Sunday, June 27, 2010

The Debt Clock Keeps on Ticking

Remember the Timex ad where John Cameron Swayze said: “Timex — Takes a Licking and keeps on Ticking.” Well, the folks at Timex have a long way to go if they want to catch up with our officials in Washington. Take a look at the U.S. Debt Clock. Besides the swelling national debt, you’ll find interesting facts such as how much we’re spending on Social Security, debt per citizen and income per family. Watching all the clocks tick away is a sight to behold ... Do you know, for instance, the personal savings for every citizen is only $1,100? Do you know that our Medicare liability is almost $76 trillion? How about the number of food stamp recipients? More than 41 million. But don’t let the ever-changing numbers depress you. Other than getting rid of all incumbents, there’s nothing you can do about them. Instead, study them ... memorize a few of the choice ones. Then imagine how you could use those goodies to impress your friends and family at the upcoming July 4 picnic. Best wishes and happy clock watching! George

Tuesday, June 15, 2010

Make Your Nest Egg Last Longer Without Shortchanging Your Love Ones

Immediate annuities are getting a lot of publicity lately. And it’s the good kind … First, a quick background on immediate annuities: You put a lump sum of money into an immediate annuity contract, and the insurance company guarantees you’ll receive a fixed income for the rest of your life. When you die, the payments stop. The size of the payments depends on the amount you deposit and your age. The older you are, the higher the payments since the insurance company is betting you won’t beat their life expectancy tables. There are other versions available that pay for a set number of years and options that will make sure a survivor, like your spouse, continues to get an income. But let’s just stay with the basic annuity today. For years, immediate annuities were portrayed as low-yielding, boring investments. Stocks and real estate left annuity returns in the dust. Then the dot-com bubble broke. Then real estate blew up. And most recently, financials have taken a bloody beating. Through it all, though, annuity holders have been getting their checks month, after month, after month. And now annuities have become the belle of the ball! Even President Obama has endorsed the importance of an immediate annuity. Without saying so, I imagine he realizes that Social Security will spend more than it takes in by 2016, and will be broke by 2037. Plus he must know that pension plans are on their way out. So it’s up to you to do everything you can to fill the gap that the government and your employer cannot. And an immediate annuity could be just what you need. For instance, you might consider an immediate annuity for paying fixed expenses, like your homeowners insurance, real estate taxes and utilities. Suppose that comes out to $1,000 per month. According to immediateannuities.com, a 65-year old male in Florida would need to come up with $158,019 to guarantee he’d get $1,000 a month for the rest of his life. Granted, that’s a hefty chuck of change. But that $1,000 will come in regardless of what’s happening to stocks, bonds, real estate or gold. Plus it’ll continue as long as he lives … even if that’s another 65 years! If you like this idea so far, great. Yet there’s a potential problem: Your love ones. Because once you pay for the annuity contract, the money belongs to the insurance company. There is, however, a way to make sure your need for a safe source of income doesn’t leave your heirs out in the cold … and that’s with life insurance. You could use part of the annuity income to buy an insurance policy with a death benefit equal to the amount you put into the annuity. Another idea is to liquidate a poor performing investment you’ve been holding forever, and buy a single-premium life insurance policy. There are other strategies you can use, too. So it’s a good idea to get with a financial planner or an insurance agent who can help you find what will work best for you and your nest egg. Best wishes, George

Tuesday, June 8, 2010

Do You Have Too Much Of Your Retirement Nest Egg In Your Employer’s Stock?

Many companies allow employees to purchase company stock inside their 401(k) plans. What’s more, company contributions are often in the form of company stock.
This can be an easy sell. After all, workers understand the industry, have a handle on what’s going on within the company and may even know the people running the organization. Plus it gives them a vested interest in the company where they spend 40 hours or more working each week.
But having too much of your retirement assets invested in company stock can be a risky strategy. Just ask anyone who had fallen in love with company stock while working for Enron or Worldcom when the firms collapsed. In fact, 57.73% of employees' 401(k) assets were invested in Enron stock as it fell 98.8% in value during 2001.
However, if you want to sell the company stock and reinvest the money in other options your 401(k) offers, there are often restrictions ...
For instance, some companies require employees hold employer-matched stock until they reach a certain age, or until a specific date. Or when administrative tasks are being performed, there could be a lockdown or blackout when account activity is frozen.
Either of these examples could spell disaster if the stock is taking a nosedive and you want to get out.
The good news is that effective May 19, 2010, for plan years that begin on or after January 1, 2011, employees will have more freedom to diversify out of company stock.
The new IRS rule requires that employees be allowed to move out of their company’s stock as often as they can move out of other investments offered in their 401(k) plan. This must be no less frequently than quarterly with at least three alternative options.
How much is too much company stock? Well, everyone’s tolerance for risk is different. But if the stock makes up 10% to 20% of your total investment portfolio, you might want to take a closer look to make sure you’re comfortable with the risk.
And at least now your ability to move out of it will be easier.
Best wishes,
George