Events and Activities during America Saves Week, February 24th – March 1st

Events and Activities during America Saves Week, February 24th – March 1st

Organizations across the nation are providing fun ways for individuals to save as part of America Saves Week, . America Saves Tweet Chats and Google Hangouts Experian #CreditChat Date: 2/26/14 Time: 12:00 pm – 1:00 pm Pacific Hosted by: @Experian with special guest @AmericaSaves Link to Announcement Post on Experian Wise Bread #WBChat: How to Develop Savings Habits Date: 2/27/14 Time: 12:00 pm – 1:00 pm Pacific Hosted by: @WiseBread and @AmericaSaves Prize: $100 Link to Announcement Post on Wise Bread. eXtension #eXASchat Date: 2/3, 2/10, 2/17, and 2/24 Time: 7:00 pm – 8:00 pm EST Hosted by: @moneytalk1 with special guest @AmericaSaves Free Webinars Brought to you by Florida Saves: February 24 (12:30pm – 1:30pm EST) – How to Save $500 – Quick, easy steps! February 26 (12:30pm – 1:30pm EST) – Women & Money: Unique Issues March 18 (12:30pm – 1:30pm EST) – Money Saving Vacation Tips April 1 (12:30pm – 1:30pm EST) – Don’t be “April-Fooled” – Smart Shopping Tips, Tricks, & Gimmicks Other Activities 2014 America Saves Challenge As part of America Saves Week (February 24-March 1, 2014), a time set aside annually to promote good savings behavior, the Cooperative Extension system is launching an online “2014 America Saves Challenge.” This free five-week program, open to anyone who enrolls online, will be held from Sunday, February 23, through Saturday, March 29, 2014. Prizes will be awarded for participants who report the highest point totals at the end of each week and at the end of the challenge. To participate in the America Saves Challenge, visit the Rutgers Cooperative Extension Small Steps to Health and Wealth™ Challenge Web site at http://rutgers.ancc.net/. Set up a user name and password...
The Season of Giving

The Season of Giving

As the holidays near, you probably find that you’re being approached for donations by many organizations . And I encourage charity donations. But have you ever gotten that call where “just $10 or $20” will be used to support one of these important causes? Money will go to support victims of natural disasters, children with cancer or other serious diseases, veterans, and first responders (police and firefighters), and mistreated animals, to name a few. The caller describes situations that tug at your heart. And they want the donation right then – no time to research. You can ask questions, of course, but can you trust the answers? I recently heard a report on American Public Radio’s Marketplace show (available as a podcast) about phone solicitations and was reminded of a call from a friendly, deep-voiced gentleman who wanted money for a police charity (I don’t remember the name of the charity). During the call, I asked questions about where the money went and how it was used. I really wanted to help, but something told me to be skeptical. I asked him to send me written information so I could make a decision. I never received the information in the mail that he’d promised. Turns out, many of these calls are from telemarketers who are working on behalf of the charities. By the time the telemarketer takes their cut, and the charity pays administrative and management costs, there’s little left for the actual cause. The state of Iowa has been investigating charities that use phone solicitation, and have found that they call donors on behalf of multiple charities. Reporting from...

GAO Report on 401(k) Rollover Focuses on Process, not Price

I’ve seen lots of headlines in the last couple of weeks about a new GAO report, “Labor and IRS Could Improve the Rollover Process for Participants”.  Media outlets and industry groups have latched on to different findings in the report, and resulting headlines vary from the humdrum (“GAO Advises Easing Rollovers Between 401(k) Plans”) to the conspiratorial (“Firms Mislead Workers on 401(k) Rollovers: GAO”). Bottom line, what seems to concern the GAO is that so much 401(k) money is flowing into IRAs. From reading the report and its summary, I sense a bias from the authors that qualified money is better off in the 401(k) environment than in the IRA environment. I’m not sure where this bias is coming from. After all, wasn’t it just a couple of years ago that the Department of Labor issued regulations to require disclosure of 401(k) fees because “the cumulative effect of the [401(k) plan] fees and expenses on your retirement savings can be substantial.[i]”? I don’t think the GAO made a very clear argument about why it’s important to keep 401(k) money in 401(k) plans rather than move it to IRAs. Don’t get me wrong, IRAs and 401(k)s are not completely interchangeable. The relative benefit of the 401(k) plan varies depending on the individual’s circumstances. There’s some insinuation that custodians are making more money off of IRAs than 401(k)s, which is probably true in some cases. And of course, a custodian would much rather keep the money “in house” in an IRA than have it move to a new employer’s 401(k). But that doesn’t necessarily mean the employee is best served by a 401(k)...
The American Taxpayer Relief Act of 2012

The American Taxpayer Relief Act of 2012

The new year began with some political drama, as last-minute negotiations attempted to avert sending the nation over the “fiscal cliff.” Technically, we actually did go over the cliff, however briefly, as a host of tax provisions and automatic spending cuts took effect at the stroke of midnight on December 31, 2012. However, January 1, 2013, saw legislation–retroactively effective–pass the U.S. Senate, and then later the House of Representatives. The American Taxpayer Relief Act of 2012 (ATRA) permanently extends a number of major tax provisions and temporarily extends many others. Here are the basics. Tax rates For most individuals, the legislation permanently extends the lower federal income tax rates that have existed for the last decade. That means most taxpayers will continue to pay tax according to the same six tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) that applied for 2012. The top federal income tax rate, however, will increase to 39.6% beginning in 2013 for individuals with income that exceeds $400,000 ($450,000 for married couples filing joint returns). Generally, lower tax rates that applied to long-term capital gain and qualifying dividends have been permanently extended for most individuals as well. If you’re in the 10% or 15% marginal income tax bracket, a special 0% rate generally applies. If you are in the 25%, 28%, 33%, or 35% tax brackets, a 15% maximum rate will generally apply. Beginning in 2013, however, those who pay tax at the higher 39.6% federal income tax rate (i.e., individuals with income that exceeds $400,000, or married couples filing jointly with income that exceeds $450,000) will be subject to a maximum rate...

Should you take a variable annuity buyback offer?

Recently, several variable annuity companies have sent letters to their customers offering a “buyback” of their variable annuity contracts with guaranteed benefits. These might include offers to waive surrender charges, pay additional cash if the annuity is surrendered, or both. Insurers are doing this because they’re holding significant reserves and capital based on the possible cost of the guarantees. Of course, the actual future cost (to the company) or benefit (to the customer) of the guarantee isn’t known. That’s why it’s difficult to know whether you should take the buyout if you get an offer. If you get a buyback offer, make sure you know what you’re giving up if you take the offer. Many times, I’ve visited with clients who believe they have a 5% or 6% guaranteed account value in the future, without understanding that the accumulation is used for a payout over many years, not provided as a lump sum.  If the annuity doesn’t fit your needs, a buyout might be worth considering. If you’re confused about your variable annuity and have an offer from your insurer, this is the time to have an independent professional review your entire financial situation to see if you should take the offer or keep the product.  Call us at 847.230.9636 to see how we can...
Fee-only, Fee-based, what’s the difference?

Fee-only, Fee-based, what’s the difference?

The financial advice industry can’t seem to avoid being confusing. Take the terms “Fee-Only” and “Fee-Based”. The only compensation “Fee-Only” advisors receive is from their clients. Fees are to be transparent. There aren’t supposed to be any forms of compensation from other third parties, especially compensation that’s directly related to product sales (i.e., commissions). “Fee-Based”, on the other hand, means that compensation to the advisor can be from clients or third parties, typically a combination of the two. Some advisors like this form of compensation because they have more control over whether the products they recommend are implemented. For example, if the advisor recommends a term insurance policy, they can sell the specific policy they’re recommending. The advisor may choose to reduce the amount the client pays directly because they are also receiving the commission to get to the total compensation they need for their advice and service. However, some clients still have the concern that the product compensation might influence the advisor’s recommendation. Use of these terms has become common, at least in the advisory community. But do consumers know what advisors mean by these terms? I talk with prospects from time to time who say they’re looking for a “fee based” advisor. I have to ask them if that means they prefer someone who takes commissions to help reduce the cost of advice, or if they’re using the term “fee-based” to describe what they really want, which is “fee-only”. Typically, it’s the latter. To make it more confusing, some advisors even use the terms as if they mean “fee-only”.  If you’re looking for a true fee-only advisor,...