My Retirement Blog

How To Find A Stock Broker

retirehappy — Thu, 05 Nov 2009 01:50:33 +0000

Every once and a while, someone emails me to ask how I find a good stock broker for my retirement assets. What do I look at when I compare stock brokers? My answer, almost always, is “it depends.”

Ahhh I bet you hate that answer too. Well, unfortunately, it’s the truth. Who you decide to use as your stock broker will depend on what you want it for. If you want to invest primarily in mutual funds, I recommend you go with a mutual fund company. If you like Fidelity funds, then open a Fidelity account. If you like Vanguard funds, go to Vanguard Group for your retirement account. For mutual funds, going with the broker that runs them makes the most sense because you don’t have to pay a transaction fee to buy and sell shares. With a Vanguard account, you can buy or sell at will.

If you want to trade in stocks, it comes down to cost. I want a broker that has a good reputation and affordable fees. If I want to trade a lot of options, then I want one that gives me good prices on options trades. If I want to trade straight equities, I want one with cheap commissions on stock trades. After that, I want to look at the account minimums and any other fees, such as an account maintenance or inactivity fee. In all truthfulness, I never pay an account maintenance or inactivity fee. There are far too many brokers for you have to stand dealing with a broker that nickels and dimes you for those fees.

No COLA in 2010, Artificially High COLA in 2009

retirehappy — Sat, 31 Oct 2009 13:46:23 +0000

While no one welcomed the news of no cost of living adjustment (COLA) in 2010 for Social Security recipients, I didn’t hear anyone complain about an “artificially high” 5.8% increase this year (2009). Artificially high is the term used in a NY Times article discussing the $250 Social Security bonus payment President Obama has discussed recently.

I thought that was an interesting idea lost in the discussion of Social Security COLA.

$250 Social Security Bonus Payment

retirehappy — Thu, 15 Oct 2009 17:55:43 +0000

When it was revealed that there would be no cost of living adjustment for Social Security in 2010, people were livid. Just reading the comments on my blog revealed that people were furious there was no adjustment next year, so you can imagine how the broader public felt about it.

It turns out the outrage has yielded results because yesterday, President Obama called on Congress to approve $250 payments to the more than 50 million senior citizens on Social Security. This would make up for the lack of a COLA for next year. Incidentally, since automatic adjustments were implemented for Social Security in 1975, 2010 would’ve been the first year there was no adjustment.

The total cost of the move is estimated at $13 billion.

In addition to the Social Security bonus payment, there was also moves to prevent a reduction in contribution limits for retirement funds like IRAs and 401(k)s.

Obama calls for $250 payments to seniors [Associated Press]

Best Companies to Retire From

retirehappy — Thu, 08 Oct 2009 19:27:09 +0000

Fortune has published a list of the best companies to retire from and the companies they list come as no surprise to me:

IBM – They cite the 401(k) plan as a “gold-standard” with automatic contributions of 4% plus a match of contributions up to 6% of en employee’s salary.
P&G – P&G has the oldest employee stock plan in the nation and they contribute cash and preferred stock based on your tenure, up to 18% after 20 years of service.
Sherwin-Williams – Another case of a company that increases benefits over time, after 35 years you get medical benefits covering 80% of your costs, even if and when you qualify for Medicare.
Alcon Labs – Alcon, maker of eye-care products, automatically contributes 7% plus another match on employee contributions up to 5%.
Principal Financial Group – 75% match on of employee contributions up to 8% of their salary, plus a pension that scales up over time and tops out at 14%. Work there for 25-30 years and the plans provide the equivalent of a full salary for life.
Devon Energy – Benefits scale up over time and the 401(k) plan tops out at 22% of pay plus medical coverage.
NuStar Energy – A relatively new company, opened in 2001, they have an interesting plan: “NuStar’s pension gives retirees their full salary for one-and-a-half times their years of service: work 20 years and get 30 years’ worth of your full pay, assuming you haven’t retired early. That’s in addition to dollar-for-dollar 401(k) matching, up to 6% of pay, and a $1,000-deductible medical plan.”
Weyerhaeuser – With both a pension and 401(k) plans, they round out the list.

8 great companies to retire from [Fortune]

2010 Income Tax Brackets

retirehappy — Wed, 07 Oct 2009 17:15:50 +0000

Every year in mid-September, the Bureau of Labor Statistics releases inflation data for the last year and tax mavens get to calculating how much all the various tax numbers will move. It turns out inflation was a mere 0.19%, meaning most of the figures won’t change at all.

For referential purposes, the 2010 IRS Tax Brackets will remain unchanged:

2010 IRS Tax Brackets

Here are the projected federal income tax brackets for 2010:

Tax Bracket	Single	Married Filing Jointly
10% Bracket	$0 – $8,375	$0 – $16,750
15% Bracket	$8,375 – $34,000	$16,750 – $68,000
25% Bracket	$34,000 – $82,400	$68,000 – $137,300
28% Bracket	$82,400 – $171,850	$137,300 – $209,250
33% Bracket	$171,850 – $373,650	$209,250 – $373,650
35% Bracket	$373,650+	$373,650+

This also means that every other number pegged to inflation will probably remain unchanged, such as the COLA for Social Security, as reported earlier.

2010 401(k) Contribution Limits Could Fall

retirehappy — Thu, 27 Aug 2009 13:55:52 +0000

The current 2009 limit for employee contributions to a 401(k) is $16,500, with employees over 50 able to contribute an additional $5,500 as a catch-up. When the IRS announced the 2010 contribution limits in October, we may find that the limit will be lowered because there is a provision in the law that requires that contribution limit to be pegged to inflation. The formula compares 2009 third quarter inflation versus 2008 third quarter inflation to calculation the contribution limits. Inflation was 4.94% in September 2008, it’s negative this year (since as far as March!).

In 2010 IRS could cut 401(k) contribution limit to $16,000 [USA Today]

Kiplinger’s Retiree Map

retirehappy — Tue, 25 Aug 2009 13:51:41 +0000

Kiplinger’s has published a retiree map that might be helpful for you if you’re nearing retirement. It gives you a visual representation of states with favorable tax (or unfavorable) tax situations for retirees. It will show you:

7 states with no income tax
4 states with no sales tax
5 states with the lowest overall sales tax (including averages for county/city sales taxes)
5 states with the lowest median real-estate taxes
Most pension-friendly states
The states that don’t tax social security benefits

Not a bad map to check out if you’re nearing retirement and looking to make a move.

Most Affordable Places to Retire

retirehappy — Sun, 16 Aug 2009 14:10:57 +0000

These days, the idea of retirement can be a little scary. With the stock marke’s fall last year, taking 401(k) and IRA account balances with them, and the cost of everything going up, the thought of going onto a fixed income and retiring from your job is very daunting. Fortunately, one thing you can do to help mitigate all those risks is move to a place in the United States, or beyond, that favors retirees.

That’s why I always enjoy articles that point out the best and most affordable places to retire. Whether it’s because of good home prices or a lower cost of living or just favorable tax benefits for retirees, these lists offer a great start if you’re deciding on a move.

BusinessWeek has published their latest survey of the best places to live and tops on the list is Tucson, Arizona. With 284 sunny days and a cost of living index of 109.44, so close to average (100) in the US.

Tucson, home of the University of Arizona, is a scenic, affordable place to retire. It is surrounded by mountains and the dry beauty of the Sonoran desert. It has its own airport, just six miles from downtown Tucson, more than 100 parks, a good public transportation system, and plenty of public and private golf courses. The university and University Medical Center are among of the state’s largest employers.

When Does a Reverse Mortgage Make Sense?

retirehappy — Fri, 10 Jul 2009 17:43:40 +0000

Reverse mortgages have recently come into the spotlight as a band aid for seniors with cash flow problems. Unfortunately, the media attention has been generally negative, focusing on a small set of shady brokers that give the entire niche a bad name.

Despite working in the mortgage industry, I’ll be the first to tell you that reverse mortgages are NOT smart for every situation because of the high up front cost. However, if you qualify and need to tighten your financial belt a bit, a reverse mortgage could make sense. Here’s a few situations where a reverse mortgage could be a sound financial decision.

If you’re retired and don’t have any cash left over at the end of the month. Some seniors are still paying a mortgage payment every month and don’t have much left after living expenses. With a reverse mortgage, individuals in this situation could completely get rid of that monthly mortgage payment. Most likely that would amount to freeing up over $1,000 every month.

If your home is paid off but your investment or pension income isn’t paying the bills. In the same vein as the first situation, it might make sense to pursue a reverse mortgage when a homeowner has a large chunk of equity in the home and their monthly income is insufficient. Equity can be cashed out up front or as a monthly payment like an annuity.

If you have high interest debt on your home or some other asset. This is a less common use for reverse mortgage proceeds but in some cases it makes sense. Say for instance, you have a home equity line of credit at 8% or more. That amount could potentially be refinanced at a lower rate or just paid off in full with a reverse mortgage.

Like any loan program, every situation warrants a individual assessment from an experienced professional. If you think a reverse mortgage might make sense, I encourage you to check out our article on the pros and cons of a reverse mortgage and check out our other resources.

Brandon Laughridge is the editor of the Mortgage Loan Place Blog and specializes in educating consumers on the merits of FHA, VA, and Reverse Mortgage programs. To learn more, please check out the MLP blog or follow Brandon on Twitter.

Take Lump Sum or Monthly Pension Payments?

retirehappy — Wed, 10 Jun 2009 19:11:54 +0000

This was the subject of a recent question to Money Magazine senior editor Walter Updegrave. The choice came down to whether you wanted the security of a monthly check for the rest of your life (monthly pension payments) or the freedom of investing the lump sum however you chose, with a few wrinkles. Updegrave says it’s more complicated than that but even after you look at the pros and cons of each, the crux of the decision has to do with just that… freedom or security.

The big con against monthly payment is that it’s rarely adjust for inflation, which is the enemy of fixed income, and the big con against the lump sum is that you won’t be able to manage it correctly. You might spend it all or make poor investment decisions.

Unfortunately, there is no universal right or wrong choice, but here is some advice in case you’re facing such a decision.