Friday, February 26, 2010

TIPS: Danger Ahead

Most of us are aware that the Federal Reserve has said that interest rates are going to rise.  Many Boomers have moved their investments into bonds as they aged or as a knee-jerk reaction to the market decline.  But when so many people head in one direction, for whatever reason, problems usually develop.  And that is what we have here.

Some folks moved into bonds and some, thinking that inflation was the real long-term worry, bought TIPS.  Turns out, both kinds of investors might be wrong.


Treasury Inflation Protected Securities are not the same as an investment that protects you from rising interest rates. While it is easy to see how investors can be confused by this, it will be a very costly mistake if you made it. In a follow-up to our warning about the potential, even probable bubble in the bond market posted a couple of days ago, investors who sought refugee in this type of security will also find trouble on the horizon.

A good deal of you moved into bonds without really knowing what you were getting into. A portion of you went with the safest bond available, the Treasury bonds. These are purchased at face value and pay a coupon (or interest rate payment) based upon the agreed upon rate at the time of purchase. Inflation can take its toll on those “yields”, as the interest paid to you is often referred to. Real yield however is the coupon payment less inflation. If inflation is low, as it has been over the last year or so, the yield on your bond will be relatively predictable and even quite profitable.


To read more on this topic about TIPS, click here.

Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer.

Wednesday, February 24, 2010

Retirement Planning: We Know We Should Have Started Earlier

Baby Boomers know better than most.  We know we should have started younger.  In fact, we know we should be doing more now for our retirement now. Start in your twenties, blah, blah.  Invest aggressively blah, blah, blah.

We have wasted the following examples on the youth: If you begin in your twenties and put away $5,000 a year, every year, faithfully until you retire, you will have a 401(k) worth in the neighborhood of about $700,000.  Of course this also relies on a steady growth in the markets of at least 5%.

But what if you missed that initial decade?  What are the chances of reaching that amount?

Since the vast majority of us missed that decade, how much more would we need to get it back?  It is important to understand, this "invest in your twenties" adds the miracle of compounding to the mix. It allows markets to correct even as you are afforded more risky investments.  What goes up in other words, really goes up and when it goes down, it doesn't fall as a far.

Older folks on the other hand, witness direct changes to their invested dollars when markets recede making the pain even more real.  

To read more about how to get back that missed opportunity...

Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer

Friday, February 19, 2010

Will More Plan Participants Ruin Your Retirement?

It was often thought that the laws of scale would solve everything.  The more the merrier so to speak.  When applied to your 401(k) plan although, the opposite might be true.


Auto-enrollment in 401(k) retirement plans was mandated in the Pension Protection Act of 2006. The PPA saw the idea as a way to help ensure that employees at least had a jump start at retirement. By enrolling new employees automatically, the theory of getting more workers involved in the plan sooner would them an opportunity to grow their future right from the first day (in some cases). At the time, it was thought to solve the under-use of these plans by a great many workers.

Is a lower company match going to impact your retirement future?  Will you increase your contribution to offset the lower match or do as some have historically done, reduce your contribution in kind?

Read more about the high cost of autoenrollement on your retirement plan.

From Paul Petillo, Managing Editor of Target 2025.com and a fellow Boomer.

Saturday, February 13, 2010

Boomer Investors Know: Mutual Fund Fees are Important

Boomer investors know better than most. They understand that no one ever said it was going to be easy being an investor. Mutual Funds, the mainstay of our 401(k) retirement plans and IRAs are no different than any other investment. They offer numerous layers, a multitude of nuances and of course, risk. And despite all of the information floating out in the public domain, the ability to tell one fund from the other is still difficult.

So the question is: Can you do the mathematical calculations required to find out how much your mutual fund is going to cost you? Chances are you might say yes, if you consider yourself a very savvy investor, able to filter all of the costs in the prospectus into a final number, understand the tax implications known and as yet unknown, and then be certain that you are right – or as close to right as humanly possible.

But chances are you can’t. Instead you fall squarely into the camp of investors who either have no clue or look at one guiding number and the vast majority of you are 401(k) or IRA investors as well. That number, widely advertised by the one group that lobbies in favor of mutual funds, Investment Company Institute or ICI comes in at an average of about 1.17% for all actively managed funds.

Most financial professionals, understanding that this is the average, suggest it as the top any client or interested investor should pay for the privilege of a little more risk than a simple index provides. Some also understand that this is more a moving target and unless they raise the cap to 1.5% as the max, they may exclude some of the better performing funds in the investment world, even at a slightly higher price.

Read the full article from Target2025.com on mutual fund math.

Friday, February 12, 2010

"TOM BROKAW REPORTS: BOOMER$!"

CNBC Presents "TOM BROKAW REPORTS: BOOMER$!" On Thursday, March 4th At 9PM ET/PT

Feb 12, 2010 - 10:38:23 AM

NBC News' Tom Brokaw Tells The Story Of History's Wealthiest & Most Influential Generation

They were born between 1946 and 1964, a vast and prosperous group of Americans who lived through the Cold War, Vietnam, Watergate and the housing bubble. They wore Buster Browns, played with hula-hoops, ate at the drive-thru and watched the Beatles play on "The Ed Sullivan Show." Raised during a time of unprecedented affluence, they exhibited extraordinary optimism and faith in the future. Now, as the oldest among them approach the age of retirement, they face a world of new challenges and opportunities they never anticipated or dreamed possible. 

On Thursday, March 4th at 9PM ET/PT, CNBC presents "TOM BROKAW REPORTS: BOOMER$!" a CNBC original reported by NBC News Special Correspondent Tom Brokaw. After defining "The Greatest Generation" in his bestselling book, Brokaw now turns his sights to their successors, the generation that vowed to change the world.

"Now, at this critical crossroads in the nation and in their lives, what do boomers do next - and how do they get there? It's a question that affects all of us and will for a long time to come," said Brokaw. 

In a landmark two-hour documentary, CNBC, First in Business Worldwide, and Brokaw take viewers on a provocative and evocative journey down memory lane and peer into an uncertain future. From Woodstock to the civil rights movement, in war and politics, Brokaw chronicles the extraordinary impact 78 million baby boomers have had on American society over the past six decades. He sits down with a fascinating cross-section of boomers to talk about their generation's life and legacy, including U.S. Senator and Vietnam veteran James Webb, author and critic Michael Eric Dyson, and political satirist P.J. O'Rourke. Brokaw also profiles quintessential boomer actor Tom Hanks, and has an intimate and gripping conversation with the parents of Denise McNair, the 11 year-old girl slain, along with three friends, in the 1963 Sixteenth Street Baptist Church bombing in Birmingham. That infamous episode brought the first casualties of the boomer generation in a civil rights struggle that led to the election of the nation's first black president. That transformation, together with historic advances made by women in all aspects of American life, is captured as part of the story of a generation that has delivered on some of its promises but not - as yet - on others. 

Brokaw also introduces viewers to everyday boomers and their children -- real people who have lived through unprecedented prosperity and now find themselves facing significant financial, physical and social challenges. For years, by their sheer heft in numbers, baby boomers altered the economy, and now, it has altered them. After experiencing historic wealth, many boomers now find themselves likely to outlive their money. Brokaw captures the stunned disbelief of a downsized generation that never saw it coming and that now confronts rising unemployment and dashed dreams of retirement. He also examines the boomers' unique and unyielding quest to preserve their youth, leading one writer to describe these children of Woodstock as, "Generation Ageless."

Mitch Weitzner is the Senior Executive Producer of "TOM BROKAW REPORTS: BOOMER$!" Jonathan Dann is the Senior Producer. Ray Borelli is the Vice President of Strategic Research, Scheduling and Long Form Programming.

"TOM BROKAW REPORTS: BOOMER$!" will re-air on CNBC on Saturday, March 6th at 7PM ET, Sunday, March 7th at 9PM ET and Monday, March 8th at 8PM ET.

Click Here to read Today's Hot Television News


http://realitytvwebsite.com/RealityTVNews/CNBC-Presents-TOM-BROKAW-REPORTS-BOOMER-On-Thursday-March-4th-At-9PM-ET-PT.html

Boomers in Business

Many Baby Boomers find themselves in a position to start a business or grow their business from a solo effort to one where employess are involved. Without ever losing your focus on retirement, there are steps that can be taken to make sure that you are paid first.

This week on MomsMakingaMillion Radio, the last in the three part series on small business retirement plans is discussed with Paul Petillo, managing editor for BlueCollarDollar.com and Target2025.com.

Kat: Today we discuss the SIMPLE IRA for small business in the last of our three part series with Paul on small business retirement plans.  Tell us just what simple is.

Paul:
The SIMPLE IRA, named because those letters stand for Savings Incentive Match PLans for Employees, are a much cheaper and far less complicated way for small employers to establish and administer than a traditional 401(k).

This type of plan is indeed easier to manage and implement but there are a few rules you need to keep in mind before choosing a SIMPLE IRA plan for you and your employees. You are required to make a contribution for every worker who receives $5,000 or more in compensation. It doesn't have to be a lot but it has to be something up to but not exceeding $11,500 for the calendar year 2010.  After that, it will be adjusted upward based on the Cost of Living.

Kat: You said the small business owner is required to make a contribution? Listen to the whole interview here.

Thursday, February 11, 2010

Should You Take the Return of the Matching Contribution Seriously?

Boomers were particularly hard hit in the days following the market meltdown in 2008.  Not only were your retirement plans decimated.  But the chances of recovering those funds in the near-term seemed to be slim to none.  For every brightside; there was a darkside.

You were among the fortunate ones.  You kept your job.  You were also among the unfortunate ones.  You lost money in your retirement just at the time when your company was trying to stop bleeding cash.  They stopped matching your contribution and you, wondering if they knew something you didn't, stopped investing exactly at the time when you should have actually upped your exposure to a nosediving stock market.  No one ever got rich investing at the top.

But you were scared.  You saw your 401(k) balance nosedive and your future evaporate (or at least it seemed it was) right before your very eyes.  Hindsight tells you that you shouldn't have done a thing; simply waited.

And now, the stock market is moving in the right direction - albeit sproradically and in fits and jerks.  And behold, companies are talking about bring back the matching contribution.


When the 401(k) match returns, and it will, you might find it to be a different beast than the one that was canceled in the previous years. The 401(k) match, a perk or incentive to get you to invest in your retirement in the absence of a pension, disappeared as companies cut back on hiring, increased layoffs and looked for numerous ways to cut costs.

They knew - and in many cases still do – that those that have a job were likely to stay put. Even without the incentive that the matching contribution was, jobs weren’t readily available. In other words, folks stayed put because they had to, not because company B down the road was offering better benefits than company A.

Are we being too optimistic about the 401(k) match?


Paul Petillo is the managing editor of Target2025.com

Tuesday, February 9, 2010

Walking Away: The Judgment that Cripples

It is my greatest hope, particularly for those close to retirement, that your house is secure, with any luck close if not already paid for and there is no chance of foreclosure in your future.  But things happen and fates change.

Last Friday, on MomsMakingaMillion radio with Gina and Kat, the topic of deficiency judgments was discussed in the MoneyTips section of the show.  I know something about foreclosures and wondered if what was being discussed could be prevented and how.

In a previous article here, we looked at the possibility of walking away from your home. The obligation, we argued is one that involves two parties: lender and the borrower.  Every financial contract, we all know comes with obligations.  But exactly how those obligations are applied can vary from state to state.

Gina, who resides in Nevada, gave fair warning to the homeowners in her state about the pitfalls of owing money long after you have been foreclosed.  Called a deficiency judgment (the only states that have no right for the lender on the books are Massachusetts, Mississippi, West Virginia and Delaware), this action theoretically allows the lender to pursue you for the balance of the loan due after the house has been foreclosed, .  While on the surface, this seems like an additional blow to your already decimated financial world, but there are steps that must be taken and certain rules that protect you.

Do you know about deficiency judgments?

Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer.

Wednesday, February 3, 2010

The Annuity Discussion has Resurfaced

The Obama Middle Class Task Force is looking to annuities as a way to make retirement just a little more secure.  Just the mere mention of annuities has sent insurers jumping for joy.

Worried that you will run out of money, annuities have been discussed as an alternative that few Americans consider but should.  Is this part insurance/part investment plan right for you? Could you outlive the insurer or will you outlive the product you bought?

Can annuities be the answer?  More at Target2025.com