Category Archives: Financial

Finance Corner

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Submitted by Christine Olivieri Donahue
Financial do’s and don’ts of divorce
A divorce can be draining—both emotionally and financially—especially later in life. And more and more people are getting divorced later in life. Just one in 10 people who divorced in 1990 was age 50 or older; twenty years later it was one in four, according to Dr. Susan Brown, professor of sociology at Bowling Green State University and co-author of “The Gray Divorce Revolution.”

Later-in-life divorce can hit women especially hard. After a divorce, household income drops by about 25% for men—and more than 40% for women, according to U.S. government statistics.2 “So-called gray divorce can be economically devastating, especially for women who have been out of the labor force,”

At the same time, retirement is more expensive when you’re solo rather than half of a twosome. On a per-person basis, the cost of living for singles is 40% to 50% higher than for couples, according to the American Academy of Actuaries. And another consequence of a mid- to later-life split is that there’s less time to recover financially, recoup losses, retire debt, and ride out market ups and downs. Meanwhile, women’s life expectancy is climbing, meaning that they may be living longer with less at Loans £3000 Pound Loan | No Guarantor | Quick Approval | PDLN UK.

So how can women over 50—or of any age—protect their financial future when they go solo? Here are a few do’s and don’ts to consider:
1. Plan. Careful preparation before your divorce may pay off. For instance, having a financial planner or accountant work with your divorce lawyer or mediator may help you make decisions about a divorce settlement that may help you protect your plans for a comfortable retirement.
2. Gather all records. “The three most important words during divorce are document, document, document. Make a clear copy of all tax returns, loan applications, wills, trusts, financial statements, banking information, brokerage statements, loan documents, credit card statements, deeds to real property, car registrations, insurance inventories, and insurance policies. Copy records that can trace and verify separate property, such as an inheritance or family gifts.
3. Know what is owed. Hidden debt is a common surprise among divorcing couples. In the nine states with community property laws—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin—divorcing spouses are generally held responsible for half of their spouse’s debt, even if the debt is in only one spouse’s name. Even in non-community property states, divorcing spouses are often held jointly responsible for debt incurred through jointly issued credit cards or loans, even when one spouse did not benefit from such debt. Obtain a full credit report to make sure there are no surprises on it. Annualcreditreport.com provides free credit reports every 12 months from each of the three credit bureaus.
4. Document household goods. Take photos of valuables around the house—jewelry, art, and perhaps sentimental items that are valuable in other ways. It’s not unheard for divorcing spouses to hide assets from one another.
5. Get your fair share. Half of everything may be yours—if you acquired it during your marriage—whether you want it or not. Even if you never liked a painting, for instance, you may be able to use it to trade for something you do want. If you helped put your spouse through graduate school, law school, or medical school, you may be entitled to some reimbursement for the cost of tuition.
6. Keep close tabs on legal and adviser fees. Keep track of what they are spending on your behalf. Remember that your lawyer is a paid professional who is billing you at an hourly rate. Be mindful of the time your lawyer spends with and for you.
7. Check Social Security benefits. Although many age-50-plus women have had successful careers, their ex’s earnings history may provide a larger Social Security benefit. You are eligible to collect those benefits if you meet the following conditions: You must be age 62 or older, you must have been married for 10 years or longer, you must not be currently married, and your own earnings must not entitle you to receive a higher benefit. According to the Women’s Institute for a Secure Retirement (WISER), you can receive your share of your ex-spouse’s Social Security benefits without filing any special papers at the time of the divorce, and—as long as you remain unmarried—you will qualify for those benefits even if your ex marries again.

Finance Corner

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How to survive a bear market

Submitted by Christine Olivieri Donahue

With the six-year bull market in stocks getting old, people are starting to wonder how they should prepare for a possible bear market. The answer: Not the way you think. The biggest mistake ordinary investors make, aside from not saving enough, is trying to predict the market. Instead of tinkering with their holdings, financial planners and academics say, people should build all-weather portfolios of stocks, bonds, cash and other items that can rise in good markets and limit declines in bad ones. Then they might find themselves actually embracing bear markets as opportunities to buy stocks at discounts. “The less you tinker with the details, the less you have the opportunity to screw them up”. People who change their holdings because they see a bear market coming almost always lose out.

 

No time to ‘time’ – The average investor in stock mutual funds made 3.8% a year over the past 30 years. Studies have shown that people buy and sell stocks at the wrong times. They sell stocks that are poised to rise and buy stocks that do worse than those they sold. This is the problem people have preparing for a bear market. They aren’t good at picking the top, and they panic and sell once stocks have fallen heavily, when they should be buying. Even people who get out before a bear market often shoot themselves in the foot: They are too frightened to get back in and miss the rebound.  The problem is especially bad now, because people who were burned in the collapses of 2000 and 2008 “have a fear in their own minds that they will be hurt again. The S&P has tripled since 2009. Anxiety also makes people trade too much, incurring losses, fees and tax liabilities.

 

What to do now – If this is true, how can people be prepared for a bear market? Money managers offer one solution: Give them the money, pay a yearly fee and let them worry.

For those who don’t like that solution, there is an alternative: Weatherproof your portfolio. By diversifying broadly, with enough stocks to ensure gains in good years and enough bonds to limit losses in bad ones, investors can create a portfolio that can withstand bull and bear markets alike. Then they should stop trading. Prof. Terrance Odean, chairman of the finance group at Berkeley’s Haas School of Business, who studies investor behavior recommends buying all-market U.S.-stock index fund and a really broad-based international fund and a broad-based bond fund, to keep fees really low. High front-end charges and annual fees charged by some funds and money managers can hinder annual gains.  People need to try to figure out their real risk tolerances, he says, and mix their stocks, bonds and cash to match those. Then rebalance the mix annually, so it stays steady. Some people do that by changing new purchases or rebalancing nontaxable retirement accounts, to avoid capital gains in taxable accounts.

 

Keeping out of trouble – What they should ask is: When? When do I need the money? Money to be spent in the next few years must be protected from decline, in short-term bonds or cash. Money needed later has time to recover from a decline, so more can be in faster-growing assets like stocks. An old rule of thumb is that your bond percentage should equal your age, although many financial planners say that, with people living longer, stock holdings should be higher than this benchmark suggests. A common misconception is that bond funds are the same as bonds. In the long term, bond funds act like bonds, but in the short run, they might not. Bond funds’ value can decline if interest rates rise, because the value of existing bonds held by the funds, with their lower rates, declines. With an actual bond, you don’t lose money unless you sell it. You get the interest you expected, just less than newer bonds may offer.

 

For people who can’t stop trading a suggestion: Take 90% of your money and put it in index funds. Take 10% and play with it, as long as you can afford to lose it. Finally, it’s important to remember something people have trouble accepting: Bear markets actually are great for long-term investors. People who contribute regularly to funds and don’t need the money soon should celebrate when stocks fall 30% or 40%. Their regular purchases now buy stocks at a discount, and history shows that broad markets always rebound. Over time, they are ahead. Instead of selling, people should redouble their buying after a big drop. Easy to say. Hard to do.

 

Six Reasons To Think Your Fears About a Stock Market Crash Are Overblown

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Six Reasons to think your fears about a Stock-market Crash are overblown

For a while there, it looked ugly on Wall Street as stocks were in a tailspin and big momentum plays were breaking down. Thankfully, it appears the worst is over. I know. Here’s where you say that those are famous last words. Here’s the thing markets have good days and bad days, and we are hard-wired to give the bad days more attention. This concept won Daniel Kahneman a Nobel Prize in economics, as he illustrated that losses hurt far more than gains feel good — something that many investors have personally experienced. So while the losses you experienced in August were real and significant challenges are ahead routine wealth blue chip stocks in india, take a deep breath the next time you hear that little voice telling you to go to cash and try to think rationally. Your fear of losses may be clouding your judgment. To prove it to you, here are a few misconceptions about the market — and why your fears of a crash may be overblown:

 

1. S&P is not overvalued – As is typical, the latest quarterly roundup provided by the folks at J.P. Morgan Chase was full of great insights. And one grouping of data that was particularly interesting to me was a look at common valuation measures for the S&P 500 — including forward P/E, CAPE, price/book and price/cash flow. You might be surprised to learn that all four of these metrics are below their 25-year averages. In fact, the only key metric that’s above its 25-year average is dividend yield — with the S&P currently offering 2.5% in dividends vs. an average of 2.1%.

 

2. Headwinds of a strong dollar are exaggerated – Over the past year, the U.S. dollar index
is up a dramatic 13% as the dollar continues to trade for a big premium over other currencies. This has undoubtedly created a headwind for U.S. corporations in terms of unfavorable exchange rates to multinationals doing business. And while it’s true that the dollar index is down from its March highs, it remains stubbornly elevated from the typical range of the past few years. This unfavorable year-over-year comparison will continue to act as an anchor on earnings for another quarter or two. But the good news is that once these high-dollar results are baked in, the overall picture will improve dramatically for many stocks

 

3. Pain in energy is overstated – It’s often seen as an excuse to blame the poor earnings performance of the S&P 500 on energy stocks. But while the decline in oil and gas stocks is very real, it’s also important to note that their specific problems are not shared by the rest of the market. Consider the latest FactSet Earnings Insight report that indicates an estimate earnings decline of more than 64% for the energy sector.
No wonder the S&P at large is seeing earnings pressure! Compare that with telecom, mypornleeks.com which is expected to see a nearly 18% jump in earnings, or consumer discretionary stocks that are projecting a 10%-plus rise in earnings. There are challenges in this market, particularly for energy stocks, but there is also opportunity if you know where to look.

 

4. Crashes are not becoming the norm – We admittedly had a wake-up call for investors after the market suffered its first technical correction with a pullback of more than 10% in August. However, most of 2015 has been characterized by stability, and big declines have been quite uncommon. Consider that even including August’s mayhem, we’ve seen just three declines of 5% or more this calendar year. Compare that with 2008, where we saw two dozen pullbacks of 5% or more as the market melted down, or 10 declines of 5% or greater in 2011, amid the European debt crisis and the domestic debt-ceiling shenanigans.

 

5. Neither is volatility – The VIX also known as the “fear index” that is a gauge of volatility at large — is back below 20 after the stress of the past few weeks and the start of another high-stakes earnings season. It’s the first dip below that threshold since Aug. 20, sexoporno and is not outside other periods of modest uncertainty in the market, including October 2014 and January 2015 — two periods when investors similarly were biting their nails and worried that the party was over.

 

6. An intrayear decline isn’t a death knell – Another great tidbit from the JPM report is the look at the last few decades, juxtaposing the worst intrayear declines with the total return on the last 35 calendar years. Most recently, consider 2012, when the market dipped 10% but rallied 13% on the year, or 2013, when the market looked doomed with a 19% loss intrayear but a full-year performance that was basically flat. If you want to look back further, check out 2003, which saw a 14% intrayear decline but a 26% gain on the calendar year, or 1997, which saw an 11% decline intrayear but 31% returns by Dec. 31.

How to survive a market crash: the lessons from history

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How to survive a market crash: the lessons from history
Strategist, Ben Inker, the top investment strategist at Boston firm GMO, follows three of the simplest, most robust, and most easily accessible investment lessons from financial history. In a nutshell: Buy early. Buy often. And buy cheap.
Buying early means not sitting on your hands and waiting for the market to bottom out before investing. No, you won’t catch the lows. But you don’t have to. Last year that those who went into the 2007-09 crash sitting entirely in cash were typically still sitting entirely in cash long after it was over. Over time the trend of global equity returns has been positive — and significantly so. OK, so I’ve been cautious on markets — too cautious, really — for some time. And I remain distinctly edgy. A massive bear market remains a possibility. But I don’t know. And no one with an investment time horizon of more than about five years can afford to sit out of stocks completely. There’s a serious question of whether they should have less than 60% of their portfolio in equities. After all, you can make far more money in the stock market than you can lose, and those who hang on long enough generally do. Yeah, I know “dollar cost averaging” is the boring mantra repeated by every financial adviser in America But there’s a good reason for that. Even those who begin investing in stocks at the absolute worst moments have generally come out all right so long as they averaged their way in. That was true even in the massive crashes of 2007 to 2009 and 2000 to 2003. It was even true, remarkably, in the infamous Crash of ’29.
September 1929 was the absolute worst moment in history to invest in the stock market. The Dow Jones Industrial Average would fall almost 90% over the next three years — and would not get back to its 1929 level for two decades.

But someone who began investing at that moment would have been in profit as early as the start of 1934 — so long as they kept their nerve throughout the crisis, and kept investing monthly. Someone who began investing at the peak in March 2000 and kept going monthly was back in profit by the fall of 2003. Someone who did the same starting in October 2007, just before things began to fall apart, was back to evens in just two years. Their losses at the bottom were smaller, their payback times were much earlier, and their profits were much greater, than those who froze up.

The third lesson is to buy cheap.
That means being willing to invest where prices are lowest, and valuations are best — which usually means where markets have fallen furthest and seem the scariest. Sure, the Dow Jones Industrial Average is about 12% off its peak. But European “value” stocks, as measured by the MSCI Europe Value index are already in a full-blown bear market: They’re down more than 20% in U.S. dollar terms from the highs seen early last year. Value stocks are those that are cheapest in relation to their current net assets, profits and earnings. They’re typically in boring companies such as utilities or consumer-goods companies. They have, historically, been a better investment than their more expensive, and glamorous, “growth” rivals. And emerging-market “value” stocks, as measured by the MSCI Emerging Markets Value index, are down a thumping 40% from their 2011 peaks. How low are they going to go? According to Fact Set, stock markets in regions such as Latin America and non-Japan Asia are nearing their lowest levels of the millennium when measured on such valuation metrics as price to sales and price to earnings. Even Europe, while nowhere near as cheap as the fire-sale levels of the 2012 euro crisis, still looks pretty reasonable. Logically this is where bargain hunters will look first. Those who prefer an easier and calmer life should at least make sure they are getting exposure to more than just the Standard & Poor’s 500 stock index 2015.

That means buying international value and emerging markets value funds as well as — if not instead of the standard U.S. funds. Buy early. Buy often. And buy cheap. Or you can always follow your crystal ball instead.

Submitted by Christine Olivieri Donahue

Let’s Expose the Gender Pay Gap

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Let’s Expose the Gender Pay Gap
HOW serious are we, really, about tackling income equality?
The took a shot at it last week, approving a rule that would require companies to disclose their — comparing how much chief executive officers take home compared with ordinary employees. That’s a fine idea. But here’s a better one: require companies to publish their gender pay gap. Think about it. Calling out top executives for making too much money will at most embarrass a few suits. But calling out companies for paying women too little will help millions — and perhaps crack one of the most intractable problems of our time.

More than a half-century after President John F. Kennedy signed the Equal Pay Act of 1963, the gap between what men and women earn has defied every effort to close it. And it can’t be explained away as a statistical glitch, a function of women preferring lower-paying industries or choosing to take time off for kids. has crunched the numbers and found that the gap persists for identical jobs, even after controlling for hours, education, race and age. Female doctors and surgeons, for example, earn 71 percent of what their male colleagues make, while female financial specialists are paid just 66 percent as much as comparable men. Other researchers have calculated that women one year out of college earn less than men after controlling for occupation and hours, and that female M.B.A. graduates earn on average than their male classmates for their first jobs. It’s not that men are intentionally discriminating against women — far from it.

I’ve spent the past year interviewing male executives for a book about men and women in the workplace. A vast majority of them are fair-minded guys who want women to succeed. They’re absolutely certain that they don’t have a gender problem themselves; it must be some other guys who do. Yet they’re leaders of companies that pay men more than women for the same jobs. Women are trying mightily to close that chasm on their own. Linda Babcock, an economist at has found that one reason for the disparity is that men are four times more likely to ask for a raise than women are, and that when women do ask, we ask for 30 percent less. And so women are told we need to lean in, to demand to be paid what we’re worth. It is excellent advice — except it isn’t enough.

There is an antidote to the problem. requiring companies with 250 employees or more to publicly report their own gender pay gap. It joins a handful of other countries. They have introduced similar rules. (In the United States, President Obama last year issued a presidential memorandum instructing federal contractors to report wage information by gender and race to the Department of Labor.) The disclosures “will cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up,” Prime Minister David Cameron said last month. Critics of the British plan protest that it’s too expensive and complex. Some contend that it doesn’t address the root of the problem: systemic issues that block women from higher-paying industries, and social issues like unconscious bias. But real-world results suggest otherwise. Last year, the consulting firm PricewaterhouseCoopers voluntarily released its gender pay gap in Britain, one of five firms in the country, including AstraZeneca, to do so. Simply saying the number out loud “created much more momentum internally” to close it, Sarah Churchman, who runs the firm’s British diversity and inclusion efforts, told me. PricewaterhouseCoopers’s analysis showed that most of its 15.1 percent pay disparity (compared with a Britain-wide gap of more than reflected a lack of women in senior jobs. So the firm focused on whether it was promoting fairly. In 2013, the grade just below partner was 30 percent female, yet only 16 percent of those promoted to partner were women. A year later, the percentage of women promoted to partner had more than doubled. The firm’s executives were also stunned to find a bonus pattern that favored men. The analysis showed that men who were passed over for partnership were routinely offered retention bonuses to keep them from quitting. Women weren’t. Ms. Churchman believes that’s because men often threatened to leave, while women typically decided to work harder and try again next year.

The potential cost savings of publishing the gender wage gap are enormous. About 20 percent of large companies now train employees to recognize unconscious bias, spending billions of dollars to try to stamp out unintentional discrimination. Paying for a salary analysis is cheaper and potentially more effective. Evidence also suggests that less secrecy about pay results in greater employee loyalty and .

There’s a strong argument to be made for transparency not just for women, but for minorities and other disadvantaged groups. African-American men earn less than white men, for example, though a found that controlling for education, black men out-earn both white and black women. Political realities being what they are, the chances of achieving that kind of transparency are slim; even the tepid C.E.O. pay gap rule took the S.E.C. five years to push through, in the face of fierce industry opposition. But why would we not want a measure that will settle the controversy over the pay gap with quantifiable facts? Shining some much-needed sunlight on the gender wage gap will make a difference for every one of us, men and women, right now.

Portfolio Stress Test

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Take the Portfolio Stress Test
An extended period of stability, such as we’ve had, may encourage you to think your portfolio is bullet-proof. But cyclicality shows that when things feel most stable is often when they’re most vulnerable. And that’s the best time to conduct a portfolio stress test. So here are six tests to run now.

1. Figure out how much stock exposure you have – The most important component of a portfolio stress-test is determining how much stock exposure you have. It may sound banal, but investors don’t do this enough. Let’s say you discover that half your portfolio is in stocks. That’s often considered a “balanced” or “moderate” portfolio, but those terms don’t tell you much. The important things are what a big market decline will do to your portfolio, and how you’ll behave in response. A balanced portfolio would have declined by around 25% during the terrible market of 2008-early 2009. That’s because stocks themselves (half of a balanced portfolio) declined by around 50% during that period. If you owned some international stocks, you experienced a slightly greater decline.

2. Remember how you behaved in 2008-2009 – It’s true that the stock market has made all those 2008 and early 2009 losses back and much more over the past six years, but that’s only relevant if you didn’t sell your stocks in early 2009. So the next part of the stress test is to examine your past behavior. Did you hang on in 2008-2009? Were you so resilient that you actually added to stocks when they were down so much? Or did you sell when stocks had reached their nadir and were poised to rebound? If you sold on the way down or near the bottom during the last downturn, chances are you’ll respond badly again with the same exposure.

3. Figure out what kind of stock exposure you have – Besides knowing how much stock exposure you have, it’s also important to know what kind of stock exposure you have. For instance, how much international exposure do you have; what is your exposure to small-caps (the stocks of smaller companies)? International stocks can be more volatile. But asset managers with good records of evaluating future asset class performance, think international and emerging markets stocks are cheaper than U.S. stocks currently. Some think small-caps are priced to deliver lower future returns over the next 7-10 years. The point, however, is to figure out how much exposure you have to international stocks and small-cap stocks, and to understand the rationale behind the exposure.

4. Check your credit risk – Since you already know your bond exposure, once you figure out your stock exposure, it’s time to stress-test your bond holdings. (Cash is another asset class, but the assumption of this piece is that you’re using it only for short-term and emergency purposes. Bondholders face two risks — credit risk and interest rate risk. Credit risk is the likelihood that your bonds won’t pay you interest and principal on time or at all. Interest rate risk is the risk that interest rates and inflation will increase, thereby eroding the purchasing power of money invested in bonds.

5. Check your interest-rate risk -To understand your portfolio’s interest rate risk, study your bond funds’ “duration” numbers. Duration generally reflects how much the price of a bond fund will decline in the event of a 1% move up in rates. Bonds maturing relatively quickly will have lower duration. Keep a good intermediate bond fund as your workhorse, and let the manager decide if he or she wants to push a little longer or shorter on the duration spectrum.

6. Stress test your adviser too – If you don’t feel confident conducting a stress test yourself, have your investment adviser conduct one with you. Remember, your adviser’s function is to teach you about what you own and why you own it.

Submitted by Christine Olivieri Donahue

How to survive a bear market

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Finance Corner
Submitted by Christine Olivieri Donahue

How to survive a bear market
With the six-year bull market in stocks getting old, people are starting to wonder how they should prepare for a possible bear market. The answer: Not the way you think. The biggest mistake ordinary investors make, aside from not saving enough, is trying to predict the market. Instead of tinkering with their holdings, financial planners and academics say, people should build all-weather portfolios of stocks, bonds, cash and other items that can rise in good markets and limit declines in bad ones. Then they might find themselves actually embracing bear markets as opportunities to buy stocks at discounts. “The less you tinker with the details, the less you have the opportunity to screw them up”. People who change their holdings because they see a bear market coming almost always lose out.

No time to ‘time’ – The average investor in stock mutual funds made 3.8% a year over the past 30 years. Studies have shown that people buy and sell stocks at the wrong times. They sell stocks that are poised to rise and buy stocks that do worse than those they sold. This is the problem people have preparing for a bear market. They aren’t good at picking the top, and they panic and sell once stocks have fallen heavily, when they should be buying. Even people who get out before a bear market often shoot themselves in the foot: They are too frightened to get back in and miss the rebound. The problem is especially bad now, because people who were burned in the collapses of 2000 and 2008 “have a fear in their own minds that they will be hurt again. The S&P has tripled since 2009. Anxiety also makes people trade too much, incurring losses, fees and tax liabilities.

What to do now – If this is true, how can people be prepared for a bear market? Money managers offer one solution: Give them the money, pay a yearly fee and let them worry.
For those who don’t like that solution, there is an alternative: Weatherproof your portfolio. By diversifying broadly, with enough stocks to ensure gains in good years and enough bonds to limit losses in bad ones, investors can create a portfolio that can withstand bull and bear markets alike. Then they should stop trading. Prof. Terrance Odean, chairman of the finance group at Berkeley’s Haas School of Business, who studies investor behavior recommends buying all-market U.S.-stock index fund and a really broad-based international fund and a broad-based bond fund, to keep fees really low. High front-end charges and annual fees charged by some funds and money managers can hinder annual gains. People need to try to figure out their real risk tolerances, he says, and mix their stocks, bonds and cash to match those. Then rebalance the mix annually, so it stays steady. Some people do that by changing new purchases or rebalancing nontaxable retirement accounts, to avoid capital gains in taxable accounts.

Keeping out of trouble – What they should ask is: When? When do I need the money? Money to be spent in the next few years must be protected from decline, in short-term bonds or cash. Money needed later has time to recover from a decline, so more can be in faster-growing assets like stocks. An old rule of thumb is that your bond percentage should equal your age, although many financial planners say that, with people living longer, stock holdings should be higher than this benchmark suggests. A common misconception is that bond funds are the same as bonds. In the long term, bond funds act like bonds, but in the short run, they might not. Bond funds’ value can decline if interest rates rise, because the value of existing bonds held by the funds, with their lower rates, declines. With an actual bond, you don’t lose money unless you sell it. You get the interest you expected, just less than newer bonds may offer.
For people who can’t stop trading a suggestion: Take 90% of your money and put it in index funds. Take 10% and play with it, as long as you can afford to lose it. Finally, it’s important to remember something people have trouble accepting: Bear markets actually are great for long-term investors. People who contribute regularly to funds and don’t need the money soon should celebrate when stocks fall 30% or 40%. Their regular purchases now buy stocks at a discount, and history shows that broad markets always rebound. Over time, they are ahead. Instead of selling, people should redouble their buying after a big drop. Easy to say. Hard to do.

Talking money with adult kids

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Finance Corner
Submitted by Christine Olivieri Donahue
Talking money with adult kids

It’s so important for adult children to raise the topic of money with their older parents.
But as an older parent, there can be times when that adult child is so insistent that you become reluctant — and with good reason. When kids are too pushy, it’s about the kids getting control of the money.
Unfortunately, shutting even pushy kids out completely is not a good solution. If you were to become ill or incapacitated unexpectedly, someone needs to be able come in and run your financial life. Chances are pretty good that person will be your grown child.

So how do you know what you need to share and what you can keep close to the vest? “Disclose financial information, yes … Financial details, no.

Specifically, here’s the financial information to disclose:
Who’s in charge?
Your adult kids need to know that there’s a point person designated to run the show if you can’t — and who that person is.
“A lot of times older adults have chosen a child to do it, but they haven’t had the discussion with the entire family because they’re worried the other members of the family will be offended. This is need-to-know information, particularly if you want to preserve the relationships your adult kids have with each other after you’re gone.

Who do they have to call/contact?
Chances are, you’ve assembled a team of people who’ve helped you with your finances through the years. Your kids need to know who they are and how to get to them. So, pull together a list, including the names and numbers for the tax preparer or accountant, the broker and the lawyer. If there’s a personal banker, include that person. Be as specific as possible. You need to disclose what the kid will need to do and access to be able to help (you) in this emergency.

Where are the accounts?
“Most kids don’t have a clue,” about what their parents spend their money on. “The answer is incredibly simple”: Bank and pay your bills online. If your kids need to know what bills they have to pay, they have an electronic trail to follow — as long as they have the passwords.

How can they step in?
One thing that’s fundamentally essential now — as compared with just a few years ago — is access to all of your passwords and user names. Aggregate all of their logins and passwords into a secure and encrypted database. Then, all you need to do is make sure your child has access to the master login for the password keeper. The other key to enabling your kids to take over in a pinch is having a durable power of attorney in place and making sure they know where to find it.
And if after all this, your kids keep pushing? They may be worried about you not having enough to maintain your lifestyle. Say: “I understand your concerns about us, but we really have taken care of all of our needs. Maybe we need to have a meeting about what we’ve done — not how much we have — but what we’ve done and what you’ll need to do if anything does happen.” Then bring in a third party to monitor the proceedings.

How to save for an emergency

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How to save for an emergency

The forecast says rain? You pack an umbrella, just in case. Car has a flat tire? Good thing you keep that spare in your trunk. But what happens if your car breaks down or you unexpectedly lose your job? Do you have a “just-in-case” fund set aside?

Probably not. More than 50% of Americans couldn’t come up with $2,000 in cash in the event of an emergency, according to the National Bureau of Economic Research and the Brookings Institution.1 Here’s help making sure you are one of the 50% who can.

Ok. So you know that having an emergency fund is important. But here are some things you might not know about saving for it.

1. How much – It is recommended that you set aside three to six months of living expenses. If you’re single and on your own but have family backup, you might be comfortable with three months of savings. However, if you have a spouse, kids, and a mortgage to support, you might sleep better with six months or even more.

2. How to come up with the cash – Think of your emergency savings fund as a bill.
Between rent or mortgage payments and contributing to a retirement fund, you already have a bunch of expenses to balance. But if you turn saving for an emergency fund into a monthly priority, you’ll get in the habit of contributing to it regularly. Inheritance or gifts. Not everyone has a wealthy great uncle, but if yours happens to leave you some money, don’t blow it all. Consider using it to start your emergency fund and invest what is left over for other savings goals.

3. Where’s the best place to stash the savings? While a traditional savings account may seem like a convenient place to keep your emergency fund, keep in mind that many earn only 0.5% in interest. Plus, you may be tempted to tap into it if it’s sitting with the rest of your money. Consider the following alternatives: Money market funds are like a savings account, money market funds tend to be a “lower-risk” place to store your cash, and generally offer better rates than your typical savings account. Shop around—many Internet banks offer even better rates than traditional banks. Certificates of deposit (CDs) they may offer even better rates than money market funds—but there is a catch. Many penalize you for taking money before the CD matures. The solution? Consider an approach called “laddering,” which means you buy a series of CDs with different maturity dates. This way, you’ll always have one ready to go if you need it.

4. Protect yourself with insurance – Besides having cash that you can access in an emergency, insurance is another way to be prepared for one. Consider these two types: Look into disability insurance. Whether you have it through work or on your own, you’ll want to know that you have enough in the event something happens. Don’t forget about health insurance if you lose your job, your health coverage goes with it. Factor in some additional money to cover the cost of health care, just in case.

Try not to use a 401(k) loan as your emergency fund. It may seem tempting to dip into it. But keep this in mind: If you quit your job, you’ll have to pay back the loan immediately, and if you don’t, you may be subject to tax and a 10% penalty. Everyone needs an emergency fund—no matter how old you are or what your income level is. And if you’re diligent about saving for it, you’ll be ready for anything—rain or shine.

Submitted by Christine Olivieri Donahue

Tax breaks for everyone (even top earners)

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Tax breaks for everyone (even top earners)
Some perks are available to just about anybody — regardless of income.
If you’re a high-income type, you’re probably painfully aware that some tax breaks are phased out (either reduced or
eliminated) as your adjusted gross income, or AGI, increases. That’s the price of success, right? Well, not necessarily.
Believe it or not, some tax breaks are available to just about anybody — regardless of income. Here are six of them.
If you’re self-employed, you may be able to contribute and deduct up to $50,000 for 2012 and up to $51,000 for 2013
by setting up a simplified employee pension, or SEP. Contributing to a SEP could dramatically reduce your taxable
income and save you a bundle. Think you’ve already missed the boat for your 2012 taxes? Think again. If you don’t
already have a retirement plan in place, you can still set up a SEP and make a deductible contribution to your account
for 2012. And that could be done as late as Oct. 15 of this year if you extend your 2011 return for the automatic six-
month period.
Credit for overpaid Social Security taxes – Did you have two jobs last year and earn more than $110,100? Then
you probably had too much withheld for Social Security tax. Your credit will be for the amount you contributed
beyond $4,624, which represents the 4.2% Social Security tax based on a maximum salary of $110,100. Getting the
money back is easy — just report the overpaid amount (you can tell what that is by summing up the Social Security tax
withholding shown on your W-2s) on Form 1040, line 69.
Deducting alimony payments to your ex – Assuming you qualify, you can claim a full write-off of your alimony pay-
ments on line 31a on page one of Form 1040.
Writing off your gambling losses – So Lady Luck up and left you during your last trip to Vegas, huh? Believe it or not,
Uncle Sam feels your pain, and will allow you to deduct your losses up to the amount you’ve won during the year on
Schedule A, line 28, assuming you itemize deductions. (Your gross winnings are taxed as regular income and should be
reported on line 21 of Form 1040.) But beware: If you claim this deduction, you should have written evidence of your
losses, just in case you get audited. So try to dig up some evidence (slot club statements, etc.). In the future, keeping a
journal of your daily net wins and losses should do the trick. After all, asking that blackjack dealer for a receipt
might be tricky.
Writing off your investment interest – Did you borrow on margin last year? As long as you itemize deductions on your
return, you probably can deduct the interest you paid on the account on line 14 of Schedule A (assuming you itemize
deductions). The deduction for the interest paid to carry taxable investments (so-called investment interest expense) is
unaffected by any phase-out rules. There’s only one small catch: Your investment interest expense deduction generally
can’t exceed your taxable income from interest, annuities, royalties and short-term capital gains. That said, any excess
investment interest expense can be carried over to the following tax year. See IRS Form 4952 (Investment Interest
Expense Deduction) for all the details (including a special election to treat long-term capital gains and dividends as
investment income).
The Dependent Care Credit – OK — so this last tax break is technically subject to some AGI phase-out rules. But
truthfully, nearly everybody who claims this credit is partially “phased out.” What’s left is still a great tax break.
If you worked last year and paid someone to take care of your under-age-13 child, you could be eligible for this credit.
Keep in mind, if you’re married, both spouses must work, unless one is a student. Additionally, neither of you could have
contributed to a child-care flexible spending account (through your employer) to cover the same expenses last year.
If your income (married or single) exceeds $43,000 then you can take a credit equal to 20% of your child-care expenses.
However, the credit limit is $600, if you have one child, or $1,200, if you have two or more. (If you earned less than
$43,000 you may be entitled to a larger credit.) Thankfully, the definition of child care is generous — it can cover
anything from summer day camp to a baby sitter. See Form 2441 for details. Claim your credit on line 48 of Form 1040.

Submitted by Christine Olivieri Donahue