines.com/individuals/retirement-readiness.html
Medical Care
Estate Planning
End-of-Life Care
This article is a terrific resource for all age levels, whether planning for yourself or assisting parents or grandparents. Check out:

January 14, 2015

When Judging Financial Advisers, Look Beyond the Annual Return

As I've mentioned numerous times, whether your adviser is a fiduciary and puts your interests before his or her own is the most important criterion in choosing or assessing an adviser. Just because the stock market did well in 2014 (11%) doesn't mean your adviser is working in your best interest. Paul Sullivan provides more advice and perspective in The New York Times Money blog: http://www.nytimes.com/2015/01/10/your-money/when-judging-financial-advisers-look-beyond-the-annual-return.html?_r=0

Ready to buy a house in 2015?

Check out Owning a Home:
This new resource is provided by the US Consumer Financial Protection Bureau. "In coming months, we will continue to add new features, but today Owning a Home can help you:

·         Learn about your loan options: As you begin your home and mortgage search, this guide will tell you all you need to know to choose the right mortgage for your situation.
·         Check interest rates: This tool gives you a realistic sense for the range of interest rates you should expect when shopping for a mortgage, so you can know whether you’re getting a good deal.
·         Understand your closing forms: Learn what to look for in your closing documents before signing.
·         Get ready for closing: As you near the end of the process, a simple checklist will help prepare you for the big day."
Check out the Owning a Home tools and tell us what you think at owning-a-home@cfpb.gov.

January 13, 2015

Stocks likely overvalued; time to reblance

"Stocks are Partying Like It’s 1929, 2000 and 2007"
Taking a look at four measures of market value, all at historically high levels
Jan 8, 2015 by Daniel Crosby 
(See also the Dec. 27 post; there seems to be a lot of agreement that stocks are overpriced. This is NOT a prediction of the future but a reminder to rebalance and consider one's asset allocation and exposure to stocks). The bull market is over 5 years old (that's ancient). Crosby writes: "I find the market significantly overvalued and think that some sort of defensive measures will be wise for most investors in the year(s) to come."  Crosby reviews 4 measure of stock valuations and explains: what it is, what it says, and what it means.
1. Shiller Cyclically Adjusted Price to Earnings Ratio (CAPE).
2. S&P 500 Price to Earnings Ratio
3. Wilshire 5000/GDP – aka, “Buffett Valuation Indicator”
4. Crosby Irrationality Index
If you are a long way from retirement- no worries. "But for those nearing retirement, an unambiguous picture seems to be emerging that returns for the next 8 to 10 years are likely to be depressed in light of the eye-popping returns of the more recent past.  Do not act in haste or deviate from your plan if one is in place, but please accept this gentle warning from a concerned party who knows that 'this time is never different.'" 

January 12, 2015

Medical Debt Harms Credit Reports

"In May 2014, the Consumer Financial Protection Bureau (CFPB)  released a research report that found consumers’ credit scores may be overly penalized for medical debt that goes into collections and shows up on their credit report. According to that study, credit scoring models may underestimate the creditworthiness of consumers who owe medical debt in collections. The scoring models also may not be crediting consumers who repay medical debt that has gone to collections."
The CFPB  offers consumer tips on how to deal with medical debt, both before it gets on a credit report and after. "Consumers should ask for an itemized bill and review each item on the bill to see if it is for a service that they received. Consumers should act quickly to resolve or dispute the medical bills that they receive. If consumers need to dispute a bill, they should send a written notice and include a copy of all relevant documents, such as records from doctors’ offices or credit card statements."
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