Asset allocation is perhaps the most important consideration when designing an investment portfolio. Selecting an appropriate mix of stocks, bonds, and cash and maintaining the proportions through regular rebalancing, is about as sure-fire a winning strategy as it gets.
And the online financial service firms are there to help, right? If I just follow the directions on the website, it’ll be easy as pie, right? Wait a minute, hombre, not so fast. Let’s compare the offerings of three large online services: Schwab, Fidelity and Morningstar.
What exactly is “aggressive”?
The first step in selecting an appropriate asset mix is to determine what “investing” style matches your investment time horizon and your tolerance to risk.
If you’re nearing retirement, you want to have a more conservative portfolio than if you’re just starting out. Workforce newbies have the most to gain from a high-risk-high-gain allocation, and more time to recoup, should the markets sour. Likewise, if you’re the type who loses sleep when the markets see-saw, you might be more comfortable with a lower volatility portfolio, and accept that you might have to work an extra year — that may be a good trade-off for you. Each website offers a walk-through questionnaire to help you evaluate where you fit on the spectrum of risk tolerance. Continue Reading »
On July 24th the Federal minimum wage will increase from $6.55 to $7.25 per hour. Adjusted for inflation, the minimum wage is lower now than when I was in high school. I’ve worked minimum wage jobs at a fast-food joint, a pizza place, and as a cashier in a chain drug store, but only during high school and college. I can’t imagine trying to support myself, let alone a family, on those wages.
The wage increase won’t affect Massachusetts residents, as our state has a minimum hourly wage of $8.00.
Everyone, even those making minimum wage, will be affected by the increase in Massachusetts sales tax from 5.00% to 6.25% as of August 1st. Sales tax affects lower income folks disproportionately, as they spend a greater percentage of their income on necessities. Food is exempt from the tax, but other essentials such as toothbrushes, laundry detergent, and car parts are not. If we have to raise taxes on the general population, I’d rather see an increase in the income tax. Of course I’m amazed that a (normally) progressive state such as Massachusetts has a flat income tax. The guy making minimum wage is paying the same rate as the hedge fund billionaire. Except, of course, the billionaire can afford lawyers to find tax loopholes.
I guess taxes really are just for the little people.
My post on converting a traditional IRA into a Roth was included in this week’s Carnival of Personal Finance. Stephanie at Poorer Than You did a terrific job pairing up each contributed post with a US President, relating the post’s topic to some aspect of his presidential legacy.
I also enjoyed the video of Warren Buffett giving investment advice to Girls Scouts while eating a Blizzard. Never too young to start talking about retirement, I say. I thought the girls did a great job, too, asking good questions. Frankly, I’d be pretty nervous sitting there. I hope they at least awarded him an honorary Junior Girl Scout Cookie Biz merit badge.
Jean at Keener Financial Planning let us know about a series of free Webinars sponsored by NAPFA. Great idea, but they’re all scheduled at 1pm (ET) on workdays — so that eliminates most of us from participating. Hopefully they’ll be available to replay later.
Frank Curmudgeon at Bad Money Advice frames the discussion of when to tap into your Social Security benefits in terms of annuities. I would have used the price of inflation-indexed annuities instead of conventional immediate annuities. After all, the Social Security payment stream would rise both with the numbers of years that you delay the start of payments and with inflation. The analysis would be similar and would most likely result in the same answer (the intuitive one you would arrive at without all that math) — if you expect to outlive the average life expectancy, delay the start of payments as long as possible.
My post on the advantages of organizing your business as an S corporation was included at this week’s Carnival of Personal Finance hosted at ManVsDebt. Check out the Carnival for Adam’s great photos of New Zealand.
The awards this week are as follows… May I have the envelope, please.
I also liked Jim’s post over at Getting Your Financial Ducks In A Row clarifying how to best divvy up an inherited IRA.
Robert Brokamp wrote a great guest post at Get Rich Slowly on the importance of saving for retirement, even if you don’t plan on retiring. I think retirement will be quite different for my generation than it was for my parents’ (or their parents’), so it pays to keep an open mind about your options.
Image credit: calca at Flickr.
The IRS will be holding a series of public discussions for input on establishing standards for tax preparers. It’s about time, I say.
July 14, 2009: The Internal Revenue Service today announced a series of public forums at which individuals and representatives of diverse constituent groups will be able to provide input on the development of tax preparer performance standards. The public forums, a crucial part of an effort launched in June by IRS Commissioner Doug Shulman to help ensure tax preparers are qualified, ethical and provide a high level of service, will kick off on July 30 in Washington, D.C.
“These public meetings will be an important part of the dialogue as we move toward a set of comprehensive recommendations by the end of this year,” Shulman said. “We want an open discussion on how to strengthen the overall integrity of our tax system.”
Knock wood. Tax preparation isn’t an occupation known for deceptive practices. Sure there are problems but nothing as scandalous as “investment advisors” like Madoff, Harkless, or Stanford. Nevertheless, tax preparers have your social security number and all of your investment account information. Someone with bad intentions could do a lot of damage quickly.
Presently only three states require licenses for tax preparation: California, Oregon, and Maryland.
I think a little accountability (no pun intended) would go a long way to increase consumer confidence. Having a national standard would improve the overall quality of services delivered, even if the federal government leaves the responsibility of oversight to the individual states.
What do you think? What qualifications do you look for in a tax preparer?
Tip ‘o the green shade to Kay Bell at Don’t Mess with Taxes for pointing out the IRS initiative.
Image credit: BeckyKP at Flickr.
Why has America not converted to the metric system? Even the English don’t use English units of measure. We should use this economic doldrum to improve our ability to compete globally.
I know, businesses are going to whine, saying that they couldn’t possibly do this extra work when the economy is so bad. But, of course, the best companies are doing exactly that — taking advantage of the quiet period to make strategic improvements — to trim programs that weren’t pulling their own weight, to create new products to improve marketshare, or to grow into new markets.
I happen to be familiar with the equipment used to make computer chips. These platforms often have a vacuum pump — made in Germany or Japan — bolted onto a chamber made in the United States. The pump uses metric nuts and bolts, and the chamber uses English. Toolboxes used to develop, manufacture, install, and maintain these systems must have both sets of wrenches. Equipment made in the US is shipped predominantly to manufacturing sites in Asia. Good luck finding a 7/16″ wrench at 2 AM in Japan. Continue Reading »
Gay and lesbian couples who choose to have children often do so later in life. After all, no children are conceived “accidentally” in LGBT families. A parent who chooses to stay home to raise the children can take advantage of a great tax break. It’s difficult to adjust to not having an income, but one upside is that it puts you at a very low — even zero — tax bracket. If you have a 401(k) from previous employment or a traditional IRA, take advantage of the opportunity to transfer the money into a Roth IRA. You’ll have to pay income tax on the amount transferred, so be sure to have money on hand to cover the taxes. Once money is in a Roth, you never have to pay tax on it again. You don’t have to transfer the entire amount at one time, so if you plan to stay home for the first three years of Junior’s life, you can break up the transfer over the three years — that should help keep you away from the higher tax brackets. Continue Reading »
With the economy in the doldrums, many folks are starting businesses to bring in a little side money. If you decide this is for you, there are a few important steps to take in forming your new venture.
I’ve written before about the importance of forming a limited liability company (LLC) to protect your personal assets. Today, I’d like to discuss the advantages (and disadvantages) of forming an S corporation. Continue Reading »
My post Is title insurance worth buying? was included in this week’s Money Hacks Carnival. The host this week is the Canadian Finance Blog, which has some solid articles on personal finance with a little maple syrup flava’. I’d like to learn more about the Canadian retirement system, so I plan to return and read more.
- I also liked the post by M is for Money on Knowing your partner’s credit — good advice for everyone.
- The Personal Financial Analyst points out in Cash for Clunkers: We never learn that most folks who drive cars that would be eligible for the rebate probably don’t have cash on hand to pay for a new car. They’ll end up with more debt — perhaps not what we want to encourage, right now. That’s a good point I haven’t heard elsewhere. Continue Reading »
Today is the first in a series of posts on sustainable energy. What, you may ask, does finding a sustainable source of energy have to do with financial planning?
I believe there is no greater threat to our long-term planning — both individually and as a nation — than finding a solution to the energy problem.
By “long-term” I mean my lifetime and that of my child’s. True financial planning considers not only how to fund your life and your lifestyle but what you are going to pass on to the next generation. I started thinking about what a financial plan for Uncle Sam would look like. Of course it’s a bit contrived, but it’s perhaps interesting to take a minute to think about what are his goals, his financial status, and his risk exposures. Continue Reading »
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