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2014-05-07T15:16:00.000-07:00

How Young People Can Get Rich Slowly

This excerpt is from "If You Can: How Millennials Can Get Rich Slowly" by William Bernstein.

Today's young people can retire comfortably with $1 million in the bank. All it takes is starting early, spending 15 minutes a year rebalancing their portfolio, and avoiding financial professionals who are mostly concerned with making themselves money.

At least that's the message of William Bernstein, cofounder of investment management firm Efficient Frontier Advisors, who recently published the short ebook "If You Can: How Millennials Can Get Rich Slowly."

It clearly resonates. The book, available for free on his website and for 99 cents on Amazon, is being snapped up by readers, and a New York Times story about Bernstein has spent the last several days at the top of the publication's most emailed list.

The popular interest seems to be a combination of older people sharing the text with their young family members and unspoken anxiety about saving for retirement, Bernstein tells Business Insider. "Of course, what I'd really like to believe," he says, "is that I've successfully stoked latent public outrage over a retirement system that expects the folks who teach our kids and flip our burgers to somehow, against all odds, manage their retirement portfolios."

So how can you get rich slowly? Here's some of Bernstein's advice, excerpted from the ebook with his permission:

***

Would you believe me if I told you that there's an investment strategy that a seven-year-old could understand and that will take you 15 minutes of work per year, outperform 90% of finance professionals in the long run, and make you a millionaire over time?

Well, it is true, and here it is: Start by saving 15% of your salary at age 25 into a 401(k) plan, an IRA, or a taxable account (or all three). Put equal amounts of that 15% into just three different mutual funds:

A U.S. total stock market index fund
An international total stock market index fund
A U.S. total bond market index fund

Over time, the three funds will grow at different rates, so once per year you'll adjust their amounts so that they're again equal. (That's the 15 minutes per year, assuming you've enrolled in an automatic savings plan.)

That's it; if you can follow this simple recipe throughout your working career, you will almost certainly beat out most professional investors. More importantly, you'll likely accumulate enough savings to retire comfortably.

But You're Still Screwed

William J. Bernstein

Investment advisor William Bernstein

Most young people believe that Social Security won't be there for them when they retire, and that this is a major reason why their retirements will not be as comfortable as their parents. Rest assured that you will get Social Security; its imbalances are relatively minor and fixable, and even if nothing is done, which is highly unlikely in view of the program's popularity, you'll still get around three-quarters of your promised benefit.

The real reason why you're going to have a crummy retirement is that the conventional "defined benefit" pension plan of your parents' generation, which provided a steady and reliable stream of income for as long as they lived, has gone the way of disco. There's only one person who can repair the gap left by the disappearance of these plans, and you know who that is. Unless you act with purpose and vigor, your retirement options may well range between moving in with your kids and sleeping under a bridge in the rain.

Further, the most important word is the IF in the above "if you can follow this simple recipe," because, you see, it's a very, very big if .

At first blush, consistently saving 15% of your income into three index funds seems easy, but saying that you can become comfortably well-to-do and retire successfully by doing so is the same as saying that you'll get trim and fit by eating less and exercising more.

People get fat because they like pizza more than fresh fruit and vegetables and would rather watch Monday night football than go to the gym or jog a few miles. Dieting and investing are both simple, but neither is easy. (And I should know, since I've been much more successful at the latter than at the former.)

In your parents' day, the traditional pension plan took care of all the hard work and discipline of saving and investing, but in its absence, this responsibility falls on your shoulders. In effect, the traditional pension plan was an investing fat farm that involuntarily limited calorie intake and made participants run five miles per day. Too bad that, except for the luckiest workers, such as corporate executives and military personnel, these plans are disappearing.

Bad things almost inevitably happen to people who try to save and invest for retirement on their own, and if you're going to succeed, you're going to need to avoid them. To be precise, five bad things — hurdles, if you will — must be overcome if you are to succeed and retire successfully:

Hurdle number one

People spend too much money. They decide that they need the newest iPhone, the most fashionable clothes, the fanciest car, or a Cancun vacation. Say you're earning $50,000 per year, 15 % of which is $7,500, or $625 per month.

In this day and age, that's a painfully thin margin of saving, and it can be wiped out simply by stringing together several seemingly innocent expenditures, each of which might nick your savings by $100 or so per month: a latte per day, a too-rich cable package, an apartment that's a little too tony, a dress or pair of brand-name sneakers you really don't need, a few unnecessary restaurant meals and, yes, an excessive smart phone plan you could, if you had to, not only live without, but also function better without.

Life without these may seem spartan, but it doesn't compare to being old and poor, which is where you're headed if you can't save. You might even save the whole $625 in one fell swoop just by living with a roommate for a while longer, instead of renting your very own place. Again, as bad as having a roomie may be, it's not nearly as awful as living on cat food at age 70.

Let's assume you can save enough. You're not home free, not by a long shot. You've got four more barriers to get by.

Hurdle number two

You'll need an adequate understanding of what finance is all about. Trying to save and invest without a working knowledge of the theory and practice of finance is like learning to fly without grasping the basics of aerodynamics, engine systems, meteorology, and aeronautical risk management. It's possible, but I don't recommend it.

I'm not suggesting that you need to get an MBA or even read a big, dull finance textbook. The essence of scientific finance, in fact, is remarkably simple and can be acquired, if you know where to look, pretty easily. (And rest assured, I'll tell you exactly where to find it.)

Hurdle number three

Learning the basics of financial and market history . This is not quite the same as the above hurdle; if learning about the theory and practice of finance is akin to studying aeronautics, then studying investing history is akin to reading aircraft accident reports — something every conscientious pilot does.

The new investor is usually disoriented and confused by market turbulence and the economic crises that often cause it; this is because he or she does not realize that there's nothing really new under the investment sun.

A quote often misattributed to Mark Twain has it that " History doesn't repeat itself, but it does rhyme. " This fits finance to a tee. If you don't recognize the landscape, you will get lost. Contrariwise, there's nothing more reassuring than being able to say to yourself, " I've seen this movie before (or at least I've read the script), and I know how it ends."

Hurdle number four

Overcoming your biggest enemy — the face in the mirror — is a daunting task. Know thyself. Human beings are simply not designed to manage long-term risks. Over hundreds of thousands of years of human evolution, and over hundreds of millions of years of animal development, we've evolved to think about risk as a short-term phenomenon: the hiss of the snake, the flash of black and yellow stripes in the peripheral vision.

We were certainly not designed to think about financial risk over its proper time horizon, which is several decades. Know that from time to time you will lose large amounts of money in the stock market, but these are usually short-term events — the financial equivalent of the snake and the tiger. The real risk you face is that you'll be flattened by modern life's financial elephant: the failure to maintain strict long-term discipline in saving and investing.

Hurdle number five

As an investor, you must recognize the monsters that populate the financial industry. They're very talented chameleons; they don't look like monsters; rather, they appear in the guise of a cousin or an old college friend. They are also self-deluded monsters; most "finance professionals" don't even realize that they're moral cripples, since in order to function they've had to tell themselves a story about how they're really helping their customers. But even if they're able to fool others and often themselves as well, make sure they don't fool you.

2012-12-10T22:59:00.003-08:00

10 Numbers That Can Change Your Life

By Paul Merriman

At some point, every investor who is planning to retire must confront his or her financial future. For most people, basic retirement planning can be distilled into 10 numbers.

As I worked with thousands of people over the years, and I saw over and over that when these numbers come into focus, the future starts looking clearer and less mysterious.

As you work to nail down these numbers, I suggest you regard the process as an exercise in discovery. Some items are easy to determine, while others may require some digging and careful thought. I think you will do a much better job if you use a competent financial adviser to help you get the right numbers and see what they mean for you.

One: Your current cost of living. This is the foundation of everything that follows. You could go into great detail on this, but a quick-and-dirty approach may be enough to get the process started: Identify your current gross income and subtract whatever you are saving for the future, including contributions to any IRA and employee retirement accounts. That's your cost of living, including taxes.

Two: The rate of future inflation. You will have to estimate this, of course. We all know that $100 isn't what it used to be, and inflation isn't likely to go away. Since 1926, inflation has been 3%. Over the years, that can do much more damage to your finances than you might think.

Three: The number of years before you will retire. This isn't as simple as it seems. We can't always control when we stop working. And baby boomers increasingly retire in stages. But getting a useful financial snapshot requires a number here. So for this exercise, choose a future date when you want to be financially ready to leave the workforce "cold turkey."

Four: Your inflation-adjusted cost of living in your first year of retirement. While you can crunch the number yourself with a financial calculator, this item can have lots of moving parts.

How will your taxes change? Will you spend more money on travel and hobbies? Less on commuting and clothes but more on health care? Will you move in search of lower housing costs, a better climate or to be closer to your kids? I suggest you use an adviser to help make sure you have not overlooked something important.
Five: The noninvestment retirement income you can count on. Probably this will include Social Security. It might also include a pension or rental income. Don't include interest, dividends and capital gains; they come into play next.

Six: The retirement income you will need from your portfolio. If you have the first five answers, this one requires only simple math. You know how much you'll need in that first year of retirement, and you know how much you can count on. The difference must come from somewhere else, most likely your portfolio.

Seven: The size of the portfolio you'll need when you retire. If your investments are properly balanced between well-diversified stock funds and low-cost bond funds, you should be able to withdraw 4% of your portfolio annually without much risk of running out of money.

Multiply the result you obtained in the previous step by 25. That's how big your portfolio should be on Day 1 of retirement. If this number seems impossibly large, don't panic. There are lots of things you can do about it.

Eight: The current size of your portfolio, excluding real estate and other nonliquid assets. For most pre-retirees, this number will be less than what you will need when you retire. The next items will help you build it up.

Nine: The amount you're saving for retirement every year. You should already know this from the very first calculation. If your annual savings plus your present portfolio will equal the result from Item seven, then you're in fine shape. More likely, these savings alone won't be enough. That's why you need some growth in your portfolio.

Ten: The annual return you need from now until you retire. While you can make this computation with a financial calculator, I suggest you discuss this point with an adviser to make sure you have reached a reasonable result.

The point of this exercise is to get a snapshot of your retirement readiness. I found an online calculator that, while it doesn't cover all the information I have described, will give you a quick idea of whether or not you are on the right track.

Several times I have recommended using a financial adviser to help you through these calculations, and you can do that without establishing a long-term relationship. You can hire one by the hour to check your work and make sure you have an action plan to get you where you want to go.

If you do that, these 10 numbers can change your life.

2012-07-22T21:36:00.002-07:00

Save your way to $1 million

By Donna Rosato

(Money magazine) -- Research shows that people who practice so-called burst saving are far more likely to sock away enough money for a comfortable retirement than those who don't.
According to a study by the research firm Hearts & Wallets, 64% of burst savers were able to build a nest egg equal to at least 10 times their annual pay, a common benchmark for a financially secure retirement.

They were also likelier than non-power savers to hit that goal no matter what age they started their savings regimen.
Says Laura Varas, a principal at Hearts & Wallets: "Once you've got a base of assets that really matters, it puts a tail wind at your back."
Part of a special report on How to reach $1 million, this story explains how saving aggressively for a decade can help you reach millionaire status by the time you retire.
KEY MOVE: Aim to save at least 15% of your income for a period of ten years or more.
HOW TO GET THERE
Get the timing right. Burst savers most commonly funded a ramp-up in their savings rate with money they received from pay hikes and bonuses, according to the Hearts & Wallets study. That way you don't feel the pain of living on less; you still take home more money, just not quite as much.

Power savers also often timed bursts to periods when their expenses fell or their income spiked. For example, many substantially increased contributions to their 401(k) or other retirement accounts after their children left home or during periods when both spouses were working.
Rein in your biggest budget busters. While small expenses do add up, it's not really buying daily lattes or the latest tech toy that most undermines your ability to save at a double-digit rate.
It's the really big bills, the five- and six-figure expenses like your home, car, and your kids' college education that ultimately do you in, says Leah Ingram, founder of the blog SuddenlyFrugal.com. "Getting serious about super saving may mean making some hard choices," Ingram says.
Case in point: computer programmer Scott Moore, 54, who's managed to build a net worth of $735,000 on an annual salary of $83,000.

Moore says the secret to his success has been keeping his housing and transportation bills low.
He bought a four-bedroom fixer-upper in an estate sale for $63,000 in 1995 and did most of the repair work himself. He's since paid off the mortgage and estimates the 2,700-square-foot house in St. Louis is now worth about $250,000. He owns a 15-year-old Buick Riviera with 154,000 miles on it and saves on gas and maintenance by mostly taking a train or bus to work and driving only when absolutely necessary.
The payoff: Moore expects to hit millionaire status -- $1.2 million to be exact -- by the time he turns 60 in six years.
Create multiple streams of income. Your salary can stretch only so far and you can cut expenses only so much.
Another way to supersize your savings is to supplement your main income with side work, says Christine Fahlund, senior financial planner at T. Rowe Price.
Deploy existing skills or focus on something you are passionate about, like fundraising, event planning, or launching a sideline catering or craft business.
"Turn your free time into cash doing something you enjoy and it won't seem like extra work," says Fahlund.
A bonus to this strategy: "The experience and skills you build up from consulting or project work now is an excellent way to transition to a flexible retirement career," Fahlund says. That way, you not only stay engaged as you age, but also get to keep adding to savings.
GETTING INTO GEAR
Set a target. Studies show that people who calculate how much money they need for retirement end up saving much more than those who don't. T.Rowe Price's retirement income calculator can help you access your number.
Develop new habits. Set a rule: Every time you get a bonus, tax refund, or other windfall, put half into savings. At irs.gov, you can elect to have your refund automatically directed into a savings account, IRA, or savings bonds.
Auto-escalate. Some 40% of employers allow you to automatically increase your savings rate each year, says Aon Hewitt. Raise contributions one point a year for five years, and you're twice as likely to save enough for retirement as those who don't.

2012-06-27T22:47:00.000-07:00

Basic Rules for Getting Rich

By Carla Fried, Anne C. Lee, Elaine Pofeldt, Susie Poppick and Penelope Wang | Money –

Part of a special report on 101 ways to build wealth, readers and experts weigh in with advice that will help you lay a foundation for accumulating wealth.
1) Focus on what's most important

ThinkstockIn achieving wealth, how you invest isn't nearly as important as how much you save.

Say you're 40, have $200,000 saved, with 60% in stocks, and are putting away 10% of a $100,000 salary (including company match). You have a 52% chance of retiring with 70% of your pre-retirement income, according to T. Rowe Price.

Boost your stock stake to 80%, and your chances improve modestly, to 57%. But if you boost your savings to 15% instead, you get to 69%.

Message: Stretch to save the most you can.

2) Make a family decision

62% of couples don't agree on their expected retirement age.

The age at which each of you will retire determines how much money you'll need. If you're among the multitude of couples that the Fidelity survey (cited above) found were not on the same page, make some time to talk with your partner about when you'll quit and what you'd like your life to be like.

3) 3 ways to get out of debt
ThinkstockCredit cards are almost never "good" debt, yet professional and managerial workers -- who theoretically should know better -- still carry a median balance on plastic of $3,300, according to the Federal Reserve's most recent Survey of Consumer Finances. Even such a small amount can be deleterious, since you're paying around 15% in interest.

Three ways to get out of the red:

Just pay it off. Behavioral research finds, oddly, that people often save in cash while carrying credit debt. That's a -15% rate on credit vs. 0.13% on savings. See the problem? If you've got enough cash to cover the balance, use it.

Get a 0% card. Interest-free balance-transfer offers are back in a big way. If you think you'd be able to pay off your total debt within 15 months, get one of these cards, and bank what you would have paid in interest.
Break out the tools. Can't pay your debt in 15 months? Use the tools at creditcards.com/calculators to come up with an aggressive schedule to erase the debt. The sooner your IOU is wiped away, the sooner you're back on the wealth-building track.

4) Fill up your 401(k)

Only 12% of 401(k) investors stash away the maximum amount allowed -- $17,000 in 2012 for those under 50 -- reports Vanguard. In fact, the average investor puts in 7.1% of pay, basically just enough to get the employer match.

Need motivation to pump up your percentage?

The value of your retirement plan at 65, starting at 40 with $0 and saving 7.1% of $100,000 salary: $614,000. If you saved the max, the value of your plan at 65 and starting at 40 with $0, would be $1,300,000.

Notes: Assumes 3% annual raises, 7% annualized return, and the 2012 maximum of $17,000.

But also save outside it. Those earning higher wages may need to save more than a 401(k) allows. Next best vehicle: a Roth IRA. The money is saved after tax, so withdrawals in retirement are tax-free. Couples with adjusted gross income up to $173,000 can add $5,000 in 2012 (partial contributions allowed up to an AGI of $183,000). Save the max for 30 years, and you'll net $505,400, assuming 7% annualized returns.

Don't forget to play catch-up. Who says there are no benefits of aging? Folks 50 and up can stash an extra $5,500 in a 401(k) and $1,000 in an IRA per year. But only 32% of those eligible take advantage, according to a TD Ameritrade poll. Too bad, since if you play catch-up on both a 401(k) and IRA each year for a decade, you'll end up with about $96,000 more in your account at 60.

5) Get the mix right
Source: Portfolio SolutionsYes, in 2008-09, investments plunged en masse. But over time assets tend to perform differently. So a diversified mix -- like the to the left, from Rick Ferri of Portfolio Solutions -- reduces risk to keep you on track.

6) Get a pro to help with the plans

Participants in 401(k) plans who receive some form of guidance earn annual returns an average three percentage points higher than those who don't, according to Aon Hewitt and Financial Engines. You may be able to get financial advice for free; an increasing number of companies offer it as a benefit. Ask HR.

7) Know your number
ThinkstockPeople who have calculated the total amount they'll need to retire have more saved than those who haven't, the Employee Benefit Research Institute recently found.

Not among the 42% of workers who've run this math? It's easy enough to do: Plug your info into the "How much will you need for retirement" calculator.

Strategize, don't improvise. Go a step beyond simply knowing the target -- know how to hit it.

A study last year conducted at the University of California at Irvine found that people who had a specific plan for their savings amassed between 28% and 85% more than those who didn't. "A formal plan makes you a more disciplined saver," says Chicago financial planner Cicily Maton. The "What you need to save" tool can help you determine how much to put away.

8) Money magazine readers speak up

Get progress reports

"We keep track of our net worth using an Excel spreadsheet, and we put all our monthly updates in a binder so we can look back on how far we've come. This motivates us to keep saving and investing and to keep our expenses to a minimum." -- Lori Watts, Allen, Texas

Make your savings untouchable

"I keep a separate savings account that I'm not able to view with my ATM card. I can only see it online. Doing this ensures that I do not take money out of the account -- it's out of sight, out of mind." -- Jay Albino, Stony Point, N.Y.

9) Set goals, but not too many
ThinkstockPeople who set fewer, more integrated financial goals saved nearly five times as much as those who set many unrelated ones, a recent study from the University of Toronto found.

Reason: With too many things to save for, you spend more time weighing priorities and less time taking action.

Limit yourself to three main goals -- say, retirement, Junior's college, the emergency fund -- then articulate a theme that describes them, like "improving my family's financial security."

2012-05-22T13:04:00.001-07:00

How much life insurance coverage to buy

If you're going to buy life insurance, make sure you've got enough.

There is no simple answer to how much coverage is enough.

Some financial planners say you need enough insurance to replace five to seven years of your salary. If you have young children or significant debt, you should bump up your coverage so you have enough to replace as much as 10 years of your salary, they say. That would mean a person making $50,000 a year should have anywhere from $250,000 to $500,000 worth of coverage or more.

Remember, the sole purpose of life insurance is to replace your income in case you die, so that your dependents can maintain their current lifestyle.

Factors to consider include whether the surviving partner will have child care expenses if one partner is out of the picture. Do you have other assets on which to draw? Will your children be out of the nest soon? These, and many other factors, influence the decision on how much coverage you need.

Buying a whole-life policy doesn't necessarily mean you are fully insured. Because of the investment component of whole life, the policies are much more expensive than term. Don't simply buy less coverage, as it defeats the purpose of buying insurance in the first place: to cover dependents.

Next, you've got to figure out how long you need the policy

source: cnnmoney

2012-05-06T15:10:00.001-07:00

Controlling your personal debt

Learn how to control your personal debt and accomplish your financial goals, by making your personal debt work for you.

1.Americans are loaded with credit-card debt.
The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

source: cnn money

2012-04-21T09:17:00.004-07:00

Explaining stocks and the stock market

Stocks are more than just a piece of paper (and sometimes not even that)
1. Stocks aren't just pieces of paper.

When you buy a share of stock, you are taking a share of ownership in a company. Collectively, the company is owned by all the shareholders, and each share represents a claim on assets and earnings.

2. There are many different kinds of stocks.

The most common ways to divide the market are by company size (measured by market capitalization), sector, and types of growth patterns. Investors may talk about large-cap vs. small-cap stocks, energy vs. technology stocks, or growth vs. value stocks, for example.

3. Stock prices track earnings.

Over the short term, the behavior of the market is based on enthusiasm, fear, rumors and news. Over the long term, though, it is mainly company earnings that determine whether a stock's price will go up, down or sideways.

4. Stocks are your best shot for getting a return over and above the pace of inflation.

Since the end of World War II, through many ups and downs, the average large stock has returned close to 10% a year -- well ahead of inflation, and the return of bonds, real estate and other savings vehicles. As a result, stocks are the best way to save money for long-term goals like retirement.

5. Individual stocks are not the market.

A good stock may go up even when the market is going down, while a stinker can go down even when the market is booming.

6. A great track record does not guarantee strong performance in the future.

Stock prices are based on projections of future earnings. A strong track record bodes well, but even the best companies can slip.

7. You can't tell how expensive a stock is by looking only at its price.

Because a stock's value depends on earnings, a $100 stock can be cheap if the company's earnings prospects are high enough, while a $2 stock can be expensive if earnings potential is dim.

8. Investors compare stock prices to other factors to assess value.

To get a sense of whether a stock is over- or undervalued, investors compare its price to revenue, earnings, cash flow, and other fundamental criteria. Comparing a company's performance expectations to those of its industry is also common -- firms operating in slow-growth industries are judged differently than those whose sectors are more robust.

9. A smart portfolio positioned for long-term growth includes strong stocks from different industries.

As a general rule, it's best to hold stocks from several different industries. That way, if one area of the economy goes into the dumps, you have something to fall back on.

10. It's smarter to buy and hold good stocks than to engage in rapid-fire trading.

The cost of trading has dropped dramatically -- it's easy to find commissions for less than $10 a trade. But there are other costs to trading -- including mark-ups by brokers and higher taxes for short-term trades -- that stack the odds against traders. What's more, active trading requires paying close attention to stock-price fluctuations. That's not so easy to do if you've got a full-time job elsewhere. And it's especially difficult if you are a risk-averse person, in which case the shock of quickly losing a substantial amount of your own money may prove extremely nerve-wracking.

At some point, just about every company needs to raise money, whether to open up a West Coast sales office, build a factory, or hire a crop of engineers.

In each case, they have two choices: 1) Borrow the money, or 2) raise it from investors by selling them a stake (issuing shares of stock) in the company.

When you own a share of stock, you are a part owner in the company with a claim (however small it may be) on every asset and every penny in earnings.

Individual stock buyers rarely think like owners, and it's not as if they actually have a say in how things are done.

Nevertheless, it's that ownership structure that gives a stock its value. If stockowners didn't have a claim on earnings, then stock certificates would be worth no more than the paper they're printed on. As a company's earnings improve, investors are willing to pay more for the stock.

Over time, stocks in general have been solid investments. That is, as the economy has grown, so too have corporate earnings, and so have stock prices.

Since 1926, the average large stock has returned close to 10% a year. If you're saving for retirement, that's a pretty good deal -- much better than U.S. savings bonds, or stashing cash under your mattress.

Of course, "over time" is a relative term. As any stock investor knows, prolonged bear markets can decimate a portfolio.

Since World War II, Wall Street has endured several bear markets -- defined as a sustained decline of more than 20% in the value of the Dow Jones Industrial Average.

Bull markets eventually follow these downturns, but again, the term "eventually" offers small sustenance in the midst of the downdraft.

The point to consider, then, is that investing must be considered a long-term endeavor if it is to be successful. In order to endure the pain of a bear market, you need to have a stake in the game when the tables turn positive.

source: cnnmoney

2012-04-15T21:47:00.000-07:00

Choosing the right life insurance

What you need to know about life insurance, including types of insurance policies and deciding on how much coverage you need.

1. All policies fall into one of two camps.
There are term policies, or pure insurance coverage. And there are the many variants of whole life, which combine an investment product with pure term insurance and build cash value.
2. Insurance is sold, not bought.
Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.
3. Whole life is expensive.
Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can't afford an adequate face value, leaving themselves underinsured.
4. Whole-life policies are built on assumptions.
The returns quoted by the agent are simply guesses - not reality. And some companies keep these guesses of future returns on the high side to attract more buyers.
5. Keep your investing and insurance strictly separate.
There are better places to invest - and without the high commissions of whole-life policies.
6. Buy enough term coverage to fill your needs.
Life insurance is no place to skimp, especially with rates at historic lows.
7. Match the term of the policy to your needs.
You want the policy to last as long as it takes for your dependents to leave the nest - or for your retirement income to kick in.
8. Buy when you're healthy.
Older people and those not in the best of health pay steeply higher rates for life insurance - so buy as early as you can, but don't buy until you have dependents.
9. Tell the truth.
There's no sense in shading the facts on your application to get a lower rate. Be assured that if a large claim is made, the insurance company will investigate before paying.
10. Use the Web to shop.
Buying life insurance has never been easier, thanks to the Internet. You can get tons of quotes - and avoid the pushy salespeople.

Whole-life policies, a type of permanent insurance, combine life coverage with an investment fund. Here, you're buying a policy that pays a stated, fixed amount on your death, and part of your premium goes toward building cash value from investments made by the insurance company.
Cash value builds tax-deferred each year that you keep the policy, and you can borrow against the cash accumulation fund without being taxed. The amount you pay usually doesn't change throughout the life of the policy.
Universal life is a type of permanent insurance policy that combines term insurance with a money market-type investment that pays a market rate of return. To get a higher return, these policies generally don't guarantee a certain rate.
Variable life and variable universal life are permanent policies with an investment fund tied to a stock or bond mutual-fund investment. Returns are not guaranteed.
The other type of coverage is term insurance, which has no investment component. You're buying life coverage that lasts for a set period of time provided you pay the monthly premium. Annual-renewable term is purchased year-by-year, although you don't have to requalify by showing evidence of good health each year.
When you're young, premiums for annual-renewable term insurance are dirt cheap - as low as a few hundred dollars per year for $250,000 worth of coverage.
As you get older, premiums steadily increase. Level-premium term has somewhat higher - but fixed - premiums for longer periods, anywhere from five to 30 years.

source: CNN money

2012-04-10T15:25:00.000-07:00


You’ve probably heard the phrase, "living within your means." But what does it really mean? Simply put, if you’re living within your means, you can pay for the things you need without getting trapped in more debt than you can handle. However, many of us believe that the only way to have nice things is to go into debt to get them. While that may be true for some large purchases such as a house or car, it doesn't have to apply to the other things we need in life. For example, when you buy a house, you take out a mortgage, and you may be in debt for as long as 30 years. That’s a long time, but this type of debt comes with benefits. The interest you pay on the loan may be deducted from your taxable income, and the equity—or money you have in the home—may be used for future loans. Making regular mortgage payments also helps you build a strong credit rating. However, buying food, clothes, toys, furniture and other items on credit is different. By doing this, you may be going into debt to buy nonessential things. Plus, the interest charged is not tax-deductible, so by the time you’ve paid for the item and all the interest, the cost is much higher than the original price. Simply put, you're robbing yourself—and your future. Instead of funding your dreams and the life you deserve to live, your hard-earned money fills the lender’s pockets. Wouldn’t it be better if the money you pay in interest could go into a savings account to help you reach your goals? Paying for everyday items by going into debt limits your choices because you’re constantly caught paying for yesterday instead of moving toward tomorrow. It can be challenging at first, but try to live within your means. Even better, try to live below your means. source: managemymoney

2012-04-10T15:19:00.000-07:00

Cut taxes without itemizing

By Kay Bell | Bankrate.com –

Taxes » Tax Deductions » Cut Taxes Without Itemizing

What do teachers, divorcees and people paying off student loans have in common? They can cut taxes, without itemizing.

These filers, along with other taxpayers who fit into special categories, might be able to claim at least one of the dozen-plus deductions found directly on Form 1040 without hassling with Schedule A.
Taxpayers who file Form 1040A can claim a few of these tax deductions on that shorter form, too.

Adjustments, not deductions

Officially, these breaks are identified as adjustments to your income. But they are popularly referred to as above-the-line deductions because you subtract them on Page 1 of your Form 1040 or Form 1040A, just above each form's last line where you enter your adjusted gross income, or AGI.
Taking these deductions will reduce your AGI, which in most cases, directly cuts your overall tax bill because figuring your AGI is the first step in arriving at your final taxable income amount. The less taxable income, the less you'll owe the Internal Revenue Service.
While these deductions mean that Form 1040 filers don't have to hassle with Schedule A, a few above-the-line tax breaks do require you to fill out another IRS form or work sheet. Still, that's a relatively small time commitment to shave some dollars off your tax bill.
Listed below, in the order in which they appear on lines 23 through 36 of Form 1040, are the current above-the-line deductions.
1. Educator expenses. With the educators' expenses deduction, teachers and other public and private school system employees can subtract up to $250 they spent on classroom supplies.
2. Certain business expenses. Unreimbursed business expenses also appear on Schedule A as a miscellaneous deduction. But some taxpayers can claim work-related costs directly on line 24 without worrying about a percentage threshold. You do, however, have to fill out Form 2106 or 2106-EZ.
The special taxpayers who qualify for this adjustment are military reservists, performing artists and fee-basis government officials. Although this collection sounds more like the cast of an avant-garde foreign language film than related taxpayers, lawmakers have deemed that anyone who falls into one of these categories deserves special tax treatment. If you are in one of these three fields, check the Form 2106 instruction book for filing details.
3. Health savings account deduction. A health savings account, or HSA, is a medical coverage plan that works much like an IRA. Eligible participants put money into an HSA where it grows tax-free and withdrawals can be made to pay medical, dental and vision-care costs not covered under a corresponding high-deductible health care policy.
4. Moving expenses. If you relocated for job reasons, some of your expenses can be deducted on line 26. You will, however, also have to fill out Form 3903.
5. Self-employment tax. If you're self-employed, you have to pay Social Security and Medicare taxes -- the amount collected from you as an employee and you as an employer. But you get to deduct half of those payments on line 27.
6. Self-employed retirement plans. If you have a self-employment pension plan, such as a Keogh or a SEP-IRA, deduct any contribution amounts on line 28.
7. Self-employed health insurance. As an entrepreneur, you now can deduct 100 percent of health insurance premiums you paid for yourself, your spouse and dependents. Don't forget to count what you paid toward long-term care policies. You get a partial break here, too. Enter the amount on line 29.
8. Penalty on early withdrawal of savings. On line 30, the IRS gives you a break when someone else slaps your hand. If you cashed in a certificate of deposit and paid an early withdrawal penalty, you'll find the amount on the 1099-INT or 1099-OID that the account manager sent you. The IRS lets you subtract that charge from your income.
9. Alimony paid. Divorced filers get a chance to recoup alimony payments on line 31. Be sure to include the Social Security number of your ex-spouse, so the IRS can make sure he or she reports the payments as income. Without the recipient's tax ID number on your return, the deduction could be disallowed.
10. IRA deduction. If you contribute to a traditional IRA, you might be able to deduct at least a portion of your contribution from your income. Precisely how much you can claim on line 32 of Form 1040 depends not only on your contribution amount, but also on your adjusted gross income and whether you or your spouse participate in a company-sponsored retirement plan. It requires some calculation, but run the numbers. This above-the-line deduction could help lower your taxable income.
11. Student loan interest. Up to $2,500 of the interest you paid on a qualified student loan can be subtracted on line 33. The loan can be for you, your spouse or a dependent. Note that there are income limits and married taxpayers who file separate returns cannot claim this adjustment.
12. Tuition and fees. The higher-education tuition and fees adjustment could reduce your taxable income by as much as $4,000. You'll need to complete Form 8917 and then enter the amount of tuition and fees deduction calculated there on line 34.
13. Domestic production activities. This above-the-line deduction was created to encourage "made in the U.S.A." manufacturing efforts. U.S.-based businesses that manufacture products domestically instead of sending the work overseas might be able to deduct up to 9 percent of the money earned or 50 percent of the wages paid in connection with the production effort, whichever is less. This tax break applies not only to such expected occupations as construction or farming, but also is available to certain creators of software, films or recordings.
You'll need Form 8903 to figure the exact credit that goes on line 35 of your Form 1040.
We're out of designated adjustment lines as we reach the bottom of Page 1, so that's the end of the nonitemizing tax breaks, right? Wrong.

Some specialty adjustments

Although line 36 simply instructs you to total your entries on all the previous adjustment lines, curious taxpayers who take a closer look at Form 1040 instructions will find even more possible ways to whittle away some of their taxable incomes.
Sure, several of these adjustments, such as reforestation amortization or repayment of specific supplemental unemployment benefits or court costs for certain unlawful discrimination cases, are for relatively limited tax situations. But a couple of the adjustments affect quite a few taxpayers.
Line 36 is where you enter any pay you got for serving on a jury, but then turned it over to your boss because you got your regular pay while at the courthouse.
Contributions to special medical savings accounts offered by some small businesses also are accounted for here. You'll need to fill out Form 8853 to determine the amount to enter on this catchall line.
So take a moment to check out all these other possible above-the-line deductions. Details are in the Form 1040 instruction book. If you're one of the select group of taxpayers to whom these apply, claim the amount and add the special notation spelled out in the instructions to line 36. The extra adjustments could really pay off.
Now it's time to add all these specially annotated line 36 amounts to the deductions claimed on the preceding 13 income adjustment lines. This final number goes on line 37. Once entered there, it's subtracted from the total income amount you entered on line 22. The result: your adjusted gross income.

A few also on 1040A

What if you don't want to or need to use the long Form 1040? You still get a chance to reduce your income if you file Form 1040A instead.
Four of these above-the-line adjustments -- educator expenses, IRA contributions, student loan interest and tuition and fees -- also can be deducted on lines 16 through 19 of that slightly shorter tax return.

2012-04-06T10:39:00.000-07:00

5 Keys To Financial Success

By Bernice Napach

If Alexa Von Tobel had her way, there would be a primetime reality show that focuses on educating people about their personal finances, just as "The Biggest Loser" educates people on eating healthy.
"I love that show," says Von Tobel, a Harvard graduate. "The six million people who tune in every Tuesday learn about healthy choices and the basics of living a healthy lifestyle. I wish there was a show like that about personal finance."
Von Tobel didn't create a TV show but did probably the next best thing. With $75,000 of her own funds and $1.1 million seed money from Goldman Sachs, she started LearnVest, a Web site dedicated to helping ordinary people organize their financial life. "You can stop a lot of [financial] problems from starting if you simply empower people to have some of the financial basics in their head before they start," she says in an interview with The Daily Ticker.
Her first words of advice: have a financial plan. "Understand what you're trying to achieve for the next three to five years and understand how to dice up all of the dollars you take home every month."
Her other top recommendations:
-Live by a budget

-Prioritize Debt Repayment

-Have 6 Months Worth of Emergency Savings on Hand

-Start Saving for Retirement Now

-Negotiate Your Salary

Von Tobel says many people haven't grasped these "financial basics" because they're not part of the public school education system. "There's a huge lack of financial literacy in America simply because it's not taught formally in our school decisions......yet it is a topic that affects us every single day of our lives.

2012-03-18T12:25:00.000-07:00

Li Ka-shing

He is the richest person of Asian descent in the world and the ninth richest person in the world with an estimated wealth of US$ 25.5 billion as of 2012

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This article is about the founder of Cheung Kong Holdings. For the vice-chairman of Henderson Land Development, see Martin Lee Ka Shing.

This article contains Chinese text. Without proper rendering support, you may see question marks, boxes, or other symbols instead of Chinese characters.

This is a Chinese name; the family name is 李 (Lǐ).

The Honourable^{[citation needed]} Sir ^{[citation needed]} Ka-shing Li 李嘉誠 GBM, KBE^{[citation needed]} , JP
Li Ka-shing inspecting the construction site of Shantou University in 1984.
Born	(1928-06-13) 13 June 1928 (age 83) Chaozhou, Guangdong, China
Citizenship	Hong Kong and Canada
Education	High school dropout^[1]
Occupation	Chairman of Cheung Kong Holdings, Hutchison Whampoa and Li Ka Shing Foundation
Net worth	US$ 25.5 billion (2012)^[2]
Spouse	Chong Yuet Ming (Deceased)
Children	Victor Li Richard Li
Awards	Justice of the Peace (1981)LL.D. (1986)D. SSc (1995)

Li Ka-shing

Traditional Chinese

李嘉誠

Simplified Chinese

李嘉诚

[show]Transcriptions
Mandarin
- Hanyu Pinyin	Lǐ Jiāchéng
Cantonese (Yue)
- Jyutping	Lei⁵ Gaa¹-sing⁴, Li² Gia¹-sêng⁵

Sir^{[citation needed]} Ka-shing Li, GBM, KBE^{[citation needed]}, JP (born 13 June 1928^[3]^[4]) is a Hong Kong based business magnate. He is the richest person of Asian descent in the world and the ninth richest person in the world with an estimated wealth of US$ 25.5 billion as of 2012. Presently, he is the Chairman of Hutchison Whampoa Limited (HWL) and Cheung Kong Holdings; through them, he is the world's largest operator of container terminals and the world's largest health and beauty retailer.^[5]
Considered one of the most powerful figures in Asia, Li was named "Asia's Most Powerful Man" by Asiaweek in 2001. His companies make up 15% of the market cap of the Hong Kong Stock Exchange.^[6] Forbes Magazine and the Forbes family honoured Li Ka-shing with the first ever "Malcolm S. Forbes Lifetime Achievement Award" on 5 September 2006, in Singapore.^[7] In spite of his wealth, Li has cultivated a reputation for leading a no-frills lifestyle, and is known to wear simple black dress shoes and an inexpensive Seiko wristwatch, which is at odds with the house he owns in one of Hong Kong's most expensive precincts, Deep Water Bay. Li is also regarded as one of Asia's most generous philanthropists, donating over US $1.41 billion to date to charity and other various philanthropic causes.^[8]
Li is often referred to as "Superman" in Hong Kong because of his business prowess.^[9]

[hide]

[edit] Early life

Li Ka-shing was born in Chaozhou in Guangdong province, People's Republic of China in 1928. In 1940 the Li family fled to Hong Kong to avoid turmoil on the Mainland.^[10] Li's family stayed at the home of his wealthy uncle. The success of Li's uncle ignited Li's determination to make a place for himself in the world.^{[citation needed]} Li married Chong Yuet Ming, his first cousin and the daughter of his wealthy uncle.
Li's father died in Hong Kong. Shouldering the responsibility of looking after the family's livelihood, Li was forced to leave school before the age of 15 and found a job in a plastics trading company where he labored 16 hours a day. By 1950 he was able to start his own company, Cheung Kong Industries. From manufacturing plastics, Li led and developed his company into a leading real estate investment company in Hong Kong that was listed on the Hong Kong Stock Exchange in 1972. Cheung Kong expanded by acquiring Hutchison Whampoa and Hongkong Electric Holdings Limited in 1979 and 1985 respectively.^[10]

[edit] Businesses

A Harvard Business School article summarises Li's career in the following way:

From his humble beginnings in China as a teacher’s son, a refugee, and later as a salesman, Li provides a lesson in integrity and adaptability. Through hard work, and a reputation for remaining true to his internal moral compass, he was able to build a business empire that includes: banking, construction, real estate, plastics, cellular phones, satellite television, cement production, retail outlets (pharmacies and supermarkets), hotels, domestic transportation (sky train), airports, electric power, steel production, ports, and shipping.

—^[11]

Li's businesses cover almost every facet of life in Hong Kong, from electricity to telecommunications, from real estate to retail, from shipping to the Internet. The Cheung Kong Group's market capitalisation is HK $647 billion (US $82.9 billion) as of December 2009 (This includes some double counting of the Group’s controlling stake in 12 listed companies around the world). The group operates in 55 countries and employs over 260,000 staff worldwide.

[edit] Plastics manufacturing

In 1950, after learning how to operate a plant, Li founded a plastics manufacturing company in Hong Kong with funds borrowed from family and friends and contacts he cultivated as a salesman. Li avidly read trade publications and business news before deciding to supply the world with high quality plastic flowers at low prices. Li learned the technique of mixing colour with plastics that resemble real flowers. After retooling his shop and hiring the best technicians he could find, he prepared for weeks for the plant visit of a large foreign buyer. Impressed with the quality of Li's plant, the buyer placed a large order. A few years later, Li grew to be the largest supplier of plastic flowers in Asia and made a fortune selling them.^[12]

[edit] Real estate

In 1958, unable to renew the lease for his company, Li was forced to purchase and develop a site by himself. An opportunity to acquire land arrived after the 1967 riots were in full swing when many people fled Hong Kong. As a result, property prices plummeted. Li, believing the political crisis would be temporary, and property prices would eventually rise, bought parcels of land at low prices. By 1971, Li officially named his real estate development company Cheung Kong (長江實業), named after Cheung Kong, (Chang Jiang or the Yangtze River) the longest river in China.^{[citation needed]}
Cheung Kong Holdings was publicly listed in Hong Kong Stock Exchange in 1972. During board meetings, Li stated on a number of occasions his goal of surpassing the Jardines-owned Hongkong Land as a leading developer.^[13]
The successful bid by Cheung Kong for development sites above the Central and Admiralty MTR stations in 1977 was the key to challenging Hongkong Land as the premier property developer in Hong Kong. Despite its size, Jardines decided in the 1980s to protect itself from hostile takeover by Li or other outside investors. The company implemented a cross-shareholding structure that was designed to place control in the hands of Britain's Keswick family despite their less than 10% holdings in the group. In 1984, the company also moved its legal domicile from Hong Kong to another British overseas territory – Bermuda, in anticipation of the transfer of sovereignty of Hong Kong to Communist China in 1997.^{[citation needed]}

[edit] Ports and electricity

In 1979, Li closed a unique transaction and acquired his current flagship company Hutchison Whampoa Limited from HSBC. The purchase created a massive conglomerate with business interests in multiple industries. The most notable branch of his business is the investment in container port facilities around the world, including in Hong Kong, Canada (Deltaport in Vancouver), China, the United Kingdom, Rotterdam, Panama, Bahamas and many developing countries. In total, Li's businesses control 13% of all container port capacity in the world.^{[citation needed]}

[edit] Retail

A subsidiary of Hutchison Whampoa, the A.S. Watson Group is a leading retail operator with over 7,800 stores. Its portfolio encompasses popular retail brands in Europe such as Superdrug (UK), Marionnaud (France), Kruidvat (Benelux countries), and in Asia including health & beauty specialist Watson's Your Personal Store, PARKnSHOP supermarkets, Great Food Hall, TASTE food galleria, gourmet boutique style fine food hall, Fortress electrical appliance stores, Watson’s Wine Cellars and Nuance-Watson airport duty free shops. ASW is also a major producer and distributor of water products and beverages in the region with Watsons Water the top selling brand in Hong Kong.^{[citation needed]}

[edit] Asset trader

Hutchison Whampoa group has the reputation of being an astute asset trader. It frequently builds up new businesses and sells them off. Huge profits were obtained in the sale of its interest in Orange to Mannesmann Group in 2001, making a profit of $15.12 billion. In 2006 Li sold 20% of Hutchison's ports business to Singapore rival PSA Corp., making a $3.12 billion profit on a $4 billion deal.^[14]
Recently Hutchison Telecommunications, nearly 50 percent owned by Hutchison Whampoa, sold a controlling stake of 67% in Hutchison Essar, a joint venture Mobile operator in India, to Vodafone for $11.1 billion. It had invested roughly $2 billion earlier.^[15]

[edit] Pyramid structure

Like many Asian conglomerates, the Li Ka-shing group is structured to retain disproportionate control without incurring the cost of owning an equivalent economic interest. This separation between control and interest is accomplished through pyramid structure, dual-class equities and cross-holdings.^{[citation needed]} While such structures are rarer in the US and UK, they do exist. For instance, Google uses a dual-class structure to give its founders and insiders 10 votes for each class-B share while the general public is offered class-A shares with 1 vote each.

[edit] Internet

His investment company, Horizons Ventures bought a stake in doubleTwist.^[16] Li Ka Shing Foundation bought a 0.8% stake in social networking website Facebook for $120 million in two separate rounds.^[17]^[18] and invested an estimated $50 million in music streaming service Spotify.^[19] Some time between late 2009 and early 2010, Li Ka-shing led a $15.5 million Series B round of financing for Siri, an artificial intelligence based virtual personal assistant application for the iPhone.^[20]

[edit] Others

Besides business through his flagship companies Cheung Kong Holdings and Hutchison Whampoa, Li Ka-shing also personally has extensively invested in real estate in Singapore and Canada. He was the single largest shareholder of Canadian Imperial Bank of Commerce (CIBC), the fifth largest bank in Canada until the sale of his share in 2005 (with all proceedings donated, see below). He is also the majority shareholder of a major energy company, Husky Energy, based in Alberta, Canada.^[21]
In January 2005, Li announced plans to sell his $1.2 billion CAD stake in the Canadian Imperial Bank of Commerce, with all proceeds going to private charitable foundations established by Li including the Li Ka Shing Foundation in Hong Kong and the Li Ka Shing (Canada) Foundation based in Toronto, Canada.^[22]
Li has some real estate interest in Vancouver, specifically in connection with Concord Pacific Developments that developed the old Expo '86 lands in Yaletown^{[citation needed]}, as well as Concord Park Place and CityPlace, Toronto in Toronto.

[edit] Personal life

His two sons, Victor Li and Richard Li, are also prominent figures in the Hong Kong business scene. Victor Li works directly with his father as managing director and deputy chairman of Cheung Kong (Holdings) Limited, while Richard Li is the head of PCCW, the largest telecom company in Hong Kong. They are both Canadian citizens.
Li is famously plainly dressed for a Hong Kong tycoon. In the 1990s he wore a $50 timepiece from Citizen Watch Co. and plain ties. He now wears a Seiko.^[23]
Even at his age, Li remains physically fit, and says that no matter what time he sleeps at night, he gets up before 6 am each morning to play golf for about an hour and a half. His golfing partner is Hong Kong movie mogul Raymond Chow. Li says that during that time, '...the ninety minutes that I have are mine.' His preferable amount of time for sleep is eight hours. It is also said that he walks on the treadmill for fifteen minutes a day at noon.

[edit] Awards and honours

[edit] Philanthropy

Li Ka-shing confers graduate degrees at Shantou University in 2008.

Li is a noted philanthropist. In 2006, Li pledged to donate one-third of his fortune to charity and philanthropic projects throughout the world – a pledge estimated at over US$10 billion.^[24]

His donation in 1981 resulted in the founding of Shantou University, near his hometown of Chaozhou.

Li was invited by Chinese leader Deng Xiaoping to become a member of the board of directors of the China International Trust and Investment Corporation (CITIC) to support the economic reform initiatives that Deng was attempting to develop. CITIC is China's largest conglomerate and is 42 percent owned by the government of China. It serves as the chief investment arm of China's central government and holds ministry status on the Chinese State Council. Li served only one year on CITIC's board before resigning his directorship. He was the non-executive director of The Hongkong and Shanghai Banking Corporation since 1980 and became Deputy Chairman of the bank in 1985. He was also Deputy Chairman of HSBC Holdings in 1991–1992.

The Li Ka Shing Centre in Cambridge, England, houses a Cancer Research UK facility with strong links to the University of Cambridge. The Centre was named after Mr Li following a £5.3 million donation, and was opened in his presence in May 2002.^[25] The Li Ka Shing Foundation endowed a professorship of oncology at the university in 2007 with a subsequent gift of £2 million.^[26]

The Li Ka Shing Library at the Singapore Management University is also named in his honour after a US$11.5 million donation in 2002 to the higher education institution.^[27]

After the 2004 Indian Ocean Earthquake disaster, he reportedly pledged a total of US$3 million.

In 2005, Li announced a HK$1 billion (US$128 million) donation to the Faculty of Medicine, University of Hong Kong. It was renamed to Li Ka Shing Faculty of Medicine on 1 January 2006, which provoked controversy between the university and a few alumni of the faculty, notably Kwok Ka Ki, over the university's naming procedures.

Also in 2005, Li donated US$40 million to the University of California, Berkeley, citing that he was impressed with the university's accomplishments in the biosciences. In recognition of Li's donation, the university has named the campus' new biosciences facility the Li Ka Shing Center for Biomedical and Health Sciences.^[28]

A long-time supporter of Stanford University since the 1980s, Li is the principal benefactor to the new US$90 million Li Ka-shing Center for Learning and Knowledge, part of the School of Medicine.^[29]

On 9 March 2007, Li Ka-shing contributed $100 million to the Lee Kuan Yew School of Public Policy in the National University of Singapore. Also, "to honour and recognise Dr Li's support and generosity, LKY SPP will name one of its three buildings at the historic Bukit Timah Campus after him".^[30]

Li Ka-shing donated C$25 million to St. Michael's Hospital in Toronto to found the Li Ka-Shing Knowledge Institute, which will serve as a medical research and education centre in downtown Toronto.^[31]

Li Ka-shing (through the Li Ka-shing foundation) donated HK$30 million (US$3.85 million) to aid relief efforts in the 2008 Sichuan earthquake^[32]

To date, Mr. Li has given away well over US$1 billion in philanthropy via his Li Ka-Shing Foundation and other private charitable Foundations^[33]

[edit] Press

Time Asia^[34]
Chronicle of Philanthropy^[35]
Wall Street Journal^[36]
Financial Times (UK)^[37]
L'Expansion (French Press)^[38]

[edit] See also

2012-03-04T20:53:00.000-08:00

The Tax-Efficient Frontier

By Rob Russell | U.S.News & World Report LP

Most men carry a wallet. Some carry a purse, but that's a whole other blog post. Most men carry their wallet in the same pocket every day. Personally, I feel it's more comfortable in my left pocket. If I have a hole in my preferred pocket, I reposition my wallet to the other pocket and it...well...feels uncomfortable. It feels kind of unnatural. Ladies, stay with me here; trust me, there's a point to my story.
[See top-ranked ETFs by category ranked by U.S. News Best ETFs.]
What happens when you have a hole in your pocket? You have to move your wallet to the other pocket so you don't lose any money through the hole. Guess what? You probably have holes in your investments that money is falling through in the form of unnecessary taxes. What should you do? Change pockets! With tax rates set to skyrocket in a matter of months, now is the time to consider repositioning your investments. It's time to put that wallet in the other pocket.
The following categorizes the most common investments by tax efficiency. Please note that this is not a discussion on investment performance, but one could draw the conclusion that the greater the tax-efficiency, the greater the return, especially for high-income earners. This is known as tax-adjusted returns, but I digress.
Mutual funds vs. managed stocks/ETFs. Many mutual fund investors will be surprised to know they may be losing a good chunk of their returns to the taxman. According to Morningstar.com, "[Mutual] fund investors are at a disadvantage when it comes to taxes. . . . [I]nvestors in conventional mutual funds can get stuck with a tax bill on their mutual fund holdings, even if they've lost money since they've held the fund."
I call this mutual fund phenomenon a double whammy: losing money in a fund because of a bad year in the market and getting a tax bill on capital gains even though you didn't gain anything.
See, mutual fund managers have the difficult responsibility of pleasing current investors while pleasing their marketing departments by posting returns that attract new investors. Because of this dual mandate, negative years in the market will typically compel the fund manager to sell an underlying investment that has a gain in order to lower the overall loss in the fund and voila, you get a tax bill for capital gains.
Mutual funds are like mass transit. They're not tailored to you; you get on with everyone else and you get off with everyone else. If you're concerned with lowering taxes, know that conventional mutual funds are one of the least tax efficient vehicles known to man. If you're comfortable with the ups and downs of the market, a professionally managed stock/ETF portfolio is more tax-efficient than conventional mutual funds because the tax strategy is tailored to your personal sensitivity to taxes. It's like riding in a limo compared to the city bus. Would you rather take the city bus or a limo?
As an added tax-saving bonus, you may even be able to deduct the management fee charged by your professional money manager. Goodbye whammy, hello tax efficiency!
Corporate bonds vs. municipal bonds. Bond investors buy bonds because they enjoy stable income (aka yield) and no market risk (except in the case of bond funds). There may also be an added benefit in the form of tax savings for some specific types of bonds. Corporate bonds offer no tax shelter because the interest income is subject to both federal and state income taxes. Municipal bond interest, however, is tax free at the federal level, and if the bond is issued within the state you live, it's also free from state income taxes. Because of their tax efficiency, municipal bonds pay a lower yield when compared to their tax-inefficient counterparts, corporate bonds.
This tax break can be huge if you're in a high tax bracket. The best way to evaluate the benefit of buying a tax-free municipal bond versus a taxable corporate bond is to calculate what's called the tax-equivalent yield:
Muni yield / (1 - your federal tax bracket) = tax-equivalent yield
So, using this formula, suppose you have a municipal bond paying a 5 percent yield and you're in the 28 percent tax bracket:
5 percent / (1 - 0.28) = 6.94 percent
This number (6.94 percent) is the tax-equivalent yield of the municipal bond, which is helpful when comparing a tax-free bond to a taxable bond. All things being equal (bond rating, maturity date, etc.), you would need a taxable bond to yield more than 6.94 percent to make it worthwhile for consideration.
Please note: All too often, I've seen other advisers misuse and abuse municipal bonds by putting them in the portfolio of a client that had no business being invested in them. Generally speaking, you shouldn't even consider this strategy unless you're in a 28 percent tax bracket or higher because you'll just be subjecting yourself to a low yield. Always use the tax-equivalent yield formula to compare apples to apples.
CDs vs. deferred annuities. CDs (certificates of deposit) over the years have earned the nickname "certificates of disappointment" because of their shameful return and terrible tax efficiency. The interest you earn on a CD is fully taxable, so you give up a large part of your return to the taxman!
If you have a $100,000 CD paying 1.50 percent, you earn $1,500 in interest over the year. If you're in the 28 percent tax bracket, you give up $420 in taxes, so the "real return" of the CD is 1.08 percent. This does not include the impact of inflation, which would put the "real return" of the CD into negative territory, but I won't even go there because this is a tax discussion.
Faithful CD owners love their CDs mostly because of the principal protection that they offer. Deferred annuity owners also love their annuities mostly because of the principal protection that they offer (in the case of fixed and fixed indexed annuities), but they also offer another significant benefit: They're far more tax efficient.
[See Equity-Indexed Annuities: The Magic Bullet?]
Interest earned on a deferred annuity is tax deferred (like an IRA), which offers protection from federal income taxes, state income taxes, and Social Security income taxes. In other words, a deferred annuity offers triple tax deferral, which over time can really add up to tremendous tax savings. Part of the magic of this strategy is understanding that not only is your principal and interest compounding, but so is the money on which you would have normally paid taxes.
What happens when the money comes out of a deferred annuity? The growth on the annuity is taxed as income (like an IRA), which is why many doctors and other high-income earners use deferred annuities as their preferred retirement savings tool.
Savings and money market accounts vs. life insurance proceeds. Savings and money market accounts share the same tax inefficiency that CDs do. Any interest earned is fully taxable, which can be a big chunk of your growth. What if you could put some of this "lazy money" to work and convert it from taxable to tax free? That's one thing life insurance is designed to do for you: take a relatively small amount of taxable money and parlay it into a much larger amount of tax-free money.
One of the few major tax breaks that the IRS gives you is the tax-free benefit on life insurance proceeds. Life insurance has been around since the 17th century, but people to this day are still surprised to hear about the tax-free death benefit that it offers.
[See What Type of Life Insurance Do I Need?]
It's all about taking advantage of the tax laws for the informed. Please note that there's tremendous controversy surrounding the various types of life insurance, but to set the record straight, insurance is NOT an investment nor should it be viewed as one. Life insurance is designed purely as an asset protection tool with tremendous tax benefits.
Robert Russell is CEO & CIO of the Ohio-based Russell & Company,

2012-03-04T20:38:00.000-08:00

Do You Need a Second Career?

By Jada A. Graves | U.S.News & World Report LP

When Art Koff retired from more than 45 years in advertising and consulting in 2003, he still wanted to work and remain challenged. "My last years in advertising were very much involved with getting clients to spend more of their budgets on the Net," he says. "I wanted to continue this effort and felt that other than AARP, there were few places where boomers, retirees, and people planning their retirement could find the kinds of information of interest to them." So he started the website RetiredBrains to serve as a networking outlet for older workers to find employment opportunities.
[See the 50 Best Jobs of 2012.]
Koff also included a wealth of information on subjects that would interest his target demographic. "When I first started, a large percentage of our traffic came to areas like memory loss ... arthritis pain, travel for seniors, senior discounts, financial and insurance services, etc.," he says, "but since the recession, the great majority of our visitors come [to the site] to look for a job, get advice on how to find employment, as well as [visit] our work from home and start your own business pages."
Managing the website has been an opportunity for Koff to stay active. "I'm in my late 70s and still put in 50-plus hours a week," he says. "But this is not work for me--it's fun."
Koff is part of a growing population who are choosing to stay employed after the traditional retirement years. According to a recent Department of Labor report, all baby boomers will have reached age 55 or older by 2020. Many of them will choose to retire and live on Social Security benefits and their personal savings. But a large portion of the boomer population will continue to work; due to financial obligation or desire, or even a little of both. A 2011 survey by the Transamerica Center for Retirement Studies shows that 39 percent of workers are planning to work past age 70 without retiring; 54 percent of workers intend to keep working once they retire. "Pensions are a thing of the past," says Marci Alboher, vice president of the retired workers website Encore Careers. "The best way to ensure a continued stream of income is to continue to earn it."
Instead of earning money working the same occupations as before, many older workers are choosing to start second careers. "If you retire at age 60, you legitimately could have 10 or 15 years to pursue another career," says Kerry Hannon, a career transition expert and author of the book What's Next? Follow Your Passion and Find Your Dream Job. "It could be worthwhile to get an education or certification to do something different. It opens up more possibilities."
So what are your choices, and should you choose to pursue a second career? Should you work part-time or opt for another full-time occupation? Are you interested in an office setting, or do you want to try working from home? One of the biggest benefits of starting a second career is the chance to choose what you do and how you do it.
According to Hannon, consulting is one of the most popular and profitable second-career options. It allows for a flexible schedule, offers the chance to use skills you already possess, and presents the possibility of learning new skills as well. "Many companies are thrilled to have you as a consultant because they don't have to pay you the benefits, but they do have your expertise," she says. "You might be using the same skill set, or you might get the opportunity to reinvent yourself that way. You're really deploying the skills you have and moving them into a new area." Hannon says this is a particularly good option for those who've held a human resources position, and it's also a natural second-career move for those who have worked as financial advisers, lawyers, and accountants.
Starting your own business is another option. Alboher's organization, Encore.org, provides support to working retired people with business ventures that serve a social good. "One main misconception is that innovation is the providence of the young," she explains. "We're trying to show that innovation happens throughout your life time." Encore.org awards an annual Purpose Prize to entrepreneurs age 60 and older who have made some positive impact within their communities through a second career. "People within this age group have a generative spirit," Alboher says. "They've reached a time when they want to make a career choice to help the world rather than just their own well-being."
Here are some tips on how to get the ball rolling on a second career:
1. Do the math. Brush up on your knowledge of Social Security, the income caps on what you can earn, and determine how your new career could affect your benefits. "Many people think they'll lose their Social Security if they work," Hannon says. "But you don't actually lose benefits, you just draw them at a different time." Use AARP's benefits calculator and the Internal Revenue Service's retirement estimator to determine how a second career could affect your Social Security.
2. Get out the house. Canvas your community, looking for gaps that you know you can fill. "Explore the rotaries, small businesses, and other community sites to see what work is available," recommends Hannon.
3. Brush up on your skills. Now that you have a better idea of where you might be needed, you can specifically pinpoint how you might be needed. "Think of ways that you can make a high-impact contribution," says Alboher. "You'll accomplish three things: You'll feel really good, you'll meet new people, and you'll network into a new job."
Twitter: @USNewsCareers

2012-03-01T20:21:00.000-08:00

7 ways to improve your relationship today
By Laura Schaefer

So you’ve hit a little bit of a bump in the road on the route to happily ever after. Perhaps you’ve found Mr. or Ms. Right, but the spark has faded a smidge. Don’t lose heart! Even the most romantic and perfect pairings in the history of the universe had their rough patches. All your relationship needs is a little help — and you’re just the person to give it. “Many people mistakenly think that both people have to work on the relationship for it to improve,” says Dr. Michelle Gannon, San Francisco psychologist and founder of MarriagePrep101.com. “However, even if only one person changes... the dynamic in the relationship can change.” With that in mind, here are seven small things you can do to improve your relationship today. What are you waiting for?

1. Be present. It’s hard to stay “in the moment” sometimes (especially with buzzing cell phones and the responsibilities of work always pulling us away from our partners), but we have to attempt to focus on the here and now as much as possible if we want healthy relationships. “Try to respond positively when your partner reaches out to you,” says Dr. Gannon. “Ask questions, communicate understanding and say ‘Yes’ to each other as much as possible. Research has found that happy couples respond to each other’s bids for attention 86 percent of the time, but unhappy couples only respond 30 percent of the time.”

2. Set aside some time for just you two. “Every couple should have some time during the week that is sacrosanct for them,” says Irene S. Levine, Ph.D., psychologist and author of Best Friends Forever: Surviving a Breakup with your Best Friend, “whether it’s a date night or a quiet dinner at home after the kids have gone to sleep.”

3. Touch each other. Melanie Greenberg, Ph.D., a clinical psychologist in California, says that when it comes to relationships, “more physical touching to show affection, such as a hug or a squeeze of the arm” makes everyone happier. Even though it’s a simple thing, it’s easy to forget that small gestures of affection really do add up. And what about those times when you can’t be in physical touch with your partner? “Call the person during the work day just to say hello,” suggests Dr. Greenberg. “Be patient and understanding. Everyone is overworked and grumpy these days.”

4. Clean something. “The main things couples fight about are money, sex, parenting, housework and in-laws,” says Dr. Greenberg, so “do your share of the housework.” It may seem like a small thing if you and your partner are arguing about bigger issues, but good feelings can spiral up out of small gestures. Clean dishes and folded laundry go a long way to making a happier home.

5. Talk about the minutiae of your daily routine; also, talk about sex. “Make time for reconnection [at night] by spending 30 minutes chatting about your days,” says Dr. Gannon. We’ve all heard it a million times: communicate, communicate, communicate! After all, it’s nice to have someone sympathize when you get cut off in traffic on the drive home, and it’s even nicer to have someone with whom to celebrate life’s small victories. If you and your honey already have this routine down, well done — but don’t flip on the TV and tune out just yet. When you’re done talking about your day, it’s not such a bad idea to take your conversation into R-rated territory. “Couples who can have intimate conversations about their sexual relationship are also happier in their relationships,” Dr. Gannon explains.

6. Bring on the funny. There’s nothing like a good laugh to brighten your partner’s day. If you’re not naturally hilarious, don’t sweat it — the jokes don’t have to come out of your own mouth to improve your relationship. Go see a comedy movie or watch something funny together on TV, and if you read something amusing on the Internet earlier in the day, make a point to share it with your partner as soon as you get the chance.

7. Focus on the good things in life. Sometimes it seems like humans are hardwired to be slightly discontent with life. It’s the quality that gets people crossing oceans and starting new businesses and just generally not settling, but it also means that we tend to overlook the things that really are working and making us happy in our lives and focusing on the areas that could use improvement. Blame self-help books, blame talk show hosts — but don’t blame your partner for every little imperfection in the life you share together. Cultivate more happiness and a better relationship atmosphere overall by taking the time to actively appreciate and remember what it is that you love about the other person, then let your partner know what you’re thinking. “Honey,” you could say, “thank you for always letting me know what time you’ll be home.” Or try something like, “Babe, I appreciate how you always pick great restaurants for us to try. I never have to think about it, and that’s nice.”

Laura Schaefer is the author of The Secret Ingredient and Planet Explorers New York City: A Travel Guide for Kids.

2012-02-25T14:11:00.000-08:00

Tough economy - fight back

It's been more than four years since the financial crisis first knocked you back on your heels. You've probably been on the defensive ever since, doing your best to deflect whatever punches the economy has thrown your way. Of course, the trick to any good rope-a-dope strategy is to sit back and let your opponent tire out before you unleash your own flurry of blows.
Get ready to go on the offensive. Your adversary -- the lousy economy that has battered your portfolio, home value, and net worth, not to mention your confidence -- continues to come at you but has clearly lost some of its sting.
The unemployment rate, while still high, has fallen from 10% in 2009 to 8.3%. Economic growth, while still slow, has accelerated
from an annual pace of 0.4% a year ago to 2.8%. And while the Dow Jones industrial average is still roughly 10% below where it was before the financial panic began, it's approaching the 13,000 level again.
Smart strategies from top experts on how to manage your investments, real estate, career, safety net, and savings, follow. None of these moves will undo the effects of the downturn. But they will help set the stage for your financial comeback.
Move 1. Change your stance on stocks
Old strategy: When the economy cratered, investors reacted emotionally to the market in ways that simply didn't pay off.
Best move now: Rationally reassess how much risk you should be taking with stocks based on changes in your circumstances.
Why: While only 3% of people abandoned equities altogether in their 401(k)s during the financial crisis, investors didn't exactly behave all that rationally during the downturn.
The young, for instance, grew seriously fearful, with 18- to 30-year-olds stashing more of their portfolios in cash than even baby boomers. Fund investors yanked billions out of U.S. equities in 2009 and shifted that into fixed income, only to see bonds get trounced by stocks that year. And the few brave souls who went searching for big gains raced into foreign stocks in 2009 and 2010, just in time for overseas equities to tank last year.
The moral of this story: Instead of trying to course-correct in reaction to a storm, you're better off calmly replotting your plan.
How to land this punch: Start with a range of equity allocations that's appropriate for your age. Those 55 and up will want to keep from 40% to 65% of their portfolios in stocks, says Lew Altfest, a financial planner in New York City. Younger investors should shoot for a stake between 60% and 80%.
Now consider how your circumstances have changed since before 2008. Chances are, you have a much better sense of your job security. Financial planners refer to your future ability to generate income -- and the dependability of that income -- as your "human capital," which must be factored into your asset allocation.
Economy in recovery? Not so fast
For instance, the income security that tenured professors enjoy allows them to be aggressive when it comes to equities. Work for a European bank, though, where you're one Greek default away from losing your job, and you'll want to ratchet down your stock exposure to the lower end of your range. "If you don't know where your next dollar is coming from, you can't afford more risk," says Colorado Springs financial planner Allan Roth.
You have a better sense of your tolerance for risk as well. That can also help determine whether you should be at the upper or lower end of your range. So too should your target retirement date. If you've concluded that you'll have to work several years longer than expected to recoup your market losses, "you can press the upper end of your range because you have more time," Altfest says.
Move 2. Take a calculated risk: Buy tech stocks
Old strategy: Some investors played defense and hid behind Treasuries, not realizing how expensive this security blanket had become.
Best move now: Go on the offensive by betting on tech stocks, which are cheaper than they've been in recent memory.
Why: What was safe is now risky, and what was risky has become a whole lot safer. Before the downturn, 10-year Treasuries were paying you two and half times the yield of the S&P 500. Today they're shelling out less than stock dividends. Meanwhile Uncle Sam's balance sheet is in far worse shape -- remember last year's credit downgrade?
Tech stocks have also come a long way -- but for the better since the dotcom days. The sector has become an earnings driver. Tech profits grew 20% faster than the S&P 500's last year, and they're projected to outpace the broad market again in 2012, according to S&P Capital IQ. At the same time, tech trades at nearly the same price/earnings ratio as the S&P 500, a far cry from a decade ago.
What's more, many companies in this sector also exhibit the kind of steady-Eddie characteristics that are valuable in tough times. "Tech can do well on its own," says Alex Motola, a Thornburg funds adviser. Businesses, for example, have to upgrade software or buy data storage, regardless of what's going on in the economy, to maintain and boost their productivity.
How to land this punch: Start by taking profits from your gains in government bonds last year -- Treasuries maturing in 10 years or more returned a whopping 30%. Next, trim that stake by an additional 5% to 10% -- Uncle Sam's debt now makes up more than a third of the total bond market, but financial planners recommend cutting back. Prior to the crisis, Treasuries made up only 25% of the bond market, so shoot for that target.
Use that money to boost your stake in tech. The typical domestic-stock fund that isn't a tech sector portfolio keeps about 18% of its assets in this group. Yet tech makes up nearly 20% of the broad market, and many market strategists say you can safely boost your stake to around 25% of your equities.
Blue-chip tech stocks aren't simply generating steady sales growth, they're also paying out dependable dividends. Motola likes Microsoft, yielding 2.7%. More than 80% of the software giant's sales are to cash-rich corporations, not consumers, and the company's earnings are forecast to grow more than 9% annually for the next five years. Plus, with a P/E of 11.2, based on trailing 12-month earnings, the stock is trading at a 20% discount to the S&P 500. Another good bet is IBM, with a projected earnings growth rate of around 11% and a modest P/E of 14.4.
Best bets in tech for 2012
Prefer a diversified fund? Check out Vanguard Information Technology, which owns more than 400 stocks and counts Microsoft and IBM among its top holdings. VGT charges rock-bottom fees of just 0.19% of assets.
Move 3. Your 401(k): Max it out right now
Old strategy: Maintain your contribution rate so as not to fall behind. Of course, by failing to boost their 401(k) savings, investors did fall behind as the market failed to deliver.
Best move now: Max out your 401(k) quickly -- you're running out of time, and your scorecard shows you're behind on points.
Why: If you've learned anything from this downturn, it's that you can't depend on stocks to turbocharge your retirement savings. The S&P 500 index lost ground on an inflation-adjusted basis over the past four years, just as it did in the 2000s thanks in part to two severe recessions. "The economy isn't exactly rewarding you," says New York City financial planner Gary Schatsky.
So what seems like good news -- the fact that the average worker has maintained the same 401(k) contribution rate of around 7% of pay that he had in 2007 -- actually isn't.
How to land this punch: Salaries are expected to rise 3%, on average, this year. Start there. Shift that amount into your 401(k). Assuming you were saving 7%, that brings your savings rate to 10%. You may not feel that you can do more, but test yourself.
"Raise your contributions to a level that might feel uncomfortable," says Chicago financial planner Chris Long, adding that you can always change your mind later.
Try this: Every three months boost your contribution by one point. Keep it up and your savings rate will hit 15% by the summer of 2013. Depending on your pay, that could max you out (the annual federal limit was raised this year to $17,000, though workers 50 and older can put in $5,500 more). If not, keep going and you'll reach 17% by the end of next year. Now, 17% isn't exactly a round number, but if you include a typical employer match of 3%, it will bring your overall savings rate to 20%, a good target to aim for.
How I'm easing into retirement
Why? If you're 45, earn $100,000, saved $300,000 and are socking away 10% of your pay, the chances your nest egg could survive until you're 95 would be just 56%, according to T. Rowe Price's retirement calculator. Boost your savings rate to 20%, though, and your chances of success shoot up to 76%.
Move 4. Home buying: Get back into the ring
Old strategy: Sit tight, because it could take years for the market to fully recover. In fact, there was little else you could do while housing was in a standing eight count.
Best move now: Act immediately. Use today's low prices and mortgage rates to take advantage of the still-strong rental market.
Why: Housing prices continued to sink at the end of last year, but most economists think home values will hit bottom in 2012. One sign: The inventory of homes on the market fell 9% in 2011 to the lowest level since March 2005.
Moody's Economy.com predicts that by 2015, average prices will rise 14%. "There's going to be a limited time frame for people to get a bargain in this market," says Daren Blomquist of data firm RealtyTrac.
But while buyers are coming off the sidelines, plenty of families are still content to rent or may not have adequate savings, income, or credit to qualify for rock-bottom mortgages. That, plus a tight supply of apartments, should keep vacancies low and rents high, says Brad Doremus, a senior analyst for Reis, a real estate research firm.
How to land this punch: Target investment properties in a nearby neighborhood that you're familiar with, preferably one near an employment center like a university. Make sure the rent will cover not just your loan payments, taxes, and fees, but also a 20% cushion for repairs and vacancies. And don't overpay.
Investors, who can typically close deals faster than other buyers because they often bring more cash to the deal and don't have to sell existing homes, tend to offer 10% to 20% below list price, according to Campbell/Inside Mortgage Finance.
If you're a few years away from calling it a career, consider purchasing your retirement home now -- and rent it out until you're ready to quit. Some of the most attractive retirement destinations are proving to be strong rental markets now.
Austin, for example, which made MONEY's Best Places to Retire list in 2011, boasts a favorable 4.9% vacancy rate, and rents rose 3.2% last year. While mortgages on investment properties are more expensive than loans on principal homes, you can still get a good rate -- expect to pay around half a point higher than a primary-home mortgage as long as you put 20% down and have a solid credit score.
Best places to be a landlord
Move 5. Your career: Think inside the box
Old strategy: Cast as wide a net as possible. In a lousy job market, you had no choice but to do whatever it took to find work.
Best move now: Look within your existing network. The challenge is no longer just keeping a job, it's preventing your career -- and wages -- from stagnating.
Why: Though the job market is finally showing signs of steady, if modest, improvement, companies aren't yet ready to start hiring en masse. There are still too many uncertainties in the global economy -- think Europe.
However, employers do need to fill full-time slots, and they're looking inward. "Nowadays, firms are thinking more in terms of career development and how to build the skill sets that they need internally," says Catherine Hartmann, a principal at the human resources consulting firm Mercer.
How to land this punch: If you survived the recession, you're probably managing a heavier workload with a downsized staff. Use that as leverage in negotiations for pay raises and promotions, Hartmann says. Evaluate your worth by analyzing your performance during such trying times.
"The people companies trust and value most are current employees. You want to tap into that," says Tory Johnson, CEO of recruiting firm Women for Hire.
Next, start talking. Identify colleagues in leadership positions and other key players at work and let them know that you want to be on their radar for future openings. Schedule an informal chat with an internal recruiter about your desire to move around.
Talk your way to a better raise
Finally, don't turn away outside entreaties. Working in your favor is the fact that highly skilled workers -- whose salaries have barely budged in real terms since before the financial crisis -- are starting to get feelers from competitors, says Ryan Hunt, a career adviser at CareerBuilder. So "companies will have to do more to keep their best workers," he says.
Move 6. Your insurance: Shore up your safety net
Old strategy: At a time when incomes and net worth were plummeting, households pared back on insurance -- an unsafe move.
Best move now: Make sure you have a safety net to protect against all types of risks.
Why: In the midst of the financial storm, cutting some of your insurance costs may have seemed like a necessary evil. The number of households with life insurance hit a 50-year low in 2010, according to research firm LIMRA, as families tightened their belts.
But ripping open your safety net in response to an economic crisis may have left you and your family vulnerable to unexpected life events -- like illness, premature death, or even a natural disaster.
So just as you would review how your retirement funds are invested, you need to reevaluate your insurance coverage to make sure it's not out of sync with your post-recession status. The last thing you'd want is to survive the financial crisis only to be upended by a different type of emergency.
How to land this punch: For life insurance, the goal is to make sure your spouse and kids have enough money to live comfortably and pay major expenses like college. Roughly speaking, that's anywhere from five to 10 times your annual salary.
Stopped paying your premium or lost your employer's group coverage? Then start shopping. A 10-year $500,000 term life policy from TIAA-CREF would cost a healthy 55-year-old man about $1,000 a year, a 50-year-old woman just $515 a year. Use the calculator at lifehappens.org to analyze your needs, and get quotes at Accuquote.com or Insureme.com. If you have coverage but haven't reviewed the terms lately, see whether you can get a better price.
"We've often been able to reinsure a person who had an older policy, say, 20 years old, for less money," says Alexandria, Va., financial planner Kelly Campbell.
Send The Help Desk your money questions
Households that cut back on homeowners and auto coverage need to make sure they didn't go too far, says Larry Ginsburg, an Oakland financial planner.
Can't afford to fully restore your coverage? Raise your deductible to $1,000, he says. Also, don't assume that your homeowners coverage amount should decline just because your home value has. The rule of thumb is to insure the amount it would cost to repair or rebuild your home, and that's a factor of local construction and materials costs, not market value.
Move 7. Your budget: Take a breather from cutting back
Old strategy: Slash your spending and boost your emergency fund by several months. Both moves were smart in scary times.
Best move now: You can stop cutting back now, as long as you commit to capping your spending for several years.
Why: After four years of being hunkered down in crisis mode, you can relax, within reason. The reality is, you can't chop your spending forever -- in fact, such severe austerity may eventually lead to binging. Already households are starting to ease up, as the savings rate fell from about 7% in May 2009 to 4% at the end of 2011. Of course, you don't want to see this trend continue forever either. It's time to strike a balance, says Los Angeles financial planner Justin Krane.
How to land this punch: If you're a retiree, a surprisingly effective way to cap your spending is to maintain your intended savings withdrawal rate -- just forgo making the annual inflation adjustments for the next few years, says Georgia planner Lee Baker.
A conservative approach to tapping your retirement accounts is to withdraw 4% of your nest egg in the first year, but to boost that initial amount in subsequent years to keep pace with inflation. Skipping inflation adjustments, though, can help mend a damaged portfolio.
T. Rowe Price found that if you retired in 2000 with $500,000 and used the 4% rule, your strategy at the end of 2010 would have had only a 29% chance of surviving a 30-year retirement. Had you taken no inflation adjustments in the three years after each of the past two bear markets, though, your chances of success would have shot up to 69%.
Workers can try something similar. Over the next several years you're likely to start collecting raises again. Yet you've proved that you can live on your current spending. So let's say you make $100,000 and "spend" 80% of that (including taxes). Well, if you get hikes of 3% a year for the next five years, your salary would climb to $116,000. Rather than spending 80% of that, though, stick to the original $80,000 budget, plus the additional amount you pay in taxes.
Best New Money Moves
That won't be nearly as hard as cutting your spending was at the onset of the financial crisis. Then again, the times aren't as tough either. And small moves like this will surely help you go the distance.
Do you know a Money Hero? MONEY magazine is celebrating people, both famous and unsung, who have done extraordinary work to improve others' financial well-being. To nominate your Money Hero, email heroes@moneymail.com.

2012-02-25T14:07:00.000-08:00

6 Benefits and Rewards of Having Awesome Credit

You've been diligent about paying the your bills on time, took steps to clean up your credit report of errors, and have even paid down your credit card balances. Having a high credit score and good credit history can set you up for many perks and low-interest loans and offers in the near future. While you can still survive with poor or less-than-stellar credit, those extra points will end up saving you money in interest charges over time and can also give you some more negotiating power.

Whether you're moving to a new city, are ready to get your first mortgage, or just want to avoid some of the inconveniences of setting up a new account with a security deposit, having awesome credit will help you in more ways than one.
Here are just six benefits and rewards of having great credit:
1. Increased credit card limits. Your borrowing capacity can increase significantly when you prove to creditors that you're a responsible credit card holder and can handle more credit. You can request a credit limit increase or the credit card company will just increase your limit automatically and let you know that you've earned this perk. Remember that the ratio of your available credit to used credit also plays a role when calculating your credit score; raising the limit could add a few more points to your already-high credit score.
2. Attractive mortgage and refinancing rates. Lenders are more likely to extend an attractive rate for your home loan when you have a high credit score and clean credit history. You are their ideal customer when it comes to getting a mortgage or refinancing your home; your high credit score wins you points with the underwriting department and tells the bank that you are a responsible borrower. You might also have more negotiating power when it comes to closing costs and other fees. Since banks are competing for your business, it's in their best interest to offer you the best possible deal in town.
[See 12 Money Mistakes Almost Everyone Makes.]
3. Lower financing rates on a car lease. If you're in the market for a new car and are thinking of leasing instead of buying, you might have some bargaining power when you flaunt your high credit score. Some dealers will be happy to offer you lower-than-average financing rates because they know that you will be paying back that loan on time. A clean credit history tells the dealer that you're a responsible borrower. If you can't negotiate a better rate, the dealer might be able to lower the price of your car instead. And don't forget about your insurance company; when they run the car's VIN through the system and review your insurance package, you may be able to get a better rate because of stellar credit.
4. Easy vacation home rental reservations. Planning an extended stay vacation and looking for a rental home? Talk to the rental agency about waiving fees or negotiate lower rates based on your credit history. Most rental agencies will run a credit check before extending a rate. You could end up saving a good amount of money on the rental property with strong credit.
5. Excellent credit card deals. Credit-savvy consumers know that it pays to use reward credit cards as long as they pay off the balance each month. The best rewards cards for people with excellent credit often provide the most attractive rewards points, free gifts, cash-back deals, and low introductory rates. While earning these bonuses is nice, make sure you don't overspend or carry a balance on these credit cards. Don't forget to stick to the smart spending habits that got you the great credit score in the first place.
6. More negotiating power. If you're applying for a personal loan from a corporate bank or a private loan from a privately held financial institution, having a high credit score could give you more negotiating power. You may be able to get a higher credit line, lower interest rates, or work out an attractive repayment plan just because you have such a solid credit history. Don't be afraid to use your credit score as leverage when negotiating a deal; the lender will consider your ability to pay back that loan on time when qualifying you for a certain amount.
Sabah Karimi is a top Yahoo contributor and a Wise Bread expert on best grocery cards and career tips.

2012-02-09T09:30:00.000-08:00

18 Tax Credits and Deductions to Take This Year

Even the most organized people hate tax season, but this year Uncle Sam has a special present: two extra days to prepare. Taxpayers will have until Tuesday, April 17 to file their 2011 tax returns because April 15 falls on a Sunday, and Emancipation Day -- a holiday observed in the District of Columbia -- falls on Monday, April 16. According to federal law, D.C. holidays impact tax deadlines in the same way that federal holidays do. Therefore, all taxpayers will have two extra days to file this year. Taxpayers requesting an extension will have until October 15 to file their 2011 tax returns.

Now on to your returns: Claim these often overlooked deductions and credits and you just might be able to pay less money to the IRS.

Hooray for inflation, at least when it comes to tax preparation. When general prices rise, the IRS nudges up some of its limits. Here's what's new for 2011 returns:

-- Personal and dependent exemption: $3,700, up $50 from 2010.

-- Tax-bracket thresholds increase for each filing status: For a married couple filing a joint return, for example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $69,000, up from $68,000 in 2010.

-- The maximum earned income tax credit (EITC): $5,751, up from $5,666 in 2010. The maximum income limit for the EITC rises to $49,078, up from $48,362 in 2010.

-- Cost-basis reporting by brokers: As of 2011, brokers must track clients' purchases of stock, real-estate investment trusts and foreign securities, and then report the original cost to the IRS when the asset is sold. This is an effort to improve tax compliance by investors. The rules for investments in mutual funds, bonds, options and many exchange-traded funds.

1. IRA/Roth Conversion: When you contribute to an individual retirement account (IRA), you help fund a future goal while lowering your current tax bill. In other words, socking cash in an IRA is like saving with help from your Uncle Sam.

The rules are pretty simple: You have until the tax-filing deadline (again, that's April 17) to contribute up the lesser of your taxable compensation for the year or $5,000 to a 2011 IRA ($6,000 if you are 50 or older). If you are self-employed, have a Keogh or SEP-IRA, and have filed for an extension to October 15, you can even wait until then to put 2011 money into those accounts.

Even if you're covered by a retirement plan at work, you can deduct some or all of your IRA contribution. The limits have increased for tax year 2011 modified adjusted gross income (AGI) as follows:

-- More than $92,000 but less than $112,000 for a married couple filing a joint return or a qualifying widow(er)

-- More than $58,000 but less than $68,000 for a single individual or head of household, or

-- Less than $10,000 for a married individual filing a separate return.

If your spouse is covered by a retirement plan at work but you are not, your deduction is phased out if your modified AGI is more than $173,000 but less than $183,000. If your modified AGI is $183,000 or more, you cannot take a deduction for contributions to a traditional IRA.

2. Roth IRA conversion: The income limit for Roth conversions was permanently removed, but taxpayers who converted to Roth IRAs in 2011 no longer have the option of deferring conversion income into later years, as was true for 2010 conversions. That means it's time to pay Uncle the taxes due on your conversion.

3. Itemized deductions and personal exemptions: The itemized deduction limitation is repealed for 2011 (and through 2012). This means that taxpayers can deduct the full amount of their itemized deductions in 2011. The personal exemption phase-out rules also do not apply through 2012.

Get the Credit(s) You Deserve

Tax credits are even better than deductions, because they lower your taxes dollar for dollar, instead of being calculated based on your tax bracket. If you are using last year's return as a guide, you should note that some credits, like the Making Work Pay credit, have expired. Still, there are plenty of other credits for taxpayers who qualify -- so don't miss them!

[Also see: Surprising Jobs with $100K Salaries -- After Only a Two-Year Degree]

4. The Child Tax Credit is up to $1,000 for each qualifying child who was under the age of 17 at the end of 2011. This credit can be claimed in addition to the credit for child and dependent care expenses. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. (Details are in IRS Publication 972.)

5. The Earned Income Tax Credit is a refundable credit (meaning that even if your credit exceeds your tax liability, you don't lose the excess and are entitled to receive any overage as a refund) for married couples filing jointly with 2011 earned income under $49,078 and singles with income under $43,998. The IRS has created handy EITC calculator to help you determine whether you qualify for the credit. (Details are in IRS Publication 596.)

6. The Child and Dependent Care Credit is calculated based on your expenses paid for the care of your kids under age 13 to enable you to work or to look for work in 2011. The credit is 20 percent to 35 percent of your child-care expenses, up to $6,000 -- the size of your credit depends on your income. (Details are in IRS Publication 503.)

7. The Retirement Savings Contributions Credit is designed to help low- and moderate-income workers save for retirement. Individuals with incomes of up to $28,250 and married couples with joint incomes of up to $56,500 may qualify for a credit of up to $1,000 or up to $2,000 if filing jointly. Check out Form 8880 for the rules.

8. Energy and Appliance Tax Credit applies to taxpayers who made energy-efficiency improvements to their homes in 2011. You may be eligible for a tax credit of 10 percent for the cost, up to a maximum of $500. Approved improvements include new windows, insulation, high efficiency furnaces, water heaters and air conditioning, among many others, but you will need your receipts and manufacturer certification as back-up. (Energy Star has a list of items that qualify for the tax deduction).

College Costs

There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit. To qualify for either credit, you must pay post-secondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit. For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis.

9. The American Opportunity Tax Credit: Each student can now get a $2,500 "higher education tax credit" for the first four years of college. The credit is based on 100 percent of the first $2,000 of tuition and related expenses, including books, paid during the tax year, plus and 25 percent of the next $2,000 of tuition and related expenses paid during the tax year (subject to income phase-outs starting at $80,000 for singles and $160,000 for joint filers).

10. Lifetime learning credit: The credit can be up to $2,000 per eligible student and is available for all years of post-secondary education and for courses to acquire or improve job skills. The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.

11. Tuition and Fees Deduction: Every family can deduct up to $4,000 of college tuition and fees in 2011. If your modified AGI is between $65,001 and $80,000 for singles or between $130,001 and $160,000 for joint filers, you are entitled to a reduced deduction of up to $2,000. (IRS Publication 970)

Add Up Those Itemized Deductions

Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. Some of those folks are leaving money on the table. If your deductible expenses exceed the 2011 standard deduction of $5,800 (up $100 from 2010) for singles and married individuals filing separately and $8,500 for heads of household, also up $100 and $11,600 for married couples filing jointly, be sure you itemize and grab these write-offs.

[Also see: Disruptions: Facebook Users Ask, 'Where's Our Cut?']

12. Miscellaneous deductions: These are deductible if they total more than 2 percent of your adjusted gross income. They include tax-preparation fees, job-hunting expenses, business car expenses and professional dues.

13. Sales tax: You can deduct sales tax paid in 2011 if the amount was greater than the state and local income taxes you paid. In other words, you get to choose: Write off your sales taxes or write off your income taxes. If you didn't keep your sales-tax receipts, use the IRS's sales tax deduction estimator. Even if you claim the sales tax amount from the IRS tables, you can add in tax paid on vehicles or boats purchased during the year, except to the extent the sales tax rate on them is more than the general sales tax rate. If you live in a state with a high income tax, like California or New York, you will probably be better off claiming your state and local income taxes rather than sales taxes. If you live in a state with no income tax, like Florida, Texas, or Washington, be sure to take the sales tax deduction when you itemize.

14. Medical expenses: This one is hard to claim, because the bar is so high to qualify. You can only deduct the portion of your 2011 medical expenses that exceed 7.5 percent of your adjusted gross income. (IRS Publication 502)

15. Mileage: Deducting miles driven for work or other purposes can be a huge tax break and save you significant money. The IRS increased the mileage deduction amounts for 2011: Business mileage = 51 cents per mile from January 1 to June 30, and 55.5 cents per mile from July 1 to December 31, 2011; medical and moving = 19 cents per mile from January 1 to June 30, and 23.5 cents per mile from July 1 to December 31, 2011; and charitable = 16 cents per mile.

16. Mortgage insurance deduction: Borrowers with AGI's up to $100,000 may be able to treat qualified mortgage insurance as home mortgage interest, which means that 100 percent of 2011 premiums may be deductible. The insurance contract had to be issued after 2006 and deductions are phased out in 10 percent increments for homeowners with AGI's between $100,001 and $109,000. (IRS Publication 936)

17. Enhanced adoption credits: As part of the Patient Protection and Affordable Care Act (March 2010), the Adoption Tax Credit was extended one year until Dec. 31, 2011, the amount of credit was increased to $13,360 and it was made refundable, meaning that families can benefit even if they have less than $13,360 of federal income tax liability. If adoption expenses have been paid for by an employer, you may qualify to exclude up to $13,360 from income. The credit is subject to income phaseouts from $185,210 to $225,210 in AGI. (IRS Topic 607)

18. Classroom deduction for teachers: K-12 educators who work at least 900 hours during the school year can claim an above-the-line deduction of up to $250 ($500 if married filing joint and both spouses are educators, but not more than $250 each) of any unreimbursed expenses (books, supplies and computer equipment -- including related software and services -- other equipment, and supplementary materials) used in the classroom. (IRS Topic 458)

2012-02-08T10:29:00.000-08:00

Simon Cowell: I Wanted to Keep Paula Abdul on X Factor

EntertainmentFebruary 8, 2012 AT 10:19AMBy Allison Corneau

Credit: Jordan Strauss/WireImage.com

When Simon Cowell let Paula Abdul go from The X Factor's judging panel, it was strictly business -- and not at all personal.

In fact, the reality TV mogul says he was overruled when it came to cutting Abdul loose along with mentor Nicole Scherzinger and host Steve Jones.
"I would've liked to have kept her," Cowell, 52, tells Extra of his longtime colleague Abdul, 49, with whom he judged American Idol for eight seasons. "She was very gracious and I said that to her. She understands it's business; it's never personal."

With Abdul and Scherzinger given the axe, Antonio "L.A." Reid is the only judge left to sit next to Cowell for season two until the vacancies are filled. "There's not a record executive out there who is as good as him for the job," Cowell confirms of the Epic Records head.
In terms of potential new judges, Cowell laughed off reports that he offered new mom Beyonce $100 million to take part. "I have no idea where this rumor came from," he told Extra. "It's complete nonsense."

So who is on Cowell's wish list? He tells ExtraMadonna could be "great" but "expensive" and that newly single Katy Perry "would be fun -- and she's feisty."
Tell Us: Who would you like to see as a judge on The X Factor?

2012-02-08T10:26:00.000-08:00

Obama Campaign Returning Funds Linked to Mexican Fugitive

VOA News

Photo: AP

President Barack Obama speaks about manufacturing and jobs during a visit to Intel Corporation's Ocotillo facility in Chandler, Arizona, January 25, 2012.

U.S. President Barack Obama's re-election campaign says it is returning some $200,000 in donations made by the family of a Mexican casino owner who fled drug and fraud charges in the U.S.

The campaign announced Tuesday that it was refunding all contributions linked to Chicago brothers Carlos and Alberto Rojas Cardona after The New York Times raised questions about them.

The newspaper reported Monday that the two Cardonas are the brothers of casino owner Juan Jose Rojas Cardona, known as Pepe, who disappeared after jumping bail in Iowa in 1994 and has since been linked to violence and corruption in Mexico.

The Cardona brothers began raising money for the Obama campaign and the Democratic National Committee last year. Obama campaign spokesman Ben LaBolt said the campaign will return the contributions from the Cardonas and any other donors they brought to the campaign. LaBolt said more than 1.3 million Americans have made donations, which he said are constantly reviewed for any issues.

The New York Times cites prosecutors in the state of Iowa as saying Carlos Cardona arranged last year for the former chairman of the Iowa Democratic Party to seek a pardon for his brother Pepe from the governor. The report said no pardon was granted.
Some information for this report was provided by AP and Reuters.

2012-02-02T16:52:00.000-08:00

Instructions for Forms 1099-SA and 5498-SA - Main Contents

http://www.irs.gov/instructions/i1099sa/ar02.html

Table of Contents

Specific Instructions for Form 1099-SA

File Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA, to report distributions made from an HSA, Archer MSA, or Medicare Advantage MSA (MA MSA). The distribution may have been paid directly to a medical service provider or to the account holder. A separate return must be filed for each plan type.

Transfers. Do not report a trustee-to-trustee transfer from one Archer MSA or MA MSA to another Archer MSA or MA MSA, one Archer MSA to an HSA, or from one HSA to another HSA. For reporting purposes, contributions and rollovers do not include transfers.

HSA mistaken distributions. If amounts were distributed during the year from an HSA because of a mistake of fact due to reasonable cause, the account beneficiary may repay the mistaken distribution no later than April 15 following the first year the account beneficiary knew or should have known the distribution was a mistake. For example, the account beneficiary reasonably, but mistakenly, believed that an expense was a qualified medical expense and was reimbursed for that expense from the HSA. The account beneficiary then repays the mistaken distribution to the HSA.
Under these circumstances, the distribution is not included in gross income, is not subject to the additional 20% tax, and the payment is not subject to the excise tax on excess contributions. Do not treat the repayment as a contribution on Form 5498-SA.

As the trustee or custodian, you do not have to allow beneficiaries to return a mistaken distribution to the HSA. However, if you do allow the return of the mistaken distribution, you may rely on the account beneficiary's statement that the distribution was in fact a mistake. See Notice 2004-50, 2004-33 I.R.B. 196, Q/A-76, available at www.irs.gov/irb/2004-33_IRB/ar08.html. Do not report the mistaken distribution on Form 1099-SA. Correct any filed Form 1099-SA with the IRS and the account beneficiary as soon as you become aware of the error. See Corrected Returns on Paper Forms in the 2012 General Instructions for Certain Information Returns for more information.

Death of Account Holder

Archer MSAs and MA MSAs. When the account holder dies and the designated beneficiary is the spouse:

The spouse becomes the account holder of the Archer MSA,
An MA MSA is treated as an Archer MSA of the spouse for distribution purposes, and
Distributions from these accounts are subject to the rules that apply to Archer MSAs.

If the designated beneficiary is not the spouse or there is no named beneficiary, the account ceases to be an MSA as of the date of death and the fair market value (FMV) on that date is reported.
If there is more than one recipient, the FMV should be allocated among them, as appropriate.
If the beneficiary is the estate, enter the estate's name and taxpayer identification number (TIN) in place of the recipient's on the form.

Distribution in year of death.

If you learn of the account holder's death and make a distribution to the beneficiary in the year of death, issue a Form 1099-SA and enter in:

Box 1, the gross distribution;
Box 3, code 4 (see page 2); and
Box 4, the FMV of the account on the date of death.

Distribution after year of death.

If you learn of the death of the account holder and make a distribution after the year of death, issue a Form 1099-SA in the year you learned of the death of the account holder. Enter in:

Box 1, the gross distribution;
Box 3, one of the following codes (see page 2):
1—if the beneficiary is the spouse,
4—if the beneficiary is the estate, or
6—if the beneficiary is not the spouse or estate;
Box 4, the FMV of the account on the date of death.

HSAs. When the account holder dies and:

The designated beneficiary is the surviving spouse, the spouse becomes the account holder of the HSA.
The spouse is not the designated beneficiary, the account ceases to be an HSA on the date of the account holder's death. The FMV of the account as of the date of death is required to be reported in box 4. Follow the rules and coding above under Distribution in year of death and Distribution after year of death.

Statements to Recipients

If you are required to file Form 1099-SA, you must provide a statement to the recipient. For more information about the requirement to furnish a Form 1099-SA or acceptable substitute statement to recipients, see part M in the 2012 General Instructions for Certain Information Returns.

Account Number

The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-SA. Additionally, the IRS encourages you to designate an account number for all Forms 1099-SA that you file. See part L in the 2012 General Instructions for Certain Information Returns.

Box 1. Gross Distribution

Enter the total amount of the distribution. Include any earnings separately reported in box 2. You are not required to determine the taxable amount of a distribution. Do not report a negative amount in box 1. Do not report the withdrawal of excess employer contributions (and the earnings on them) returned to an employer as a distribution from an employee's HSA. Do not report excess MA MSA contributions returned to the Secretary of Health and Human Services or his or her representative.

Box 2. Earnings on Excess Contributions

Enter the total earnings distributed with any excess HSA or Archer MSA contributions returned by the due date of the account holder's tax return. Include this amount in box 1. Report earnings on other distributions only in box 1.

For HSAs and Archer MSAs, if you are reporting earnings on a distribution of excess contributions, use the method under Regulations section 1.408-11 for calculating the net income attributable to IRA contributions that are distributed as a returned contribution. If the amount in box 2 includes earnings on excess contributions, enter distribution code 2 in box 3.

Box 3. Distribution Code

Enter the appropriate distribution code from the list below that shows the type of distribution.

1—Normal distributions	Use this code for normal distributions to the account holder and any direct payments to a medical service provider. Use this code if no other code applies. Also, see Distribution after year of death on page 1.
2—Excess contributions	Use this code for distributions of excess HSA or Archer MSA contributions to the account holder.
3—Disability	Use this code if you made distributions after the account holder was disabled (see section 72(m)(7)).
4—Death distribution other than code 6	Use this code for payments to a decedent's estate in the year of death. Also use this code for payments to an estate after the year of death. Do not use with code 6. See Death of Account Holder on page 1.
5—Prohibited transaction	See sections 220(e)(2) and 223(e)(2).
6—Death distribution after year of death to a nonspouse beneficiary	Use this code for payments to a decedent's nonspouse beneficiary, other than an estate, after the year of death. Do not use with code 4.

Box 4. FMV on Date of Death

Enter the FMV of the account on the date of death. See Death of Account Holder on page 1.

Box 5. Checkbox

Check the box to indicate if this distribution was from an HSA, Archer MSA, or MA MSA.

Specific Instructions for Form 5498-SA

File Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, with the IRS on or before May 31, 2013, for each person for whom you maintained an HSA, Archer MSA, or Medicare Advantage MSA (MA MSA) during 2012. You are required to file if you are the trustee or custodian of an HSA, Archer MSA, or MA MSA. A separate form is required for each type of plan.
For HSA or Archer MSA contributions made between January 1, 2013, and April 15, 2013, you should obtain the participant's designation of the year for which the contributions are made.
For repayment of a mistaken distribution amount, see HSA mistaken distributions on page 1.

Rollovers

You must report the receipt of a rollover from one Archer MSA to another Archer MSA, and receipt of a rollover from an Archer MSA or an HSA to an HSA in box 4.

Transfers

Do not report a trustee-to-trustee transfer from one Archer MSA or MA MSA to another Archer MSA or MA MSA, from an Archer MSA to an HSA, or from one HSA to another HSA. For reporting purposes, contributions and rollovers do not include these transfers. However, see box 2 on this page for the reporting of a trustee-to-trustee transfer from an IRA to an HSA.

Total Distribution, No Contributions

Generally, if a total distribution was made from an HSA or Archer MSA during the year and no contributions were made for that year, you need not file Form 5498-SA nor furnish a statement to the participant to reflect that the FMV on December 31 was zero.

Death of Account Holder

In the year an HSA, Archer MSA, or MA MSA owner dies, generally you must file a Form 5498-SA and furnish a statement for the decedent. If the designated beneficiary is the spouse:

The spouse becomes the account holder of the HSA or Archer MSA.
An MA MSA is treated as an Archer MSA of the spouse for distribution purposes, but no new contributions may be made to the account.

If the designated beneficiary is not the spouse or there is no designated beneficiary, the account ceases to be an HSA, Archer MSA, or MA MSA.

Statements to Participants

If you are required to file Form 5498-SA, you must provide a statement to the participant (generally Copy B) by May 31, 2013. You may, but you are not required to, provide participants with a statement of the December 31, 2012, FMV of the participant's account by January 31, 2013. For more information about statements to participants, see part M in the 2012 General Instructions for Certain Information Returns.
If you furnished a statement of the FMV of the account to the participant by January 31, 2013, and no reportable contributions, including rollovers, were made for 2012, you need not furnish another statement (or Form 5498-SA) to the participant to report zero contributions. However, you must file Form 5498-SA with the IRS by May 31, 2013, to report the December 31, 2012, FMV of the account.

If you do not furnish another statement to the participant because no reportable contributions were made for the year, the statement of the FMV of the account must contain a legend designating which information is being furnished to the Internal Revenue Service.

Account Number

The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 5498-SA. Additionally, the IRS encourages you to designate an account number for all Forms 5498-SA that you file. See part L in the 2012 General Instructions for Certain Information Returns.

Box 1. Employee or Self-Employed Person's Archer MSA Contributions Made in 2012 and 2013 for 2012

Enter the employee's or self-employed person's regular contributions to the Archer MSA made in 2012 and through April 15, 2013, for 2012. Report gross contributions, including any excess contributions, even if the excess contributions were withdrawn. No HSA information is to be reported in box 1.

Box 2. Total Contributions Made in 2012

Enter the total HSA or Archer MSA contributions made in 2012. Include any contribution made in 2012 for 2011. Also include qualified HSA funding distributions (trustee-to-trustee transfers from an IRA to an HSA under section 408(d)(9)) received by you during 2012. Any excess employer contributions (and the earnings on them) withdrawn by the employer pursuant to Notice 2008-59, Q/A 24, available at www.irs.gov/irb/2008-29_IRB/ar11.html, should not be reported as a contribution. You may, but you are not required to, report the total MA MSA contributions the Secretary of Health and Human Services or his or her representative made in 2012. Do not include amounts reported in box 4.

Box 3. Total HSA or Archer MSA Contributions Made in 2013 for 2012

Enter the total HSA or Archer MSA contributions made in 2013 for 2012.

Box 4. Rollover Contributions

Enter rollover contributions to the HSA or Archer MSA received by you during 2012. These amounts are not to be included in box 2.

Box 5. Fair Market Value of HSA, Archer MSA, or MA MSA

Enter the FMV of the account on December 31, 2012.

Box 6. Checkbox

Check the box to indicate if this account is an HSA, Archer MSA, or MA MSA.

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2012-02-02T10:04:00.001-08:00

Obama, Top Leaders Attend National Prayer Breakfast

Photo: AP

President Barack Obama holds up a book that he was given by author and keynote speaker Eric Metaxas, at the National Prayer Breakfast in Washington, February 2, 2012.

U.S. President Barack Obama and first lady Michelle Obama gathered in Washington with top leaders Thursday for the annual National Prayer Breakfast.

In his speech, President Obama stressed that God can play a critical role in everyone's life, no matter one's religious beliefs. He said all people can benefit by listening to "our creator" and avoiding "phony religiosity."

"This is especially important now when we're facing some big challenges as a nation, our economy is making progress as we recover from the worst crisis in generations. But far too many families are still struggling to find work or make the mortgage or pay for college and in some cases even buy food," said the president.

Obama said in moments of prayer, he is reminded that faith and values play a large role in solving some of the most urgent problems the United States faces. He said if people leave their values behind, they abandon much of the "moral glue" that has held the U.S. together for centuries.

"These moments of prayer slow us down, they humble us, they remind us that no matter how much responsibility we have, how fancy our titles, how much power we think we hold, we are imperfect vessels," said Obama.

Vice President Joe Biden was in attendance, along with several top lawmakers and one of the most famous players last season in U.S. college football, Baylor University quarterback Robert Griffin the third.

The National Prayer Breakfast is hosted by members of the Senate and House of Representatives who meet each week for prayer on Capitol Hill.

Every U.S. president has attended the event since it began in the 1953. Guests have come from some 130 countries, and the guest list often includes foreign dignitaries and celebrities. Mother Teresa, former British Prime Minister Tony Blair and musician Bono have all attended the event.
Some information for this report was provided by AP.

2012-02-02T10:03:00.000-08:00

Different Blood Pressure in Both Arms Linked to Heart Disease

Could be indicator of vascular risk and death

Doctors generally check their patients' blood pressure during office visits, but a new study says many are not doing it the right way - and that by doing it incorrectly, the doctors could be putting their patients' lives at risk.

Cardiologist Oscar Garfein takes blood pressure readings from both of his patients' arms. That technique saved the life of one of his patients.

"I found that in one arm, it was very, very low, and in the other one, it was normal," says Garfein. "And it helped me arrive at a diagnosis of a potentially-lethal condition."

Garfein's routine is supported by a new study showing that different readings in the right and left arms could be a sign of heart disease or blood vessel problems. If the two readings of systolic blood pressure - the pressure of blood in arteries when the heart is contracting - differ by 15 or more, it could indicate a narrowing of arteries to the legs, decreased blood flow to the brain, heart disease and a 70 percent increased risk of dying from either heart attack or stroke.

If heart or blood vessel disease is diagnosed at an early stage, changing risky behavior or taking statin drugs can reduce death rates.

"You want to search for the risk factors that are associated with this," says Garfein, "such as high blood pressure or cigarette smoking or high cholesterol, and treat them very aggressively."

Many cardiologists routinely check blood pressure in both arms, but the practice is much less common on a routine doctor's visit. This study, published in The Lancet, confirms a double reading could flag an underlying vascular problem in someone who otherwise seems to be healthy.
The study shows it doesn't matter what the systolic number was, it's the difference between the two readings that matters.

"All it takes is about a minute and you can find something that really, most of the time, points to the fact that this patient has established vascular disease," says Garfein.

2012-01-29T10:08:00.001-08:00

Jolie-Pitt Kids Tell Dad Brad: "Get Mommy a Ring!"

By Zach Johnso

Credit: Steve Granitz/WireImage

Brad Pitt may finally be ready to make an honest woman out of Angelina Jolie.
In an interview with CBS Sunday Morning (airing January 29), the Academy Award nominee says his six children are begging him to propose to In the Land of Blood and Honey director Jolie, 36.

"We're getting a lot of pressure from the kids," Pitt, 48, says. "It means something to them."
Pitt admits he hasn't "been very good" at explaining why he and Jolie have put marriage on hold since first becoming a couple in 2005. "We will someday. We will," Pitt promises. "That's a great idea."

When his brood of six -- Maddox, 10, Pax, 8, Zahara, 7, Shiloh, 5, and Knox and Vivienne, 3 -- asked him to "get mommy a ring," Pitt vowed: "Okay, I will! I will."
The Moneyball and Tree of Life actor adds that he's always been mindful of his children's desires -- especially when it pertains to his busy work schedule.

"You have less time to spend on a project," Pitt explains. "You come home and you're Dad. You're much more conscious of how much time you give to a production."
Pitt's full interview on CBS Sunday Morning airs January 29.

2012-01-24T09:18:00.000-08:00

Designer Vera Wang Stuns in Swimsuit at 62

Vera Wang defies age in the February issue of Harper's Bazaar. Douglas Freidman/Harper’s Bazaar

You probably already know that Vera Wang is a famous fashion designer, best known for her dazzling (and often outrageously expensive) bridal gowns. But you probably have no idea how old she is ... and if you had to figure it out by looking at her, your guess would probably begin with the number four.
Turns out the fashion mogul is actually 62 years old, but you'd never believe it from the recent photo shoot she did with Harper's Bazaar where Wang shows off her sleek and swanky new Beverly Hills home as well as her slim figure in a strapless swimsuit.

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The designer in her new kitchen. Douglas Freidman/Harper’s Bazaar

"I am not the sort of woman who would wear high heels with a bathing suit. Let's get that straight right now," she says in the magazine's February issue. Well, with a body like that, she should be!
Jean Queens
While Wang insists she's still very much a New Yorker, she explains in the interview that she purchased her new 90210 abode (which once belonged to Burt Reynolds) last summer as a "zen escape."

Wang poses in front of her sleek new L.A. home. Douglas Freidman/Harper’s Bazaar

"New York for me is about work. If L.A. were to become a West Coast version of that, I'd shoot myself," says Wang. "The climate, the lifestyle — it really fits as the yin to my New York yang."

What fashionista's home would be complete without a gigantic closet? Douglas Freidman/Harper’s Bazaar

But it was the home's billion-dollar view of the entire city that eventually sold her on the home -- the same view that serves as the backdrop in the poolside photo she still can't get over submitting to, especially considering her usually covered-up style.
La Dolce Rita
"I wanted to wear a corset from [fellow designer] Alexander Wang, whom I like a great deal. I was thinking it would be over a legging or a boyish short, but the next thing I knew, I was there in a swimsuit," she laughs, explaining her initial intentions for the picture. "The funny thing is that I'm the girl who no one sees at the beach. Ask anyone who's traveled with me. Normally, I'm in so many layers, I look like Lawrence of Arabia!"
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Wang, in her usual, more covered-up style. Douglas Freidman/Harper’s Bazaar

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