2008 Insights

December 2008

This holiday season spend liberally – with your time, if not your money.  Take time to enjoy old traditions or start new ones.  Spending time with family and friends makes us feel better and after these past few months we could all benefit from the good cheer of loved ones.  Helping those less fortunate – by donating time or used clothing – also makes us feel better.  Don’t forget to document items you donate to charity; you may qualify for a tax deduction.

November 2008

Many people are surprised to learn that Medicare does not cover nursing home care beyond short-term rehabilitation.  Long-term care insurance will help pay for nursing home and, usually, home health care, for people needing assistance with at least 2 of the 6 daily living activities such as bathing, eating, etc. The average yearly premium for long-term care insurance for a 55-year old, healthy individual is about $1,578 for a maximum daily benefit of $150.  This presumes a 3-year benefit period, 90-day waiting period and 5% inflation.  Long-term care insurance is generally most appropriate for those who have enough assets to continue premium payments and want to protect their estate for their loved ones.

October 2008

Even with all of the turmoil we are now faced with, the S&P 500 index is up an average of 8% per year since its 1987 high. In 1987 the market went though a bear market, losing over 30% in 2 months. If you had invested $10,000 in guaranteed investments in 1987 and earned, say 4% annually since then, you would now have $22,787.  If you had invested $10,000 in a low-cost S&P 500 index fund at the 1987 high, you would have over $50,000 today.  Invest for the long-term.

September 2008

With school starting again, many parents are wondering how much pocket money a college freshman living in a dorm needs.  Wall Street Journal writer Karen Blumenthal says that the suggested personal expense budgets vary widely from school to school.  For example, New York University suggests a budget of $1000 per year while the University of Kansas recommends a budget of nearly $2300 per year.  However you and your student determine the amount for personal expenses, this is a great opportunity for them to take more responsibility for their finances.  Sooner or later, depending on your child’s maturity, they should get a credit card in their own name.  Help them with ground rules on when – and when not – to use it.  Having their own credit card can help them establish credit in their own name, which is important with more employers checking credit scores for new hires.

August 2008

According to the Employee Research Benefit Institute, fewer than half of workers surveyed said they tried to figure out how much they’ll need to retire comfortably.  The people who have calculated their retirement needs changed their behaviors or goals, with most people increasing their savings and investments.  However, almost half of the people that tried to determine their retirement needs said they guessed at how big their portfolio should be.

July 2008

We recently led a panel discussion for the Lindenhurst/Lake Villa Chamber of Commerce Women in Business group on Preparing to Meet with a Financial Professional.  The panel discussed reasons people may want to meet with an advisor, questions to ask, and information you’ll need to share such as tax returns, investment statements and social security statements. We suggested asking if the advisor is a fiduciary, in other word are they working in your best interest. Also, ask how you will be paying for their advice (fees, commissions, incentives or other) and whether there is a conflict of interest.

June 2008

With gas up over $4 a gallon, most everyone is looking for ways to cut down on driving.  But when you do drive, consider slowing your rate of acceleration from a stoplight.  According to Edmunds.com, this can help conserve a lot of gas – as much as a quarter of a tank each time you fill up, if you drive with an extremely light foot. That extra savings can go towards groceries(!).

May 2008

What to do with the tax rebate checks: first and foremost, pay down credit card balances, starting with the highest interest card.  If you don’t carry any balances month-to-month, give yourself a pat on the back in the form of saving at least 10% of your rebate.  Finally, when you think about spending what’s left, consider your priorities and what will provide you with the most value for the money.  See “Pursuing Happiness” in our 4th Quarter 2007 Newsletter for some thoughts on money and happiness.

April 2008

The IRA contribution limits have increased for 2008 to $5,000 for people under 50 and $6,000 for people 50 and older.

BusinessWeek personal finance columnist Lauren Young wrote an article about Roth IRA conversions and cited Mary Erl based on a conversation the two had about Roth conversion considerations.  Ms. Young hit key points in her clear, concise manner.  To see the article, Click Here or access it through the ‘Articles’ Menu above.

March 2008

The economic stimulus package has been approved by all parties and most taxpayers will receive a “rebate” in the next few months.  In fact, even the elderly who aren’t required to file an annual return may be eligible for a rebate.  However, in order to qualify they must file a tax return for 2007 with “Stimulus Payment” written across the top.  For more information and to see a sample 1040A go to: IRS Stimulus Information.

February 2008

We’ve had difficult start to the year in the stock market.  We won’t know for certain whether we’re in a recession until we’re well into it – a recession is generally defined as 2 quarters of negative growth.  But keep in mind that since the last recession and stock market decline in early part of the decade, we saw the total US stock market index rise 31% in 2003, 12.5% in 2004, 6% in 2005 and 15.5% in 2006.  Last year, even with all the volatility, the US stock market index rose about 5.5%. Make sure you have a robust emergency fund in case of cutbacks at work.

January 2008

Do you make resolutions every January only to let them fade away by mid-February?  You’re not alone…many resolutions are broken shortly after they are set.  This January, instead of making a resolution, try setting goals instead.  Goals should be specific, measurable, meaningful, and time- bound; the more details you define, the more likely you are to meet your goals. For example, instead of just saying you want to save more, decide how much more (maybe 5%?) and set up an automatic savings plan so you won’t be tempted to spend it.  Knowing what you ultimately want to do with the money (and when) will help you dismiss or delay discretionary purchases while you save for your goal.