Retirement

Oblivious Investor-Mike Piper

Oblivious Investor-Mike Piper

By in Asset Allocation, Investing, Personal Finance Luminaries, Retirement | 8 comments

Personal Finance Luminary-Interview with Mike Piper Welcome to an interview with Mike Piper, of the Oblivious Investor Website. This fourth interview for the Personal Finance Luminaries series continues with the mission to highlight and learn from outstanding personal finance educators. Mike follows Luke of Consummerism Commentary, Dr. Charles Richards, author of The Psychology of Wealth, and Kyle of The Penny Hoarder. Mike Piper has been a favorite blogger of mine for several years. In addition to his CPA designation, he is the author more than nine money related books including the newest Microeconomics Made Simple, and publisher of the well regarded Oblivious Investor Website. I admire Mike’s brevity and disciplined message. Piper is faithful to his message, “This blog is dedicated to spreading the idea that investment success is based upon stubbornly following a few (very simple) principles.” His recipe for success is simple, continue reading and learn more about author and website publisher Mike Piper! 1. What led you to transition from working for Edward Jones to writing books and publishing a website? There was a stage after working as a financial advisor and prior to writing books during which I worked as a tax accountant. Each tax season, I was flooded with tax questions from friends and former classmates. Eventually I decided to answer all the most common questions in a short book so I could simply refer them to that rather than answering the same questions over and over. As it turned out, complete strangers ended up buying the book on Amazon and giving it pretty good reviews. I was quite surprised that it ended up being a lucrative endeavor. 2. What is a typical day like for you? Most days, I spend about half my working hours answering emails from readers. The rest of the time is spent writing articles and doing research for articles. 3. How transferable is your work situation to others who might like to work from home and support themselves online? I think the business model could very easily be applied to other fields — any topic that people are looking to learn about. Write a book about the topic, then write a blog with short articles about related topics. Market...

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MBA Class; Use Net Present Value to Make Investment Decisions

MBA Class; Use Net Present Value to Make Investment Decisions

By in Advanced Investing, Asset Allocation, Investing, Mutual Funds, Retirement | 15 comments

Investing Solutions (part 3) Welcome to Investing Solutions Week at Barbara Friedberg Personal Finance. Don’t miss parts 1 and 2. Investing Solutions (Part 1); Why You Must Start Saving Now Investing Solutions (part 2); Six Investing Solutions Six Dangerous Investing Myths I’m in the midst of teaching a Corporate Finance class for MBA students at a local university. Some of the concepts, although rather complicated, have important real world applicability. an extremely important concept is, how to use net present value (NPV). It is a method to put a dollar amount on future cash payments. It’s great if you win the lottery and want to determine whether to choose the lump sum payment or monthly option. Or what if you or your folks want to determine the present value of their monthly social security or annuity checks.    When reading one of my favorite blogs, Consumerism Commentary, Luke had to decide whether to take a lump sum payment of his retirement account or monthly payments for the rest of his life. After reading the article, I was curious about which choice would lead to a greater present value for Luke. Here’s how to use net present value to decide whether a lump sum or annuity payment would be worth more. Here was Lukes’s situation: He could receive a lump sum payment of $18,000 or $65 per month for the rest of his life. Before I tell you which one he chose as well as the alternative most of his readers recommended, I’m going to introduce you to a systematic way to decide whether to take a lump sum payment or an annuity. Read more: Should I Invest in an Annuity?>>> How to Calculate and Understand Net Present Value You need to make an assumption before figuring out which alternative is better. The assumption is this; what percent return do you think you can get on your investment? I chose 7% because historically, an investment portfolio containing about 65% stocks and 35% bonds approximates a 7% return.  To calculate how much a regular payment which continues indefinitely is worth today, all you need is this perpetuity formula: Annual cash flow/Interest rate = Present Value If Luke were to receive $65 per month, then he gets $65 x 12 or $780 per...

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Why Delay Social Security Benefits? To Boost Long-Term Wealth

Why Delay Social Security Benefits? To Boost Long-Term Wealth

By in Money Management, Retirement | 5 comments

Do you spend more time making money than you do managing the money that you already have? For those of us tiptoeing toward the Social Security (S.S.) deadline, did you know that by appropriately managing your benefits, you can earn tens of thousands more dollars or more in retirement? That’s right, managing when you and your partner take your Social Security benefits can be equivalent to giving yourself a juicy raise in your retirement paycheck.  How Can I Tell if I’m On Track for Retirement?>>>> By poking around the Social Security Website you may even uncover more data about the question, ‘Why Delay Social Security Benefits?’   I signed up at the online Social Security website a few months ago and drilled down into proposed benefit scenarios for my spouse and me. It was thrilling to find out that we can expect a decent income stream from Uncle Sam.  So here’s a quick kick in the seat to get you planning for retirement. Understand why to delay Social Security benefits. Take a few moments away from making money to manage what may be your greatest retirement income stream. Sign up at Social Security and Find Out Why To Delay Social Security Benefits The Social Security Website may be your best wealth building tool. 1. Sign into your account at socialsecurity.gov/myaccount. 2. Keep track of your earnings and make sure they’re accurate. 3. If you’re still working, get and estimate of your future benefits.  4. Manage your benefits, if you need to change your address, adjust a direct deposit, get a replacement Medicare card or any other activities. 5. Check out these amazing Social Security calculators. Get an idea of your future S.S. income from the Retirement Estimator, Life Expectancy Calculator, Retirement Age Calculator and more. Final Social Security Tip-Worth Thousands (or More) Why delay Social Security benefits? According to the CNN Money Ultimate Retirement guide; “Your benefits payment goes up 8% for every year after full retirement age that you delay collecting payments. Until you turn 70, of course – that’s the longest you can delay. There’s no benefit to delaying past age 70; you’d just be throwing money away.” If your full retirement age is 66 and you wait...

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What Not to Do With an 401(k) Rollover

What Not to Do With an 401(k) Rollover

By in Advanced Investing, Asset Allocation, Automatic Saving, Investing, Money Management, Mutual Funds, Retirement | 0 comments

The 401(k) Saga-Don’t do This! Financial professionals frequently suggest rolling over your 401(k) into an IRA when you leave a job. The down side of leaving your retirement account with the old employer means you’re subject to their fee structure and investment options. If you rollover your 401(k) into an IRA-you gain control! Advantages of a 401(k) Rollover into an IRA You choose; where to house your money. Already have an account with Schwab, Fidelity, Vanguard, ETrade or another discount broker? You can transfer the funds into the same company. You may make money rolling over your account. We got a $600 bonus from the discount broker when I transferred my husband’s old 401(k) into a new discount broker. Make sure to ask, these types of benefits may not be widely advertised. What investments to choose? If you like ETFs, you can buy them for the account. Prefer low cost index mutual funds? Choose whichever variety you prefer.  Click now to get a low cost plan to cut investment fees to the bone and manage your own investments. You can control costs buy purchasing a low cost product. Disadvantages of a 401(k) Rollover Into an IRA There may be fees when you leave the former company 401(k). Some holdings may need to be liquidated before you can transfer them out. There’s some paperwork and oversight, and you must make sure to do a ‘custodian to custodian’ rollover to avoid taxes and early withdrawal penalties.  401(k) Rollover-Don’t Do This We (okay, I) make a mistake in rolling over my husband’s 401(k) into a Roth IRA when he left his last job.  In 2011 my husband switched jobs. We moved across country, from Pennsylvania to California. If the stress of a cross country move wasn’t enough, we sold our house too fast and so had 3 months with nowhere to go before our new house in California was slated to be available. So, those 3 months in Mom and Dad’s basement were the beginning of a big new adventure. But, I digress. We had a lot to do and I didn’t worry about the Pennsylvania employer 401(k). It was invested well and there was no urgency to do anything. Eventually, we...

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How Can I Tell if I’m On Track for Retirement?

How Can I Tell if I’m On Track for Retirement?

By in Asset Allocation, Investing, Money Management, Personal Finance, Reader Question, Retirement | 0 comments

Reader Question: Am I On Track for a Secure Retirement? “Barbara, I started investing late and although I have a military pension, a 401k, and brokerage accounts; I wonder if I am track to a comfortable retirement.  I use commission free ETFs in a taxable account.”   You’re doing what you think is right, saving, investing, living modestly, but how do you know if you’re on track for retirement? This question from a reader echoes a common concern. After all, no one wants more life than money! How to Find Out If I’m On Track for a Secure Retirement?  Here’s a roadmap to find out if you’re on track for retirement. 1. Figure out approximately how much money you think you’ll need per year in retirement (usually about 80%  of your current income, but it varies a lot from person to person). 2. Then jot down how much you’ll get from your military pension plus any other retirement plans, such as social security. 3. Next estimate, with an online calculator how much your current investments will be worth at retirement.  CNN Money has an excellent retirement calculator to help you figure out the future value of your retirement portfolio.  Choose your rate of return carefully. When putting in your expected rate of return, I suggest being conservative. Although average historical stock market returns have topped 9% and long term bond market returns hover around 5%, I’d assume future returns will be lower. It’s better to under rather than over-estimate your future retirement earnings. Click here to learn the best way to invest and build wealth for retirement. To come up with a reasonable rate of return, figure out the percent of assets invested in stock funds and the percent in bonds-your asset allocation. Next add those percentages mulitplied by expected asset returns to come up with your expected rate of return.  For example, Kaitlin has 60% invested in stocks and stock mutual funds. She has 40% invested in fixed assets such as bond funds. She selected an expected 7% future return for her stock assets (2% lower than the historical averages) and 3.5% expected future return for her bond investments. To calculate the future expected return to input into the...

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What Happens to Retirement Accounts During Bankruptcy?

What Happens to Retirement Accounts During Bankruptcy?

By in Debt, Guest Post, Retirement | 1 comment

Facing Bankruptcy? Understand What Happens to Retirement Accounts During Bankruptcy No one wants to imagine filing for bankruptcy, particularly as they get close to retirement age. Unexpected job losses, injuries, illnesses, or other disasters can leave people owing more than they can afford to pay. Sixty-two percent of all bankruptcies are related to medical expenses. Other common causes include job loss, divorce, lack of insurance to pay for disaster costs, and poor credit management. Instead of thinking about moral imperatives, think about how to paint a better financial picture for yourself going forward. Bankruptcies have increased because of the recent financial crisis, so you’re not alone in seeking protection. Make sure to ask your bankruptcy attorney for formal advice about protecting your retirement assets. Let’s take a look at what you can and can’t keep when you file for bankruptcy. For the purposes of this article, we’ll assume that you’re filing for Chapter 7 bankruptcy protection. What’s Protected From Your Creditors When you file bankruptcy, you can keep most retirement and pension plan funds. The types of retirement accounts are protected during bankruptcy: 401k 403(b) Keoghs Profit sharing plans Defined benefit plans (traditional pensions) Money purchase plans As of 2015, traditional and Roth IRAs are exempt up to $1,245,475. This amount changes every three years due to cost of living adjustments, so it’s always good to double-check the amount with your attorney. Anything over that upper limit might be used to pay back your creditors. The exception to this rule is the rollover IRA. If you rolled over retirement funds from one of the exempt plans into a traditional or Roth IRA, your rollover remains protected from creditors even if the amount exceeds the upper limit. If you’re already collecting income from your retirement accounts, the bankruptcy court can’t touch any amount needed for your essential support, but it can take an amount deemed unnecessary to meet your needs. Again, double-check with your attorney to find out how much of your income is protected. Also, just because funds are held in an instrument called an IRA doesn’t mean that the money is exempt from bankruptcy. According to the Supreme Court’s recent Clark v. Rameker decision, IRAs inherited from someone else...

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