Roth versus Traditional IRA – the hidden assumption

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It’s almost tax day, and as usual we are seeing a lot of articles about whether people should use a Traditional IRA or a Roth IRA.  The difference between the two options is when you pay taxes.  When you use a traditional IRA, you get a tax deduction today and all the earnings in the account grow tax free until you take the money out.  When you withdraw the money, it is taxed as ordinary income.  With a Roth IRA, ...

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Dividend Investing

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In the last year or so, I have seen a renewed interest in “dividend investing”.  Dividend investing means that people select what stocks to buy based primarily on the amount of dividends that the company pays as a percentage of the price of the stock.  This is called the Dividend Yield.  Before getting into more details, let me define some terms and concepts:

What are dividends and why do companies give them?  A dividend occurs when a company distributes a share ...

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Til Debt Do Us Part

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I recently  did an interview with Canada’s Anokhi Magazine about newlyweds and money.  Click here or copy this to a new browser window:   http://www.anokhimagazine.com/dollars-sense/till-debt-do-us-part.

In the article, I recommend that newlyweds have open, honest discussions about money, set realistic financial goals, give some tips on controlling spending and think about the financial aspect of having children.

 

 

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Buffett versus Gross – We have a winner!

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In August, 2010, I wrote about the opposite approaches that arguably two of the most successful investors of all time have taken related to bonds.   Bill Gross not only sold all of the US government debt in the PIMCO Total Return Fund, he was so convinced that the price of US Government debt would drop he went so far as to sell the debt short.  Warren Buffett, on the other hand, felt that US Treasury Bonds were a solid investment ...

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2012 Health care costs

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According to an article today (8/25/2011) on Kiplinger.com,  the National Business Group on Health issued a report that shows we can expect to pay more for health insurance in 2012.  The increases are expected in all areas – premiums, co-pays and deductibles.  Additionally, 17% of employers plan to offer only High Deductible Health Plans and Health Savings Accounts (HDHP/HSA) .  These health plans require the employee to pay deductibles  of at least $1,200 for individuals ...

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The worst advice EVER!!

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In an article that appeared on Smartmoney.com (http://blogs.smartmoney.com/advice/2011/08/22/when-401k-loans-are-a-smart-move/) on August 23, 2011, Olivia Mitchell from the Wharton School of Business and David Wray of the Profit Sharing / 401(k) Council of America praise those who used 401(k) loans before the market crash of 2008 and the recent market downturn.  Their logic is that since those people sold their stocks while the market was higher and are now paying themselves back at an interest rate of about 4.25%, they get ...

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Managing your portfolio in retirement

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One of the biggest financial impacts of retirement is the mind-set change that is needed to manage your portfolio.  Prior to retirement, financial planners recommend having “ready-cash” or an emergency fund equal to 3 – 12 months of expenses.  In addition, every month you are adding money to your portfolio through 401(k) accounts, IRAs, etc.

In retirement, the dynamics of your portfolio are turned upside down.  Instead of adding to your savings every month, most people need to take money out ...

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Divorce and Social Security

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Like anything related to Social Security, the rules for people who are divorced start out straight forward, but can get very complicated as your situation changes. In general, you are entitled to “spousal benefits” based on your former spouse’s work record if:

  1. You are over 62
  2. You were married for at least 10 years
  3. Your former spouse is eligible to receive Social Security
  4. You have not  remarried

Loosely defined, “spousal benefits” are one-half of your spouse’s benefit amount.  The full definition is much more complicated, ...

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Pitfalls in divorce settlements

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A recent episode of “The Good Wife” featured a story line about divorce.  While the show is not intended to be a “how to” guide for legal issues, this episode highlighted the problems that arise during divorce.  The husband and sole income earner has several legitimate businesses and is one of the biggest drug dealers in the city.  The first settlement offer called for the husband to pay $100,000 per month in spousal support to the wife until their youngest ...

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Diversification in Action

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Diversification is a great way to reduce the ups and downs in your portfolio.  This morning, the effects of the earthquake in Japan and related issues around their nuclear reactors are wrecking havoc on stock markets around the world.  The Japanese market was down about 10.6%, Germany’s market was down about 4.8% and the US market (as measured by the S&P500) opened down about 2.5%.

How does this prove that diversification works if the major stock markets are all down on ...

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