| March 17, 2010 |
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Brian R. Carruthers, CFP®, CMTSM
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First Quarter 2010 |
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Hope all is well with you. Stocks and
high yield bond prices have rebounded
off of their February lows and the
markets look good at this time. We are
basically fully invested and
the current rally should continue
higher over the coming months.
This is our second newsletter of the
year and I try to include articles
which may be of interest to you. They
typically are areas which are
currently being discussed and should
help you with your finances and
planning.
Sincerely,
Brian R. Carruthers, CFP, CMT
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Weigh Your Retirement Options and Plan
One casualty of the recent bear
markets has been many people's faith
in their ability to retire.
Retirement plans based on what once
seemed a reasonable 10% annual rate of
appreciation have instead seen 10
years of minimal, if any, real
appreciation in their equity
investments. The question now is what
should you do with respect to planning
for retirement?
The first step is simply to spend less
and save as much as you can.
If the market experiences an average
return of 5.5% (which looks quite rosy
at this point), building a nest egg of
$1 million will take either hefty
investments now, or a longer period
until retirement. Each year you delay
saving, the more you will need to set
aside.
Source: Investopedia
Remember that risk is very real when
you invest your savings.
Before working with a financial
adviser or money manager, ask what
they will do to protect your savings
in the event of another market
downturn, because there will be one.
If they don't have a plan that you can
buy into, don't invest.
Consider alternative retirement goals.
- Work longer, which will increase
your Social Security payments and give
your retirement investments more time
to grow. IRS regulations allow
participants in a 401(k) and other
workplace retirement plans to delay
their required minimum distributions
well beyond 70.5 as long as they
continue to work.
- Phase in your retirement.
Gradually reduce your work hours until
you can afford to fully retire.
- Plan to work part-time in
retirement. But be careful because
this will impact the amount you
receive from Social Security if you
opt for early retirement.
Hit
reset on your lifestyle.
A smaller house, renting a vacation
home instead of owning, cutting back
on club memberships... these are all
ways to free up funds that you can use
for retirement. Look for ways to
minimize monthly expenses such as
property maintenance, loan payments
etc. Even when expenses seem small
individually, added together they
become real money. If you are
assisting younger members of your
family with their expenses, this may
be the time to cut the strings.
Retirement is not beyond your reach.
In fact, it may be much more feasible
than you think. The important thing is
to not wait until the last minute to
start planning. The earlier you put a
plan in place the greater your chances
of succeeding. For help with achieving
your retirement goals, let's talk.
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Watch Out for this Advice!
The fallout from the investment
scandals of the past two years usually
takes the form of a list of guidelines
for investors such as the following:
- Do your homework when picking a
financial adviser.
- Ask tough questions to identify
potential conflicts of interests.
- Ask tough questions about risk
factors, too.
- Check whether the fund manager's
interests are aligned with yours.
- Check whether the fund firm's
interests are aligned with yours.
Before you take these statements to
heart, you need to face one very
important fact.
Crooks
lie. The better the crook, typically
the better the lies. Asking the
questions above does you no good
unless you have a means of verifying
whether or not the answers are true.
In place of the advice above, we offer
the following:
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Never write an investment check to
an individual unless you are
purchasing real property, such as
real estate or gold coins and even
then use a financial intermediary to
assure that you receive legal
possession of the asset.
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Financial investment checks should
be written only to legal entities,
i.e. brokerage firms, trust
companies, investment companies,
etc. that are legally organized
under the laws of the state. If you
have any questions, verify with the
state of record.
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Have your assets held/custodied at
an independent custodian (brokerage
firm, trust company, mutual fund
company, annuity issuer) where the
investment manager or adviser has
the ability to direct how your funds
are invested but does not have
access to those funds.
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Receive and review monthly
statements from the custodian, not
just your financial adviser. Ideally
have online access to your account
so you can verify where your assets
are invested at any time.
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If you are investing directly with a
hedge fund, limited partnership or
pooled investment structure, your
risks increase. You need to
understand that you have given up
regulatory oversight. The
compliance burden is on you.
You need to have some means of
verifying that statements from the
company are true and that verification
needs to be more than once a year. Who
is the auditor? What is their
relationship to the firm? How often
are portfolios reviewed? Request a
copy of the latest audit.
How are assets held within the
portfolio legally titled? Verify with
the state of record that the assets
are indeed held under that entity.
It's a matter of public record. How
are the investors' assets protected in
the event of a lawsuit. If there a
means of checking the manager's
statements consider it a red flag.
It's not like asking if their
interests align with yours. It's
saying "prove it."
A good crook is a good liar. Check
the facts. Know where your money is.
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With Federal Reserve Rates Near 0%,
What's Happening to Your Credit Card?
Kudos to the credit card companies for
doing their best to help Americans
reduce their credit card debt. Although,
that might not be their intent or
desired result.
Many credit card holders have received
notices in the last few months of
dramatic increases in their interest
rates and fees, more than one might
expect in a financial environment where
the Federal government is trying to hold
interest rates to a minimum. The reason
is a law passed by Congress last May,
limiting the ability of banks to adjust
credit card rates and fees. Many credit
card issuers decided their best mode of
defense is to raise rates and fees in
advance of the law taking effect in
February. Lower rates can then be
offered as "special promotions."
Credit card issuers are also well aware
of predictions that the next credit
collapse will be the credit card market,
as unemployment continues in the double
digits and depressed real estate prices
make consolidating debt in a home loan
less feasible.
What should individuals do to avoid
being hit with higher fees and 28% (or
higher) interest rates on their credit
cards? Number one is to avoid carrying
a balance on your card on which you will
have to pay interest. Only use credit
cards with a grace period and pay off
balances within the grace period.
Number two is to never miss a payment.
Missed payments not only incur late fees
(which have jumped to $50 and more at
some credit companies) but also could
trigger increases in your interest rate.
To make certain you never miss a
payment, set up an automatic minimum
balance payment from your checking
account to your credit card. There's no
charge to do so and it could save you
considerable funds if a particularly
crazy month or travel results in
overlooking a bill's due date.
Remember credit cards have always been a
poor way to borrow money. The rates and
calculation of interest charges are set
up to benefit the credit issuers, not
the consumer. While using a credit card
has a number of benefits, including
fraud protection and the ability to earn
points and cash back, you should only
use a credit card for charges you can
afford to pay.
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Request Annual Free Credit Report
The Fair Credit Reporting Act guarantees
individuals access to a free credit
report from each of the three nationwide
reporting agencies - Experian, Equifax,
and TransUnion - every 12 months. Make a
practice of ordering a free report each
year. You want to make certain no
accounts have been opened in your name
that you haven't authorized. And, you
want to make certain information on the
report is accurate.
The U.S. Federal Trade Commission
authorized source to request your free
report is
AnnualCreditReport.com, or
call
1-877-322-8228, or fill out the
Annual
Credit Report Request form and
mail it to Annual Credit Report Request
Service, P.O. Box 105281, Atlanta, GA
30348-5281. You can request all three
reports at once or order one report at a
time. By requesting the reports
separately, you can monitor your credit
more frequently throughout the year.
Be wary of ordering free reports from
other sources. Because you are supplying
your social security number and personal
data with the request you don't want to
take chances. You also don't want to end
up with charges for services or
information. The credit reports must be
provided FREE from the major reporting
agencies. That doesn't mean they won't
try to sell you on credit monitoring
services, credit scores, etc., but you
don't need to pay anything to access
your reports once a year.
You are also entitled to a free report
if you are refused credit, are currently
unemployed and looking for a job, or are
a victim of identity theft. |
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Brian R.
Carruthers, CFP®, CMTSM
Brian R. Carruthers & Associates
Your Conservative Advisory Firm Since 1990
301 Forest Avenue
Laguna Beach, California 92651-2115 USA
Telephone: 1-949-464-1900
www.gobcafunds.com
brian@gobcafunds.com |
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CFP®, Certified Financial Planner™ and
are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
