Archive for the ‘Retirement Planning’ Category

Nouriel Roubini Offering Free Access for Financial Crisis

Wednesday, October 1st, 2008

We advise you to sign up for RGE Monitor, run by Nouriel Roubini.

We aren’t economists, here at StocksAndMutualFunds.com.

We are investors, and we’re web developers; but we’re not economists.

For real economists, you usually have to pay.

Usually.

One of the best economists in the world is Nouriel Roubini.

He is a professor of economics at New York University’s Stern School of Business, and he is highly sought after for his advice by think tanks and politicians.

He started talking about the U.S. national debt in the nineties. He started talking about the housing bubble in 2004. He started talking about the credit crunch in 2005.

He’s on top of things in a way that most of us, who work too many hours per week to adequately inform ourselves, can be.

His online service, RGE Monitor (short for Roubini Global Economic Monitor), is available at rgemonitor.com, and it contains a number of useful, if controversial, points of view about the current state of our economy.

Usually he offers his premium service for hundreds of dollars per year.

During this economic crisis, premium services at rgemonitor.com are free.

We are in no way affiliated with Nouriel Roubini or rgemonitor.com, and we only see this as a way to educate our readership in a way that we are not capable.

The legislation currently running through the U.S. Congress will need additional legislation to make it work for the long term. The Paulson Plan is a short-term solution, which will be ineffective come January 20, 2009, when we will have a new president and a new Congress.

It is of unequivocal importance that our citizens take the time to educate themselves about the oncoming economic crisis that this bill is prolonging (not avoiding, but prolonging).

The first step in educating yourself is getting acquainted with Nouriel Roubini’s ideas, particularly his HOME plan, which combines relief for lenders (banks, investors), as well as homeowners.

As web publishers, there are a lot of things we want our readership to do:
— Make good financial decisions about their futures and retirement
— Sign up for brokers we recommend
— Retire comfortably and early
— Protect their nest eggs so that they have something to pass on to the next generation

As citizens of the United States, however, we want our readership to educate themselves about the dangers of the credit markets that are looming beyond bad mortgages.

The crises we’re now experiencing are only symptoms of larger problems described by Mr. Roubini.

We do not make recommendations on stocks, or mutual funds. We just report what’s going on.

This is our first recommendation since our founding in early 2006:

Signup for rgemonitor.com now, while it’s free.

It is an unprecedented opportunity to educate yourself on the potential crises ahead, and an outline for how to protect yourself and your assets during these difficult times.

Start Investing With Just $100

Sunday, January 28th, 2007

While there really is no comparison to a professional investment adviser to help make investing decisions, for most people it’s just too expensive to get that advice. Further, most advice centers on investing with $1,000 or $10,000, and most just don’t have that to risk in the stock market.

We’re going to tell you how to do it with as little as $100.

Ultimately, whether you have $100 or $1,000,000, the story is the same: create a diverse portfolio of stocks and bonds that will withstand stock market dips while increasing in value over the long term.

Here are three simple steps to achieve this with $100:

  1. Open a brokerage account with a discount broker that has no investment minimums and low transaction fees. We recommend Zecco, which offers 40 free trades per month and no hidden fees or account minimums.
  2. Fund the account. This is where you send money to the account by check, wire transfer, or automated clearing house (ACH). ACH is preferred because it is faster than a check and wire transfers are relatively expensive.
  3. Make your first investment.

You’re going to want, as mentioned earlier, a widely diverse portfolio that covers all sectors and countries. You can’t exactly do that with $100 if you’re going to invest in stocks. Also, corporate bonds and mutual funds are out, since they require more capital than $100.

ETFs (Exchange Traded Funds), however, are like mutual funds that trade on the stock market, and you can purchase partial shares. Many ETFs track widely diverse indices, such as the S&P 500 or the MSCI-EAFE global index, or the Lehman Brother Aggregate Bond Index.

If you were to invest $100 in a different ETF every month for three months, you could have a well-diversified portfolio of stocks and bonds that would withstand most market volatility while steadily growing as the market does over time.

Of course, you would want to add to your investment on a regular basis, and I would invest no less than $100 at a time to keep transaction fees from limiting your growth. And when your account reaches $10,000 you’ll want to seek professional advice or at least move your funds over to traditional mutual funds, which typically have lower cost structures and are easier to manage.

But this is a pretty simple, inexpensive way to start investing.

Should You Rollover a 401(k) into an IRA?

Wednesday, January 17th, 2007

If you have ever left a job where you had a 401(k) you’ve asked this question. Depending on your circumstances, the answer may differ from case to case. While nothing beats advice from a professional who can evaluate your situation fully, here are some basic situations that may lead to the right decision.

Is your human resources department reliable and easy to communicate with?

This is the stickler that most people can answer with a resounding NO!

If you keep your 401(k) with a previous employer, it will typically be the human resources department at that company that you deal with whenever you want to make a change to the account. If they are approachable and easy to communicate with now, they will likely be so after you move on to your new employer.

If, however, they are hard to set an appointment with, incompetent or disinterested, or if you have burned any bridges with them, you won’t want to leave your money with them.

Are you satisfied with the options your 401(k) had?

This is different than, “Did the investments in your 401(k) do well.” Rather, you have to evaluate the different investment options available to you and determine if there will be enough variety to suit your needs in different circumstances. If you’re 27 and moving on to your second job, the stock funds you’re in may be perfectly suitable, but if the 401(k) doesn’t have adequate fixed income (bond) options, you may need to make changes as you get closer to retirement.

If the options available in your 401(k) were not adequate, it’s time to shop around for an IRA, where you’ll have more investment options.

Are you in dire need of money immediately?

Most investment advisers and financial planners do not consider this possibility, mainly because of the tax consequences and penalty, but there may be times when you need to cash in some of your 401(k). Sometimes things just don’t work out as planned.

If you find yourself suddenly unemployed, with a mortgage, car payment, rent, a family to feed (not to mention your own voracious appetite), and, to top it all off, you need a new suit for interviews, it may be appropriate to take some of that 401(k) and put it to good use until you get to that next rung on the ladder.

Obviously, it’s a last-ditch effort, and adjusting your lifestyle is the first in a long series of steps that you need to take to get back on solid financial footing. But remember, by cashing out a retirement account prematurely, you not only have to pay taxes on the proceeds, but also will be penalized 10% for the early withdrawal of funds.

If you do find yourself in this situation, do it cautiously, and make every effort to preserve as much as you can to rollover into a qualified plan once you are back on your feet, since you have 60 days from the withdrawal to rollover into an IRA.

Do you want to manage multiple accounts?
You can have as many retirement accounts as you want, but they will have different fees associated with them and different investment options available to them.

If you’re not interested in evaluating each account every six months, it may be best to consolidate your retirement savings into a single IRA or a(new employer’s) 401(k).

If you are going to rollover your funds…

The most important thing when rolling over into an IRA is to do it quickly: you have sixty days before the IRS considers it a withdrawal and, therefore, taxable and penalized.

Are Losses in an IRA Account Taxable?

Wednesday, January 10th, 2007

Depends… This question is a bit confusing, so I’ll go over all possible scenarios that the user may have meant, and I’m going to separate this into two columns. This one will deal with losses in a Traditional IRA. The next column will deal with losses in a Roth IRA.

Q: Can you write off losses in an IRA?

A: No, not unless you’ve made non-deductible contributions to your IRA.

A Traditional IRA is tax deductible in the year that you invest the principal, and it is only taxed when you redeem (sell, or cash out). So, let’s say I invested $1,000 in an IRA in 2005 and the value has fallen to $700. I’ve already written off the $1,000 back in 2005, so I cannot make a second deduction now that I’ve lost money.

If I redeem my IRA and get the $700, then I will have to pay taxes (plus penalty, since I’m not of retirement age) on the $700. The $300 is gone, and it’s as if I never had it to begin with; I never paid taxes on it, so I can’t write it off.

Q: Do you pay taxes on losses in an IRA?

A: No.

Remember, a Traditional IRA is written off to begin with. So, you will only pay taxes on what you take out of the account.

Take the scenario above, where my $1,000 investment decreased to $700. I do not pay taxes on the $300 loss, I only pay taxes on what I take out (up to $700).

If you really want to dig deeper, here’s some light reading: IRS Publication 590: Individual Retirement Accounts (IRAs)

Can You Hold IRA Accounts With Different Companies?

Wednesday, January 10th, 2007

This is a question I recently got, and the answer is simple: yes, but the maximum annual IRA investment is a total (cumulative) amount, not per account. In other words, if you have four different IRAs with four different companies and your maximum IRA contribution is $4,000 for the year, you can only contribute $4,000 total, to all four accounts.
A more important question is: should you have different accounts?

Most investment advisors will tell you no, partly because it will be too difficult to manage, and partly because they want all of your money to be going to them and their funds.

While there is more to pay attention to when holding multiple accounts, there is usually little active management that goes on in an IRA. You open the account, buy the securities (usually mutual funds or money markets), and hold.

There isn’t really a lot of management with an IRA. Every year you’ll want to make sure your asset allocation is appropriate. You’ll add funds as you can.

The benefit of holding multiple accounts is no different than the benefit of holding different investments: diversification. Maybe one company is offering low fees but has a limited selection of mutual funds available. Another company may have slightly higher transaction costs but a wider variety of funds.

Sometimes, opening a new account is the only way to invest in a mutual fund you really would like to hold in an IRA. If your current broker (or 401(k), or SEP IRA, etc.) does not offer a particular fund, for example, you may have to open an account with another broker just to hold a fund in a tax-deferred account.

The downside is cost… maybe

Each company you have an account with will likely charge you a fee for management, but some discount brokers only charge for purchases and redemptions. As a result, you should have as few accounts as possible.

So, take a look at account fees and determine whether it’s worth it to pay each company the fees it is deducting from your bottom line.

The important thing is that you are satisfied with your investments and the way the management company reports your holdings, returns and losses.