Monthly Archives: December 2012

What to Do If You Win the Lottery

Let’s face it, just because you have a better chance of being struck by lightning several times in a row than winning the lottery, doesn’t mean that we are not sometimes tempted to buy a ticket.  In fact a lottery ticket shows up in my Christmas stocking every year. 

So what should you do if you do strike ti rich via the lottery?  This article gives some good advice.

1. Protect That Ticket and Take Your Time – make sure it is not lost or stolen before you collect your winnings.
2. Don’t Quit Your Job Just Yet – you may not have the winner after all.
3. Hire Professionals – you can afford it.
4. Change Your Address and Go Unlisted – you’ll have lots of people who want you to share your good fortune.

You also have to decide whether to take a lump sum or take the payout over 20 or 30 years.  There are advantages and disadvantages to both.

Finally, listen to the advisors you hired, pay off any debts, put money aside for the future, make contributions to charity and learn to say no.




How to survive fiscal cliff

CNN  Money has some ideas on how to survive if we go over the so-called “Fiscal Cliff.”

What’s going to happen?

If the fiscal cliff isn’t avoided, tax rates on income, estates, gifts, capital gains and dividends will increase, and a number of tax breaks will expire.

The average household will face a total tax increase of $3,500, according to the Tax Policy Center.

Income tax rates would revert to higher levels if the Bush tax cuts expire. Gift and estate tax rates are slated to soar to 55% for anything worth $1 million or more next year — up from the current 35% tax and exemption of $5.12 million.

What about the stock market?  the fact is that no one can be sure.  If your portfolio is too stock heavy and you are older, a more balanced portfolio may be appropriate.

For those particularly worried about investment losses, Levin has been shifting their stock and bond holdings. While a typical portfolio has 70% stocks and 30% bonds, he said in some cases he will scale back the stock investment to as little as 55%. …

Otherwise, planners are telling clients not to panic.

And here’s good advice, Fiscal Cliff or not:

Even if Congress reaches a deal and their taxes don’t end up rising, this is still a good way for people to make sure they’re living within their means and their finances can sustain an emergency or future tax code changes.

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Need help with your 401(k)?

Do you have a 401(k) or similar retirement plan but can’t find anyone who will provide you advice on how to invest it?  Confused by all the investment options so you found the fund with the highest past return only to find out that you lost a lot during the last bear market?  Did you go to the employee benefits department only to find out that they can’t help much?

Until recently, investment advisors were unable or unwilling to provide investment advice unless you opened an account and transferred your assets to them.  But for 401(k) accounts that is probably not possible.

The answer is to find a Registered Investment Advisor (RIA) who is willing to provide you with ongoing investment guidance and monitoring even if you don’t transfer your assets to him.  Of course there is a fee for doing this, but it’s often much more cost effective than dong it yourself.  And the fees you pay may well be tax deductible if you itemize.

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Two income couples managing their 401(k) plans.

There are a few things to consider of you are a two income couple and both have 401(k) type plans.

  • Maximize your contributions.  Retirement for many people now may be 30 years long and your 401(k) may be the single biggest asset you have to make that retirement enjoyable.  If necessary, look for places to save if you are not maxing out your plan.
  • At the very least, take advantage of your employer matching money.  Failure to do so is like leaving money on the table.  If there is limited money for saving, make sure the plan with the biggest match gets funded first.
  • Manage your 401(k) like you would any investment account.  Study the investment options and diversify.
  • If you are not a financial expert, get the assistance of a Registered Investment Advisor (RIA) who will provide your with the guidance you need to manage your account.
  •  Coordinate your retirement dates so that you can access your plan assets when you need them.
  • Keep track of your fees.  Different plans have different fees associated with them.
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2013 Market Outlook

At Korving & Company we are engaged in the business of planning and investment management.  That means that we focus on the client and on the long term.  We are often asked about our shorter term outlook.   In reply we will often cite people who are in the business of making predictions.  With that as prelude, here is Morningstar’s prediction.

Many firms provide market forecasts, but Morningstar has a few special things going for it — such as being unbiased (ostensibly) and having an analyst named Heather Brilliant. Ms. Brilliant’s forecast for 2013 includes these elements:

• The market is fairly valued, so don’t expect multiple expansion.
• Expect market volatility due to continuing debt problems in Europe, growth in China, and fits and starts of the U.S. economy.
• Due to market volatility, stock picking will make a comeback — for example, even though the S&P is up 15%, certain housing-related stocks fared much better.
• The fiscal cliff will be a non-event, even if nothing is done before year’s end, since most changes will have an effect over the course of the year. And even if we are drawn into a recession, it will not result in a protracted market decline.
• The U.S. economy could surprise everyone.
• Real estate and consumer defensive sectors are the most overvalued.


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Merry Christmas

And, since the world did not end, best wishes for a happy, healthy and prosperous New Year

Who is preparing for retirement?

SmartBlog on Finance has an article on who is saving for retirement and where they live.

These days, planning for retirement is a concern for most Americans.   In the past, many Americans relied on Social Security and company pensions to fund their retirement.  Today, Social Security does not pay enough for some people to be comfortable in their retirement, and most companies have eliminated pensions (if they had them to begin with). Therefore, making 401(k) and IRA contributions are critical to people’s retirement to ensure that they have enough money once they stop working.

The average American contributes $1,325 to retirement accounts per year, according to Esri, world’s leader in geographic information systems (GIS). What types of Americans are most likely to contribute?  Who contributes to 401(k) accounts?  What about IRA accounts?  Where do these Americans live?   …

The areas with the highest likelihood of residents that contribute to a 401(k) are in states on the Eastern Seaboard; in the Midwest, and along the California coast.

The article concludes that everyone dreams of a comfortable retirement, but that may not necessarily be true.  Many younger people are living paycheck to paycheck, don’t think that far ahead or believe that that can put off planning until later.  They may have crushing college loan debt and no job.  They may be looking at their parents’ savings and thinking of an inheritance.  Whatever the reason, if the average is $1,325 per year, the average person will end up with a bleak retirement.


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Funding college for grandchildren

The most popular tax advantaged plans to pay for college education ar called “529 Plans.”  They allow people to put money into tax sheltered accounts which, if they are withdrawn for educational expenses are tax free.

Grandparent-owned 529 accounts offer distinct advantages.  Grandparents concerned about estate taxes can move large sums from their estate, tax-free. They can help trim college costs for their progeny. And there’s security knowing that money in 529 plans can be redeemed, if necessary, often with a modest tax bill.

One other advantage the 529 Plan has is that the grandparent stays in control of the money in the plans to insure that it’s used for the purpose it was intended.   With the high cost of college education today, many grandparents who have the ability will be willing to put money aside for their grandchildren’s education rather than gifts of games or toys.

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Top 10 States for Foreclosure

According to RealtyTrac, the top ten states for foreclosure are:

  1. Florida 1 in 304
  2. Nevada 1 in 390
  3. Illinois 1 in 392
  4. California 1 in 430
  5. South Carolina 1 in 455
  6. Ohio 1 in 458
  7. Arizona 1 in 468
  8. Georgia 1 in 494
  9. Michigan 1 in 621
  10. Indiana 1 in 684.

The national average for foreclosure is 1 in 728.


A few facts about gold ETFs

Gold is probably not going to do you much good if the Mayan calendar is right about the end of  the world tomorrow.  However, many people have become very interested in owning some of the metal in the last decade, which partially explains the increase in price.   One way people have invested in gold is via ETFs (Exchange Traded Funds) which can be bought and sold like a stock, avoiding the need to pay for storage or the risk of theft.

So what are some of the things that people should know about gold?

  • Emerging market demand. In the third quarter, India’s consumer demand was 223.1 tons and Greater China, including China, Hong Kong and Taiwan, hit 185.1 tons.

  • Central banks. The U.S. sits on 8,333 tons of gold, India 557.7 tons, Netherlands 612.5 tons, Japan 765.2 tons, China 1,054.1 tons and France 2,435.4 tons.

  • Investment demand. Jewelry made up 78.5% of total demand in 2002. In the third quarter of 2012, jewelry demand was 59.9% while investments accounted for the other 40.1%. According to the World Gold Council, 91% of European gold demand was in physical investment vehicles over the third quarter as a safe hedge against the euro currency.

  • Exchange traded funds. ETFs are the fastest growing market for gold demand, increasing 58% over the year ended in the third quarter 2012.

  • Supply. While 171,300 tons of gold has been extracted since mining began, the U.S. geological society estimates that about 51,000 tons still sit underground and the World Gold Council expects about 730 tons mined each year.

  • Inflation. Gold has appreciated from $18.92 in 1911 to over $1,700 in 2012.

  • Diversification. Gold is that rare investment product which is historically uncorrelated to financial assets.

  • Recyclable. Around 40% of total supply is recycled gold in 2012.

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