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March 17, 2010
 
BlueMast
Brian R. Carruthers, CFP®, CMTSM First Quarter 2010
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IN THIS ISSUE
Benefits of Active Management Acknowledged
2010 Window Opens for Roth IRA Conversions
With Federal Reserve Rates Near 0%, What's Happening to Your Credit Card?
Request Annual Free Credit Report
Dear Brian
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, 
 

                        FirstNameBlue
 

       Brian R. Carruthers, CFP, CMT
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.
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:
  1. 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.

     
  2. 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.

     
  3. 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.

     
  4. 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.

     
  5. 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.
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.
 
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.
 
 
Brian R. Carruthers, CFP®, CMTSM
BlueSignature
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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Brian R. Carruthers & Associates

BCA | A Fee-Only Registered Investment Advisory Firm Since 1990

301 Forest Avenue · Laguna Beach, California 92651-2115 USA
Telephone: 1-949-464-1900 · Facsimile: 1-949-464-1400 · Contact

CFP®, Certified Financial Planner™ and CFP Bug 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.

CMTSM and Chartered Market TechnicianSM designations are awarded and permitted to use by full members of the MTA. The CMT Program is administered by the Accreditation Committee of the Market Technicians Association (MTA).

The National Association of Active Investment Managers is a professional organization of registered investment advisors who believe in active management of client assets to reduce the risk of down markets and to structure client portfolios to produce high risk adjusted returns.

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