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Everything posted by Chrysopylae

  1. http://www.bloomberg.com/invest/calculator...re_payroll.html "A employee sponsered retirement savings account can be one of your best tools for creating a secure retirement. It provides you with two important advantages. First, all contributions and earnings are tax deferred. You only pay taxes on contributions and earnings when the money is withdrawn. Second, many employers provide matching contributions to your account, which can range from 0% to 100% of your contributions. Use this calculator to see how increasing your contributions to a 401(k), 403(b) or 457 plan can affect your paycheck as well as your retirement savings. This calculator has been updated to use the new withholding schedules for 2007. " - Bloomberg website.
  2. "Various studies have demonstrated that small busniness spend uo to 4 times as much in tax advisory/preparation fees as the IRS collects in taxes but I have never heard anyone propose that they should be exempted from paying taxes because of the excessive cost of the tax collection process." Ah, I see. Out of curiosity, have you heard of anyone proposing that the tax law be simplified so that small businesses still pay taxes but don't have tax advisory/preparation fees up to 4 times higher than the tax paid. Please, don't waste time with straw man arguments. "I am not going to waste any more time trying convince you of the futility of your dream." Well, AP Teacher, that's one down. I remember a few years ago I volunteered as part of a letter writing campaign to get the CARB (Califormia Air Resource Board) to strengthen emission standards for cars. We didn't get everything we wanted, but we did get emission standards strengthened against the wishes of the major automobile manufacturers. One step at a time. Perhaps we fail. But maybe, just maybe, we succeed.
  3. I have actually thought this would be a great idea, as well. The main obstacle, as I see it, is that some large companies would fight tooth and nail not to lose their captive audiences. I would note that the law does not currently require that businesses contribute to several types of employee retirement plans, including 401k plans, and corporations may compensate their highly paid employees in non-tax deferred ways like stock grants, stock options, or warrants. One issue I see is how would funds be treated under bankruptcy laws. As to taxes and revenues, here is an article you might find interesting: How George Bush, Big Spender, Destroyed Nirvana: Kevin Hassett
  4. As a general rule, if you are using both taxable and tax deferred/advantaged accounts, put income products in tax deferred or tax advantaged accounts (e.g. REITs, bonds, high dividend stocks) and products with little or no interest or dividends in taxable accounts. Depending upon your situation, you might consider buying individual stocks for your taxable account. For example, suppose you buy $1,000 of XYZ with a $7 commission and hold it for ten years. Provided that XYZ continues to re-invest profits rather than distribute them as dividends, then you would not have any taxable events. Now suppose that you sale XYZ in 10 years. Your profits are taxed as a capital gain. So your total costs are the commission when you buy and your capital gains and and commission when you sale. Furthermore, the original commission is 0.7% of your purchase amount, but you only pay it once and you pay no management fee for holding the stock for each of those 10 years. [suppose, you buy $2,000 of XYZ with a $7 commission, then the original commission is 0.35% of your purchase amount. I'm just pointing out that when you buy more stock, the transaction cost as a percentage of the entire transaction decreases.] Finally, and perhaps most importantly, as an individual stock holder you have a say in how the company is run.
  5. Here are a couple of lists: http://www.socialinvest.org/directory/resu...=&keywords= http://www.socialfunds.com/fs/planners.cgi Not all the advisors on these lists are necessarily fee only. Here is a link to the National Association of Personal Financial Advisors, an association of fee only advisors: http://www.napfa.org/ Now for the shameless self promotion. If you're in the Bay area (northern California), I'm available.
  6. http://www.marketwatch.com/news/story/how-...E0A4CC95D8CB%7D
  7. From Morningstar: "This fund earns 5 stars under Morningstar's rating methodology, meaning that compared with other funds in its category, it has historically generated excellent returns given the amount of risk it has taken on. In this case, that's impressive, because the fund had to turn out extremely strong returns to compensate for its unusually high volatility." Morningstar rates funds by comparing them to their peer group (in this case 2000 to 2014 target funds) in terms of return and volatility.
  8. Minimum Required Distribution rules can be confusing. Here are some points that will hopefully help: 1) Talk to your plan administrator or the company that holds your retirement accounts. Usually they will have knowledgable staff who can help you determine your RMD. 2) Be sure to consider your RMD for each type of retirement account (e.g. 401k, 403b, Traditional IRA, 457). 3) Be sure that you are withdrawing funds from the correct account. For instance, don't attempt to satisfy your Traditional IRA RMD by withdrawing from a Roth IRA. (Just in case anyone is wondering, there is no RMD for a Roth IRA). For a quick over view of RMD rules, check this link from Fidelity: http://personal.fidelity.com/planning/reti...&buf=999999
  9. What is the best way for a fee only advisor to address teachers and let them know of his/her services?
  10. For some reason when I post links to pages within the Fidelity and Vanguard sites, and then try the link from the post, the link does not take me to the page I want. So, to find the fund on the Fidelity site, just go to www.fidelity.com and type FIREX in the search option and select the third search result. Fidelity International Real Estate Fund: FIREX The expense ratio is 1.07% If you are looking to make a one time purchase, then the ishares FTSE EPRA/NAREIT Global Real Estate ex. US fund (IFGL) might be the better choice in terms of expenses. The expense ratio is 0.48%. www.ishares.com
  11. Sorry for the confusion. The ticker was for a large and mid-cap stock index fund. I provided it just as an example of an SRI fund and chose that one just because it is part of the Vanguard index funds. You may find details about that particular fund on the Vanguard site: https://personal.vanguard.com/us/funds/snap...;FundIntExt=INT Here is an article you might find useful in picking a REIT index fund: http://www.experiglot.com/2006/10/26/diver...ough-reit-etfs/ You may find Vanguard's REIT index fund here: https://personal.vanguard.com/us/funds/snap...;FundIntExt=INT Fidelity has an international REIT fund in addition to a domestic REIT index fund. Sorry, once I posted, I realized the Vanguard links aren't working. You can get to the funds by going to www.vanguard.com and selecting Index Funds and then scrolling through the list.
  12. REIT: Real Estate Investment Trust REITs may include home rental properties, commercial rental properties, warehouses, storage facilities, Port faciliities, land, companies that hold mortgages. A REIT must pass through 90% of its taxable income. As a result, REITs avoid corporate taxes on the income passed through to the REIT holder. REITs may be held individually or via an index fund. REITs may be domestic or international. You might also consider SRI (Socially Responsible Investing) options. SRI funds come in many types and different screens. If you are interested in learning more about these funds, you might look at www.socialfunds.com and www.socialinvest.org. Vanguard has an SRI index fund: Vanguard FTSE Social Index Fd (VFTSX).
  13. http://www.sec.gov/investor/brokers.htm "Investment Advisers People or firms that get paid to give advice about investing in securities generally must register with either the SEC or the state securities agency where they have their principal place of business. Investment advisers who manage $25 million or more in client assets generally must register with the SEC. If they manage less than $25 million, they generally must register with the state securities agency in the state where they have their principal place of business. Some investment advisers employ investment adviser representatives, the people who actually work with clients. In most cases, these people must be licensed or registered with your state securities regulator to do business with you. So be sure to check them out with your state securities regulator. To find out about investment advisers and whether they are properly registered, read their registration forms, called the "Form ADV." The Form ADV has two parts. Part 1 has information about the adviser's business and whether they've had problems with regulators or clients. Part 2 outlines the adviser's services, fees and investment strategies. Before you hire an investment adviser, always ask for and carefully read both parts of the ADV. You can view an adviser's most recent Form ADV online by visiting the Investment Adviser Public Disclosure (IAPD) website. You can also get copies of Form ADV for individual advisers and firms from the investment adviser, your state securities regulator, or the SEC, depending on the size of the adviser. You'll find contact information for your state securities regulator on the website of the North American Securities Administrators Association. If the investment adviser is registered with the SEC, you can get Form ADV (Part 1 only) by sending an email to the SEC’s Office of Investor Education and Advocacy at publicinfo@sec.gov. You also can make a request by sending a fax to (202) 777-1027. Please note that you will have to pay a p######ocopying charge of $0.24 per page, plus tax and postage. In addition, at the SEC’s headquarters, you can visit our Public Reference Room from 10:00 a.m. to 3:00 p.m. to obtain copies of SEC records and documents. If you have a question, you can contact OIEA at (202) 551-8090. Because some investment advisers and their representatives are also brokers, you may want to check both the CRD and Form ADV. " In the state of California, investment advisors are required to provide clients with the ADV form and contract.
  14. Yes, you may still contribute to a traditional or Roth IRA. The IRS does provide some caveats, of course. http://www.irs.gov/publications/p590/ch01.html For 2008, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is: More than $85,000 but less than $105,000 for a married couple filing a joint return or a qualifying widow(er), More than $53,000 but less than $63,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. For 2008, if you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your AGI is more than $159,000 but less than $169,000. If your AGI is $169,000 or more, you cannot take a deduction for contributions to a traditional IRA. Note, the above text regards the ability to take tax deductions for a traditional IRA. These rules may affect your decision to choose a traditional or a Roth IRA. The IRS does provide examples and worksheets to help you determine your AGI and tax deductions.
  15. http://www.finra.org/InvestorInformation/index.htm
  16. Provided you qualify (http://www.irs.gov/publications/p590/ch02.html#d0e9115), you might consider putting $5,000 in a 2007 traditional or Roth IRA and $6,000 in a 2008 traditional or Roth IRA.
  17. Chrysopylae


    In general, to create a diversified portfolio, you may want to consider US stocks, developed market international stocks, US bonds, and US REITs. Developed market international stocks will often be labeled EAFE or Europe (e.g. UK or Germany), Australasia (e.g. New Zealand or Australia), and Far East (e.g. Japan or Hong Kong). You might also include emerging market stocks, international bonds, high yield bonds, international REITs, and commodities. Are you familiar with these investment options? Since your husband has a 401k, you might choose one of two routes in creating your portfolio. 1) You could create a diversified portfolio for yourself. This option might be better particularly if you have a different risk tolerance than your husband or different investment goals. 2) You could create an overall diversified portfolio that includes your husband's portfolio selection. One advantage of considering an overall diversified portfolio is that you may be able to choose investments in your Roth IRA that are not available to your husband in his 401k. If you choose option 2, then you should discuss with your husband the investments available in his 401k and his allocation to each investment.
  18. Chrysopylae


    A basic thought on using pre or post tax funds: Suppose you have a certain principal (P), a current tax rate (Tc), a future tax rate (Tf), an expected return (y), n years of compounded growth, a return (R1) from principal invested pre- tax, and a return (R2) from principal invesed post-tax. R1 = #######P * (y ^ n) * (1 - Tf) R2 = [(1 - Tc) * P] * (y ^ n)] You will notice that the only difference in these two equations is that the first uses (1 - Tf) and the second uses (1 - Tc). Therefore, if Tf > Tc, the return from principal invested post-tax (R2) is larger; if Tf < Tc, the return from principal invested pre-tax (R1) is larger; and if Tc = Tf, R1 and R2 are equal. I put the # in there for spacing purposes. Hopefully, it makes the point easier to understand.
  19. Chrysopylae


    For tax questions, I would suggest starting with the IRS website: www.irs.gov. You might look at publication 590 for specific questions about Roth IRAs http://www.irs.gov/publications/p590/index.html. You will probably notice that my previous post relied heavily on this document. I apologize for not being more specific, but I get very nervous discussing any tax issues as I am not qualified in that area. "So, from what you are saying is that I can only get a Roth IRA if our AGI is less than $166,00?" Yes, according to the IRS website you generally may contribute to a Roth IRA if your modified AGI is less than $166,000 provided you file jointly with your spouse. Since you expect to have a larger income in the future, the Roth IRA may be your better option. If you choose to contribute to a Roth IRA, contribute first for 2007, then 2008. This way if your husband decides to contribute later this year or early next year, or you find yourself able to contribute additional funds later in the year, you will maximize your contribution opportunities. “You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).” "Any recommendations for companies to go through for an IRA?" You may open a Roth IRA directly with a fund company (e.g. VanGuard) or through a brokerage account (e.g. Scottrade). You may open more than one Roth IRA. For instance, you could open a Roth IRA with VanGuard and a second Roth IRA with Fidelity. Just remember that the maximum contribution is for all accounts totalled. For instance, you could open a 2008 Roth IRA with VanGuard with $2,500 and a 2008 Roth IRA with Fidelity with $2,500, because your total contribution would fall within the $5,000 limit. If you feel computer savvy and comfortable placing online trades, then I would suggest using a discount broker (e.g. www.scottrade.com) for any individual stock or bond purchases. If you do not feel comfortable placing online trades, then you might choose a broker that offers broker assisted trading (e.g. www.scottrade.com or www.schwabb.com). Provided you are not seeking advice, do a price comparison and choose the cheaper option. [if you consider buying international stocks or bonds, then the answer is a bit more complicated.] If you are buying a no load fund without a 12B-1 fee, then generally, you may want to invest directly with the fund company. If you go to the fund company's website (e.g. www.vanguard.com), you will generally find instructions for opening an account directly with the company. I have to take care of some work now, but I will come back to this discussion to add more concrete details regarding investments in a Roth IRA.
  20. ft6, In addition to the other comments, I would also suggest getting community involvement. 1) Have people write letters. Provide a sample letter that they may use as a template. Depending upon how much time you and your fellow teachers want to spend, you might contact the local PTA to speak with the members to write letters or go to farmers' markets or stand in front of grocery stores or malls. Unfortunately, since the meeting is coming up quickly, you might try a petition instead. 2) Have people speak at the meeting. If you want to make multiple points, you might have each person stress one of the points. 3) Have people attend the meeting and point out to the board who there supports your position (ask them to raise their hands for instance). 4) Go to local organizations. There are actually SRI index funds. So you might ask your local environmental groups, like the Sierra Club, that have experience lobbying government bodies and officials to help you. If you are in the Bay area, let me know, and I will help you. I have actually helped in letter writing campaigns before and know that they can be very effective. Best of Luck!
  21. Actually, REITs may act as a strategic diversifier for a portfolio. I believe Vanguard has a REIT index fund available. Perhaps later I will come back with the correlations, but you can find past REIT data from the NAREIT website to run your own analysis. REITs may include warehousing, office buildings, rental buildings, land, port facilities, and certain mortgage products.
  22. Chrysopylae


    Should you choose a 403b, traditional IRA or Roth IRA? It depends. One factor will be taxes. With the 403b and traditional IRA you may be able to defer taxes now in exchange for paying them later. With the Roth IRA you pay taxes now, but do not have to pay taxes on earnings later. So one consideration is your current tax rate and your expected future tax rate. A second factor is how much can be contributed to your retirement. You stated that you plan to contribute $100 / month (=$1,200 / year) and your husband maxed out his 401k ($15,500 / year?). Has your husband also contributed to an IRA, would your husband like and be able to contribute additional funds for retirement, and will your husband contribute to an IRA on your behalf? Also, did you or your husband contribute to a traditional or Roth IRA in 2007? If your husband would like to contribute additional funds, he may be able to set up an IRA for himself for 2007 and 2008 and contribute funds to an IRA on your behalf for 2007 and 2008. Below are some facts to consider in making your decision: The contribution limit to a traditional IRA for 2008 is the smaller of the following amounts: *$5,000, or * Your taxable compensation for the year. For 2008, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is: * More than $85,000 but less than $105,000 for a married couple filing a joint return, * More than $53,000 but less than $63,000 for a head of household, or * Less than $10,000 for a married individual filing a separate return. Roth IRA contribution limit. If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of: * $5,000, or * Your taxable compensation for the year. Generally, you can contribute to a Roth IRA if you have taxable compensation and your modified AGI is less than: * $166,000 for married filing jointly, *$114,000 for head of household, or married filing separately and you did not live with your spouse at any time during the year, and * $10,000 for married filing separately and you lived with your spouse at any time during the year.
  23. Chrysopylae


    Here is a link to the Social Security Administration's mortality table: http://www.ssa.gov/OACT/STATS/table4c6.html Some key questions are how old are you now, what are the odds of you living to a certain age, like 85 or 94,(hence the table), and expected return. If you are married or have a dependent, then you should take that into consideration, as well. As an example, suppose you are currently 77, then you would begin receiving annuity payments in 10 years. The probability of living to age 87 is 40% and the probability of living to 94 is 8%. (I assumed that you are male.) If you reach age 87 (assuming the mortality table remains the same), you would have approximately a 17% probability of living to age 94. If you are married, then you might also want to consider the probability that both you and your spouse will live a certain number of additional years. Should you buy it? What you might consider doing is creating a personal life expectancy table using the mortality table from the SSA site, calculate the return by investing in a Treasury Bond, and finally compare this information with your return on the annuity. Also, carefully read the annuity guarantee. You may buy US Treasuries directly here: http://www.treasurydirect.gov/ I created the table below as an example. (I am assuming that you don't earn any additional interest from re-investment of the $5,000 in interest you earn each year. This assumption seems unlikely, so you should probably assume re-investment either in a savings account or by buying additional T-Bonds. The difference could be significant. For instance, if you re-invest at 5%, then the $5,000 earned in the first year would equal 1.55 times that amount (or $7,756) 9 years later when you start withdrawing funds at age 87.) AATH = Annuity Amount to Heirs TBATH = Treasury Bond Amount to Heirs POL = Probability of Living AATH TBATH POD Yr 1 86776 41776 + Bond Value 40% Yr 2 73552 33552 + Bond Value Yr 3 60328 25328 + Bond Value Yr 4 47104 17104 + Bond Value Yr 5 33880 8880 + Bond Value Yr 6 20656 656 + Bond Value Yr 7 7432 Yr 8 0 After year 6, using my assumptions (and I think there are good reasons to make different assumptions - like reinvestment), you would need to start selling your T-Bonds to earn income. You may find historical Treasury yields at the Fed website www.federalreserve.gov. Sorry, it looks like the table doesn't come out as well on the post. I also assumed you have your funds in a tax deferred account. If you have your funds in a taxable account, you might substitute insured GO Bonds. I used Treasuries because they generally are assumed to have no default risk.
  24. Wonderful! Your husband should be able to help you with the details of the insurance contract. In regard to the insurance contract (insurance is not my specialty) is the fund under-performance coming from the asset allocation, fees, or both? Since you seem to be concerned primarily with higher returns and very little with portfolio volatility, you might see if you can move your funds within the insurance product to a more aggressive allocation. You might also see if you can reduce some of the insurance costs that you don't want covered. However, your better action might be to eat the surrender fees and go ahead and invest elsewhere now. Here are some steps for a basic cost benefit analysis to determine if you should accept the surrender fees and move your money or leave it for the next 7 years. First, determine your expected net return by leaving it where it is. For example, if you expect a 2% net return per year over 7 years, then calculate 1.02 ^ 7 = 1.15 (rounded). Take that return and multiply by your starting amount: 1.15 * $1,894.11 = $2,175.74. (I didn't round the calculation until the end.) Second, determine your expected return by moving to a different investment option. Take your current amount and reduce it by the surrender charge. For instance, if your surrender charge is 10%, then $1,894.11 * 0.90% = $1,704.70. Now make an assumption on your expected rate of return. For example, if you expect a net return of 8% per year, then you would calculate your 7 year return this way: 1.08 ^7 = 1.71. Take that return and multiply by your starting amount: 1.71 * $1,704.70 = $2,921.56. Compare the returns. In the hypothetical examples above, the net return after 7 years is $2,175.74 if you leave it inside the insurance product, and $2,921.56 if you take the surrender charge. In this hypothetical example, the conclusion would be to accept the surrender charge and move your money. There are other ways to go about measuring the cost-benefit, of course. A major note, if someone provides you a mean return, make sure it is the geometric mean, NOT the arithmetic mean. If you have any questions about the rational or methodology, please ask.
  25. What was your financial planner's rational for suggesting the 403B over an IRA? You may have more options than just an IRA or your wife's 403B. Just to give you something to consider, here is a list of some retirement plan options that might be available to you: Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Traditional 401k, SIMPLE 401k, Roth 401k, Profit Sharing Plan, Money Purchase Plan, Defined Benefit Plan, VUL Insurace, and, of course, your wife's 403b. You may be able to use a combination of the options listed. Depending upon your particular situation, some options may be unavailable legally to you. Here are some questions that you will need to answer (and your financial planner should ask): 1)What is the structure of your business? You stated you are self employed. Is your business set up as a sole proprietorship, partnership, LLC, S Corporation, or C Corporation? 2)Do you have employees? If so, how many? How old are your employees? How much are you willing to contribute to your employees retirement? Would you like your employees to be able to contribute to a company plan? Do you have any highly compensated employees? 3)How old are you? How near retirement are you? How much money do you want to contribute to retirement? (If you have not already done a retirement analysis, then you should before answering this question). How much money can you contribute to retirement definitively each year? How much money might you be able to contribute to retirement each year? At what point in the year will you know how much you are able to contribute? 4)Do you have children? Does anyone else in your family assist you with your business? Would you like to leave your business to anyone in your family or outside your family? Do you have plans (e.g. A buy sell agreement) for your company in the event of your death? Do you have liquid funds to cover expenses in the event of your death? 5)What happens if someone sues your business? How are your assets protected? 6)Do you file taxes jointly or separately from your spouse? What is your AGI? The list above is not a definitive list, but hopefully will help you get started in thinking about which retirement vehicle will best serve your own and your wife's retirement needs, as well as some estate planning issues that you may need to address.
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