Monthly Archives: March 2013

New Highs for Dow & S&P 500

The CNBC headline says it all:  Record-Smashing Quarter: S&P 500 Ends Above 2007’s Record Close, Dow Posts Best Q1 Since 1998.  So what now?  The remarkable recovery of the US stock market following the debacle of 2008/2009 is testimony to the fact that people have the ability to recover from disaster if left free to do so.  Companies faced problems caused by the banking crisis and dealt with it in various ways.  Some didn’t make it but most did and the recovery of the market is an indicator that today much of the US private sector is profitable once more.

One part of that CNBC article caught my eye when they stated that Hewlett-Packard (HPQ), one of the Silicon Valley pioneers, was the biggest gainer on the Dow for the quarter, skyrocketing more than 67 percent.  HPQ had booked staggering losses caused by bad acquisitions and accounting irregularities.  The stock dropped from $53.15 in 2010 to $12.99 in 2012.  The company replaced its CEO and yesterday the stock closed at $23.84.

What’s interesting about the HPQ story is that this was a classic “stock picker’s” value story, a venerable company whose management had made some big mistakes but which had the resources to recover.  It was also one of the 30 stocks in the Dow Jones Industrial Average and was for a time one of the “Dogs of the Dow.”  The “Dogs” strategy forces people to buy high dividend paying stocks that are out of favor which, when they recover, often generate outsized gains.  Some investment managers use the “Dogs” strategy to generate both income and capital appreciation.  For more information contact us.

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Don’t Miss the 2012 IRA Contribution Deadline

If you haven’t already made your IRA or Roth IRA contribution for 2012, don’t miss the deadline. Not contributing to an IRA every year could end up costing you in retirement!

You have until Monday, April 15, 2013 to make a contribution for your IRA or Roth IRA for 2012. Even if you don’t have an IRA yet, it’s not too late to open one and fund it for 2012. But hurry, once the deadline passes you will have not have any additional opportunities to make contributions for the year 2012!

How much can you contribute to an IRA? Well if you’re under 50 years old, you can contribute $5,000 for 2012, and $5,500 for 2013. If you’re over 50, you are allowed to make an extra $1,000 “catch-up” contribution each year (meaning those who are age 50 or over could contribute $6,000 for 2012 and $6,500 for 2013). The “catch-up” provision provides those who are closer to traditional retirement age to put away extra funds. In order to qualify, you must have reached age 50 by the end of the year in which the contribution is for. Here’s a chart to simplify:

2012 Limit 2013 Limit
Under 50 years old $5,000 $5,500
Over 50 years old $6,000 $6,500

To put money into a Roth IRA, you do have to be under a certain amount of income, but there are no income limitations on a traditional IRA other than that you (or your spouse) must have income from working. The difference between a Roth IRA and a Traditional IRA sounds like it should be the topic for another blog post, but if you have any questions in the meantime, please let us know!

-SJK

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Changing Jobs? Where’s your 401(k)?

Changing jobs?  Left a company but left your 401(k) behind?  It’s very common.

Unless you take action, when you leave an employer your 401(k) stays behind.  The smart thing to do is to do a “rollover” into an IRA.  But that requires you to take action and many people never take action because they either have other things on their mind or they don’t know what eles to do.  Now it looks as if some companies are going to force them off their rolls.   The Wall Street Journal tell us that a number of firms are handing out another kind of pink slip: booting former employees from 401(k) plans.

These people may not know it but their old employer is doing them a favor.  Money left in old 401(k) plans is rarely managed the way that it should be.

If you have an old abandoned 401(k) give us a call and see if we can help you put this money to work for you.

 

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Retirement Is No Holiday From Debt

 

Once upon a time, people who retired had paid off the mortgage and if they had debt, it was probably a car payment.  But no more.  According got the Wall Street Journal

Gone are the days when most Americans went into retirement with little credit-card debt and without a mortgage. Now, for a growing number of seniors, high levels of debt are threatening their retirement dreams.

At any age, debt troubles are a major challenge and can take a heavy emotional toll. But for retirees with limited ability to boost their income and greater likelihood of big medical bills, it’s even more of an uphill battle. …

Back in 1992, one quarter of Americans families ages 65 to 74 had debt tied to their home. In 2010, that stood at 41%, including homeowners who are tapping the equity in their homes via reverse mortgages. Meanwhile, for those 75 and older, the percentage with a mortgage or other housing loan was 24%, up from 7% in 1992.

Part of a retirement plan is to either have no major debts or have the income to cover debt payments during retirement until the debt is paid off.  From time to time we meet people who are within a few years of retirement who have a large mortgage and minimal savings but assume they will be able to retire in a few years.  It’s a challenge to explain to them that their plans are unrealistic.  The most valuable asset that young people have is time because that allows the power of compound interest to work its magic.

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What Downton Abbey Can Teach Us About Money

At the Hook Law Center, Maureen E. Hook, Ph.D. has an interesting article about one of my favorite television programs: Downton Abbey.  It’s superbly acted, set in a famous castle in Yorkshire, England and provides a number of lessons.  Maureen mentions two:

So what are the lessons that “Downton Abbey” teaches? First, sell the house, and don’t burden your heirs with something they may not really want. Parents tend to overestimate a property’s value to the next generation. That goes for vacation homes, as well. Old estates and houses can become money pits. François Sicart, chairman of Tocqueville Asset Management in New York says, “Even leaving a home with a trust stuffed with cash to maintain it can backfire, because the children ‘will resent that the cash went to the house and not to them. ”

Second, specify control and ownership rights to minimize family squabbles. Everyone should know who has voting rights, the power to fire, and the size of each person’s equity share in the business or inheritance.

There is a third lesson.  If you have watched the series which has now finished it’s third season, you know that people don’t all die of old age.  One of the daughters dies quite young  in childbirth and (spoiler alert) one of the main characters dies in an accident just after the birth of his first son.   All of which is a great lesson about leaving instructions for our spouse and children even if we’re in the prime of life.  There is no better way of doing that than to buy a copy of my book Before I Go and the accompanying workbook.  It can be ordered from Amazon.com or by contacting us via our website

 

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Reducing Retirement Stress

Giving up your job to live on your savings causes stress.

Of course a lot of people look forward to retirement when the stress of work is removed.  But retirement, even the thought of retirement, causes a different kind of stress. 

A new survey from Franklin Templeton finds that nearly three-quarters (73%) of Americans report thinking about retirement saving and investing to be a source of stress and anxiety.

In contrast to those making financial sacrifices to save, three in 10 American adults have not started saving for retirement. The survey notes it’s not just young adults who are lacking in savings; 68% of those aged 45 to 54 and half of those aged 55 to 64 have $100,000 or less in retirement savings.

…two-thirds (67%) of pre-retirees indicated they were willing to make financial sacrifices now in order to live better in retirement.

“The findings reveal that the pressures of saving for retirement are felt much earlier than you might expect. Some people begin feeling the weight of affording retirement as early as 30 years before they reach that phase of their life,” Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments, said in a statement. “Very telling, those who have never worked with a financial advisor are more than three times as likely to indicate a significant degree of stress and anxiety about their retirement savings as those who currently work with an advisor.”

One way of reducing the stress people feel about the financial issues surrounding retiring is to get the aid of a professional retirement specialist.  When you head into uncharted territory, areas you have never been before, doesn’t it make sense to get the help of a guide who has been there, done that, and helped others find their way?  Contact us.  And while you’re at it order a copy of our book Before I Go.

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A Deposit In A Bank Is Not A Riskless Form Of Saving

This is a good time to remind our readers of something.    Via ZeroHedge

Cyprus has reminded us of a couple of awkward truths:

  1. A deposit in a bank is not a riskless form of saving.We may not see eye to eye with the FT’s Martin Wolf on many aspects of modern economics and central banking in particular, but he described banks well last week:

    Banks are not vaults. They are thinly capitalised asset managers that make a promise– to return depositors’ money on demand and at par– that cannot always be kept without the assistance of a solvent state.”

  2. When states become insolvent, the piper must ultimately be paid. Fatal, embarrassing insolvency is not a problem that can be perpetually or painlessly deferred.

Why do we have FDIC?  Because banks can fail,, and when they do, without someone else like the FDIC, depositors can lose part or all of their money, which is what happened in the Great Depression of the 1930s.  For a lesson in banks, watch “It’s a Wonderful Life.”

And even if the bank does not fail, if the interest they pay does not exceed inflation after taxes, the money in the bank is worth less over time because you can’t buy as much with the money as you did in the past.  The simple truth is that there is no “safe” place for money, even under the mattress.  Whenever you have money there is risk of loss.  Cash can be stolen.  Banks can go bust and investments can lose money.  For serious money, get professional help.

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What’s the matter with Cyprus?

Cyprus has gotten a great deal of attention recently because it has run into very severe problems with its banks.  As a result, it has come looking for a bail-out from the European Union.  How did this come about?

It turns out that Cyprus is something of a banking haven for Russian plutocrats who were looking for a “safe” place to stash cash.  As we all know, banks accept deposits but they don’t simply keep those deposits in the vault.  They lend the money out to make a profit.  The problem the Cypriot banks faced is that they received so much money that they were forced to look for investment opportunities in other countries, like Greece.  So the Greek financial crisis became the Cypriot financial crisis, losing the banks billions and wiping out their capital. 

Now, if you’re a country like the US, you just print dollars, lend it to the banks and everything gets fixed.  Unfortunately Cyprus is part of the European Union and can can’t print Euros.  They are at the mercy of the EU leaders who have money to lend.  And the EU leaders are getting more and more reluctant to tax their citizens to bail out countries that live beyond their means and bankers who make big mistakes.

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Hiding the TV

This may seem like a non-problem for most people, but as TV sets become not just slimmer but wider, it’s become an issue for the people who are concerned about home decorating. 

  

IF NBC WERE TO DO a special edition of “The Biggest Loser” featuring household appliances, the television set would probably confound the judges. Newly svelte since losing the tube, the average flat-screen is a few inches thin. But what it has lost in depth it’s rapidly gaining in width.

And that makes it a decorating conundrum: The larger the screen, the more it looks like a gaping black hole in the wall—which is why the “television question” is one of the first designers raise when they sit clients down. “It’s always in the initial dialogue,” said Kristine Irving, the creative director of Koo de Kir, a design firm in Boston. “‘Where’s it going to be? Do you want to see it?'”

Here are some of the solutions:

  • Convince the TV it’s a flea-market find 
  • Outsmart it with art 
  • Blur its identity 
  • Tuck it in a ‘fireplace’ 
  • Slip-slide it away
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Korving & Company Featured in Elder and Wiser magazine

 The latest issue of Elder and Wiser is focused on educating seniors about the financial aspects of retirement.   

To quote the publisher:

You send a lifetime working hard, raising a family and paying off your house and then at retirement you are rewarded with inflation and a cost of living that eats through your retirement funds than you thought possible.  ….

Finding a strong Financial Advisor along with a great elder Law Attorney is something that a lot of seniors put off far longer than they should ….

We agree wholeheartedly.  That’s why we published Before I Go

We are also pleased to be listed among the Certified Financial Planners whose specialty is Seniors in Retirement.   If you are a senior or know someone who is, please feel free to check us out.

 

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