Investments

Save for Retirement and Still Pay Your Kids’ College Costs

January 7, 2015
BY IVORY JOHNSON, CNBC

You can borrow money for a college education but not for your retirement. It’s what we, as financial experts, truly believe. But a constant tug-of-war between 401(k) plans and Section 529 college savings plans has ensued in investors’ hearts and minds—and neither side appears to be winning. Identifying priorities is no easy task. Just ask an average parent if his or her retirement is more important than paying for a child’s education.

Most parents are aware that over the course of an adult’s working life, high school graduates can expect, on average, to earn $1 million less than those with a bachelor’s degree and are 50 percent more likely to be unemployed. So it isn’t hard to see why parents might be tempted to make paying for their kids’ college education a priority over saving for their own retirement.

At the same time, college costs have, according to published reports, increased 1,225 percent since 1978 (that is not a typo)—more than housing, food or health-care expenses. Penn State cost my parents $7,500 a year, but I will be on the hook for almost $40,000 a year if my son goes to the same school. (It hurts me just to write that sentence.)

As a consequence, parents who are willing to provide a more lucrative future for their children do so at the expense of their own. It should be no surprise, therefore, that 57 percent of U.S. workers have less than $25,000 in savings. Meanwhile, student debt has reached $1.2 trillion, growing seven times faster than this country’s mortgage debt in just the past 10 years.

So what to do? A flexible game plan might be the best option.

Sure, the 529 plan allows parents to save money in a tax-deferred account with no taxes on distributions if used for qualified education expenses, but why not manufacture a similar outcome with a retirement vehicle? In other words, here is a chance to kill two birds with one stone.

For example, a Roth individual retirement account offers tax-deferred growth and tax-free distributions, a winning combination for anyone trying to save for retirement. Should the account holder choose to use that money for a child’s education, they might be in luck. Contributions made to a Roth IRA can be withdrawn tax-free if used for a qualified education expense.

Moreover, the Roth IRA will treat those distributions on a “return of contributions first and earnings second” basis. In other words, a $5,000-a-year contribution for 10 years would allow a parent to withdraw $50,000 for college tax-free and leave the earnings in the same account to be used during retirement.

Most households depend on a 401(k) plan to save for retirement on the grounds that they receive a tax deduction today and pay ordinary income taxes when they take distributions later, presumably when they are in a lower tax bracket. I suspect, however, that if somebody offered to lend me money without disclosing the interest rate or any of the terms, I would decline the invitation.

That is exactly what a 401(k) plan is, a tax-deferred contribution today in exchange for the expectation that tax rates will be lower when 70 million baby boomers are receiving their entitlement benefits. Furthermore, a hardship distribution from a 401(k) to pay for education is still subject to the 10 percent early withdrawal penalty for those younger than 59½, and that is on top of ordinary income taxes.

Another option to consider is cash-value life insurance to plan for both objectives. Should the policy offer attractive guaranteed rates of return, over time the cash value will grow to a reasonable level without being subject to market volatility or capital gains taxes. When it is time for either college or retirement, the policy holder can borrow money from the cash value and pay it back with the death benefit when they die.

Please note that when you borrow money from a life insurance policy, it doesn’t show up as income and has no impact on financial aid or the tax rate on Social Security benefits. These policies are known to have high expenses but may offer steady returns, tax-deferred growth and no exposure to income taxes in the future.

There are several strategies that can address the same goal, so find one that lets you sleep at night. If you are comfortable working longer in exchange for your child’s education, then own it. List it as a priority, write it down, and don’t second-guess the decision later. The only reason anyone ever gets upset is because their expectations aren’t met. Our life is the sum total of the choices we make, so it is about what is important and what we can live without.

When it comes to retirement vs. education, choose wisely, make a plan, stick to it, and avoid that tug-of-war.

H/T Source: The Fiscal Times

Investments

Ultimate Guide to Retirement II

October 27, 2014

Where should I save my retirement money?

Tax-favored retirement accounts such as individual retirement accounts (IRAs) and 401(k)s are the best places to save for your retirement. The different types of plans have different features, but most of them allow you to defer taxes on the money you save and the returns you earn within the account.

“Tax deferral” means that the amount you contribute escapes the usual income taxes until you start withdrawing the money years later. As a result, more of your money can earn investment returns over time – an enormous advantage over ordinary taxable accounts.

The plans have other advantages as well. For example, many employers will match part of their workers’ contributions to employer-sponsored retirement plans such as 401(k)s.

How should I invest the money?

To build a nest egg large enough to see you through retirement, which may last 30 years or more, you’ll need the growth that stocks provide.

The stock market returned 9.8% a year on average between 1926 and 2009, versus just 5.4% for bonds, according to research firm Ibbotson Associates. Given stocks’ superior returns over the long haul, most financial advisers recommend that investors whose retirement is more than 20 years away hold at least 3/4 of their portfolios in stocks and stock funds.

Of course, a stock-heavy portfolio can give you some hair-raising moments (or years). For example, during the 1973-74 bear market, U.S. stocks lost 43% of their value – and it took the market three-and-a-half years to recoup those losses. The stock market also suffered a 47.6% decline during the bear market at the start of this decade.

If you don’t have the stomach for steep downturns, you might increase your allocation to include more bonds or bond funds. Holding, say, 70% of your portfolio in stocks and 30% in bonds will let you capture most of the long-term growth of stocks while sheltering your investments to a certain extent during market downturns.

How should my strategy change as I get older?

As you approach retirement age, most experts agree you should gradually shift more into bonds to protect the money you’ve accumulated. But retirement can last a few decades, so it generally pays to maintain a healthy dose of stocks well into retirement: possibly between 40% and 50% while you’re in your 70s, and up to 30% when you’re in your 80s.

If you want to put your asset allocation on autopilot, consider “target-date retirement funds,” which are available in many retirement plans. You simply choose a fund that’s labeled with the year you intend to retire, and it will automatically adjust what it invests in (usually a mix of stocks, bonds and cash) to maximize your return and minimize your risk as you get older.

For an idea of what the right mix of stocks and bonds is for you, go to our asset allocation calculator.

How much money will I need in retirement?

Ah, the key question. One rule of thumb is that you’ll need 70% of your pre-retirement yearly salary to live comfortably. That might be enough if you’ve paid off your mortgage and are in excellent health when you kiss the office good-bye. But if you plan to build your dream house, trot around the globe, or get that Ph.D. in philosophy you’ve always wanted, you may need 100% of your annual income – or more.

It’s important to make realistic estimates about what kind of expenses you will have in retirement. Be honest about how you want to live in retirement and how much it will cost. These estimates are important when it comes time to figure out how much you need to save in order to comfortably afford your retirement.

One way to begin estimating your retirement costs is to take a close look at your current expenses in various categories, and then estimate how they will change. For example, your mortgage might be paid off by then – and you won’t have commuting costs. Then again, your health care costs are likely to rise. For more help making a precise estimate, use this calculator.

Will pensions and Social Security be enough?

Unfortunately, probably not. When you run the numbers, you should definitely factor in other sources of income in retirement, including Social Security and a traditional pension, if you’re lucky enough to have one. But your personal savings will have to generate enough income to cover the shortfall.

You can check your estimated Social Security benefits by using the government’s Social Security Online calculators. Current or former employers can provide estimates of any pension benefits you might receive when you retire.

H/T Source: CNN Money

Fraud Protection

7 Ways to Protect Yourself from ID Theft

October 20, 2014

ID theft: It’s still a Problem

Identity theft is everywhere. Turn on your TV, and you’ll see “special reports” on how to prevent it. Turn on the radio, and hear ads for services pledging to protect you from it. Search for it on Google, and you get 140 million results. In fact, according to a 2013 report by Javelin Research, there is one incident of identity fraud every three seconds.

The Javelin report also shows that the number of identity fraud incidents increased by 1 million consumers in the past year and the dollar amount stolen increased to $21 billion.

Fortunately, there are some easy ways to lower your risk of becoming another ID theft victim.

Don’t over-share on social networking websites

Thanks to social networking sites such as Facebook and LinkedIn, people are now putting unprecedented levels of personal information online, and many aren’t doing enough to keep it away from would-be criminals. A 2011 Javelin report found longtime social networking users were almost twice as likely as those newer to social networking to become victims of ID theft.

“The Internet has turned into this place where the less-educated consumer will willingly give up information in places where they just shouldn’t,” says Sean Brady, director in the identity management protection group for RSA, an information security firm based in Bedford, Mass.

The good news is you can protect yourself, Brady says. He recommends setting your privacy settings at the highest level and not sharing facts like your exact birth date, including the year, or information that could be used to answer your security questions such as your mother’s maiden name.

Ultimately, Brady says social media users will have to decide how much information they’re willing to disclose and weigh it against the benefits of social networking.

Maintain anti-virus and anti-malware software

Increasingly, identity thieves are using viruses and harmful programs known as malware to steal Americans’ financial information, says Michael McKeown, supervisory special agent, FBI Cyber Division.

These programs can enter your personal computer in several different ways, the most common being email with links or attachments that when clicked on, install malware on your machine. From there, they can record keystrokes to mine passwords, hijack online banking sessions and probe your PC for financial information.

Beside keeping anti-virus and anti-malware software up to date, another way to prevent yourself from being hurt by malware is to keep the financial information on your PC limited, Brady says. He advises consumers to decline every time you’re asked to save your password when you’re logging on to a financial site.

“Malware these days, that’s one of the first areas that it goes to, the location where all that’s kept,” Brady says.

Handle financial documents with care

Physical documents aren’t as much of a threat as they once were, simply because stealing them from a mailbox or the trash can be dangerous work for thieves, Brady says. Still, the key to minimizing the risk is storing needed documents carefully and destroying the ones you don’t need.

“A shredder is your friend,” says Steven Toporoff, attorney with the Federal Trade Commission’s Division of Privacy and Identity Protection.

Certain documents need to be retained for tax and other purposes. “Short of that, you should be shredding documents regularly that you no longer need, especially those that have any kind of account number or identifying information,” Toporoff says.

Also, shred any kind of financial solicitations you get in the mail, especially those credit card offers containing blank checks.

Create strong passwords

In a world where online banking is increasingly ubiquitous and access to large chunks of your net worth is just a username and password away, having a strong password is important.

That’s because once thieves have zeroed in on your email address or account username, they’ll often try to guess your password, either manually or using a computer program to try thousands of passwords until they find the correct one.

To keep from becoming a victim of ID theft, stay away from obvious passwords. “‘12345’ is just not a good password,” Brady says. “Everybody has passwords that he can remember — mnemonics or very personal things that are better passwords that aren’t publicly known.”

Incorporate spaces, special characters, and lowercase and uppercase letters. “Whatever your password is, (it) should not be a word that’s found in the dictionary,” he says.

McKeown says using multiple passwords also can limit the damage a thief can do, especially for your online banking accounts.

Be careful with unsecured Wi-Fi

It may be convenient to do online banking at a cafe or to keep your home Wi-Fi network unsecured to avoid typing a password, but criminals have become increasingly adept at intercepting unsecured Wi-Fi communications, Toporoff says.

“You don’t want to do banking or to look up your financial accounts in a Wi-Fi situation where it’s not secure,” he says. “Others who are sitting there with you on the same network conceivably can get access to your information.”

To protect yourself, Toporoff recommends putting a password on your home Wi-Fi network and waiting until you get home or to another secured network to make financial transactions.

Don’t be reeled in by phishing scams

Phishing, or the practice of sending out fraudulent emails soliciting financial information or getting users to click on virus-laden links or attachments, is a growing identity theft threat, RSA’s Brady says.

That’s because phishing emails have grown increasingly convincing, thanks to growing information available to thieves about you to make the emails more persuasive. Brady says consumers are seeing emails, referring to them by name and containing their address, friends and family names or their job stolen from social networking sites and data breaches, known as “spear phishing.”

Brady cites one example of spear phishing as the 2011 data breach at Dallas-based marketing firm Epsilon, where thieves accessed millions of Americans’ email addresses and names.

“That gave the ability … to send personalized emails that have a greater chance of success,” he says.

To avoid becoming a victim, read emails carefully before clicking on links or attachments, especially if an email comes from out of the blue or asks for personal or financial information, Toporoff says.

Instead of clicking on such links, Toporoff recommends contacting the company directly, using contact information you know to be accurate.

H/T Source: Bankrate, Inc.

Insurance

7 Best Ways to Save Money on Car Insurance

October 13, 2014

Boost your Deductible

Generally, when someone decides on a deductible amount for his or her car insurance, he or she sticks with it. But increasing the amount you pay for fender benders is the best place to look when trying to lower your annual out-of-pocket expenses, according to the Insurance Information Institute.

Admittedly, it’s a gamble. A car wreck will cost you more this way, but if you and everyone else on your car insurance policy have a history of safe driving, it’s a way to save money. And if the threat of a big deductible payment worries you, put the money aside. Use your annual savings as an auto emergency fund so you’ll never be caught by surprise.

Carpooling

Joining a car pool has benefits beyond helping the environment. If you carpool with three other people, with each driving one-2010-frugal-save-car-insurance-3-carpool-lgweek shifts, you can cut the miles you drive by up to 75 percent. And the less you drive, the more you save on car insurance.

“Most companies track mileage,” says Art Scott, a retired insurance agent who worked for State Farm for 30 years. “Anything under 7,500 miles is considered the pleasure rate — and that’s the lowest. Up to about 13,000 miles is a medium rate, and anything over that is a higher rate.”

The amount you save will vary depending on several factors, but J. Robert Hunter, insurance director for the Consumer Federation of America, says the difference could be as much as 25 percent.

Buy What You Need

The car insurance you need when your car is brand new is often considerably different than what you need later on. Initial rates are generally higher, since you’re required to get both comprehensive and collision coverage if you took out a car loan to pay for the vehicle. Comprehensive pays for the repair or replacement of your car from damage that doesn’t result from an accident, and collision covers damages if you’re in a wreck.

Once it’s paid off, most people forget to save money by exploring their car insurance options. Check the value of your car through the Kelley Blue Book or NADAguides.com. You might have more collision insurance than you need. And in some cases, it might be worth dropping it entirely, especially if your car is an older model.

“It’s often smart to drop collision on older vehicles,” says Mike Barry, spokesman for the Insurance Information Institute. “Comprehensive is so inexpensive, and you’re giving up a coverage you might need — that’s worth hanging on to, though.”

Among the reasons you might need comprehensive coverage: damage from storms, vandalism and theft.

Combine Your Policies

If you’ve got your car insurance through a different company than you did your homeowners insurance or renters insurance, you2010-frugal-save-car-insurance-5-combine-lg may be paying more than you should. It’s called “multilining” in the industry. It means that by combining policies with a single company, you can stack discounts and save money.

Car insurance is the biggest risk for policy writers. You’re more likely to get in an accident or have your car stolen than to have something catastrophic happen to your house. By combining policies, you lower some of the insurance company’s risk.

“Multiline is where they make their money, rather than just picking up a loser like auto insurance,” says Scott. “The more lines (of insurance that insurance companies) can get, the more they’re willing to give discounts for it.”

Audit Your Driving

Have you changed jobs recently? Maybe you’ve moved to an area where your favorite stores are a lot closer? Keep an eye on that odometer to save money. Just like with carpooling, reduced driving mileage means reduced car insurance rates, says Scott, the retired insurance agent. But people often don’t reach out to their insurance agents when their residence or driving habits change, and they end up sticking with unnecessarily high rates.

Consider a Tracking Device

If you know you’re a careful driver, you might save money with a new car insurance policy from Progressive Casualty Insurance Co. called MyRate. A small wireless device is attached to your car, letting the company monitor your driving habits, including distance, most frequent travel times and driving habits, such as sudden stops or speeding.

After the first year, you could save as much as 60 percent, according to Progressive. But you will be sacrificing some privacy for the savings. And in some states, such as New Jersey, if the company doesn’t like your driving habits, it could raise your rate by up to 9 percent.

Concerns about the device’s intrusive nature have slowed the rollout of MyRate in several states. In Pennsylvania, Progressive ultimately withdrew its filing to introduce the coverage, says Melissa Fox, deputy press secretary for the Pennsylvania Insurance Department.

Pay Your Bills

Your timeliness in paying your bills may not seem like it has anything to do with your driving abilities, but it’s something car insurance companies pay attention to. If you’ve got a good credit report, it’s worth checking with your agent to see about a discount and save money.

“Many insurers use credit-based insurance scores,” says Barry. “It’s a contentious issue in certain state houses … (but) insurers will say their studies show that if you’re responsible in your personal life, you’re less likely to file claims.”

There are other ways to get car insurance discounts. Older drivers who complete adult driver safety programs can get premium reductions, while many insurers offer discounts for teens who maintain a 3.0 grade point average in school.

H/T Source: Bankrate, Inc.

Auto Loan

4 Questions to Help You Decide on a New or Used Car

October 6, 2014

  • The reasons to buy new or used aren’t the same for everyone
  • Depreciation is the single largest expense of car ownership
  • Maintaining a used car requires more time and money

Once you’ve finally decided to replace your current car, the next question to ask yourself is: Should I buy new or used?

That depends. Unfortunately there is no one-size-fits-all answer. There are sound reasons to buy new and sound reasons to buy used.

Too often the only questions we ask ourselves: Will I look good behind the wheel? and How big a monthly car payment can I afford? Neither of these questions will help you make smarter car buying decisions.

Here’s a tip: Buying a car based on how much car payment you think you can afford per month will almost always ensure you buy too much car and pay too much for it. It’s also the wrong question to ask yourself when deciding between new and used.

When making the new vs. used decision, each of us must examine our unique set of financial and life requirements. A little introspection is good for the soul and the wallet.

For most people, we think it makes more sense to buy used, but there are some exceptions.

Here are four questions to help you be a smarter consumer and navigate the new-used decision-making process.

Do you have a down payment or a trade-in with equity?

If your credit is good, you may have less problem buying new with little or no down payment than buying used. That’s because many manufacturers offer incentives for new cars that simply aren’t available in the used-car market. These are typically in the form of rebates, cash incentives and discounted financing.

Financing a used car will almost always require money down, whether in cash or a trade-in with equity.

If you do your research and wait for the right opportunity, you may find a new car with a large enough manufacturer incentive to cover the down-payment requirements.

Is there a good reason you, rather than someone else, should take the huge new-car depreciation hit?

Depreciation, or the loss in a car’s value over time, is sneaky because it’s a hidden cost most of us don’t face until trade-in time.

But if a car depreciates, say, $7,500 from the time you buy it to the day you sell it, that’s like throwing $7,500 away. That’s $7,500 you will never get back and won’t have available to spend on other things.

There’s usually an emotional tie with a car that’s missing in our relationship with the vacuum cleaner or washing machine; but in reality, a car is just another appliance. It’s not a buddy; it’s not an investment. It can convey status and provide some pleasure, but it won’t make us smarter, better looking, more interesting or wealthier.

Because of depreciation, generally it makes more sense to buy used and here’s why: On average, a new car loses between 20 and 30 percent of its value the moment it rolls off the dealer’s lot. Some cars can depreciate up to 50 percent in the first three years.

You don’t have to take our word for it. Kelley Blue Book has a Cost of Ownership calculator designed to figure the average five-year costs of any vehicle, including depreciation.

According to that calculator if you purchased a 2012 Honda Accord EX Sedan with a suggested retail price of $25,875, it would depreciate a whopping $6,735 in your first year of ownership and $1,883 in the second. That is, it would be worth 74 percent of its original value after the first year and 67 percent after year two. It would only be worth $15,525, or 60 percent of its original value, after three years. And Honda has a better track record for retaining value than many other brands.

How do you feel about throwing away $10,000 every three years?

If you purchased a two-year-old EX, the average retail price, according to KBB.com, would be $20,675. That’s a purchase-price savings of $5,200 – all of which is depreciation.

Depreciation, though, has little affect on owners who drive a car until the wheels fall off. After more than a decade or two, that old beater won’t be worth much in terms of trade-in or resale value any way. Those same owners, however, don’t seem to mind driving an older car, so why not buy a two-year-old model to begin with and save more than $5,000 on the purchase price?

Buying used should also translate into lower insurance premiums and personal property taxes – meaning even more savings.

Can you afford to maintain and repair a used car?

Some carmakers offer free maintenance for the initial years of new-car ownership. That’s in sharp contrast to the average cost of upkeep for a used car. It can be argued that buying used is just assuming someone else’s problems. It’s a roll of the dice.

You can take some steps to minimize the likelihood that you are buying a “problem” used car by having it inspected by a qualified mechanic and obtaining a detailed vehicle history report from an agency like Carfax or AutoCheck before buying, but some issues may still go undetected.

No matter how well a car has been cared for, at 30,000 plus miles, some bits and parts are going to naturally wear out; consequently, maintenance and replacement costs will be higher for a used car than a new one.

Unlike depreciation, repairs and maintenance are hard costs that must be addressed as they arise. KBB estimates that a two-year-old Honda Accord EX will cost $1,838 in maintenance and repairs the first year you own it. Those costs drop to $880 the next year, but it’s still a substantial amount. These are costs for which you will need to budget. Do you have the discipline to do that?

If you buy a nearly new used car, you may inherit some portion of the new-car warranty providing some protection for a few months or even a couple of years. Many car companies now provide powertrain warranties for five, six or even ten years. But be sure to check the automaker’s rules on transferring the warranty before you buy.

Many car companies also offer certified pre-owned cars that cost a little more, but offer a factory-backed limited warranty.

Can you cope with the time a used car spends in the shop?

Not only does a used car cost more to keep operating, but it will likely spend more time in the shop. It may only be a day here and there, but could be a week or more for bigger repairs.

On average, new cars spend less time in the shop. Moreover some manufacturers or dealers offer loaner cars during routine maintenance visits while a car is under warranty. Can you deal with a used car’s extra down time?

Once you answer these questions for yourself, you will figure out whether it makes more sense for you to buy a new or used car.

H/T Source: AutoTrader.com

Auto Loan

Benefits of Buying a Used Car

September 22, 2014

There are many good reasons to buy a used car, including ample selection and the improving reliability of older cars, but the big draw for used-car buyers? Affordability.

Price

Buying a new car is definitely more expensive than buying a used one. Unless you decide to lease, your initial costs on a new car will be hefty. Financial institutions typically require down payments of at least 10 percent on a new-car loan (but it helps to add more). If you pay less money upfront, your monthly payment will be higher. Two other key considerations may tip the balance in favor of used cars: certification programs and new-car depreciation.

Certification Programs

One trend that makes buying used a better option is the proliferation of certified pre-owned programs. The idea started with luxury brands such as Lexus and Mercedes-Benz. Today, most manufacturers have instituted these programs.

General benefits of CPO cars include:

  • Manufacturers usually consider only late-model, relatively low-mileage used cars and trucks with no history of major damage for their certification programs.
  • CPO vehicles undergo a rigid inspection process of mechanical and cosmetic items before they obtain certification.
  • CPO vehicles are normally covered by a warranty that extends beyond the original factory warranty. The warranty often includes the same features as a new-vehicle warranty, such as roadside assistance.
  • Several manufacturers offer special financing on CPO vehicles, usually at lower rates than those on new-car loans or the typical, higher used-car loan rates.

Buyers should be aware that they pay more for a CPO car than for a typical used car, but the higher price should be worth it for the extra attention, coverage and the peace of mind buyers receive.

Avoiding Depreciation

Once you drive your new car off the dealership lot, its value will drop immediately in your early years of ownership. On mainstream vehicles, expect your new car to lose at least 30 percent of its value in the first two years of ownership. Consult used-car value guides to get an idea of what a particular model will be worth in the future. Leasing guides are another good source, even if you intend to buy instead. Lease payments are calculated based on residual, or resale, values.

H/T Source: Cars.com

Fraud Protection

Identity theft

September 15, 2014

How to Protect Yourself Now

There’s a lot of advice about how to deal with identity theft around these days – some helpful, some unrealistic, and some a little ridiculous. We’ve done the research for you and present the following easy-to-do, indispensable steps. These items should be considered MUST-DOs if you’re serious about minimizing the effect identity theft can have on your life.

  1. Don’t leave printed personal and/or financial information lying around at home.
    This is a no-brainer, right? Yet more often than not, identity thieves are friends or relatives of the victim who get their personal information offline – not electronically. Keep checkbooks, social security information, billing information, and anything else a thief could use to steal your identity out of sight and secure.
  2. Minimize the risks posed by mail theft.
    Shred bank and credit statements and credit card offers by hand before throwing them away. Even better, get a crosscut shredder. Don’t mail checks from your home mailbox. Instead, drop them off at a U.S. Mailbox or the U.S. Post Office. Also, have new checks delivered to your bank, not your home.
  3. Get and review your bank statements electronically.
    View your personal finance statements electronically at least twice a month. By doing this, you will spot a fraud much sooner if it happens. Catching a fraud early minimizes the damage thieves can do and usually results in less time and money spent resolving problems.
  4. Subscribe to a service that will provide you with a copy of one of your credit reports and FICO® scores on a regular basis.
    By monitoring your report and your FICO score for any changes you can’t account for, you’ll know if someone has applied for credit in your name.
  5. Check and review your FICO scores and credit reports at least once a year.
    When you look at your reports, make sure you recognize all the account information listed. If you see anything you can’t account for, get to the bottom of it as soon as you can. As with electronic statements, checking your FICO scores and credit reports is one of the most sure-fire ways to spot a fraud quickly and minimize any damage done.
  6. Avoid giving out your Social Security number whenever possible.
    Your SSN is the key to your credit reports and banking accounts and is the prime target of criminals. Anyone who already has your social security number (along with other information) already poses a risk: your doctor’s office, accountants, lawyers, loan officer, health insurance, schools, courts, etc. Shady employees at any of these places could steal your identity, so be very choosy about to whom you entrust it in the future. Never put your social security number on your checks or your credit receipts. If a business requests your SSN, ask to give them an alternate number (such as a driver’s license) instead and tell them why. If a government agency requests your social security number, there must be a privacy notice accompanying the request.
  7. Secure your home computer.
    Install a firewall and buy virus-protection software, and if you dispose of a PC, remove your data with a “wipe” utility program (erasing files manually isn’t the same thing).
  8. Be smart about choosing passwords.
    When choosing passwords, assume that someone already has a bunch of your personal information and is trying to break into your accounts. Don’t use the same password for all your accounts. Avoid using your SSN (or even a part of it), you or your mom’s maiden name, birth date, middle name, pet’s name or consecutive guessable numbers for passwords. If you have trouble remembering hard-to-guess passwords, write them down and keep them somewhere secure – hide them in a locked drawer, for example. It’s a bit of a hassle, but it’s nothing compared to having your identity stolen.

Signs of Identity Theft to watch out for

  1. Unexpected phone calls from creditors.
    If you get a call from a creditor demanding payment for a purchase no one in your family can account for have the caller give you all the information possible and investigate.
  2. Strange credit card charges.
    It’s easier to spot these if you keep all your receipts and reconcile them with your statements each month.
  3. Getting turned down for credit unexpectedly.
    This is one of the more common ways victims discover they’ve been victimized – don’t be one of them. Subscribe to a service that will provide you with a copy of one of your credit reports and FICO scores on a quarterly basis.
  4. Account usernames and passwords or ATM PINs stop working.
    This suggests that an identity thief may have changed your access codes.
  5. Missing bills
    If you’re used to getting billed for services you subscribe to and the bills stop arriving, it could mean an identity thief has changed your address in order to use bank accounts without raising suspicion.
  6. Strange information in your files.
    If information in a personal file definitely does not match up with you, it could be simply a case of mistaken identity – or it could be more than an innocent mistake. One way to help avoid mistaken identity problems is to use your middle name or middle initial on applications to help distinguish you from others who have the same name.

What to do if Identity theft strikes

  1. Call the credit bureaus and get their help.
    TransUnion Fraud Assistance Department: 800-680-7289

    Call the number above. In 24 hours or less, a fraud alert will be put on all your credit reports, alerting creditors to call for permission before opening any accounts in your name. Unfortunately, creditors aren’t required by law to pay attention to fraud alerts, so you’ll have to check your credit reports frequently to make sure no new accounts are opened. If you live in California, Texas, Louisiana, or Vermont, however, you do have the right to put a credit freeze on your account – this will stop any attempt to open new accounts in your name. When you get your credit reports, make a note of your account number – you’ll need it when you talk to the agencies. Also, add a victim’s statement to each of your credit bureau reports asking creditors to contact you in person to verify all applications made in your name.

  2. Lock thieves out of your accounts by changing all your account access information.
    Change your account passwords to something unguessable. Contact your banks and have them help you obtain new account numbers for all your accounts. Pick a new PIN number for ATM and debit cards. Close all credit card accounts and reopen them with new account numbers. You may want to contact the Social Security Administration at 800-772-1213 to get a new SSN. You also may want to contact your telephone, long distance, water, gas and electrical companies to alert them that someone may try to open an account in your name. You may need to change your driver’s license number if someone is using yours as an ID – go to the Department of Motor Vehicles to get a new number. Contact telephone and utility companies to prevent an ID thief from using a utility bill as proof of residence when applying for new credit.
  3. Report the crime to all relevant authorities.
    Call your local police department. Make sure the police report lists all fraudulent accounts. Give as much information as possible. Get a copy of the police report and send it to the creditors and credit-reporting agencies as proof of the crime. Notify the Postal Inspector if you suspect mail theft. Contact the FTC at (877) 438-4338. Fill out the ID Theft Affidavit at the FTC’s Web site, make copies and send to creditors. The agency also has an online complaint form. While their investigators only tend to pursue larger fraud cases, the FTC does monitor all levels of identity theft crimes to find patterns and breaking up bigger identity theft rings. Notify the Office of the Inspector General if your social security number has been used fraudulently. Request a copy of your Personal Earnings and Benefits Statement and check it for accuracy.
  4. Report all fraudulent transactions to creditors.
    Contact creditors for any accounts that have been tampered with or opened without your knowledge. Be sure to put your complaints in writing. Ask each creditor to provide you and your investigating law enforcement agency with copies of the documents showing fraudulent transactions. You may have to fight to get this documentation, but don’t give up. You’ll need these to help track down the perpetrator.
  5. Keep a log of everything you do to resolve problems.
    Finally, create a log of all the contacts you make with authorities regarding the matter. Write down each person’s name, title, and phone number in case you need to re-contact them or refer to them in later correspondence.

H/T Source: myFICO

Investments

Ultimate Guide to Retirement

September 8, 2014


How much should I save?

“As much as you can” is the standard advice. Many financial planners recommend that you save 10% to 15% of your income for retirement, starting in your 20s.

But that’s just a general guideline. This is your retirement we’re talking about, so it pays to get a little more specific by doing your homework up front. It’s a good idea to establish a savings target – one that tells you roughly how much you should set aside over time to meet your retirement goals.

The best way to determine your savings target is to use an online calculator like this one. It will help you figure out how much you should accumulate and how much you must set aside in the meantime to reach that target. Be sure to update the calculation each year, so that you can see if you’re on track.

As a general rule, you’ll need at least $15 to $20 in savings to cover each dollar of the annual shortfall between your income and your expenses. So for example if your projected retirement expenses exceed Social Security and pensions by $20,000 a year, you might need a nest egg of $300,000 to $400,000 to bridge the gap.

What if I can’t save enough?

Try to divert as much of your earnings into savings as you can. If you don’t have a budget, create one. If you do have a budget, revise it to reflect your newly urgent commitment to saving, as well as any changes in your spending since your last outbreak of budget fever. Chip away at wasteful habits – that might mean ditching expensive dinners or unused gym memberships.

If you’re still young and you can’t save enough right now, don’t be discouraged. Your income will probably grow as you progress in your career, allowing you to save more. You might also have other opportunities to boost your savings rate; for example, a bonus or inheritance can make a big difference in your long-term prospects if you invest some of the money in retirement accounts.

How can I reduce the amount I’ll need?

The most obvious way is to rethink your standard of living in retirement. Swapping the around-the-world sailing trip for a Caribbean cruise may help you lower your retirement target to a more attainable goal.

You can also delay your planned retirement date from, say, 62 to 68 or so. Working past the traditional retirement age will let you postpone withdrawals from your retirement accounts. Your savings will have more time to grow, and you’ll reduce the number of years you’ll need to draw on them. Working longer may also let you delay taking Social Security until you reach at least full retirement age (66 if you’re 50 today), potentially increasing the size of your monthly benefit by 30% or more.

The great thing about online retirement savings calculators is that you can play with the numbers to see exactly how much more or less you’ll need to save based on when you plan to stop working, or how much you’ll spend in retirement, or any number of other factors.

Working part-time can help too. But the problem is that you don’t know if you’ll have the interest or energy to work at an advanced age – or if you’ll have health problems that prevent it. You also may have a tough time finding an employer who wants to hire you in your later years for the amount of money you want to earn. So pinning your entire retirement strategy to working in your 70s or beyond isn’t such a great idea.

What if I’m running out of time?

If you find yourself running short on time – say, you’re in your 40s or even your 50s, and you haven’t gotten started yet – there are still a few things you can do. The key is to do themnow.

You should first max out your contributions to tax-favored retirement accounts like IRAs and 401(k)s. For 2012, the IRS allows $17,000 for a 401(k) (though your employer may impose lower limits), and $5,000 for traditional and Roth IRAs. If you’re over 50, you can contribute additional catch-up contributions. Even the government understands that this is crunch time, and it has devised a few ways to help you out.

For example, workers age 50 and older can put more money into IRAs and workplace retirement plans than younger savers can. That means you can and should contribute an additional $5,500 to a 401(k) and $1,000 to traditional and Roth IRAs.

If you’re arriving late to retirement planning, a traditional IRA may be a better choice than a Roth.

I’m saving a lot but will still fall short – what now?

Consider other alternatives that can reduce how much you need to save. The most obvious one: Think about delaying retirement by a few years. That strategy will allow you make more contributions to your retirement accounts while postponing withdrawals – which could significantly increase the size of your nest egg even as it reduces the amount you need to accumulate to make it through retirement.

For example, if you retire today at age 65 with $500,000 in retirement savings and withdraw $43,000 a year, your savings likely would last until you reached age 90. But if you delay retirement for another five years and max out your IRA contributions during that period, you would retire at 70 with $772,680 saved. That nest egg would let you withdraw $72,000 a year until age 90. (Calculations assume an 8% annual return on your investments.) So by delaying your retirement just five years, you can increase your retirement income by nearly $30,000 a year.

Getting a part-time job after you retire also can make a big financial difference – and can provide mental, physical and emotional benefits as well. Other options include trading down to a less-expensive home (you can invest the profits toward retirement), reining in your spending or transforming the equity in your home into income by taking out a reverse mortgage – though high costs mean this last option is a good idea for only a small number of retirees.

When can I retire?

Trying to figure out whether you can afford to retire is like putting together pieces of a financial jigsaw puzzle. First, you need to estimate how much you’ll spend in retirement. Then you must consider the income you’ll collect in retirement frompensions and Social Security – as well as the amount you can afford to draw from your personal savings or other sources.

The idea is to assemble the various pieces, and then see whether the picture of retirement life that emerges is acceptable to you.

To help bring the retirement picture into better focus, try plugging all your pertinent financial information – including pensions, Social Security, retirement investment accounts and anticipated retirement expenses – into an online calculator. The calculator can crunch all the numbers and assess your odds of being able to retire on the schedule you envision.

Revisit the calculator and all the different pieces of the puzzle each year, in order to make sure you remain on track.

H/T Source: CNN Money

Auto Loan Insurance

How to Save Money on Auto Insurance

September 1, 2014

We all need car insurance these days and what is more everybody loves saving money. So if we speak about an insurance you should understand that there are tons of opportunities to save money on auto insurance, you should only read the following tips and follow them.

Steps

1

Compare: Feel free to visit as many insurers as you want, because prices really differs. Numerous companies offer really significant discounts and quotes. This industry is very competitive and you have a huge assortment of companies to choose from.

2

Reputation: Always find everything you can about reputation of the company you would like to deal with. Ask questions, read reviews and pay attention to ratings.

 3

Higher deductibles: Try your best to opt for the highest deductible possible. A deductible is an amount that you pay when you get into a wreck or crash.

 4

Package: Pay attention to a package of insurances. I mean, many insurers offer package discounts if you carry both policies with them.

 5

Discounts: There are periodical, seasonal or holidays discounts. Most insurers offer a wide variety of discounts.

 6

Telematics: There are a growing number of insurance firms that are offering a “telematics” or “black box” insurance policy. This basically requires the driver to have a GPS device installed in the car to track how the vehicle is being driven. This actually helps to reduce the cost of car insurance and will continue to do so as long as the motorist drives well and safely. Sat Nav technology has revolutionized car insurance.

Tips

  • Find out if you qualify for any group plans. For example, if you are an alumnus of a college or university, or a member of a professional organization, you may qualify for an affinity discount or a special group plan with one or more insurance companies.
  • In the long run, it often doesn’t pay to switch insurance companies, especially if you do it a lot. Insurance rates may go up and down—usually up—each year, and if you switch companies for a lower rate you may find that your rates increase even higher at the next policy renewal. In addition, if you stick with a company for several years, you may become eligible for a “long-term” discount. Additionally, you may earn “accident forgiveness” as a long-term customer, so that if you get into an accident, your premiums won’t rise.
  • Make your child earn driving privileges by getting good grades. If you do allow your son or daughter to get a drivers license, insist he or she get good grades in school. The “good student” discount can save you up to 20% or more off the rate you pay for a child. A “B” average (3.0 GPA) is usually required to qualify.
  • Don’t be afraid to get a second opinion. Not sure if you need the coverage your agent advises you to have? Check with another agent or your attorney for advice.
  • Review your policy at each renewal. Make sure that all your discounts still apply, and check to see if you may be eligible for additional discounts. Sometimes discounts need to be certified each year(“good student” discounts, for example) and sometimes a computer glitch will accidentally drop a discount from your policy.
  • Keep your insurance policy up-to-date. A lot of variables affect your insurance rates. So, if your situation changes, you’ll want to make sure your policy reflects that. If you get married, if you’ve moved, if your commute to work has changed, or if you’ve installed a car alarm, for example, your rates may be reduced. Keep in mind, however, that if your commute is longer, or if you’ve moved to a neighborhood with higher loss rates, your price could go up.

Warnings

  • Don’t lie to your insurance agent. Insurance companies check your accidents, tickets and some other information on a national database, so if your rates go up because of an accident, you can’t just switch to another company for a lower rate. If you lie to your insurance company or omit to tell them about something that affects the rate (a young driver in your household, for example,) this could be considered a “material misrepresentation” and any claim you make may be denied.
  • Do not exclude a driver from your policy unless you can be absolutely certain that he or she will never drive your vehicle. If the excluded driver gets into an accident, you will have no coverage and will be responsible for paying for your own repairs and any liability to others.
  • Never drive without insurance. Driving without insurance is illegal in almost all jurisdictions, and the fines and increased insurance costs can be staggering. If you get into an accident while uninsured you will have to pay out of pocket for any injuries or property damage you are responsible for.
  • Make sure you are adequately covered. While lowering your liability coverage limits or declining injury protection may save you money, the decision might be unwise. Many people don’t carry enough liability coverage as it is. Remember, if you’re liable for injuring someone, the medical costs could reach hundreds of thousands of dollars, and if you can’t pay those costs, you could be sued and have your wages garnished or your assets (including your home) taken. Discuss your coverage with your insurance agent or attorney, especially if you’re thinking of making any changes.
  • When it comes to buying insurance, deal with a reputable auto insurance firm. You can always check their Insurance Bureau rating before purchasing insurance from them, and you can find out about complaints (and file one, if necessary) by contacting your state’s insurance commissioner.

H/T Source: wikiHow

Auto Loan

Buy a New Car or a Used Car?

August 31, 2014

There’s nothing like that new-car smell. Buying a new car has a lot of allure: It’s brand new and it’s all yours; nobody has abused it. You can get the vehicle equipped just the way you want, and you get the full factory warranty. But hold on. Your best deal could well be a late-model used car.

The used-car market has changed dramatically in the past few years. To start with, today’s new cars — and thus used cars — are simply made better. Overall quality and durability has increased as U.S. manufacturers pushed hard to catch up to imports. A second factor is the rise of leasing.

New used-car superstore chains are also making it easier than ever to buy with huge inventories and no-haggle shopping. The kicker is that if you opt for a 3-year-old model instead, you could save as much as 30% to 40% over new.

In the last few years, car dealers, backed by manufacturers, have introduced what they call “certified” used-car programs for newer used cars (usually up to 3 years old). Manufacturers insist that a used car must pass a series of inspections before it can become certified. And once a car passes, the manufacturer adds a fresh warranty, sometimes 12 months or more.

If you want a used car, start by checking prices of the vehicles that interest you. Among the best websites areEdmunds.com and Kelley Blue Book’s KBB.com. Both are free, and both will let you check the going prices for almost every make, model and year you could want. (Both sites list new-car prices as well.)

Sites like Autotrader.com and Cars.com list classified ads for used cars, mostly from dealers. Enter your zip code and you’ll get a selection of cars within 100 miles or so of your home. While ads for these same vehicles undoubtedly also are running in your local paper, you get more detail online.

For those willing to venture farther from home, eBay Motors, part of the eBay auction site, lists used cars for sale. You can restrict your search to cars in your area, but you’ll probably do better by looking at cars all around the country. eBay provides various protections, as well as partnerships with used-car inspection services, to take some of the worry out of buying a used car entirely online. Read the eBay Motors “How to buy” page and see if you feel comfortable with the process.

Once you zero in on some possibilities, you need to double-check them. Unless you are buying a certified used vehicle, spend a little extra to check any specific car, truck or van you are close to buying.

First make sure the odometer is honest and that the car has never been totaled. (The used car business may have become less sleazy than it used to be, but problems still do occur.)

Firms like Carfax and Autocheck will track down the history of your prospective vehicle by its Vehicle Identification Number (VIN), usually listed on a metal plate just inside the windshield. If, for instance, the car had 50,000 miles when its title last changed but now shows 30,000 miles, take a pass. If the car has ever been sent to a junkyard, a salvage title will show up on the report. About one in 10 cars in its database has some kind of problem, say Carfax officials.

Once a car has passed those big hurdles, you still need to get it checked by your own mechanic, if you have one. If you don’t, many cities have specialized mechanic services that will make on-the-spot inspection of used cars. If you are considering spending $15,000 for a used car, that $100 to double-check it may be well spent.

If you’re buying on eBay Motors, they’ve got an auto inspection agreement with SGS Automotive. Sellers can have their car inspected and a report posted for potential buyers to see.

The most important thing to remember: Anything’s negotiable except the right to inspect. If the seller won’t let you and your mechanic inspect the car, walk away, no matter how nicely it runs.

Often, this rule of thumb means you’ll be buying from an individual rather than a dealer, for many dealers don’t allow inspections. Those who do typically won’t let you take the car off the premises and won’t let you use their lift.

Unless you have an unusually close relationship with your mechanic, he’ll want you to bring the car to his shop. This isn’t unreasonable, a lift is essential for hunting out rust, worn brake drums and deteriorating exhaust systems. However, a good mechanic can tell a lot from sliding underneath the car, inspecting the exterior paint for repaired body damage, and checking the odometer reading against actual wear.

Confining your search to individuals usually means you’ll get a lower price — but it’s more time-consuming because there’s only one car at each location. Regardless of where you buy, there are some rules you can follow.

Jack Gillis, director of public affairs for the Consumer Federation of America, recommends what he calls the “touch and comment” technique often used by new-car dealers when they inspect trade-ins. “When you review the car, visibly point out the various problems that you note,” he says. “An exaggerated touch of some loose parts or running your hand along body damage can put the seller in a defensive position.”

This tactic can be used effectively when your mechanic is conducting an inspection within earshot of the seller. Have your mechanic mention each problem, allowing you to comment grimly.

Having your expert on hand can make all the difference because even if you know a lot about cars, you need an expert witness to present the damning evidence. Like any expert witness,mechanics must be paid. Some shops offer a pre-purchase checkout for a set amount that can vary widely depending on the shop and the procedures performed. Others offer on-premises inspections for their hourly labor rate, which can range from $40 to $70 an hour, depending on the region and the type of shop.

While indispensable, your mechanic is your consultant, not your agent. To get the best possible deal on a used car, you must do some work yourself. Some pointers:

– Before going to look at cars, peruse the Official Used Car Guide of the National Automobile Dealers’ Association. It lists recent prices fetched by specific year models in your region. The range between the trade-in value and retail value is your room to maneuver. If you can buy a decent car from a dealer for less than its NADA book trade-in value, more power to you.

– If the seller touts the car as an immaculate jewel, be sure to negotiate an acceptable price before bringing in your mechanic. Failing to do so could leave you with no bargaining leverage if the car actually is in great shape. Make sure the seller understands that the agreed-on price is entirely contingent on the vehicle making Phi Beta Kappa. Once your technician determines the car’s shortcomings — and there are few used cars on the market without any — it’s your job to put a generous price on each repair needed. After all, you intone, the initial figure was based on perfection.

– Before buying, try to arrange a test drive at night and another on a rainy day. Nothing reveals a cheap windshield like oncoming headlights, and a replacement windshield may mean the car’s been wrecked and then given a convincing paint job. Also, it’s impossible to know if trunk and door seals are leaking except when it’s raining. Again, leaking seals may mean that the car’s been wrecked, especially on a car only a few years old.

There is a point at which too many glitches should eliminate the car from consideration. Says automotive author Mortz Schultz: “If you find a major problem, or if you rack up enough minor ones, forget the car.”

In return for your rigors, do you get an absolute assurance that you won’t regret the purchase? Of course not. It’s still a used car, after all. Buyers must accept the occasional ping, ding or rattle. But if your mechanic is competent, and you negotiate adroitly, you can get a great vehicle for a substantially lowered price.

If you decide, however, that you really want a new car, you have a different choice to make: Should you buy or lease?

H/T Source: CNN Money

Fraud Protection

Identity Theft & Credit Card Fraud – How to Protect Yourself

August 25, 2014

ID-TheftIdentity theft occurs when someone obtains your personal information, such as your credit card data or Social Security number, to commit fraud or other crimes. The Federal Trade Commission estimates that 9 million Americans suffer identity theft annually. It sounds like a big number, but it isn’t.

For one, the hysteria has been stoked by much-publicized data breaches. In reality, identity theft only touches a sliver of the U.S. population each year (about 3%). One-quarter of those cases are credit-card fraud and not full-blown identity theft, according to FTC figures. The credit-card fraud occurs when a thief uses your credit card to make purchases. More serious is when someone uses your information to open accounts or take loans in your name. That’s when you’ll have to fight to get your credit restored and your name cleared, an arduous process that can take months or years to complete.

In response to concerns over identity theft, numerous companies and financial institutions have stepped in with products that monitor your credit, reimburse you for lost wages or funds and guard your identity. Some employers also now offer ID theft insurance to help you reduce the amount of time and money spent resolving the crime, so check with your company’s benefits specialist about your eligibility.

Do You Need Identity Theft Protection? Before examining the services available, try these common-sense, no-cost measures to protect against identity theft and fraud:

Guard your information online. These days, many of us do most of our shopping and banking on the web. With all those account numbers and passwords floating around, it’s easy for someone to nab your information and go on a spree.

• Clear your logins and passwords. This is especially important if you’ve been working on a public computer. Change logins and passwords monthly.

• Pay for online purchases with your credit card, which has better guarantees under federal law than your online payment services or your debit card.

• Be alert for phishing, a trick in which spam or pop-ups mimic legitimate banks or businesses to obtain your personal information, which they use to access your accounts. Always verify that you’re on a familiar Web site with security controls before entering personal data.

Monitor your bank and credit card statements. Check your accounts regularly so you know when something’s awry. Purchases you didn’t make should be obvious—like a gas fill-up halfway across the country.

Verify your mailing address with the post office and financial institutions.Identity bandits may fill out change of address forms so that delinquent credit notices remain off your paper billing radar.

Monitor your credit report. By law, you’re entitled to a free report every year from each of the three bureaus (Equifax, Experian, and TransUnion). Request one every four months, changing bureaus each time. You can order the report directly through each agency, or at annualcreditreport.com. Use this URL—there are hordes of knockoff sites that will try to charge you for your report and other needless services. Scan it for abnormal activity, such as accounts or credit cards you didn’t open. (And don’t fall prey to faux free credit report advertisements.)

Shred sensitive documents. Buy a shredder and regularly shred outdated bank statements, credit card applications, bills, and anything with your personal information before tossing it into the trash or recycling. Junk mail often includes some of your personal details.

Does it make sense to pay for ID theft protection if you’ve taken all these precautions? It depends on your spending habits and overall level of caution. You might want to invest in an identity theft protection service if:

• You do lots of online banking or shopping. • You don’t have time to monitor your information on your own. • The thought of investing time and money into recovering from an identity theft sickens you.

Picking the Right Service Before you spring for identity theft protection, which, at a minimum, is likely to set you back at least $150 a year, consider the no-cost measures you can take to protect yourself. Remember, despite the hype, the odds of having your identity swiped are actually quite low. And no identity theft protection is bulletproof, so consider these factors before you buy.

First, decide whether you’d like to purchase the services of a dedicated identity theft protection firm or one of the products offered by your bank or insurer. Many banks now offer customers daily credit checks that alert them to fishy activity in their accounts. Some will also provide insurance to repay lost wages or legal fees incurred as a result of identity theft or fraud. Other plans assign you a caseworker to help restore your credit. You can also try to bundle identity theft insurance with your home or auto coverage. Be wary of this kind of insurance, however — these policies can be riddled with exclusions that may prevent you from ever collecting in the event of theft.

Then there are the specialty companies—LifeLock and TrustedID are two of the most prominent—that market themselves as identity theft protection experts. These companies offer a mix of preventive and reactive tools to maintain your identity and credit, the most common being fraud alerts and credit freezes.

Fraud alerts. Some identity-theft protectors will immediately place fraud alerts on your files with the three main credit bureaus, whether you’ve been victimized or not. In essence, it forces any bank or credit agency to balk before approving credit requests in your name. It’s not foolproof, though. The law only requires the creditor to take reasonable precautions before extending credit. This may only be a speed bump for a practiced thief, so don’t consider it a guarantee that your identity won’t be swiped.

Credit freezes. Freezes are far more effective than alerts. Icing your files prevents any company from accessing your credit unless you already do business with them, effectively sealing your records against any new creditor. Freezes can be a pain if you’re seeking a mortgage or student loan—or any form of credit. You’ll have to contact the bureaus to unfreeze your records, which can take up to three days. Plus, the credit bureaus normally charge a small fee whenever you freeze and unfreeze your files. Credit freeze rules vary by state.

Alerts and freezes are two measures you can take yourself, so consider whether you want to pay a company to do it for you.

If you’ve detected fraudulent activity, notify the financial institution where the fraudulent activity occurred first so they can freeze your account. Depending on the situation, you’ll need to file a complaint with the FTC and your local police department, as well as investigate all of your other accounts. And keep a vigilant eye on that credit report.

H/T Source: The Wall Street Journal

Investments

Retirement Savings: No Excuses

August 18, 2014

The list of excuses for why it’s impossible to save for retirement is endless. Some people may be just getting started in their careers, making small starting salaries. Others may be stay-at-home parents with no earned income. Everyone is juggling a plethora of different financial goals, of which retirement is just one. And those who are midway through their careers and who have procrastinated signing up for their workplace retirement plans may be wondering if there’s any point at all to begin saving now.

The fact is, the best time to save for retirement is right now, no matter what your personality traits are or where you are in the continuum of your career. Bankrate consulted financial experts who offer some tips on how to make it happen. Their advice will help you get motivated, so one day you can make a seamless transition from the 9-to-5 workday world to a retirement where you can call the shots on how to spend your time and money.

Don’t ever think you’re too young to save for retirement. As a new worker, “entry-level Emily” has something far more valuable than her experienced superiors: time. A 25-year-old worker who saves $5,000 a year throughout her career will amass nearly $1.3 million by the time she’s 65, assuming 8 percent annual growth. If she waits until age 35 to save, she’ll accumulate less than half that amount — $566,416 — assuming the same return.

Bottom line: If you’re just starting your career, don’t walk to open a retirement account. RUN.

Grab free money. Have access to a 401(k)? Save enough to qualify for your employer’s matching funds. That’s typically 50 cents for every dollar you save, up to 6 percent of earnings.

Automate your savings. If you don’t have a 401(k) plan at work, set up direct deposits into an individual retirement account at a brokerage firm before you spend your whole paycheck.

Go for growth. “An entry-level worker should put 100 percent of their retirement fund in equities,” says CFP professional Drew Tignanelli, president of Financial Consulate in Hunt Valley, Md. The reason: Stocks grow more over time, and you’re young enough to ride out dips in the market.

Rough it. Saving early is potentially worth millions, so make sacrifices now. “Keep eating ramen noodles, and save like crazy until you’re 30,” says Rick Kahler, president of Kahler Financial Group in Rapid City, S.D. “Then you can look at upping your lifestyle.”

Even if “stay-at-home Sally” has no earnings, she can still save for retirement. Meetings and commutes may be distant memories for her, but retirement planning shouldn’t be.

“Somebody at home is more preoccupied with the here and now — a child, an ailing parent and so forth,” says Eleanor Blayney, consumer advocate for the CFP Board. “At-home spouses have to make a concerted attempt to keep retirement front and center.”

Open a spousal IRA. Your working spouse can make yearly contributions on your behalf — up to $5,500 in 2014, or $6,500 if you’re older than 50 — as long as he or she earns enough to cover the contribution. That adds up: Save $5,500 for, say, 10 years. After another 20 years, you’ll have $294,059 if your money grows at 7 percent.

Keep saving. Spouses can gift unlimited amounts to each other. Save these gifts in an account that’s specifically dedicated to your retirement. “It’s harder to spend … if it’s labeled,” says Blayney.

Guard against mishaps. A workplace life insurance plan may not be enough in the event you’re suddenly widowed. Get extra coverage. Find a quote for term policies at Bankrate’s insurance center.

Stay employable. You’re home today, but keep ties to your profession. Network. Update skills. “Don’t go completely fallow,” says Blayney. “Prepare.”

Pay yourself first.

“Juggling Jerry” has heard that before, but what about the credit cards, the children’s college education and those vacation plans?

When it comes to juggling finances, we often put our futures dead last. “I can tell you story after story of people who blew their chance to save for retirement,” says Tignanelli.

It’s time to reprioritize.

Set a goal. Just 46 percent of workers have attempted to calculate how much they will need for retirement, according to the latest Retirement Confidence Survey by the Employee Benefit Research Institute, or EBRI. But without a goal, it’s impossible to know how much to save — and what’s left over for other things. Set a target.

Kill the bills. Debts cost more than what you’re likely to earn with savings or investments. Experts generally agree it’s important to be debt-free before investing. The exception: If you have a 401(k) or 403(b), save enough to qualify for matching funds as you pay off bills. “You don’t want to leave free money,” says Philip Lee, a wealth manager at Modera Wealth Management in Boston.

Maximize savings. If you have catching up to do, fund up to the maximum allowable limits. In 2014, that’s up to $17,500 in a 401(k), plus another $5,500 if you’re 50 or older.

Now juggle. Once you’re on track for retirement, you can start saving for your kids’ college and that fun vacation.

“Procrastinating Pete” is not alone. Nearly 3 out of 10 retirees say they didn’t start planning for retirement until they were within 10 to 19 years of retiring, according to EBRI’s 2013 Retirement Confidence Survey.

No matter how far behind you are, don’t give up. Instead, buckle down — pronto.

Increase savings. This year, you can save up to $17,500 in a 401(k), plus $5,500 more if you’re at least 50, for a total of $23,000. In addition, IRA contribution limits are $5,500 ($6,500 for those 50-plus). If you’re 50-plus and you maximize contributions for both the IRA and workplace plan, you can amass more than $1 million in 20 years, assuming a 6 percent annualized return.

Save smarter. A Roth IRA is often a great option for late starters because you can leave assets in them as long as you like. Plus, when you do withdraw new earnings after the account has been open five years and you’re 59 1/2, the money is tax- and penalty-free.

Consider converting. If you have an IRA, you can convert it into a Roth IRA, but you’ll pay taxes. Is it worth it? It may be if you have at least 20 years before retirement.

Delay Social Security. You can start collecting Social Security as early as 62, but it pays to wait. A monthly Social Security benefit worth $1,000 when you’re at full retirement age will be reduced to $750 if you collect at 62. Wait until you’re 70, however, and you’ll get $1,320.

“Super-organized Stan” worked hard and managed to save for retirement. What else is there for him to do?

Plenty. “People save without a plan,” says Bill Baldwin, president of Pillar Financial Advisors in Waltham, Mass. “They do helter-skelter planning.”

Calculate. Sure, you’ve amassed “a lot.” But is it enough? It’s great if you’re among those who have calculated their income needs in retirement. If you haven’t calculated your needs yet, try using a retirement calculator, for starters.

Get expert feedback. When you have $100,000 to $200,000, it’s probably time for some professional guidance. Opt for a fee-only planner who doesn’t earn a commission by selling financial products. A good resource is the National Association of Personal Financial Advisors at NAPFA.org.

Take stock. Excessive fees, lackluster returns or unbalanced portfolios can undermine your efforts. Do a financial review annually to make sure you’re saving smart. Tactical asset allocation funds, which are actively managed, or periodically rebalanced strategic asset allocation funds can get you the right mix without the hassle of micromanaging your investments.

Remember heirs and insurance. Your annual retirement review should include a look at all of your paperwork. Are beneficiary forms current? If not, you may end up leaving that annuity to your ex-husband. You should also consider getting long-term care insurance.

H/T Source: Bankrate, Inc.

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