A nifty little trick that can be part of your savings plan is simply this: once a debt is paid off, still treat that payment as a bill – but now direct that bill payment to your bank account, IRA, or employer sponsored plan. Here’s how it works: Let’s say you have a car payment of $250 per month. You’ve worked hard to get the debt reduced and eventually (maybe even early) you pay off your loan on the car. What a feeling! Instead of allocating the money to be spent elsewhere, such as buying another car or spending it on other items you probably don’t need, consider taking that $250 per month and reallocating it to yourself. The easy thing about this is that you’re already used to paying it, you’ve already budgeted for it, why not pay yourself? Also, you can consider putting the payment to yourself on […]
financial planning
My credit card meets Carly Rae
So, is it just me? I try not to be too terribly difficult to work with. I go along with most requests without any roadblocks, but every once in a while something comes up that just drives me bats. Problem is, this seems to be something that crops up more and more often. All too often I come across this issue – maybe not every day, but very regularly. What is it that I’m talking about? Let me borrow a line from Ms. Carly Rae Jepson to help explain: Hey! I just met you… (And this is crazy) … but here’s my number, so call me maybe? Okay stop being freaked out that I happened to know the lyrics to that song. I just happen to know things, among those things are the lyrics to many a song, inane or otherwise described. Ask anyone who has taken a long road […]
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Financial Planning Pyramid: Foundations
You can’t build a house from the top down, right? Like most solid structures, they start with solid base, a firm foundation. Some of the biggest skyscrapers are started below ground level, well beyond what’s in our view when we look at the behemoths of structures. Can you imagine a skyscraper built on just a foundation of concrete? The first strong wind or tremor would send it toppling. The same process can be applied to financial planning. You have to have a solid base, a firm foundation before you can think about building a portfolio, estate planning, etc. Generally, the financial planning pyramid starts with the base known as risk management. This includes such risks as auto and home insurance, an emergency fund, life and disability insurance, and a will. Having this solid base protects you from many risks in life, but also protects your plan and your money that […]
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Financial Autonomy
Recently, I had the opportunity to sit across from a couple nearing retirement, and looking for some options with regards to their cash flow needs, possible retirement dates, and the ever-present question, “Do we have enough?” Typically, these conversations involve careful consideration given to a number of different worries, fears and “big” problems that clients face. Frequently I will work with couples who have a hard time agreeing on how much they can spend in retirement, how much the can afford to save, and where to prioritize and allocate the money (to retirement, a wedding, college, etc.). This couple, however, was different. Well in position to enter retirement comfortable with little, if any to worry about, the tension between these two spouses could be cut with a knife – it was almost tough to sit through. One would snip at the other, and the other would interrupt while the snipping […]
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Book Review: Investment Mistakes Even Smart Investors Make
This book is a must read for all investors. Author Larry Swedroe has demonstrated once again how he has a full understanding of the average investor’s situation, by listing 77 real-life mistakes that all of us have encountered at one time or another. What’s more, Mr. Swedroe also takes the time to provide examples of where the mistakes listed have damaged investors’ situations, as well as to show how the investors could have avoided the mistakes. Larry Swedroe, for the uninitiated, is a best-selling author of many books which explain his concepts of investing – including The Only Guide series, The Quest for Alpha, and others. These books cover primarily passive investing, or investing without active management, and as such he is a sort of guru in the self-managed investment world. The listed mistakes in this book include everything from hindsight bias (believing after the fact that a particular occurrence […]
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Book Review – Freedom From Wealth
This book is an excellent resource for folks who have been accumulating wealth over their lifetimes – wealth that is more than they need to live off of. Granted this isn’t everyone, but it’s probably a lot more of you than you think. You don’t need to be a Bill Gates to have these sorts of issues in your path. When you’ve worked your entire life to build up your wealth, you likely want to leave some of it to your children and grandchildren, but is it best to just hand it all over to them at your passing? What if you also hoped to make a difference in the world with your money – perhaps with charitable activities, or to help your offspring to establish their own place in the world, or to leave a legacy, a way that your name can live on? The first part of this […]
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An Oldy – But a Goody
I’m traveling this week, so instead of the usual posts that I put up for you thrice a week I thought I’d take the easy way out provide you with a link to a post from the past that I think is particularly useful and that perhaps some of you could get benefit from. I originally posted this one a little over a year ago, and it’s been one of the more popular articles – it’s all about how long to save various documents. During tax season we all go through the agony of reviewing our old records and looking in vain at the piles from years past, so maybe this article will help you to clear out some of the clutter and maintain only the important ones… And if you’re not saving the right records, maybe you’ll be inspired to start. Here’s the link – hope you get some […]
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Lifetime Income Disclosure
There is a piece of legislation hanging around in the Senate that makes a good deal of sense, and really shouldn’t cause too much grief to implement in the long run. This particular bill, introduced by Senators Bingaman (D-New Mexico), Isakson (R-Georgia), and Kohl (D-Wisconsin), is called the Lifetime Income Disclosure Act, and it proposes that the administrators of ERISA-approved retirement plans provide for their participants a disclosure of the “annuity equivalent” of the total benefits that each participant or beneficiary has accrued within the retirement plan. What this means is that, for likely the first time for most folks, an estimate would be provided to them with their statement that outlines what that lump sum means in terms of real, annualized income replacement in retirement. Specifically, the government would establish certain assumptions about the annuity value of a lump sum, given the participant’s age, and from those assumptions a […]
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Your 2% Opportunity in 2011
By now you’ve heard the news from the 2010 Tax Act – one of the provisions is that during calendar year 2011, the Social Security withholding tax is reduced from 6.2% to 4.2%. This means that you have an additional 2% of your income, up to the $106,800 limit, available to you to do with as you wish. This is your opportunity to make a splash! I think it would be a very good idea to bump up your 401(k) deferral by 2% if you aren’t already maxed out. If you have maxed out your 401(k), you could use the extra money to contribute to your Roth IRA, or put some money into your taxable investment account. No matter what, since this money was originally intended to be for retirement (if it had been withheld for Social Security, it would have gone to *someone’s* retirement), you should put it toward […]
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New Book: “Can I Retire?”
My friend Mike Piper at Oblivious Investor recently published a new book Can I Retire? Managing a Retirement Portfolio Explained in 100 Pages or Less. The book is available for sale on Amazon. As the latest addition to Mike’s “…in 100 Pages or Less” series, this book answers two questions: How much money will you need to retire? How should you manage your retirement portfolio to minimize the risk of outliving your money? What Makes This Book Unique? How does this book hope to be better than, for example, The Bogleheads’ Guide to Retirement Planning or Jim Otar’s Unveiling the Retirement Myth? It doesn’t. It’s not better. It’s shorter. Can I Retire? is written for the person who might not be able to find the time to read Otar’s entire 525-page book or the 370-page Bogleheads’ Guide. If you’re considering reading a more in-depth guide to retirement planning, I wholeheartedly […]
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The Legislation Page
If you haven’t done so recently, you should check out the Legislation page on this blog. I’ve recently updated the summaries listed here, plus this is where you’ll find the coming tax law changes that you should be aware of. You can check back here regularly to find out about major legislation affecting your financial future, including healthcare, retirement plans, jobs, and taxes. As always, if you have questions about any of the information listed, just let me know!
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Expanded Adoption Credit Available for Tax Year 2010
The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based upon the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. In addition to filling our Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2010 tax returns one or more adoption-related documents, detailed in the guidance from the IRS. The documentation requirements, designed to ensure that taxpayers properly claim the credit, mean that taxpayers claiming the credit will have to file paper tax returns. Normally, it takes six to eight weeks to get a refund claimed on a complete and accurate paper return where […]
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Guidance from the IRS on Flex Spending Plans
Here’s one of the opening salvos, brought to you by the Affordable Care Act of 2010: the IRS has now issued guidance regarding changes to Flex-Spending plans (or Flex Spending Arrangements, FSAs), which has changed things for folks who use these plans – specifically the medical expense reimbursements. In the past, these plans have been eligible to reimburse the owner of the account for a myriad of medical expenses, not only physician expenses, prescription drugs, and other health care expenditures, but also over-the-counter medicines or drugs (not controlled by prescription). Beginning in 2011, due to the Affordable Care Act, over-the-counter drugs and medicines that are not ordered by prescription will no longer be eligible for reimbursement from a medical Flex-Spending plan. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses and contact lenses, co-pays and deductibles. […]
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What Does A Fidelity Target Date (Freedom) Fund Invest In?
Note from Jim: I’m on vacation this week – hope you enjoy the following post from my friend and colleague, Roger Wohlner, CFP® who writes at the blog Chicago Financial Planner. Roger operates his Fee-Only financial planning practice out of Arlington Heights, Illinois. Fidelity is one of the largest providers of 401(k) plans and like many fund company platforms it is common for their plan sponsor clients to offer several or all of Fidelity’s Target Date funds known as the Fidelity Freedom funds. These funds have target dates from 2005 every five years out to 2050 with an even shorter-term Retirement Income fund. The premise behind these and other Target Date funds is that a plan participant will choose a fund with a date close to when he or she might retire, invest their contributions and let the fund manager do the rest. The funds typically lighten up on equity […]
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Independent’s Day
Okay, this has nothing to do with America’s celebration of independence from British rule… other than it’s a play on words and you know I can’t possibly resist. No, today’s post is about your own independence from the biases that are infused into advice you might receive from an advisor who is working for an insurance company, a brokerage, a bank, or a mutual fund company. The way you can achieve this independence is to work with an independent advisor – an advisor who operates as a fiduciary, providing advice that is solely in your own best interest. This is an important enough issue for me to direct you to other advisors’ websites – folks who technically are competitors to me – so that you can see what they have to say about this independence and the fiduciary duty of care that you, the consumer of financial services, deserve. So, […]
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The Lost Decade and What it Means
By now you’ve likely heard plenty about the “lost decade” in the stock market: On January 3, 2000, the S&P 500 index closed the day at 1,455.22, and on May 28, 2010, the index closed at 1,089.41 – for a negative return on the nearly 10 1/2 years… I’m sure you’ve noticed in your investment statements. But what does this mean? There are plenty of folks out there (in the mass media) who will tell you that stock market investing is no longer a wise move… why, after all, if you’d had your money in a savings account you’d have done better! So does this mean it’s time to chuck all of your stock investments and switch everything to bonds? Of course not. Remember, it’s long term No matter who you are as an investor, if you expect to achieve any return above inflation, you have to include equities (stocks) […]
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Financial Checkups – Have You Had Yours Lately?
Many of us are diligent about maintaining the “stuff” in our lives… we get regular oil changes in our cars (and have the tires rotated when we think of it), we try to make it to the dentist regularly, and we have the annual inspection of our furnace/air conditioner. But one aspect of our lives sometimes doesn’t get the attention that it really needs: our financial plans. For lots of folks, we’d almost rather spend time in the dentist chair than gather all of those statements together, along with our previous plans (if we have any), and do a thorough review of where we are, where we’re headed, and if we’re on track for our goals – retirement being the goal of foremost importance to most. Yes, we may have gone to a financial planner and talked over our financial situation, then implemented well… some of the recommendations. After that, […]
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Economic Indicators – What’s Important to Watch?
You see them on the news, in the newspaper, on the internet. Not every day, but certainly it seems like a new one every week: Key Economic Indicators. There’s the CPI, GDP, and Unemployment. There’s also the Consumer Confidence Index and Leading Economic Index. What’s this all about? What do these numbers mean? And most importantly, which ones should we pay attention to? Below I’ve listed several of the more important economic indicators and what makes up the indicator, along with my commentary on what the indicator may tell us. If I’ve left out any of your favorites, let me know! Key Economic Indicators Gross Domestic Product (GDP) – this is the value of all goods and services produced in the United States, minus the value of imported goods and services. This broad measure of economic health shows the quarter-by-quarter growth or shrinkage of the US economic output. Comparisons are […]
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The Healthcare Plan – A Review
I haven’t had time to delve very deeply into the new Healthcare plan that the President signed recently. Somehow the pile of tax returns keeps getting in the way… Never fear though, a colleague of mine, Curtis Smith, CFP®, of Sugarland, Texas, recently posted a couple of blog articles reviewing the major tenets of the plan, along with what we can expect over the remainder of this year, and for the next several years to come (unless things change). Curtis’s first article is called “Health Care Changes in America” – and you can view it by clicking on the article title. This is the overview for the average American. The second article is entitled “How Will Health Care Reform Affect Your Small Business” – and as the title indicates, it’s the small business viewpoint. These articles are an excellent, balanced review of the plan – I think you owe it […]
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Real Estate Investing in Your IRA
From time to time this question comes up: why can’t I use my IRA account to purchase a retirement home? After all, for many folks, the IRA represents a pretty large account, possibly even enough to purchase a retirement home outright – so why not? No Personal Use This is a thorny question, because there are lots of restrictions around this sort of purchase with an IRA account. First of all, you need to understand that you cannot use the real estate personally, if it is owned by your IRA. Specifically, you, your spouse, heirs, and any other linear relatives can not use such a piece of real estate while your IRA owns it. That factor in itself should answer the question for a lot of folks. So, for example you could not – purchase a home in a sunny clime and use it for your own purposes two months […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.