Category Archives: investing

It’s an Age Thing.

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A common question I hear is: “when should I take Social Security”? This may be one of the biggest decisions you can make. For those born between 1943-1954 full retirement age is 66. It climbs to age 67 for those born between 1955-1959. You can start taking Social Security at age 62 but you will condemn yourself to a 25% reduction in benefits.

Besides waiting to full retirement age to avoid a haircut, waiting can open up a variety of choice for married couples. Your decision is much greater than taking these benefits early or waiting to full retirement age or beyond.

On January 24th Denise Kovach and I will discuss all of the Social Security choices and the impact each can make in your retirement. Go to www.financialgroup.com to make a reservation for our Social Security Seminar.

 

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How to raise a trillion dollars….

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We have been hearing nothing but fiscal cliff and spending cuts lately is there a solution on the horizon? I don’t know when we will get past this but here are a couple of items that I hope do not get touched.

Employer-provided pensions, which allow companies to offer tax-deferred pensions and 401k’s could be a major target for savings. These accounts defer $163 billion in revenue that could help reduce the deficit. I would rather have that savings in my pocket – a 401k is the best way to save for retirement in my opinion.

Another cherished middle-class deduction is mortgage interest; this too is on the line. Nearly $100 billion a year. Taking away this deduction would also have a major negative impact on many people and industries, also, my opinion.

Please find out who your Congressmen & Senators are and write them regarding these issues.

 

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When was the last time you looked?

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You may or may not know this but I have been the victim of identity theft twice. I subscribe to a credit alert service and check my bank account daily. Some may think that is a bit much but once you have gone through the process of trying to straighten everything out, it is not.

Each year we can all look at our credit files free of charge. If you have not done this, I strongly suggest that you do. Here is the web address to go to for your free look:

www.annualcreditreport.com

You owe it yourself to look.

 

Disclosures:http://www.hechteffect.net/?page_id=31

How much should I keep liquid?

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I purchased a home earlier this year and want to know how much money to keep in my home repair/upkeep fund. I have a small house (3 bdrm, 2 bath, 1500 sq ft) on a small lot. I have no debt other than my small mortgage ($900/month, including taxes and insurance).

My retirement (including a pension) is continuing to be fully funded on an ongoing basis and I already have an emergency fund that is fully funded with six months of living expenses.

Thanks, in advance, for your advice. Happy New Year!

My answer:

Congrats – it sounds like you have put yourself in a fine position for short term emergency funds and long term savings. Home repairs can be tricky as far as pre-funding goes. Next week we will be replacing our roof at a cost of $20k. If you were to look at that as being the most expense home repair to plan for, that would be my goal. Any repair below that, such as a hot water heater, would be less than $1000. If you use the roof as a maker you should be well prepared for anything. If you have any other questions, please let me know.

The final comment:

Thanks for responding. I was thinking around $20K too, good to have it confirmed by an expert.

 

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What is Chained-CPI?

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We are familiar with hearing about CPI, which is actually called CPI-U. This is a measure of the average expenditures on selected items by the urban shopper. Fluctuations in these prices have an impact on what the Government perceives inflation to be. In plain English, this tells us if there will be a raise in Social Security payments or not.

As part of the Fiscal Cliff negotiations we are now introduced to Chained-CPI. Chained-CPI attempts to account for how we react to inflated prices. Would we buy cheaper meat or more house brand products if we feel that prices are rising? It follows the chain of spending. But why make a change now from the standard CPI-U to Chained-CPI?

Making this change would mean paying out less in Social Security benefits over time. Chained-CPI would lead to a larger across-the-board cut in Social Security benefits and a .19% income surtax.

Will Chained-CPI become the new policy? Watch the news and the Fiscal Cliff negotiations to find out.

 

 

disclosures:http://www.hechteffect.net/?page_id=31

How to help the community of Newtown

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In the wake of the unfathomable tragedy at Sandy Hook School Friday, people all over the world have been aching to do something, anything to help. The following are a few organizations that are accepting donations for the community:

The United Way has set up the Sandy Hook School Support Fund.

“United Way extends our most sincere condolences and prayers to all those families affected by the devastating events in Newtown/Sandy Hook, Connecticut. While the eyes of the world may be on Newtown/Sandy Hook, to several staff, volunteers and contributors, Newtown is home. We will stand with the community and everyone affected directly and indirectly by this tragic event as we face the days and weeks ahead,” the United Way of Western Connecticut’s Web site says.

Check donations may be mailed to:

Sandy Hook School Support Fund
c/o Newtown Savings Bank
39 Main Street, Newtown CT 06470

 

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Ugg! New tax issues for 2013

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Nobody likes dealing with taxes. Just when we have gotten used to the current rules, change rears its ugly head. Here are a few changes to plan for in 2013.

Currently you can contribute $5000 to a Flex Spending Account. This will be reduced to $2500 as of January 2013. Each person may have their own FSA and contribute the $2500 even if your employer makes a contribution.

If your AGI is above $250,000 for married filing joint, you will now enjoy an additional 3.8% tax on your net investment income as a Medicare funding tax.

Still alive? Well the cost of living past 12/31/12 just got higher. The estate tax exemption will change as of January 1, 2013 from $5,120,000 to $1,000,000. The current maximum estate tax rate will change from 35% to 55%!

If any of these changes will apply to you, hire a tax pro. With changes like this – and more to come, professional help will keep you out of hot water.

 

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Cliff diving!

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We have heard a lot of back and forth about the fiscal Cliff and the proposed changes. The following are the proposed changes by the Administration taken from the 215 pages the Department of Treasury report. All of the changes put forth the following reason – or a modification of the reason:
“Limiting the tax benefit of upper-income taxpayers’ would reduce the deficit, make the income tax system more progressive, and distribute the cost of government more fairly among taxpayers of various income levels.” That being said… here are the proposals, somewhat simplified.

Itemized deductions would be reduced by 3% of the amount by which the AGI exceeds statutory thresholds. The thresholds would be $250k for married filing joint, $200k for single taxpayers.

Reinstate the personal exemption phase-out from the current $3800 to $2500. The thresholds are the same as above.

Reinstate the 36% and 39.6% tax rates by replacing the 33% and 35% tax brackets with these rates. The thresholds are the same as above.

Tax on qualified dividends as ordinary income will expire for income that is taxable at the new 36 and 39.6% brackets. All dividends will be taxed as ordinary income for these taxpayers.

Net long-term capital gains tax restored to 20%. It would also repeal the special reduced rate on gains from assets held over 5 years. (Editorial note: keep in mind an increase from 15% to 20% is an additional 25%, not a 5% increase).

All of this will go into effect 12/31/12 if there is no compromise.

 

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When is the right time to splurge?

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Most purchases can make us feel good – for a while, and then those warm fuzzies go away. Splurging has an important part in our lives.  The right type of splurge can bring us happiness and keep us motivated.  An indulgence now and again makes it easier to stay on course.  Here is the wrong way to splurge:

   On impulse:  often we regret unplanned binge spending.

 

   In Fear:  Hype can go a long way to make us spend; think of beanie babies. You know, you did not want your kid to miss out.

 

   Habitually:  Do you always buy name brands?  Do you always have to have the latest and greatest?  Sometimes the stores’ brand is better economically and waiting a bit can get you the latest at a better price.

 

Plan for your splurges.  Pick that item that you really can’t live without and save for it.  Who knows, while you are saving it may go on sale.

 

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