Inflation Vs Deflation
by Takara Alexis
In the most common sense, inflation is an increase in the average price of goods over a period of time. The rate that prices increase is known as the inflation rate. Inflation happens either when costs go up or when it takes more money to purchase the same items.
CPI is not the same as inflation. Inflation is the change in CPI over a period of time. It can be calculated as [CP1 Year 1 - CPI Year 2]/CPI Year 2, where Year 1 is greater than Year 2. Using the example above the inflation rate from 1984 to 2009 would be 95%. That's (195-100)/100.
Using CPI isn't necessarily an indicator of the specific inflation rate for any given consumer since the goods and services you purchase may not be included in the basket. Instead, CPI and the inflation rate is an approximate value for the country in total.
Monetary inflation takes place when the amount of cash in circulation increases quicker than the quantity of products in circulation. The government is the only entity who is allowed to do this. Back in the day, they would just print more money. Today, the government purchases securities from banks, thereby increasing the money supply.
Inflation could eventually lead to deflation. In theory, people would spend less money when costs are going up, but that isn't always the case. In practice, people spend the money now because they believe the prices will be higher in the future. If they do not have the money for desired purchases, then they borrow it.
Another downside to inflation is that it puts some products and services out of reach for consumers. Rarely do wages go up the same rate as inflation, so consumers have less money to spend. As the gap between income and expenses minimizes, so does spending. That situation could eventually lead to deflation.
In general, deflation is when the average price of goods goes down. When the inflation rate falls below zero, showing negative inflation, we know that there has been deflation. Remember that the inflation rate is calculated based on the change in the Consumer Price Index, or CPI.
Inflation and deflation are both pieces of a properly functioning economy. They commonly happen in cycles and can correct themselves without any government intervention. However, in extreme situations, like the Great Depression, the economy does need a helping hand from the Feds.
Tuesday, April 26, 2011
Collection Fees On HOA Bills
Collection Fees On HOA Bills
by Takara Alexis
Collection agencies could charge up to $1,950 plus "reasonable attorney fees" on a house that is late on its homeowner association assessment under a bill passed out of committee Friday by Senate Democrats.
Senate Bill 174 passed along party lines after an intense debate that had Republicans accusing Democrats of wading into a legal battle in favor of collection agencies.
The bill is typically supported by homeowner associations and collection agencies and opposed by consumer protection groups and investors. Sen. Allison Copening, D-Las Vegas, argued that the fee cap would protect homeowners from the excessive collection practices, and "reasonable attorney fees" could be settled by a judge. She said that the collection agency fees are essential for keeping homeowner associations stable and able to supply services for existing residents.
Copening works as a lifestyle director for a homeowner association management company, and critics, including homeowners who aren't happy with their association boards, have said her outside employment presents a conflict.
The legislation has been a source of drama this week, and a sign that the Democratic assembly is less than iron clad. Copening this week initially would not say whether she was a part of the Democratic caucus.
Tempers flared Friday in a back and forth between Copening and Sen. Michael Roberson, R-Las Vegas. Sen. Valerie Wiener, chair of the Judiciary Committee, stopped the sides at one point and said, "Take a breath. Take a breath."
Friday was the deadline for bills to make it out of committee, and SB174 now moves to the full Senate.
Consumer advocates said collection fees on late HOA bills have become a growing problem in the recession and as people walk away from their houses.
"The fees that are being charged to homeowners for past-due HOA fees are exorbitant," said Cena Valladolid, operations director for the nonprofit Consumer Credit Counseling Services in Las Vegas. She said collection agencies hired by HOAs have been unwilling to lower payments or offer much flexibility to consumers.
The bill specifies that collection agency fees are "super-priority liens" - moving to the front of the line to be paid back when a house is sold. Investors have argued that collection agency fees should not be "super-priority," which they say the Legislature specifically reserved for past homeowner association dues.
Republicans argued that the Senate bill wouldn't do much to slow a problem in Nevada of aggressive collection agencies taking on fees of thousands of dollars on relatively small homeowner association bills. Roberson said the Legislature should also refrain from getting involved in a legal disagreement between two private parties.
Copening brought up the case of Paradise Spa homeowner association in Las Vegas, which was raided by the FBI and Nevada Attorney General's office last week. A single investor there owes more than $1 million in assessments, she said. Residents face having their gas shut off on Monday, Copening said, calling the investor a "slumlord."
Roberson, an attorney, scoffed at the "reasonable" attorney fees in the bill. "How are homeowners supposed to dispute 'reasonable or not?'" he said.
"They're going to have to hire their own attorney, and have more legal fees?" said Sen. Ruben Kihuen, D-Las Vegas, who added he was not completely satisfied with the bill, and reserved the right to vote against it on the floor. He said he would move it forward to prevent excessive fees right now.
Sen. Shirley Breeden, D-Henderson, was the other undecided Democrat on the Committee. She called Copening's bill "a good start" to capping collections.
A regulation pending in front of a Legislative committee is built to cap the collection fees at $1,950 for each house, plus costs.
by Takara Alexis
Collection agencies could charge up to $1,950 plus "reasonable attorney fees" on a house that is late on its homeowner association assessment under a bill passed out of committee Friday by Senate Democrats.
Senate Bill 174 passed along party lines after an intense debate that had Republicans accusing Democrats of wading into a legal battle in favor of collection agencies.
The bill is typically supported by homeowner associations and collection agencies and opposed by consumer protection groups and investors. Sen. Allison Copening, D-Las Vegas, argued that the fee cap would protect homeowners from the excessive collection practices, and "reasonable attorney fees" could be settled by a judge. She said that the collection agency fees are essential for keeping homeowner associations stable and able to supply services for existing residents.
Copening works as a lifestyle director for a homeowner association management company, and critics, including homeowners who aren't happy with their association boards, have said her outside employment presents a conflict.
The legislation has been a source of drama this week, and a sign that the Democratic assembly is less than iron clad. Copening this week initially would not say whether she was a part of the Democratic caucus.
Tempers flared Friday in a back and forth between Copening and Sen. Michael Roberson, R-Las Vegas. Sen. Valerie Wiener, chair of the Judiciary Committee, stopped the sides at one point and said, "Take a breath. Take a breath."
Friday was the deadline for bills to make it out of committee, and SB174 now moves to the full Senate.
Consumer advocates said collection fees on late HOA bills have become a growing problem in the recession and as people walk away from their houses.
"The fees that are being charged to homeowners for past-due HOA fees are exorbitant," said Cena Valladolid, operations director for the nonprofit Consumer Credit Counseling Services in Las Vegas. She said collection agencies hired by HOAs have been unwilling to lower payments or offer much flexibility to consumers.
The bill specifies that collection agency fees are "super-priority liens" - moving to the front of the line to be paid back when a house is sold. Investors have argued that collection agency fees should not be "super-priority," which they say the Legislature specifically reserved for past homeowner association dues.
Republicans argued that the Senate bill wouldn't do much to slow a problem in Nevada of aggressive collection agencies taking on fees of thousands of dollars on relatively small homeowner association bills. Roberson said the Legislature should also refrain from getting involved in a legal disagreement between two private parties.
Copening brought up the case of Paradise Spa homeowner association in Las Vegas, which was raided by the FBI and Nevada Attorney General's office last week. A single investor there owes more than $1 million in assessments, she said. Residents face having their gas shut off on Monday, Copening said, calling the investor a "slumlord."
Roberson, an attorney, scoffed at the "reasonable" attorney fees in the bill. "How are homeowners supposed to dispute 'reasonable or not?'" he said.
"They're going to have to hire their own attorney, and have more legal fees?" said Sen. Ruben Kihuen, D-Las Vegas, who added he was not completely satisfied with the bill, and reserved the right to vote against it on the floor. He said he would move it forward to prevent excessive fees right now.
Sen. Shirley Breeden, D-Henderson, was the other undecided Democrat on the Committee. She called Copening's bill "a good start" to capping collections.
A regulation pending in front of a Legislative committee is built to cap the collection fees at $1,950 for each house, plus costs.
Roth IRA
Roth IRA
by Takara Alexis
A Roth IRA is a type of personal retirement account that's similar to a traditional IRA (Individual Retirement Account) but with some key differences. Most significantly, unlike a traditional IRA, contributions made to a Roth IRA are not tax-deductible. That means that you cannot take an IRA deduction on your Roth IRA to reduce your taxable income.
Even though there are not immediate tax benefits to having a Roth IRA, there are other benefits. A very significant benefit is the tax-free withdrawals that are able to be made in the future. But, to get these benefits you need to follow the Roth IRA rules.
You are allowed to own both a traditional IRA and a Roth IRA, but the maximum IRA contribution limit is $5,000 between the two accounts. That means if you contribute $3,000 to a traditional IRA, you can only contribute $2,000 to a Roth IRA. The Internal Revenue Service (IRS) won't permit you to contribute more than your income to a Roth IRA. If you make $3,000, you can only contribute a maximum of $3,000 to a Roth IRA.
There are no age limits on Roth IRA contributors. In addition, there is no Required Minimum Distribution (RMD). After 70 1/2, you could continue contributing to your Roth IRA and you aren't required to withdraw any money from the account.
You are allowed to make a withdrawal from your Roth IRA, without penalty if you do so within certain guidelines set forth by the IRS. When you make a qualified IRA distribution, neither the principal deposited nor the interest earnings are taxed.
Qualified IRA distributions can be made five years after you opened the account and after you have reach age 59 1/2. You might be able to make a qualified distribution before age 59 1/2 as long as the first contribution was made five years ago and you're making the distribution for one of these reasons: to help buy your first house, to pay for education expenses, you become disabled, you use the money for medical expenses, or you rollover the distribution into another qualified IRA plan.
If you make a withdrawal outside the guidelines listed above, it is thought of as an early withdrawal and will be subject to a 10% early withdrawal penalty as will as income taxes on the amount withdrawn.
A Roth IRA is a good idea for saving for retirement, but to get the maximum benefit from the account, you must follow the Roth IRA rules.
by Takara Alexis
A Roth IRA is a type of personal retirement account that's similar to a traditional IRA (Individual Retirement Account) but with some key differences. Most significantly, unlike a traditional IRA, contributions made to a Roth IRA are not tax-deductible. That means that you cannot take an IRA deduction on your Roth IRA to reduce your taxable income.
Even though there are not immediate tax benefits to having a Roth IRA, there are other benefits. A very significant benefit is the tax-free withdrawals that are able to be made in the future. But, to get these benefits you need to follow the Roth IRA rules.
You are allowed to own both a traditional IRA and a Roth IRA, but the maximum IRA contribution limit is $5,000 between the two accounts. That means if you contribute $3,000 to a traditional IRA, you can only contribute $2,000 to a Roth IRA. The Internal Revenue Service (IRS) won't permit you to contribute more than your income to a Roth IRA. If you make $3,000, you can only contribute a maximum of $3,000 to a Roth IRA.
There are no age limits on Roth IRA contributors. In addition, there is no Required Minimum Distribution (RMD). After 70 1/2, you could continue contributing to your Roth IRA and you aren't required to withdraw any money from the account.
You are allowed to make a withdrawal from your Roth IRA, without penalty if you do so within certain guidelines set forth by the IRS. When you make a qualified IRA distribution, neither the principal deposited nor the interest earnings are taxed.
Qualified IRA distributions can be made five years after you opened the account and after you have reach age 59 1/2. You might be able to make a qualified distribution before age 59 1/2 as long as the first contribution was made five years ago and you're making the distribution for one of these reasons: to help buy your first house, to pay for education expenses, you become disabled, you use the money for medical expenses, or you rollover the distribution into another qualified IRA plan.
If you make a withdrawal outside the guidelines listed above, it is thought of as an early withdrawal and will be subject to a 10% early withdrawal penalty as will as income taxes on the amount withdrawn.
A Roth IRA is a good idea for saving for retirement, but to get the maximum benefit from the account, you must follow the Roth IRA rules.
Thursday, April 21, 2011
Avoiding Retirement Hazards
Avoiding Retirement Hazards
by Takara Alexis
As health care costs keep rising dramatically all of the time, employers are also shifting more weight of the prices onto their employees. Many companies are starting to drop retired workers from their health plans, and on top of that, millions of Americans have no form of coverage at all.
So one of the most common mistakes made in retirement, is a lack of preparation for the financial impact of your health. One very overlooked and most expensive costs is long-term healthcare. Long-term health costs can be devastating to a financial plan, so buying long term care insurance early on can assist with minimizing its costs severely.
A typical assumption is that you should have enough retirement assets to last you until your life expectancy is reached.
But today, the world is always going through changes. As medical technology goes up along with life expectancy, the odds are good that at least you or your spouse will live past age 90. So it is vital that you are prepared to live longer.
Your generation is famous for working extra long, hard and abnormal hours to try to get ahead. And most baby boomers agree that they will be working long into retirement. But that could be one of the biggest retirement mistakes you make.
As of now, the average age of retirement in America, is 62. According to the Employee Benefit Research Institute Retirement Confidence Survey of 2007, among retirees who had to leave the workforce earlier than they wanted to, 28% did so because of disability, 28% because of layoffs or corporate restructuring and 25% to care for a spouse or family member. So even if you decide to work as long as you can, it may not always be possible and it's vital that you plan and save for such a scenario.
by Takara Alexis
As health care costs keep rising dramatically all of the time, employers are also shifting more weight of the prices onto their employees. Many companies are starting to drop retired workers from their health plans, and on top of that, millions of Americans have no form of coverage at all.
So one of the most common mistakes made in retirement, is a lack of preparation for the financial impact of your health. One very overlooked and most expensive costs is long-term healthcare. Long-term health costs can be devastating to a financial plan, so buying long term care insurance early on can assist with minimizing its costs severely.
A typical assumption is that you should have enough retirement assets to last you until your life expectancy is reached.
But today, the world is always going through changes. As medical technology goes up along with life expectancy, the odds are good that at least you or your spouse will live past age 90. So it is vital that you are prepared to live longer.
Your generation is famous for working extra long, hard and abnormal hours to try to get ahead. And most baby boomers agree that they will be working long into retirement. But that could be one of the biggest retirement mistakes you make.
As of now, the average age of retirement in America, is 62. According to the Employee Benefit Research Institute Retirement Confidence Survey of 2007, among retirees who had to leave the workforce earlier than they wanted to, 28% did so because of disability, 28% because of layoffs or corporate restructuring and 25% to care for a spouse or family member. So even if you decide to work as long as you can, it may not always be possible and it's vital that you plan and save for such a scenario.
Collection Fees On HOA Bills
Collection Fees On HOA Bills
by Takara Alexis
Collection agencies could charge up to $1,950 plus "reasonable attorney fees" on a house that is late on its homeowner association assessment under a bill passed out of committee Friday by Senate Democrats.
Senate Bill 174 passed along party lines after an intense debate that had Republicans accusing Democrats of wading into a legal battle in favor of collection agencies.
The bill is usually supported by homeowner associations and collection agencies and opposed by consumer protection groups and investors. Sen. Allison Copening, D-Las Vegas, argued that the fee cap would protect homeowners from the excessive collection practices, and "reasonable attorney fees" could be settled by a judge. She said that the collection agency fees are required to keep homeowner associations solvent and able to provide services for existing residents.
Copening works as a lifestyle director for a homeowner association management company, and critics, including homeowners unhappy with their association boards, have said her outside employment presents an issue.
The legislation has been a source of drama this week, and a sign that the Democratic assembly is less than iron clad. Copening this week initially would not say whether she was a part of the Democratic caucus.
Tempers flared Friday in a back and forth between Copening and Sen. Michael Roberson, R-Las Vegas. Sen. Valerie Wiener, chair of the Judiciary Committee, stopped the sides at one point and said, "Take a breath. Take a breath."
Friday was the deadline for bills to make it out of committee, and SB174 now moves to the full Senate.
Consumer advocates said collection fees on late HOA bills have become a growing problem in the recession and as people walk away from their houses.
"The fees that are being charged to homeowners for past-due HOA fees are exorbitant," said Cena Valladolid, operations director for the nonprofit Consumer Credit Counseling Services in Las Vegas. She said collection agencies hired by HOAs have been unwilling to minimize payments or offer any flexibility to consumers.
The bill specifies that collection agency fees are "super-priority liens" - moving to the front of the line to be paid back when a house is sold. Investors have argued that collection agency fees should not be "super-priority," which they say the Legislature specifically reserved for past homeowner association dues.
Republicans argued that the Senate bill wouldn't do much to slow a problem in Nevada of aggressive collection agencies taking on fees of thousands of dollars on relatively small homeowner association bills. Roberson said the Legislature should also refrain from getting involved in a legal disagreement between two private parties.
Copening brought up the case of Paradise Spa homeowner association in Las Vegas, which was raided by the FBI and Nevada Attorney General's office last week. A single investor there owes more than $1 million in assessments, she said. Residents face having their gas shut off on Monday, Copening said, calling the investor a "slumlord."
Roberson, an attorney, scoffed at the "reasonable" attorney fees in the bill. "How are homeowners supposed to dispute 'reasonable or not?'" he said.
"They're going to have to hire their own attorney, and have more legal fees?" said Sen. Ruben Kihuen, D-Las Vegas, who added he was not completely satisfied with the bill, and reserved the right to vote against it on the floor. He said he would move it forward to prevent excessive fees right now.
Sen. Shirley Breeden, D-Henderson, was the other undecided Democrat on the Committee. She called Copening's bill "a good start" to capping collections.
A regulation pending in front of a Legislative committee is arranged to cap the collection fees at $1,950 per home, plus costs.
by Takara Alexis
Collection agencies could charge up to $1,950 plus "reasonable attorney fees" on a house that is late on its homeowner association assessment under a bill passed out of committee Friday by Senate Democrats.
Senate Bill 174 passed along party lines after an intense debate that had Republicans accusing Democrats of wading into a legal battle in favor of collection agencies.
The bill is usually supported by homeowner associations and collection agencies and opposed by consumer protection groups and investors. Sen. Allison Copening, D-Las Vegas, argued that the fee cap would protect homeowners from the excessive collection practices, and "reasonable attorney fees" could be settled by a judge. She said that the collection agency fees are required to keep homeowner associations solvent and able to provide services for existing residents.
Copening works as a lifestyle director for a homeowner association management company, and critics, including homeowners unhappy with their association boards, have said her outside employment presents an issue.
The legislation has been a source of drama this week, and a sign that the Democratic assembly is less than iron clad. Copening this week initially would not say whether she was a part of the Democratic caucus.
Tempers flared Friday in a back and forth between Copening and Sen. Michael Roberson, R-Las Vegas. Sen. Valerie Wiener, chair of the Judiciary Committee, stopped the sides at one point and said, "Take a breath. Take a breath."
Friday was the deadline for bills to make it out of committee, and SB174 now moves to the full Senate.
Consumer advocates said collection fees on late HOA bills have become a growing problem in the recession and as people walk away from their houses.
"The fees that are being charged to homeowners for past-due HOA fees are exorbitant," said Cena Valladolid, operations director for the nonprofit Consumer Credit Counseling Services in Las Vegas. She said collection agencies hired by HOAs have been unwilling to minimize payments or offer any flexibility to consumers.
The bill specifies that collection agency fees are "super-priority liens" - moving to the front of the line to be paid back when a house is sold. Investors have argued that collection agency fees should not be "super-priority," which they say the Legislature specifically reserved for past homeowner association dues.
Republicans argued that the Senate bill wouldn't do much to slow a problem in Nevada of aggressive collection agencies taking on fees of thousands of dollars on relatively small homeowner association bills. Roberson said the Legislature should also refrain from getting involved in a legal disagreement between two private parties.
Copening brought up the case of Paradise Spa homeowner association in Las Vegas, which was raided by the FBI and Nevada Attorney General's office last week. A single investor there owes more than $1 million in assessments, she said. Residents face having their gas shut off on Monday, Copening said, calling the investor a "slumlord."
Roberson, an attorney, scoffed at the "reasonable" attorney fees in the bill. "How are homeowners supposed to dispute 'reasonable or not?'" he said.
"They're going to have to hire their own attorney, and have more legal fees?" said Sen. Ruben Kihuen, D-Las Vegas, who added he was not completely satisfied with the bill, and reserved the right to vote against it on the floor. He said he would move it forward to prevent excessive fees right now.
Sen. Shirley Breeden, D-Henderson, was the other undecided Democrat on the Committee. She called Copening's bill "a good start" to capping collections.
A regulation pending in front of a Legislative committee is arranged to cap the collection fees at $1,950 per home, plus costs.
Friday, April 8, 2011
Reverse Mortgage
Reverse Mortgage
by Takara Alexis
As thousands of Americans plan for retirement and turn to alternative sources of post work income, one that might come to mind is a reverse mortgage. The concept of a reverse mortgage is pretty simple: someone pays you, based on the value of your home. There are plenty of options available as to how you want to receive this money. You may choose to take monthly payments, take a lump sum, or receive a line of credit.
When you purchased your home you probably had to make mortgage payments. As you did, you began to decrease the amount of debt owed and gradually increased the amount of equity in your home. Reverse mortgages are the opposite. As time passes, you gradually receive more and more money from the lending company.
The intention of a reverse mortgage is to have an added source of income, particularly if you plan on selling your home near the end of your life or after you die. It permits you to take in the equity from your home and enjoy it in retirement. The amount you receive in the reverse mortgage is based on the value of your home, current interest rates, and your current age.
Once you've received the amount your home has been determined to be worth, less any fees charged by the lender, you will owe that amount to the lender. You can pay that back any way you wish, but in numerous cases, the idea is to sell your home and repay the debt. Usually, this is done by an estate after a person passes away and still has debt. As long as you're permanently living in your home, you don't need to pay the lender back.
Reverse mortgages contain a lot of details and can get complicated, which is why it is best to ask a financial professional for advice prior to looking into them much further. While they may have a lot of technical details, they don't have many requirements. In general, you have to be 62 years of age or older, and own your own home. Those are the two basic requirements of a reverse mortgage. Beyond that, there are a few other basic things to keep in mind.
Reverse mortgages do have upfront costs, just like a regular mortgage. They also have monthly service costs. However, all of the money you receive from the lender is tax-free. To receive a better estimate of how much a reverse mortgage would pay you, it is wise to meet with a financial professional.
Unfortunately, reverse mortgages aren't for everyone. Reverse mortgages could supply a valuable resource to individuals when the circumstances are right, but there are many considerations to be taken before choosing one, involving: fees, restrictions, estate planning considerations, need for income, other assets, health considerations, insurance coverage, and so on.
Frequently a reverse mortgage is a last resort for income for many individuals and many individuals decide that reverse mortgages aren't for them. And in many situations, for instance, if you want the house to stay in your family for many generations, then it might not be for you.
by Takara Alexis
As thousands of Americans plan for retirement and turn to alternative sources of post work income, one that might come to mind is a reverse mortgage. The concept of a reverse mortgage is pretty simple: someone pays you, based on the value of your home. There are plenty of options available as to how you want to receive this money. You may choose to take monthly payments, take a lump sum, or receive a line of credit.
When you purchased your home you probably had to make mortgage payments. As you did, you began to decrease the amount of debt owed and gradually increased the amount of equity in your home. Reverse mortgages are the opposite. As time passes, you gradually receive more and more money from the lending company.
The intention of a reverse mortgage is to have an added source of income, particularly if you plan on selling your home near the end of your life or after you die. It permits you to take in the equity from your home and enjoy it in retirement. The amount you receive in the reverse mortgage is based on the value of your home, current interest rates, and your current age.
Once you've received the amount your home has been determined to be worth, less any fees charged by the lender, you will owe that amount to the lender. You can pay that back any way you wish, but in numerous cases, the idea is to sell your home and repay the debt. Usually, this is done by an estate after a person passes away and still has debt. As long as you're permanently living in your home, you don't need to pay the lender back.
Reverse mortgages contain a lot of details and can get complicated, which is why it is best to ask a financial professional for advice prior to looking into them much further. While they may have a lot of technical details, they don't have many requirements. In general, you have to be 62 years of age or older, and own your own home. Those are the two basic requirements of a reverse mortgage. Beyond that, there are a few other basic things to keep in mind.
Reverse mortgages do have upfront costs, just like a regular mortgage. They also have monthly service costs. However, all of the money you receive from the lender is tax-free. To receive a better estimate of how much a reverse mortgage would pay you, it is wise to meet with a financial professional.
Unfortunately, reverse mortgages aren't for everyone. Reverse mortgages could supply a valuable resource to individuals when the circumstances are right, but there are many considerations to be taken before choosing one, involving: fees, restrictions, estate planning considerations, need for income, other assets, health considerations, insurance coverage, and so on.
Frequently a reverse mortgage is a last resort for income for many individuals and many individuals decide that reverse mortgages aren't for them. And in many situations, for instance, if you want the house to stay in your family for many generations, then it might not be for you.
Thursday, April 7, 2011
When Good Markets Go Bad
When Good Markets Go Bad
by Takara Alexis
The markets have nearly rebounded to the historic highs reached in 2000, but investors have not forgotten the emotional confusion of the tech bubble burst and its aftermath. History tells us the markets will cycle down once more eventually; we just don't know exactly when. When that downturn comes, a financial plan, an investment strategy (how you get to the big picture) and a trusted financial professional can make the difference between staying the course and bailing out too soon.
Not surprisingly, researchers have found that the human brain wants to be happy and will in fact bend our perceptions of reality to that end. Faced with evidence that we have made a mistake in judgment, our brain denies, rationalizes, blames and defends, because admitting mistakes ruins our self esteem and makes us unhappy.
Faced with investment decisions, our brain seeks for ways to support its chase for happiness. We stuff ourselves with information - from the media, from the stock ticker, from cocktail party conversations - and take on a sense of achievement that we have superior knowledge. We do not. We have a surplus of information.
That false sense of knowledge causes us to make an investment based on performance from the past - despite prospectus disclaimers warning us that past performance doesn't promise future gain. We buy what's popular - because our brain tells us that many people can't be wrong. We resist selling investments when performance indicates we should - because we do not want to admit we were wrong. And we invest in stocks just because we know the name or, worse yet, because we work for the company.
If you've fallen pray to these financial defects in the past, now is the time to examine your financial strategy. That starts with a financial professional you can trust to be the voice of reason when you start to freak out about your portfolio. That trusted advisor should be assisting you develop a financial plan that starts with determining your life goals, not just a target amount for your investments. Be upfront when it comes to your assets, your liabilities, your hopes and your fears so your advisor gets a comprehensive picture of what you wish to accomplish.
To put your plan into action, you need an investment plan that fits your time frame, money needs and risk tolerance. With your financial expert, decide which investment vehicles are most acceptable for your profile. That includes understanding what criteria or scenario should prompt you to sell an investment, hold it or purchase more.
When the inevitable happens, and the markets retreat, don't lean on the media, your friends or even the major indexes for your next move. Look to the financial plan and investment strategy you and your financial professional developed and decide if those should change in the current climate. Good markets will always, eventually, go bad. With preparation, planning and professional financial counsel, that does not have to be true of your portfolio.
by Takara Alexis
The markets have nearly rebounded to the historic highs reached in 2000, but investors have not forgotten the emotional confusion of the tech bubble burst and its aftermath. History tells us the markets will cycle down once more eventually; we just don't know exactly when. When that downturn comes, a financial plan, an investment strategy (how you get to the big picture) and a trusted financial professional can make the difference between staying the course and bailing out too soon.
Not surprisingly, researchers have found that the human brain wants to be happy and will in fact bend our perceptions of reality to that end. Faced with evidence that we have made a mistake in judgment, our brain denies, rationalizes, blames and defends, because admitting mistakes ruins our self esteem and makes us unhappy.
Faced with investment decisions, our brain seeks for ways to support its chase for happiness. We stuff ourselves with information - from the media, from the stock ticker, from cocktail party conversations - and take on a sense of achievement that we have superior knowledge. We do not. We have a surplus of information.
That false sense of knowledge causes us to make an investment based on performance from the past - despite prospectus disclaimers warning us that past performance doesn't promise future gain. We buy what's popular - because our brain tells us that many people can't be wrong. We resist selling investments when performance indicates we should - because we do not want to admit we were wrong. And we invest in stocks just because we know the name or, worse yet, because we work for the company.
If you've fallen pray to these financial defects in the past, now is the time to examine your financial strategy. That starts with a financial professional you can trust to be the voice of reason when you start to freak out about your portfolio. That trusted advisor should be assisting you develop a financial plan that starts with determining your life goals, not just a target amount for your investments. Be upfront when it comes to your assets, your liabilities, your hopes and your fears so your advisor gets a comprehensive picture of what you wish to accomplish.
To put your plan into action, you need an investment plan that fits your time frame, money needs and risk tolerance. With your financial expert, decide which investment vehicles are most acceptable for your profile. That includes understanding what criteria or scenario should prompt you to sell an investment, hold it or purchase more.
When the inevitable happens, and the markets retreat, don't lean on the media, your friends or even the major indexes for your next move. Look to the financial plan and investment strategy you and your financial professional developed and decide if those should change in the current climate. Good markets will always, eventually, go bad. With preparation, planning and professional financial counsel, that does not have to be true of your portfolio.
Wednesday, April 6, 2011
Income Distribution
Income Distribution
by Takara Alexis
In terms of your finances, your pre-retirement earning years focus on accumulation and growth of your money. You earn money from your job or business to pay for your current living expenses. You set some away in case of emergencies and for any needs in the future like college and retirement. Your goal is to gather as much as possible by earning it and investing it.
After retirement, you typically no longer contain money earned from work or business to pay for your living expenses. You require safety and liquidity to ensure available funds for day-to-day costs of living along with growth to help ensure your funds last your lifetime. The growth-oriented portfolio structure of your earning years may no longer apply, and you may need to change the way you evaluate your portfolio' s performance.
In fact, in an effort to assist with reducing risk and protect principal, a lot of retirees alter their asset mix to a more conservative, income-based allocation. The outcome is a portfolio made to provide higher rates of current income and less volatility. In other words, your need to preserve what you have now typically outweighs your need to grow your money at a benchmark rate, although you still need enough growth to ensure inflation doesn't minimize your buying power during retirement.
Depending on your age, your investment tendencies might lean too much toward growth or too far toward conservative income. If you are at the leading edge of the Boomer generation, you could have experienced years of significantly high market returns, changing your expectations for your own portfolio toward the high end.
If you're in the senior or "veteran" age group, however, you may harbor some distrust of stocks and over- confidence in bonds. Investors in this group also tend to underestimate their life expectancy, based on how long their parents lived. By overweighting your portfolio in the relative safety of fixed income and income investments, you increase the potential of outliving your money.
A retirement distribution plan looks to find that middle ground between reduced risk and greater return, taking into regard all income streams (i.e., Social Security, wages, pensions, investment income, annuity income), assets, inflation risk, investment risk and tax exposure. Plenty of variables can come into play, so each factor needs to be evaluated based on the individual situation.
Generally, a retirement distribution model will allocate a larger portion of assets to fixed income and income segments, followed by growth and income, growth, aggressive growth and most aggressive segments in progressively lesser percentages. The intended result is an inflation-adjusted income that lasts your lifetime by minimizing emotional investment decisions, keeping purchasing power, minimizing risk, preserving principal and maintaining an appropriate amount of long-term asset growth.
Organizing a retirement distribution plan can be complex and requires a thorough understanding of investment products and strategies and their associated risks. Your financial professional will help you determine the asset allocation model and products that best meet your needs.
by Takara Alexis
In terms of your finances, your pre-retirement earning years focus on accumulation and growth of your money. You earn money from your job or business to pay for your current living expenses. You set some away in case of emergencies and for any needs in the future like college and retirement. Your goal is to gather as much as possible by earning it and investing it.
After retirement, you typically no longer contain money earned from work or business to pay for your living expenses. You require safety and liquidity to ensure available funds for day-to-day costs of living along with growth to help ensure your funds last your lifetime. The growth-oriented portfolio structure of your earning years may no longer apply, and you may need to change the way you evaluate your portfolio' s performance.
In fact, in an effort to assist with reducing risk and protect principal, a lot of retirees alter their asset mix to a more conservative, income-based allocation. The outcome is a portfolio made to provide higher rates of current income and less volatility. In other words, your need to preserve what you have now typically outweighs your need to grow your money at a benchmark rate, although you still need enough growth to ensure inflation doesn't minimize your buying power during retirement.
Depending on your age, your investment tendencies might lean too much toward growth or too far toward conservative income. If you are at the leading edge of the Boomer generation, you could have experienced years of significantly high market returns, changing your expectations for your own portfolio toward the high end.
If you're in the senior or "veteran" age group, however, you may harbor some distrust of stocks and over- confidence in bonds. Investors in this group also tend to underestimate their life expectancy, based on how long their parents lived. By overweighting your portfolio in the relative safety of fixed income and income investments, you increase the potential of outliving your money.
A retirement distribution plan looks to find that middle ground between reduced risk and greater return, taking into regard all income streams (i.e., Social Security, wages, pensions, investment income, annuity income), assets, inflation risk, investment risk and tax exposure. Plenty of variables can come into play, so each factor needs to be evaluated based on the individual situation.
Generally, a retirement distribution model will allocate a larger portion of assets to fixed income and income segments, followed by growth and income, growth, aggressive growth and most aggressive segments in progressively lesser percentages. The intended result is an inflation-adjusted income that lasts your lifetime by minimizing emotional investment decisions, keeping purchasing power, minimizing risk, preserving principal and maintaining an appropriate amount of long-term asset growth.
Organizing a retirement distribution plan can be complex and requires a thorough understanding of investment products and strategies and their associated risks. Your financial professional will help you determine the asset allocation model and products that best meet your needs.
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