Thursday 26 November 2015

New Rules Could Help Millions Save for Retirement - By Janna Herron


Money
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States may soon be able to automatically enroll workers into state-sponsored IRAs if their employers don’t offer retirement plans, thanks to a new move by the Obama Administration that circumvents Congress.
The Labor Department on Monday proposed a safe harbor from federal pension law so states can offer workers only an opt-out option—rather than an opt-in one—for these retirement plans. The proposal would also allow employers to make automatic deductions from employee paychecks to go into the state plans.
The goal is to get as many of the 68 million workers who lack access to employer retirement plans to start saving. Less than 10 percent of these workers have set up an IRA on their own, and research has shown that participation in employer 401(k) plans with automatic enrollment is 10 percentage points higher than those without.

So far, Illinois, Oregon, Washington and California have already passed legislation to create payroll-based retirement savings vehicles, while 19 other states are considering it.
“Overall, it’s a great opportunity for states to promote saving for retirement,” says John Crosby, a certified financial planner and head of the government relations committee for the Financial Planners Association in New Jersey. “Hopefully, what will happen as a byproduct is that employees are going to realize the benefit and put more money aside.”
Crosby has been working with state legislators and business groups on the state’s plan called New Jersey Secure Choice Retirement Saving Program. Under the plan, employees without workplace retirement savings plans will automatically have 3 percent of their salary deducted into the retirement plan. They can opt out if they want.
Crosby says New Jersey, along with most states considering similar plans, will outsource the management of the funds to an investment company such as Vanguard or Fidelity to select assets for the greatest return. Workers will still have to abide by IRA rules that limit contributions to $5,500 a year.

“But if you put away $5,000 every year for 40 years at 7 percent, that’s almost a million dollars,” Crosby notes.
The move by the Labor Department comes less than two weeks after the federal government introduced myRA, a basic retirement savings plan similar to a Roth IRA.
President Obama has recommended automatic IRA enrollment for employees without a workplace retirement savings plan in every budget since taking office, according to a blog post from Labor Secretary Tom Perez and Jeffrey Zients, director of the National Economic Council.
“But Congress has failed to act on this proposal,” they wrote.

Culled from The Fiscal Times

Wednesday 25 November 2015

7 Ways to Maximize Your Retirement Savings When You Leave the Workforce -By Donna Fuscaldo

Retirement isn’t the end of the line anymore and can easily last for twenty years or more. If you are like millions of people, you probably didn’t save enough for this phase of your life. But that doesn't mean you're in a hopeless situation. There are a host of ways to maximize your savings even if you are facing a significant shortfall.

Curb Your Expenses

Income doesn’t flow as freely in retirement, so being mindful of your expenses becomes essential if you want to maximize the amount you save. Depending on how much you want to put away for the years to come you could downsize your home or your lifestyle or curb the little expenses that quickly add up. Either way the idea is to free up more money to save for future costs.

Delay Taking Social Security Until 70

A surefire way to boost your savings is to get more each month from Social Security, yet far too many people take it as soon as possible. Waiting has a lot of benefits, mainly for your bottom line. If you were born in 1943 or later and delay collecting Social Security benefits beyond your retirement age, you’ll see an 8% annual increase each year until age 70. The longer you wait, the more you can earn and thus save.

Cut Income Taxes

No one thinks of saving money when it comes to income taxes but in retirement you can even find some savings there. When you retire your income declines which automatically means lower taxes. Not to mention there are deductions that weren’t available to you when you were working that can save you more money. To lower their tax income further, retirees should curb their expenses, so they draw down less from their retirement accounts.

Get A Part-time Job

The ideal way to increase savings is by working. Retirees can get a part-time job and save all of their earnings. Having a part-time job boost savings, but it also gives retirees a purpose. Retirees that started collecting social security benefits need to be careful they don’t run afoul of IRS rules. If they earn more than $14,160, the benefit is reduced by $1 for every $2 above that limit. People who are in full retirement won’t see their earnings impacted at all.

Consider Using A Rewards Card

When it comes to credit cards, you want one that rewards you for the purchases you are going to make—that is where rewards credit cards come in. For retirees who like to travel getting a travel reward card can reduce the amount of money they spend on airfare and hotels, freeing more up for savings. If you spend on specific things each month then a cash back, the credit card that gives you a percentage back on everyday purchases may be right for you. Keep in mind that the only way a rewards credit card will boost your savings is if you pay it off each month and don’t spend unnecessarily just to get the extra rewards points.

Be More Aggressive With Your Investments

While this strategy is not for everyone, investors can increase their return and thus their savings by being more aggressive in their investments. The knee-jerk reaction when someone enters into retirement is to become conservative, moving most of their money into bonds and stable large-cap stocks. Doing that was the norm in the past but because retirement often lasts longer than in the past you have to be less conservative in the early years of retirement. That doesn’t mean throwing all your money into high-flying stocks or risky investments, but it does mean increasing your risk tolerance somewhat while staying diversified.

Be Mindful of Bank Fees

Any easy way to curb your expenses and boost your savings is to be mindful of the fees you pay for banking with a particular financial institution. That’s because banks can charge a range of fees such as a fee to maintain a checking account or a fee for using an ATM outside the bank’s network or for overdraft protection. These fees may be nominal, but they can quickly add up. Take ATM fees for one example. Go to a non-bank cash machine and you can get hit with a $3.00 just for withdrawing money. These days there are a lot of banks and financial institutions that have low costs or are willing to wave fees. If your bank doesn't help out, it may be time to find another one so more money can go to your savings.

The Bottom Line

In a perfect world, everyone would enter retirement with enough money saved to live out their golden years but the harsh reality is many people don’t have much saved at all. If you fall into the latter category, it doesn’t mean you will end up desolate. From getting a part-time job to getting a little more aggressive with your investments, there are a ton of ways to maximize your savings when you are already in retirement

Culled from Investopeadia

Tuesday 24 November 2015

Survey: Americans dreaming of a no-credit Christmas -By Marcie Geffner

When it comes to holiday spending, cash will be king this year, according to the latest Bankrate Money Pulse survey.
Seven in 10 Americans say they will use either cash (39%) or a debit card (31%) for most of their holiday purchases. Just 22% say they will put the bulk of their holiday spending on credit cards.
Deciding how to pay for holiday purchases can have a big impact on consumers' bottom line. That's because shoppers this year will spend an average of $805.65 on gifts, decorations, food and other holiday-related purchases, according to a survey for the National Retail Federation, a trade group in Washington, D.C.
"Paying with cash or debit means people definitely have changed their priorities. They're going to buy what they can afford and no more. That's very good," says Ronit Rogoszinski, wealth advisor at Arch Financial Group on New York's Long Island.

Wealthy more likely to use credit

Income and age appear to be factors in the decision to use cash over plastic, the survey found.
Americans with household incomes of less than $30,000 were most likely to say they will use cash for most purchases (53%), while 21% of those with household incomes greater than $75,000 say cash will be a first option. Indeed, high earners were the most likely wage demographic to indicate they will use credit cards for most of their holiday purchases.
That's not the case for millennials. Just 14% say credit cards will be their No. 1 choice. This reflects something an earlier Bankrate survey found: 18- to 29-year-olds just don't like credit cards.
So how will young adults pay for their holiday purchases? Nearly half of millennials (48%) say they will use a debit card the majority of the time.

Debit vs. credit

That choice can have both positive and negative consequences.
Debit cards are "great for budgetary control," says nationally recognized credit expert John Ulzheimer, but they don't offer as much protection for consumers as credit cards.
Federal law limits consumer liability for credit card fraud to $50, and the 4 major credit card companies -- Visa, MasterCard, American Express and Discover -- lower that risk to 0 liability.
That means you'll almost never lose money if your credit card is used in a fraudulent manner.
Debit cards don't have those same protections. Debit card holders are liable for $50 if they report fraud within 2 days and up to $500 if they report within 60 days. Any loss will probably be returned, but not immediately, leaving consumers to contend with less money in their bank accounts in the meantime.
"It's a lot safer to use a credit card," says Ulzheimer, who formerly worked at the credit bureaus FICO and Equifax. "Although the counter-argument is that you can also get into a lot more debt, which is absolutely true."
Retail store-branded credit cards offer the same trade-off. They also have higher interest rates and lower credit limits, which can hurt a consumer's credit utilization ratio and, in turn, their credit score.
"Buying $1,000 of holiday presents on a retail card means something very different from buying $1,000 on a credit card with a $30,000 limit. In one case, it's almost immaterial. In the other, it could be very problematic," Ulzheimer says.

Smartphone use not yet catching on

Of course, cash, debit cards and credit cards aren't the only ways to make purchases. The Bankrate survey also asked consumers about spending via mobile payments (commonly referred to as mobile wallets) and by check.
The survey found that spending by check is a dying payment form, with just 3% of Americans indicating that's the dominant method they will use this holiday season.
As for mobile payment services like Apple Pay, Android Pay and Samsung Pay, consumers have yet to warm to this technology.
The Bankrate survey found that 84% of smartphone users do not plan to use a mobile wallet app to make an in-store purchase this holiday season.
Millennials are the most likely age group to use a smartphone to pay, with 19% indicating they will use a mobile payment service in store over the holidays. Americans 65 years and older are the least likely age demographic to make a mobile payment (8%).
Jason Oxman, CEO of the Electronic Transactions Association, a Washington, D.C., trade group that represents electronic payment companies, says smartphones eventually will replace plastic cards.
"Using your phone to pay makes a lot of sense," Oxman says.
Security is a concern among shoppers who don't plan to make a mobile wallet purchase. The Bankrate survey found that 36% thought the platforms weren't secure enough, even though fraud is more likely to occur with a swipe card that has a magnetic, or "mag," strip on it.

One other way to spend

Cash is a great option for managing "budgetary control," Ulzheimer says.
The downside, according to Oxman, is that cash can be lost or stolen, and there's no replacement plan for paper money. Cards also can be helpful if a purchase needs to be returned, exchanged, is defective or gets broken.
Another idea Ulzheimer likes is to shop with gift cards accumulated during the year or earned through a credit card rewards program.
"It's a fantastic thing to wake up after the holiday season and get your credit card bills," he says, "and there's nothing on them."
Methodology: Bankrate's Money Pulse survey was conducted Nov. 5-8 by Princeton Survey Research Associates International with a nationally representative sample of 1,000 adults living in the continental U.S. Telephone interviews were conducted in English and Spanish by landline (500) and cellphone (500, including 276 without a landline phone).
Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error is plus or minus 3.8 percentage points for the complete set of data.

Culled from Bankrate.com

Monday 23 November 2015

7 Ways Millennials Are Getting Retirement Saving Wrong - By Beth Braverman



The transition into financial adulthood hasn’t been easy for millennials. They graduated with student loans into a terrible job market. So, it’s no wonder that retirement took a back burner for many of them while they were underemployed and living in their parents’ basements.


Half of millennials don’t have a 401(k) and only three in ten are actively planning for retirement, according to a recent study. At the same time, a whopping 60 percent of millennials believe Social Security—a key retirement component—will go bankrupt before they retire, another study found.
As the employment picture brightens, millennials have a second chance to bolster their finances, including putting together a basic plan to meet their retirement goals. Here are seven common mistakes that millennials are making while planning for the future.
They don’t have a rainy day fund.
An emergency fund doesn’t seem like part of retirement planning. But having one will keep you from dipping into your retirement funds to cover an unexpected event like a car breakdown or big medical bill.
Only one in five millennials have at least five months’ worth of expenses saved up, according to a recent Bankrate survey, even though the rule of thumb is six. “I know it seems ridiculous to have money sitting around in the bank earning nothing,” says Lynne Ballou, a managing partner with Ballou Plum Wealth Advisors “But an emergency fund is your best friend.”
It also helps you avoid costly penalties that come with early retirement withdrawals and saves you from losing years of earned interest. Think about it: a $5,000 withdrawal that would have earned 5 percent equals a loss of $35,200 after 40 years, or when you’re closing in on retirement. That’s not chump change.

They’re underestimating their costs.
Seven in 10 millennials think they’ll spend less than $36,000 a year in retirement, or 30 percent less than what average retirees are spending now ($46,757), according to a recent survey by Generational Kinetics. That average will increase considerably with inflation over the next thirty years.
“Millennials are unrealistic about retirement,” says Wayne Copelin, founder and president of Copelin Financial Advisors in Sugar Land, Texas. “They’ll say, ‘No, I can live on less than that.’”
They’re not saving enough.
At a minimum, millennials should be saving enough in their 401(k)s to get the full employer match if one is offered, but two in five are leaving some or all of this extra benefit on the table, according to a July report by T. Rowe Price. That’s free money and a 100 percent return on investment.
Overall, millennials should be aiming to set aside at least 10 percent to 15 percent of their salary for retirement, instead of the current 6 percent median for this group.
Consider this: A 23-year-old who saves 10 percent per year can retire comfortably at 70, or five years earlier than those saving only 6 percent. Saving 15 percent would bring the retirement age down to 65, according to a recent analysis by NerdWallet.
In 2015 and 2016, millennials can save up to $18,000 in a 401(k) account.

They’re missing out on an opportunity to invest in a Roth.
Unlike a 401(k) or a traditional IRA, a Roth IRA or Roth 401(k) allows after-tax savings that can be withdrawn tax-free in retirement. Those are great vehicles for young savers who are likely in a lower tax bracket than they will be in retirement.
“The beauty of being younger is that generally your income won’t disqualify you from any retirement savings tool,” says Craig LeMoine, a professor of financial planning at The American College in Bryn Mawr, Pa.
Roth accounts also offer some tax flexibility for withdrawals when paired with more traditional retirement accounts. For example, if withdrawing from a traditional IRA or 401(k) would push you into higher income bracket, then you could withdraw the money from a Roth account instead.
This year, millennials can put a total of $5,500 in a Roth IRA, a traditional IRA or a combination of the two.
Their investment mix is too conservative.
Perhaps because they witnessed the carnage in the stock market during the financial crisis of 2008, millennials are risk-averse investors, to the detriment of their retirement savings.While 85 percent of millennials are saving for retirement, only a quarter of them own stocks, a Bankrate survey this spring found.
“Staying out of stocks is a mistake,” says Joshua DeJohn a financial advisor with Waterstone Financial Services in Pittsford, N.Y. “You need to have long-term exposure to equities in order to grow your assets.” That’s because stocks offer bigger returns over time, so the growth in your savings can outpace inflation.

Use an online asset allocation calculator to determine an appropriate blend of stocks and bonds for your risk tolerance, or select a target-date fund that will automatically rebalance investments to become less risky as you approach retirement.
They’re putting too much money toward their kids’ education.
Since many millennials are still paying off student loans, they know first-hand the burden that college debt can be in the early years of adulthood. To shield their children from this strain, millennials are increasingly over-investing in their children’s 529 college accounts at the expense of their own retirement.
Millennial parents want to cover on average three-quarters of their children’s college costs, and half want to pay the entire bill, according to
a Fidelity report in September.
Fund your retirement first, because you can’t borrow to pay for your golden years. Then help your children select an affordable college and a major that provides a decent return on investment to pay back any student loans.

They’re betting on an inheritance.
Some millennials may be too optimistic about a potential inheritance. One in ten millennials expect to be gifted their retirement, according to a September study from Insured Retirement Institute and the Center for Generational Kinetics. But a quarter of their Baby Boomers parents believe it’s better to spend all your money and let the next generation create its own wealth, according to an HSBC report released last year.
Even Boomers who want to leave money to their millennial kids may have trouble doing so, given their own retirement planning shortfalls. “
“Boomers are spending more money because they’re living longer and they’re healthier,” says Lauren Locker, head of Locker Financial Services in Little Falls, N.J. “They’re still trekking around and traveling in their 80s. I’m not sure there will be anything left for the millennials.”
Culled  from The Fiscal Times

Friday 20 November 2015

Do financial advisors put your needs before theirs? -By Andrew Osterland


A new fiduciary standard applying to financial advisors of retirement accounts, including individual retirement accounts, is expected to be finalized by the Department of Labor within the next several months. Even if the Republican-controlled Congress passes legislation to halt the DOL rule-making process, President Obama will veto it, enabling the biggest changes to the Employee Retirement Income Security Act (ERISA) since it was drafted 40 years ago.
"The ERISA fiduciary definition goes back to 1974, when there were no 401(k) plans and IRAs were still small," said Kevin Keller, CEO of the Certified Financial Planner Board of Standards. "The world has changed dramatically since then. It's time to update the rules."
Currently, registered investment advisors regulated by the Securities and Exchange Commission or state securities regulators are already held to a fiduciary standard of conduct under which they must act in their clients' best interests. That means putting the client's needs before their own, and if they don't, they can be sued by investors.
The CNBC editorial team presents our inaugural list of the Top 50 Money Management Firms .
Securities brokers, however, are regulated by the Financial Industry Regulatory Authority under a "suitability" standard. The investments they recommend must be suitable for investors, but they are not required by law to act in their clients' best interests. Any disputes between brokers and their clients are settled through an arbitration process.
"The new rule represents long-overdue consumer protection," said Geoffrey Brown, CEO of the National Association of Personal Financial Advisors, which also supports the DOL proposal.
"It's time for this," he said.
Opponents of the proposed rule — predominantly organizations representing brokerage and asset management firms — contend that it will hurt many of the investors it is intended to protect.
"Our biggest concerns are reduced access to advice for the lower end of the investor spectrum and higher costs for individuals," said Andy Blocker, executive vice president of public policy and advocacy at the Securities Industry and Financial Markets Association (SIFMA). "Either investors will be put in an account where they pay more, or they'll get less service.
"As the rule is constructed, it's unfeasible to serve the market profitably on the lower end," he added.
Blocker said that the DOL rules are overly complex, have onerous disclosure requirements for firms and will create new legal liabilities for advisors to retirement accounts.
"These restrictions will upend the marketplace," he said.
There is no question that the DOL proposals will force major changes on broker-dealers currently managing 401(k) plans and advising on individual retirement accounts. The new systems required to monitor advisors and produce better disclosures for clients will cost a lot of money — some of which will almost certainly be passed along to consumers.
"In the short term, costs will increase, but in the medium- to long term, there will be more transparency in the market, and prices may start to come down in time," said Marcia Wagner, head of the Wagner Law Group, which focuses on ERISA law and employee benefits.
"Like every major regulatory project, there are positive and negative aspects to this," Wagner said.
The DOL has had an extended comment period and has held hearings on its re-proposed rule — it initially tabled the rule in 2010 — and is expected to make significant changes to the proposal. Keller of the Certified Financial Planner Board of Standards expects the department will relax some of the disclosure requirements and modify the rules about communications between advisors and prospective clients and likely give firms more time to comply with the rule.
He also expects it will change some of the details around the "best interest contract" (BIC) exemption, which is the biggest change to the DOL's original proposal. Advisors receiving commissions or other compensation that might cause conflicts with their clients' interests can receive an exemption as long as they adequately disclose and manage those conflicts.
Blocker at SIFMA said the BIC is unworkable as is, and if the DOL plans to make substantial changes to it, it should put those changes out for public comment and hearing again.
So will individual investors with small retirement accounts be left to manage for themselves? Possibly. Wagner expects that some firms will decide to exit the marketplace rather than revamp their operations.
However, there will be plenty of advisors willing to fill the breach if firms choose to exit the business. Retirement plan sponsors and participants may need to do some legwork, but there will be options.
"People may need to search out the experts in 401(k) plans and IRA rollovers," she said. "If an advisor says they can no longer handle the account, find someone who can. They are out there."
While the DOL proposal will significantly change the ground rules for many advisors currently serving retirement accounts, it won't be the massive upheaval that opponents of the rule suggest, said Keller.
In 2007, when the CFP board decided to require that CFPs follow the fiduciary standard, industry opponents made similar gloomy predictions about firms and advisors abandoning their certification. Since then, the number of advisors with the CFP certification has risen by a third.
"This will change the way firms operate, but they will figure out how to accommodate the new requirements," said Keller. "There are costs involved, but the benefit to consumers of having their interests put first far outweigh the expenses."
Additionally, Secretary of Labor Thomas Perez unveiled on Monday the DOL's proposed rule to clarify ERISA's application to state-run IRA programs. The proposed regulation includes a rule modifying the payroll-deduction safe harbor to allow for an ERISA exemption for auto-enroll payroll-deduction IRAs offered by states as a default program where there is a requirement for an employer to have a plan.
  Culled from CNBC.com

Thursday 19 November 2015

Taxes on Retirement Assets: How to Pay Less By Roger Wohlner

Retirement planning can be tough. It is hard enough to save for a comfortable retirement during your working years. Once you actually retire, managing your withdrawals and your spending can be complicated. One important and complex area in both instances is managing the process in the most tax-efficient manner.
If you have portions of your nest egg in various types of accounts ranging from tax-deferred to tax-free (a Roth) or to taxable it can be a challenge to decide which accounts to tap and in what order.
Required minimum distributions (RMDs) also come into play after age 70.5. Here are some tips for those saving for retirement, retirees and for financial advisors advising them.

Fatten Up Your 401(k)

Contributing to a traditional 401(k) account is a great way to reduce your current tax liability while saving for retirement. Beyond that your investments grow tax-deferred until you withdraw them down the road.
For most workers, contributing as much as possible to a 401(k) plan or a similar defined contribution plan like a 403(b) is a great way to save for retirement. The maximum salary deferral for 2015 is $18,000 with an additional catch-up for those age 50 or over of $6,000, bringing the total maximum to $24,000. Add any company matching or profit sharing contributions in and this is a significant tax-deferred retirement savings vehicle and a great way to accumulate wealth for retirement.
The flip side is that with a traditional 401(k) account, taxes, at your highest marginal rate, will be due when you withdraw the money. With a few exceptions, a penalty in addition to the tax will be due if you take a withdrawal prior to age 59.5. The assumption behind the 401(k) and similar plans is that you will be in a lower tax bracket in retirement, though as people live longer and the tax laws change we are finding this is not always the case. This should be a planning consideration for many investors.

Use IRAs

Money invested in an individual retirement account (IRA) grows tax-deferred until withdrawn. Contributions to a traditional IRA may be made on a pre-tax basis for some, but if you are covered by a retirement plan at work, the income limitations are pretty low.
The real use for an IRA for many is the ability to roll over a 401(k) plan from an employer when they leave a job. Considering that many of us will work at several employers over the course of our careers, an IRA can be a great place to consolidate retirement accounts and manage them on a tax-deferred basis until retirement.

Considerations With a Roth IRA

A Roth account, whether an IRA or within a 401(k), can help retirement savers diversify their tax situation when it comes time to withdraw money in retirement. Contributions to a Roth while working will be made with after-tax dollars so there are no current tax savings. However, Roth accounts grow tax-free and if managed correctly, all withdrawals are made tax-free.
This can have a number of advantages. Besides the obvious benefit of being able to withdraw your money tax-free after age 59.5 and assuming that you’ve had a Roth for at least five years, Roth IRAs are not subject to RMDs—that's a big tax savings for retirees who do not need the income and who want to minimize their tax hit.
For money in a Roth IRA, your heirs will need to take required distributions, but they will not incur a tax liability if all conditions have been met.
It is generally a good idea to roll a Roth 401(k) account into a Roth IRA versus leaving it with your former employer in order to avoid the need to take required distributions at age 70.5 if that is a consideration for you.
Those in or nearing retirement might consider converting some or all of their traditional IRA dollars to a Roth in order to reduce the impact of RMDs when they reach 70.5 if they don’t need the money. Retirees younger than that should look at their income each year and in conjunction with their financial advisor, decide if they have room in their current tax bracket to take some additional income from the conversion for that year.

Open an HSA Account

If you have one available to you while you are working, think about opening an HSA account in conjunction with your high deductible health insurance plan. Pre-tax contributions of $3,350 for an individual and $6,650 (increasing to $6,750 for 2016) for a family can be made to the account and those age 55 or over can contribute an additional $1,000.
Withdrawals to cover qualified medical expenses are tax-free. The real opportunity here for retirement savers is for those who can afford to pay out-of-pocket medical expenses from other sources while they are working and let the amounts in the HSA accumulate until retirement to cover medical costs that Fidelity now projects at $245,000 for a retiree couple where both spouses are age 65

Choose the Specific Share Method for Cost Basis

For investments held in taxable accounts, it is important to choose the specific share identification method of determining your cost basis when you have purchased multiple lots of a holding. This will allow you to maximize strategies such as tax-loss harvesting and to best match capital gains and losses. Tax-efficiency in your taxable holdings can help ensure that more is left for your retirement.
Financial advisors can help clients to determine cost basis and advise them on this method of doing so.

Manage Capital Gains

In years when your taxable investments are throwing off large distributions — to the extent that a portion of them are capital gains — you might utilize tax-loss harvesting to offset the impact of some of these gains.
As always, executing this strategy should only be done if it fits with a client’s overall investment strategy and not simply as a tax-saving measure. That said, tax-management can be a solid tactic in helping the taxable portion of your retirement savings portfolio grow.

The Bottom Line

Saving for retirement is mostly about the amount that is saved. But at all phases of saving for retirement there are things investors can do to help mitigate taxes that can add to the amount ultimately available in retirement. This is an area where knowledgeable and experienced financial advisors can add real value to their client relationships
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Culled from Investopedia

Wednesday 18 November 2015

7 Ways to Pay for College Without Student Loans - By AJ Smith


7 Ways to Pay for College Without Student Loans
pay-off-student-loans
College isn't cheap — and the price continues to rise year after year. Student loans are the first place most prospective students look to, but they are not always necessarily the right option.

Federal student loans can cover the bulk of college costs, but they may not foot the entire bill for some students. And when private student loans require a credit check or a co-signer for some borrowers with no credit history, students may not be able to utilize that option too. (You can get your free annual credit reports at AnnualCreditReport.com and get your credit scores for free on Credit.com to see where you stand.)
Here are some ways you can pay your tuition bills without taking out loans as you work toward your degree.
1. Picking the Right School
The price tags on colleges and universities can vary greatly, so you can save yourself some money by choosing wisely. In general, public schools are cheaper than private institutions. There are also schools that provide financial aid based on need, some that offer free tuition based on your academic record, and some that are free altogether. You can also consider attending community college for the first few years of school then transferring to a four-year institution, saving thousands of dollars.
2. Grants
Grants are essentially gifts typically (but not always) reserved for students who demonstrate financial need. They can be awarded by the government at the state and federal level or come from private organizations and universities. Many grants target specific segments of student by major and interest or some other defining trait (like first-generation students). You will need to fill out the Free Application for Federal Student Aid, or FAFSA to be eligible for a federal grant. It's also a good idea to do some online research to find others.
3. Work-Study
Student employment through the university can help fund your college expenses. The Federal Work-Study Program offers these opportunities at more than 3,400 schools, so make sure you tick the box on your FAFSA indicating interest in student employment. These are usually part-time positions that likely align with your field of study, giving you an additional resume boost.
4. Scholarships
There are all sorts of scholarships out there that you may qualify for based on your academic, athletic or community-oriented experiences. Some are highly competitive, and it's a good idea to look for and apply to as many as you can. Qualifications may be based on background, ethnicity, location, desired area of study or something you have accomplished. Most will require a writing sample so you can prepare early by writing a few different essays that you can customize for specific scholarship offers and keep track of the key information for each one with a spreadsheet. Like grants, these do not have to be repaid.
5. Side Jobs
If possible while maintaining your studies, you can always look into leveraging your skills and work ethic into an off-campus gig. Look online and at job boards across campus or in your college town for some easy ways to earn more cash. These can range from waiting tables, working on a construction crew, acting as an administrative assistant, getting a paid internship, tutoring kids in the local community, or even freelancing your writing or design skills.
6. Crowdfunding
The newest way students are finding financial help for college education is through online crowdfunding sites like GoFundMe, DreamFund, Indiegogo and more. You can ask family and friends to pitch in any possible amount for your education and even inspire strangers by sharing your personal story. The more compelling your degree pursuit is and the better an investment you can sell yourself as, the more successful this strategy is likely to be.
7. Employer Reimbursement
If you have a job before earning your college degree, you may be able to get help funding higher education with your employer. Many will reimburse employees for part or all of college tuition costs — especially if the course or major is directly related to their current field. Check with your employer if you are looking into colleges and see if you can reach some sort of arrangement. You could even seek out employers or companies that offer this benefit if you are just starting your job search.
The cost of higher education can be overwhelming, but there are avenues you can take to afford college and enter "the real world" without carrying too much (if any) debt. All it takes is some research, a little creativity, and a lot of hard work.

More from Credit.com

Tuesday 17 November 2015

3 ways you’re sabotaging your retirement without realizing it - By Elizabeth O'Brien

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If you’re like most American workers, it’s easier for you to buy a flat-screen TV today than to save for a future when you might be too deaf to hear it. The reasons why, however, have little to do with Cyber Monday specials.
Our deficits are many, and they’re not entirely our fault. We’re the products of ancestry, culture, and upbringing, after all, and we approach retirement planning with deep-seated forces stacked against us that go back to humanity’s earliest days.
“There are good, biological reasons why you want to live with what you have rather than save for an uncertain future,” said Jeffrey Stevens, assistant professor in the department of psychology at the University of Nebraska-Lincoln, who studies the development of human decision-making.
Read: We’re all idiots about money and there’s little we can do about it One byproduct of this evolutionary, cultural and parental baggage is an estimated national retirement deficit — the amount by which U.S. households will collectively fall short of their projected needs — of $4.13 trillion, according to the Employee Benefit Research Institute. And while average 401(k) balances at Fidelity hit a record last year, that average was just enough to fund one year in a private room of a median-cost nursing home.
D MA MB MC MD ME ZG ZH ZQ ZR ZS ZT ZU To close that gap, retirement plan designers are taking aim at human behaviors in both plan design and employee education to encourage better saving. This isn’t altruism: Well-designed retirement plans can help employers attract and retain workers, and companies generally prefer that their workers retire on schedule to manage costs.
They’re doing that by plumbing the field of behavioral finance, which studies the reasons people make seemingly irrational financial decisions. MarketWatch explored three of the biases — default, present and optimism — that may be keeping us from saving as much as we should without our realizing it.
Default bias pulls us toward the option in front of our faces
It’s natural that humans feel comfortable sticking with the default. Hunters and gatherers didn’t accumulate wealth for the future, instead consuming resources as they became available, said Coren Apicella, assistant professor of psychology at the University of Pennsylvania. While daily survival was no mean feat, it didn’t require much complex decision-making.
Our default bias might be an outgrowth of “a mismatch between our ancestral environment and the modern world,” Apicella said. Humans today need to make complex, forward-looking decisions that weren’t required of us in our ancestral pasts. Whenever possible, we let those decisions slide.
Students of human behavior have long known that we eschew active decision-making, preferring to stick with whatever option is before us. The Pension Protection Act of 2006 paved the way for the widespread use of auto-enrollment, which exploits inertia by enrolling workers in 401(k) plans automatically and requiring those who don’t want to participate to opt out.
Read: 7 lies investors tell themselves
Similarly, auto-escalation automatically increases the rate at which employees save. This is key, since around half all of plans still default participants into a too-low savings rate of 3% of their salary — a rate workers tend to interpret as a recommendation rather than a fluke of history. (The 3% rate became widely adopted after it was used in an early government illustration that wasn’t intended as an endorsement, industry experts say.)
Since we’re hard-wired for passivity, companies are studying the best times to let workers know when to act. “If you’re asking people to make complex decisions, it matters if they’re not tired,” said Stephen Wendel, head of behavioral science at Morningstar. A study Wendel’s team conducted for a large retailer found Sunday evening was the best time to email employees, while a large manufacturer found the sweet spot during a midweek morning.
And then there are times to avoid: “At 2 a.m. you don’t want to send anything, because half of the people on the Internet are drunk,” said Shlomo Benartzi, professor and co-chair of the behavioral decision-making group at the UCLA Anderson School of Management and chief behavioral economist at AllianzGI, who has studied how plan participants make decisions. (One finding: “People make more emotional decisions on smaller screens.”)
We can co-opt our default bias for our own good with some self-awareness, said Sudeep Bhatia, assistant professor of psychology at the University of Pennsylvania. Those with college-bound children, for example, can put college savings on autopilot through regular bank account withdrawals into a 529 plan.
Present bias makes the pull of instant gratification strong
Instant gratification is well-documented in scientific literature and ingrained in our consumer culture. Humans tend to prefer current rewards over future rewards, discounting the gains that frugality today can yield tomorrow.
“Universally, people are motivated for the here and now,” said Hal Hershfield, assistant professor of marketing at the UCLA Anderson School of Management, who has worked with Prudential on various campaigns that use behavioral finance to help people save.
From an evolutionary perspective, this makes sense: The future was uncertain for ancestors who spent their days hunting wild animals. What’s more, saving for the future might have meant starving now. (That remains the case for many low-wage workers today.)
Our upbringings can either enhance our natural tendency for instant gratification or help us restrain it. People who grew up in households where money was regularly discussed but not argued about usually have better impulse control than those who grew up in homes where discussing money was taboo, said Nancy Molitor, a practicing clinical psychologist and assistant professor of clinical psychiatry and behavioral sciences at Northwestern University Feinberg School of Medicine.
Read: 6 ways thinking differently can make you money
Molitor has affluent clients who never had to limit purchases growing up. Their parents bought them whatever they wanted, and the means to that end wasn't discussed. This makes it hard for them to self-regulate in adulthood. “I often see people with the means to save, in their prime earning years, and yet they struggle,” Molitor said.
Saving seems risky to these people, Molitor said, even though not saving is far riskier. Gradual exposure is key in helping them overcome their fear, she said. Beginning savers can start by putting away a tiny amount a month — as little as $1 will do — and then gradually increasing that amount when they see that no harm has come from their efforts.
Regardless of our backgrounds, it’s hard for most of us to envision our future. This makes saving for a vague point on the horizon more difficult than saving for, say, a wedding next year. This, too, has evolutionary underpinnings.
Courtesy Prudential A photo of this story's author, aged using an application like one Prudential provided to a client. (Courtesy Prudential) D MA MB MC MD ME ZQ ZR ZS ZT ZU When the human race began more complex thinking thousands of years ago, the average lifespan was much shorter than it is today. “We didn’t live that long,” Stevens said. “There was minimal retirement.”
Prudential and other companies have tried to help workers over this hump by aging pictures of their faces. “It’s trying to ramp up the emotional connection to our future selves,” Hershfield said.
To the extent that we can visualize our futures, we might picture them differently than our peers. Companies have begun tailoring the retirement images they present to particular worker demographics, said Robyn Credico, defined contribution practice leader at consulting company Towers Watson: While a lone figure on a golf course might be the ideal retirement vision for some, others might prefer a picture of a large, multigenerational meal.
Those of us without full-on phobias who nonetheless find it hard to save can make indulging harder, experts advise. We can avoid the shoe store if we can’t leave without buying a pair, delete the bookmarks of our favorite online retailers, stop saving our credit card information on e-commerce sites and opt out of promotional emails.
Optimism bias can make us think too highly of the days to come
People tend to be optimistic about the future, which causes us to rationalize our lack of planning. “Things will work themselves out,” we say. Or, “I’ll deal with it when I get there.”
This could have evolutionary underpinnings, according to Stevens. If our ancestors weren’t optimistic about the future, they wouldn’t have ventured forth to explore new lands, and society wouldn’t have progressed to the extent it did.
When motivating employees to save for the future, Fidelity opts for positive reinforcement instead of negative messages that can foster apathy, said Jane Souza, senior vice president of workplace solutions at Fidelity Investments, which acts as the 401(k) record keeper for 21,000 companies representing 13 million investors. Instead of a red “danger zone” on the online dashboard of a saver who’s not on track to meet her goals, for example, the system may give her a green check mark when she completes a step to encourage her to continue.
Prudential has designed employee seminars to address optimism bias, part of the company’s effort to “blow up” traditional 401(k) education, said Jennifer Putney, vice president, marketing & strategy, total retirement solutions at Prudential Retirement.
Workers are asked to post experiences that happened in their past on one board, and post experiences that might happen in their future on another board. Good things went on yellow post-its and bad things went on blue post-its. (The company also ran a television commercial showing this exercise done on a large scale with magnets.)
The board representing the past was an even mix of yellow and blue, but the future board was mostly yellow. The goal is for workers to realize that the future, like the past, will probably be a mixed bag , and that it’s prudent to set aside funds for the rainy days to come.
Simply recognizing that optimism bias exists can go a long way in helping us overcome it. Part of that involves recognizing that we’re not going to magically become different people as we age.
“We’ll have the same emotional makeup in the future,” Hershfield said. If we can easily save today, we’ll easily save tomorrow. If it’s hard for us to save now, it will require effort — and not the passage of time — to change that.


Culled from MarketWatch

Monday 16 November 2015

7 Social Media Mistakes That Can Get You Fired From Your Job-Megan Elliott


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Sometimes, a social media faux pas is more than embarrassing. Failing to police your online behavior could get you into big trouble at work if you’re not careful. An ill-timed tweet or a thoughtless Facebook post might earn you a stern talking-to from your boss. In the worst-case scenario, a social media blunder might cost you your job.
Everyone’s heard the stories of people who’ve been fired because of their social media screw-ups. But until you find yourself in the hot seat, it’s easy to forget that your actions online may come back to haunt you.
“Social media is now so woven into the fabric of young people’s lives that they forget not everything is suitable to put out there,” Alison Green, a former hiring manager who runs askamanager.org, told Time.
A healthy dose of common sense is usually enough to stop most social media blunders before they start. Yet given our culture of constant sharing, it’s easy for a momentary lapse in judgement to turn into a big problem. Short of shutting down all your profiles, your best approach is to think before you post. That should help you avoid these seven big social media screw-ups, which are potential career killers.

1. Making racist, sexist, or other offensive comments

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Posting inflammatory content online is a quick route to a pink slip, a lesson many people have learned the hard way. Back in 2013, PR rep Justine Sacco tweeted an insensitive comment about AIDS just before getting on a plane to South Africa. By the time she landed a few hours later, her job was history and her reputation was toast. That’s how quickly things can spin out of control.
Sacco’s hardly the only person who’s had a career go up in smoke because of an offensive or thoughtless post. In Little Rock, Ark., the owner of travel agency fired an employee for making homophobic comments online. The employee’s remarks were not only offensive, but they were costing the company business.
Policing what an employee says outside of work may seem unfair, no matter how despicable their comments. But a company that ignores those comments may be putting themselves at risk.
“[Employers] are required by law to maintain a diverse and respectful workplace,” Nicholas Woodfield, an attorney with The Employment Law Group in Washington, D.C., told the Associated Press.

2. Complaining about your job

Everyone needs to vent sometimes, but publicly sharing your true feelings about your job on social media can land you in hot water. While valid complaints about working conditions are protected speech in many cases, according to the National Labor Relations Board (NLRB), general gripes about your boss probably aren’t.
Employees are allowed to engage in “concerted activity” to improve their pay and working conditions, says the NLRB. So, when a group of construction workers posted a YouTube video sharing their concerns about unsafe working conditions, the NLRB said they were within their rights to do so. But if your complaint is that your job is boring or your boss is a jerk, you should probably keep it to yourself.
“Be very careful what you write,” Kathleen Lucas, labor and employment attorney at Lucas Law Firm in San Francisco, told the San Francisco Chronicle. “Not only can there be consequences, you can really create a problem in your workplace.”

3. Sharing confidential information

confidential information
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Accidentally sharing your company’s secrets online may be easier than you realize. While posting confidential reports and documents is an obvious no-no, even innocent updates may inadvertently reveal information that your employer would prefer to keep private.
Say your company is planning a merger that hasn’t been formally announced yet, but you tweet something that gives away the big news. Or a big deal you’ve been working on falls apart and you post about your disappointment on LinkedIn, even though your bosses would prefer to keep the news under wraps.
“[O]ften employees don’t recognize the crossover between their professional and personal worlds and the ways that seemingly personal updates can reveal business information,” noted Inside Counsel, a magazine for corporate lawyers.

4. Posting something stupid on behalf of your company

It pays to think twice about what you post if you’re in charge of your company’s social media. Just ask the American Apparel employee who tweeted a photo of the Challenger explosion to mark the Fourth of July (it turns out the employee, who was born after 1986, didn’t realize they were sharing a photo of a national tragedy). Or the Houston Rockets employee who posted a tweet with some inappropriate emojis during the playoff series with the Dallas Mavericks (the employee was later fired).
If you’re tweeting or sharing on behalf of your employer, remember that whatever you do reflects on them. While some mistakes are truly innocent, post anything wildly out of line and you’re likely to be shown the door.

5. Sharing when you should be working

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Not only does using social media while working make you less productive, it could reflect poorly on you as an employee. Some old-school employers may still look unkindly on any kind of social media activity during the workday. More forgiving bosses are likely to understand that you might occasionally check Twitter from your phone. They may even want you to use your personal accounts to promote the company. But getting too caught up in the online world and ignoring projects at work could spell trouble.
“Are you blogging or Facebooking during work hours when you shouldn’t be? Your boss or a vindictive, catty co-worker can easily catch on, landing you a warning or a meeting with the HR department,” CEO and co-founder of Strikingly.com David Chen told CIO.

6. Posting drunk photos from work gatherings

You and your co-workers hit the bar after a long day at the office, and everyone indulges in a few too many drinks, including your boss. You snap a few goofy picks of everyone and share them on Instagram, not thinking anything of it. That is, until the next day, when your boss sobers up and isn’t so happy that those photos are out there in the world for anyone to see.
When it comes to work gatherings that involve alcohol, remember that the rules are different from hanging out with friends. The best move is to stay sober, but if you do find yourself a little tipsy at an office gathering, try to keep your phone in your pocket.
“In college, getting drunk is rewarded. But when you’re in a workplace, there are different consequences,” Michael Ball, founder of CareerFreshman.com, told NBC News.

7. Broadcasting your job search

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Social media is a key tool in the modern-day job search. But if you’re on the hunt for a new gig and your current boss sees that you’ve suddenly connected with half a dozen recruiters on LinkedIn, it could make for an uncomfortable situation at the office. You may find yourself passed over for plum assignments or even first on the list of employees to be let go in the next round of layoffs.
“[Your boss] will assume that you’re unhappy and worst case scenario, may start taking steps to terminate you. Supervisors want employees who are committed to the job, not to a job search,” Andy Teach, the author of From Graduation to Corporation, told Forbes.
That doesn’t mean you should take your job search offline, or give up looking for a new position. After all, you’ll find it easier to get hired if you’re currently employed. You just need to be savvy about your social media moves. Adjusting your LinkedIn privacy settings will help you keep your job search secret from your boss and coworkers.

Culled cheatsheet