3 Dividend Stocks Retirees Should Avoid By Dan Caplinger

The energy sector is a dangerous place for dividends right now. Image: Flickr user Ian Burt.

Retirees are always looking for ways to boost their portfolio income, but in today's market environment, not every dividend stock is a smart holding for conservative investors. If you're not careful, you can get in over your head with an ill-suited dividend stock and end up with a sizable capital loss. To help prevent any nasty surprises, let's take a look at three dividend stocks that retirees should think twice about before jumping into right now.
Denbury Resources is a high-risk oil gamble
Plunging oil prices have hammered stocks throughout the energy industry, and the resulting share-price carnage has taken what used to be fairly modest dividend yields and turned them into impressive high-yielding stocks. Denbury Resources (NYSE: DNR  ) is one example, with its modest $0.0625 per share quarterly dividend now working out to a yield of more than 6%, because of the stock's 75% drop since late last year.
Denbury is far from a lost cause, as its technology for tertiary recovery still gives it an impressive competitive advantage against other energy companies. Yet with about $3.5 billion in debt and about a year's worth of hedge protection for future production, Denbury really needs to see oil prices regain at least part of their lost ground in the near future to avoid what could become a cascading liquidity event. If that recovery comes, Denbury shares could skyrocket, but the risk involved is higher than many retirees will want to take on even with such a huge potential reward.
Annaly Capital could still end up falling with the Fed
Real-estate investment trusts that invest in mortgage-backed securities were huge winners in the recovery from the financial crisis, as falling interest rates allowed them to make big profits from their leverage-financed portfolios. Yet what retiree investors have figured out is that even though Annaly Capital (NYSE: NLY  ) has consistently sported double-digit dividend yields, its share-price losses have been large enough to wipe out the positive impact of its dividend payments. Investors have seen a negative total return over the past four years, and the Federal Reserve hasn't even made any moves to raise short-term rates yet.
Mortgage REITs can take steps to protect themselves against higher rates by lowering levels of leverage and being more conservative in their investing. Yet long-term investors will remember that Annaly has been through this part of the business cycle before, and the stock lost nearly half of its value when a long period of low interest rates finally came to an end. If Annaly were to adjust its strategy, it could find ways to mitigate losses in an upward-trending interest rate environment, but retirees shouldn't take the risk that the mortgage REIT will just keep the status quo and plan for the long run.

Source: KB35, Flickr.

Coca-Cola is too fizzy
My last pick is controversial, as blue-chip beverage giant Coca-Cola (NYSE: KO  ) is a well-known favorite among many investors who point to the company's track record of 53 consecutive years of raising its dividend every single year. Coca-Cola also carries an attractive 3.2% yield, which is well above the average for the Dow Jones Industrials (DJINDICES: ^DJI  ) , of which it is a member.
Where Coca-Cola runs into problems is with its valuation. The company trades at 24 times trailing earnings, and even based on forward 2016 estimates, Coca-Cola stock fetches an earnings multiple of 20. That wouldn't be so bad if the company's earnings were growing, but most investors expect Coca-Cola to have a flat bottom line this year, and long-term growth estimates are in the low- to mid-single digit percentages. Paying such a high multiple for a low-growth company is fraught with peril, eating into the beverage giant's reputation for being a defensively positioned stock. When interest rates start to rise, conservative investors will likely see an exodus away from Coca-Cola stock that could result in substantial capital losses.
Retirees need to be careful in assessing dividend stocks, because an attractive yield can often hide problems that can blossom into full-blown crisis situations that produce substantial losses. By being picky about choosing dividend stocks, you can protect yourself as much as possible from potential future carnage.

The $60K Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could ensure a boost in your retirement income of as much as $60,000. In fact, one MarketWatch reporter argues that if more Americans used them, the government would have to shell out an extra $10 billion… every year! And once you learn how to take advantage of these loopholes, you could retire confidently with the peace of mind we're all after. Simply click here to receive your free copy of our new report that details how you can take advantage of these strategies.

Culled from fool.com

Pension "advance" firms sued over deceptive practices -Kevin McCoy

(Photo: CFPB)

Online ads offering advance payment on future pension income may have seemed like a financial lifeline for some senior retirees and military veterans.
But a lawsuit filed Thursday by federal and state regulators charges that the offers by California-based Pension Funding LLC and Pension Income LLC in reality came with high interest rates — a detail not disclosed to customers.
The federal court action filed by the U.S. Consumer Financial Protection Bureau and the New York State Department of Financial Services accused the firms and present or former executives Steven Covey, Edwin Lichtig and Rex Hofelter of deceiving consumers by characterizing the transactions as advances, not loans.
"These companies duped consumers into taking out pension loans by deceiving them about the terms of the deal," CFPB Director Richard Cordray said. "We are working to put a stop to the illegal practices these companies are using to sell their bogus product to military veterans and other pensioners."
A joint telephone number for the firms had been disconnected, and corporate representatives could not immediately be reached for comment.
The companies paid to steer Internet search traffic to their websites by targeting consumers who conducted Google browser searches for such phrases as "pension loan" or "sell my pension," the lawsuit charged.
The company websites described "tailored financing programs" in which the firms purported to make lump-sum payments for eight years of future cash flow from consumers' pension payments, the lawsuit alleged.
"This pension payment is not a pension loan; it is a pension lump sum," the websites stated, according to the lawsuit. The sites also allegedly promised "[n]owhere else can you leverage your military, civil service or corporate pension to secure near-immediate cash."
Regulators said the scheme operated from 2011 until roughly December, 2014. The companies and their officials told applicants the purported advances were better than a home equity line of credit or a credit card, based on lower rates and fees, the lawsuit charged.
However, the transactions represented loans that on average had an effective annual interest rate of $28.56%, the lawsuit charged. The companies made their entire profit and deducted all fees at the inception of each deal, the lawsuit charged.

New York State Department of Financial Services logo. (Photo: NYSDFS)

"This scheme involved false advertising, illegal loans at high interest rates and other abusive tactics that our department simply will not tolerate," said Anthony Albanese, acting superintendent of the New York Department of Financial Services.

Culled from US Today

How to Fix 3 Retirement-Savings Flaws-By Anne Kates Smith

By avoiding these common mistakes, you'll make the most of your savings.

Thinkstock

In its annual snapshot of retirement saving, investment giant Vanguard says more people are socking money away and doing it effectively with balanced, diversified target-date funds. But there’s room for improvement. Below, some savings shortcomings and how to fix them.
1. Low savings rate. More than 60% of retirement plans that enroll workers automatically do so at default rates of 3% of income or less. The fix: Boost your rate with the goal of getting to 12% to 15% (including any employer match) as quickly as you can.
2. Extreme investing. Roughly one in eight employees had portfolios that held either no stocks or nothing but stocks. The fix: Accounting for age and risk tolerance, keep stocks within a range of, say, 90% for aggressive investors with a horizon of 30-plus years to 50% for conservative investors whose goal is 10 years out or less. Most retirees should keep some money in stocks.
3. Too much company stock. Eight percent of plan participants still hold outsized stakes. The fix: Your human capital is already invested in your company—it’s the source of your income. Limit company stock to no more than 10% of your portfolio.

Culled from kiplinger.com

Survey: 1 in 10 not saving a dime for retirement -By Janna Herron

One in 10 American workers isn't saving for retirement, according to a survey that accompanied Bankrate's Financial Security Index for August. And their numbers are increasing, even though the economy has improved.

The national telephone survey, which includes a number of personal finance questions, asked how much people were contributing this year compared with last year. Among those who took the survey, 10% said they "did not contribute this year or last year." That's the highest percentage since Bankrate started asking the question in 2011.

"With millions of Americans behind in their retirement savings, it is important not only to save but to save more each year."- Greg McBride, CFA, Bankrate

There were a few positive developments among those who are saving, however. Among American workers:

• 19% are saving more in their retirement savings accounts when compared with last year.
• 14% are saving less than they were a year ago. That's an improvement from 2011, when 29% reported saving less.
• More than half are saving the same amount.

"With millions of Americans behind in their retirement savings, it is important not only to save but to save more each year," says Greg McBride, CFA, Bankrate's chief financial analyst. "Even for those saving the maximum, 401(k) contribution limits increased for 2015, affording the opportunity to put more away for retirement."

Retirement outlook

A persistent concern among many Americans is whether they'll be able to retire. The Great Recession and a lack of adequate planning have forced many seniors to keep working well into their 60s. And retirement researchers have pointed out that the decline of pension programs, the anticipated increase in medical expenses and a rising cost of living could make retirement more of a privilege than an expectation in the future.
The National Institute on Retirement Security reported in July that Americans in almost every state won't meet their financial needs in retirement. In a separate report, the group estimated that the median retirement account balance for all households near retirement was $14,500. For all households, it was a meager $2,500.
Part of the problem is that fewer companies are offering retirement accounts to their employees, according to an April study from The New School's Schwartz Center for Economic Policy Analysis. Only 53% of American workers were offered a retirement account at work in 2011, down from 61% in 1999.

Millennials are least likely to save

Bankrate's FSI survey revealed how different demographic groups went about saving for retirement. For instance:

• The youngest age group in the survey, adults age 18 to 29, was the most likely not to be contributing to a retirement fund.
• Democrats were nearly twice as likely as Republicans to say they saved more than last year.
• Those earning less than $30,000 a year were the most likely to not save at all.
• College grads were more likely to save more, while those who never attended college were the most likely to not sock away any savings.

Expert advice

Financial planners agree that saving sooner is the key because the money will compound over a longer time period, resulting in a bigger nest egg.

For example, an investor who puts away $5,000 a year from age 25 to 65 at a compounded rate of 8% will amass almost $1.3 million over those 40 years, says Gilbert Armour, a financial planner with SagePoint Financial. "Their friend, who procrastinates and starts 10 years later and has only 30 years, will reach $566,416 at age 65 -- less than half of their forward-thinking friend," he says.

Marguerita Cheng, CEO of Blue Ocean Global Wealth, encourages clients to contribute enough to receive a company match, if there is one. Then, slowly increase by 1% a year. If that's too much, then try $50 or $100 per paycheck.

"Challenge yourself to pay yourself first," she says. "We tell clients that we want you to have fun today and fun in the future."

Financial comfort fading

Overall, Americans are feeling confident about their financial circumstances, though they're less optimistic than they were earlier this year. Bankrate's Financial Security Index slipped for the 3rd straight month to the lowest reading since October 2014. The security readings for savings, debt, net worth and overall financial situation all declined.

Women's feelings of financial security turned negative for the 1st time this year, while men's feelings tied the lowest level of the year.

Still, the overall reading of 101.2 indicates improved financial security compared with 1 year ago, and job security rebounded from last month's decline.

Culled from Bankrate.com

Don’t be too generous with your retirement cash-By Elizabeth O'Brien

Study: older households give lots to younger relatives

We hear a lot these days about the strains on the sandwich generation, those caught between the demands of their children and their aging parents. Yet a recent study suggests these intergenerational demands aren’t always equal: while children can strain middle-aged pocketbooks, aging parents generally don’t.

Indeed, older family members are more often on the giving end than on the receiving end of financial support, according to a recent study by the Employee Benefit Research Institute (EBRI). The goal with familial cash transfers is to make sure they’re based on math, not emotion, so they don’t endanger the giver’s near-term finances or retirement security, experts say.
In 2010, only about 4% of households with at least one member age 50 or above reported receiving cash transfers, including monetary gifts, loans or direct help paying bills, from their children or grandchildren over the previous two years.
Meanwhile, up to 45% of older households reported giving money to their younger family members, according the EBRI report, “Intra-Family Cash Transfers in Older American Households,” which analyzed data from the University of Michigan Health and Retirement Study, a long-running survey of older households conducted every two years.
The cash involved isn’t chump change, either: during the two-year period between 2008 and 2010, the average amount transferred by households who had at least one member between ages 50 and 64 was $8,350, while the average transferred by households with at least one member aged 85 or above was $4,787.
Planning for it
Often, this type of familial assistance isn’t formally budgeted for, experts say. “We think of cash transfers as discretionary, so they’re not included in the household budget,” said Sudipto Banerjee, research associate at EBRI and author of the report.
When it’s not properly accounted for, such help can pose a threat to the giver’s retirement security. “From a planning perspective, it’s important to determine what you’re willing to do, how you’re going to do it, and how it will impact your finances,” said Stein Olavsrud, a certified financial planner with FBB Capital Partners in Bethesda, Md.
Ideally, it’s best for families to consider the parameters of their potential support before confronted with a request. Parents who paid their minor child’s every expense should proactively consider whether they will contribute to their young adult’s down payment or graduate degree. “When a parent is faced with the need to support a child, they emotionally respond ‘yes’ and they often don’t take their financial life into account,” said Mark Avallone, founder and president of Potomac Wealth Advisors in Rockville, Md.
Thinking about future needs
Pre-retirees are more at risk of jeopardizing their nest egg than those already in retirement when giving cash to relatives, experts say. People who are still saving and investing for their retirement often don’t appreciate “the magnitude of their future retirement needs,” Avallone said. By contrast, those already in retirement are used to living on a fixed budget and have a better idea of how much money they can afford to give their relatives.

Not only do pre-retirees tend to underestimate their future needs, but many also tend to overestimate their financial position, Avallone said. He has midlife clients who have amassed bigger savings than they’d imagined possible when they were young, so they feel they have ample resources to share with their adult children without doing any math to back it up.
For many boomers, “having a million dollars meant you’d be wealthy,” Avallone said. Indeed, $1 million was the median amount estimated by workers of all ages — from their 20s to their 60s and beyond — to be necessary to retire comfortably, according to the 16th Annual Transamerica Retirement Survey of Workers released this spring.
While a million dollars is indeed much more than most Americans have amassed on the cusp of retirement, experts caution that it’s not enough to guarantee a comfortable retirement for a couple retiring today, much less one retiring in 10 to 15 years. After all, medical costs alone are estimated to gobble up $220,000 over the lifetime of a couple retiring in 2014 at age 65, according to Fidelity, and that amount doesn’t even include long-term care costs such as those associated with nursing homes or assisted living facilities.
Meanwhile, mid-lifers in the sandwich generation most frequently support their aging parents with time and service — not cash, experts say. This type of care could still result in financial hardship for the adult children if they’re forced to cut back at work to accommodate their parents’ needs.
Michael Delgass, managing director of Sontag Advisory in New York City, said he has a few clients who financially support their older parents, but for the most part, “money transfers downhill.” This dynamic could change in the coming decades, as fewer older people have pensions. Many of today’s retirees enjoy the financial cushion of a guaranteed income stream, which frees up funds for family members.
Either way, the mantra of retirement planning won’t change, Olavsrud said: “You have to take care of yourself first.” After all, those who gave generously to family members only to wind up short in old age will find the tables turned when they become dependent on the younger generation.

Culled from MarketWatch

How your chip debit card fights crime-By Claes Bell

That little gold chip embedded in your new debit card may not look like much, but it will mean big changes in the way you check out at the register -- and how likely you are to be hit by fraud.
What does the chip do anyway?
Built around a standard called "EMV" (short for Europay, MasterCard and Visa, the 3 payment networks that spearheaded it), the chip contains a tiny microprocessor that:

• Securely stores your payment information.
• Sends a unique, 1-time-use digital code to the payment terminal.

The chip can communicate with a payment terminal by being swiped like a regular card or dipped into a slot. Some chips also will be able to make a "contactless" payment from a short distance away.
If you haven't gotten a chipped card yet, you may soon. More than 4 out of every 10 debit cards in the U.S. are going to be chipped by the end of 2015, according to Aite Group, a financial industry research and consulting firm.
"From this point forward, you will see most banks issuing EMV-capable cards," says Julie Conroy, research director at Aite. "The smaller banks are a little bit further behind in the reissuance process."

Still, it will be a while before most payment terminals require you to dip your card rather than swipe, Conroy says.

Response to a debit card fraud epidemic
Why the switch? The biggest driver behind the move to chip debit cards is rampant debit card fraud.
A 2014 poll by ACI Worldwide and Aite Group found that 1 in 5 Americans had experienced debit card fraud in the past 5 years, and Aite data from 2010 put the annual cost for U.S. card fraud at about $8.6 billion a year.
Frequent data breaches that expose consumers' data have only added fuel to the fire. A 2014 report by Javelin Strategy and Research found 46% of U.S. consumers notified that their data was exposed in a data breach in 2013 went on to experience debit card fraud.
If you suspect your financial data has been compromised, check your credit report for suspicious activity. Get yours for free at myBankrate.
"In the current environment, all the criminals have to do is take that card information and they can create a card, or they can use any gift card that they get off the rack and put a new card number on the mag stripe, and then use it to conduct unauthorized transactions," says Doug Johnson, senior vice president of payments and cybersecurity policy at the American Bankers Association.
EMV chip debit cards make that particular tactic much more difficult.

"It becomes next to impossible for criminals to then just take all the data that was compromised in the Target breach and make a bunch of counterfeit cards because they wouldn't be able to replicate that dynamic transaction code that's generated by the chip," Aite's Conroy says.

Why you should care
To the extent that EMV cards can prevent some types of fraud, it may be smart for consumers to get their hands on one as soon as possible.

The impact of debit card fraud can range from annoying to catastrophic, depending on your financial circumstances. Thanks to consumer protection laws, most victims eventually will get their money back, as long as they report the problem in a timely manner. But they may have to wait until after the bank or credit union investigates the matter, leaving them scrambling to pay bills.

Also, if you don't report debit card fraud fast enough, banks may not be obligated to reimburse all -- or even some -- of your money.

If you want a chip debit card, you might be able to get one just by asking your bank, Conroy says.

"If the bank has the capability to issue EMV cards at this point, then most of them are able to honor customer requests," she says.

But don't expect miracles

Chip cards may help some consumers avoid falling victim to fraud, but that doesn't mean debit card fraud will go away, says Bob Hunt, vice president and director of the Payment Cards Center at the Federal Reserve Bank of Philadelphia.

"It is important to understand that, at present, EMV is not a solution to the entire problem of data breaches and fraudulent transactions," Hunt says. "This is particularly true for card-not-present transactions, such as purchases made on the Internet."

ABA's Johnson agrees EMV isn't a panacea.

Many countries that have switched to EMV cards have seen fraudulent debit purchases made in person drop substantially, but that drop was accompanied by a surge in so-called card-not-present fraud conducted online, Johnson says, and that will probably be the case in the U.S. as well.

It also won't help prevent companies from losing your payment details to hackers in data breaches, Aite's Conroy says.

1 in 5 Americans has experienced debit card fraud in the past 5 years.

"EMV is very effective at preventing counterfeit card use, but it does nothing to encrypt the data once it gets in the merchant's system," says Conroy.

Merchants get a deadline

Banks pay the biggest tab for debit card fraud, so you can understand why they would want to push forward with an expensive new card standard to stop fraud.

But merchants are less willing to foot the multibillion-dollar bill to install EMV-compliant terminals, says Sarah Jane Hughes, a university scholar and fellow in commercial law at Indiana University Bloomington's Maurer School of Law.

"Merchants are resistant ... because you need a different reader, and the readers are fairly expensive," Hughes says.

The total tab to replace point-of-sale terminals could reach $6.75 billion, according to Javelin.

That's why the major card networks will stage a "liability shift" to prod merchants into upgrading to EMV. After Oct. 1, if a counterfeit debit card purchase happens with a chip debit card because a merchant failed to upgrade, the merchant, not the bank, will be responsible, ABA's Johnson says.

ATMs and gas station card readers will follow in October 2017.

100% adoption will be a long time coming

Card networks hope this will be enough to persuade merchants to make the switch, but it could be a while, especially for smaller merchants. Aite Group is projecting that just under 6 in 10 payment terminals in the U.S. will be EMV-enabled by the end of 2015.

"The big merchants are going to be ready to go by the liability-shift date," Conroy says. "Many of them are kicking and screaming all the way because merchants aren't crazy about this essentially unfunded expense that got handed to them. Smaller merchants will absolutely trail, though."

Culled from Bankrate.com

Money and dating: Men dish on their biggest deal breakers-By Mandi Woodruff

Last week, in a decidedly unscientific fashion, Yahoo Finance asked a handful of women in their 20s and 30s to tell us their biggest dating deal breakers — specifically, the money habits that turned them off the most. This week, we gave the guys a chance to weigh in. Here's what they had to say:

Paying on the first date: Nearly all of the men agreed they would cover the bill on a first date, which is a good thing, considering almost all the women we interviewed said going Dutch on a first date is a no-no. The exception: One of our guys said he didn't pay on a blind date. "I didn't ask her out, so I didn't feel obligated to pay for the date," he said.

Asking about their finances too early in the relationship. Apparently bringing up questions like "What's your credit score?" or "How much do you earn?" aren't welcome early on in the dating process (no surprise there). The guys said finances shouldn't come up until at least the three-month mark. 

Too much credit card debt. Like the ladies, the men agreed that too much credit debt is a red flag, though they didn't specify exactly how much is considered too much. Only one guy said he could look past a potential mate's bad shopping habits, saying "Love trumps all...I'd have to really, really love her." Now there's a real romantic.

Their partner earning more. Who says men don't like earning less than their partner? Only one of the men we spoke with admitted he preferred earning more, while the others said it would be a major plus. "People who have issues with that might be a little insecure," one fella said

Culled from yahoo finance