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Archive for April, 2012

Call It What You Want

April 5th, 2012 at 08:29 pm

Whether you call it the Affordable Care Act or ObamaCare, one thing is for sure: major parts of the health care law have already taken effect. While we sit and wait for the Supreme Court to rule whether it is constitutional to require people to purchase health care insurance, people at all income levels have started to take advantage of the law.

There are two parts that apply directly to those who are retired or nearing retirement.
1. More than 32 million people 65 and older have already received free preventive services, including an annual ‘wellness’ visit to a doctor. There is no co-pay or deductible, and no need for a Medicare supplement. Preventive care is also free of charge for working people as part of their employer health plans. The idea here is that an ounce of prevention is worth a pound of cure.

2. The so-called prescription drug ‘donut hole’ is shrinking, and by 2020 it should go away entirely. The donut hole is the portion of the Medicare Part D drug benefit program in which prescription drug costs skyrocket until a certain payment level is reached, and then costs go back down. Prescription drug costs for name-brand drugs have been reduced 50%, and as a result, more than three million Medicare recipients have saved about $2 billion on their prescriptions.

Other parts of the law that have taken effect: (1) The Pre-Existing Condition Insurance Plan (PCIP) provides insurance now for people who are uninsured and have a pre-existing condition that prevents them from getting health coverage. (2) Federal tax credits are now available to small businesses that offer health insurance to their workers. (3) Young adults can now stay on their parents’ health insurance plan until the age of 26.

Your doctor’s office or your employer’s human resources department can tell you more about how the law affects you. Most polls show that by a slight margin, Americans are against the new health care law. But like it or not, you may be able to benefit right now.

Reduce Your Risk

April 5th, 2012 at 08:26 pm

For long-term investors, the stock market continues to offer the greatest opportunity for gains, and the greatest risk for losses. Here are five tips that may lower your stock risk:

1. Choosing mutual funds and exchange traded funds (ETFs) over a few individual stocks means your eggs are spread among more baskets. If you are creating your own portfolio with individual stocks, make sure those stocks are spread among different industries.

2. Choose funds and ETFs with low expenses. A mutual fund that charges you 1.5% annually compared to one that charges 1% may not seem like much, but it can mean thousands of dollars over a 20-year period.

3. Invest in different industries. Mutual funds and ETFs often do this for you, but it’s also possible to latch onto funds that invest strictly in a particular field. Resist the temptation to predict the booming areas of growth over the next 10 or 20 years.

4 Invest globally. It can be hard for Americans to understand the industries of Brazil, China and Australia, but funds and ETFs with a global reach may give you greater diversification. Many American companies also have a strong presence around the world.

5. Have patience. The nearly 60% drop in the S&P 500 in 2008 and early 2009 proved that the stock market can wield cruel blows. Those who stayed put have regained most of what they lost. Those who jumped out near the bottom are poorer.

As the past 10 or 12 years have shown, there are no guarantees in the stock market. The good news is that the 30-year period from 1950 to 1980, and the 30-year period from 1980 to 2010, yielded nearly identical 10% annual gains in the stock market. Patience does pay off, but the journey to get there is rarely easy.

"If a business does well, the stock eventually follows." Warren Buffett

No Matter What Your Age

April 2nd, 2012 at 02:51 am

(Evansville Business Magazine…February/March 2012)

OK, it’s mid-winter and your New Year’s resolutions about money are kicking into high gear…or, more likely, you’ve simply kicked them down the road. Fear not. ‘My Money’ has produced the definitive ‘There’s Still Time’ resolutions for you.

20-Somethings: In the words of Suze Orman, you are young, fabulous and broke. (1) Cobble together $500 to start an emergency fund. (2) Pay off student loans. They will always be an anchor around your financial neck. (3) Contribute enough to your 401(k) to earn the company match—a.k.a. free money. (4) Don’t buy insurance that you don’t understand. (5) Work hard to increase your salary, and have some fun.

Young Families: Your life is no longer yours. It belongs to your employer, your spouse and your kids. Quit whining; you’re now officially a grown-up. (1) Put as much as possible—automatically, every month—into your retirement account. It gives you no reward now, but you'll be so glad it's there when you need it. (2) Open a 529 college savings account for your children and ask every relative to help fund it. (3) Buy a house if you can put down at least 20%, or move up if it’s affordable. Mortgage rates are incredibly low. (4) Read to your kids, and have some fun.

Established Families: Your life is still not yours. Now you’re dealing with teenagers and/or aging parents. (1) Keep socking away the retirement and college savings money. (2) Consider long-term care insurance. It’s affordable at your age. (3) Prepare now to retire, even if it’s 20 years away. Sitting down with a pro to map your financial future can help tremendously. (4) Plan so you can pay off the mortgage before retirement. (5) Your wallet’s probably lighter than you hoped; find cheap ways to have some fun.

In Retirement: It’s not as relaxing as young folks think. You worry about your health and outliving your money. (1) Exercise daily, even when the body wants to sit in the rocking chair. (2) Understand Social Security and Medicare rules so that you take full advantage of both. (3) Keep your investments conservative, but keep investing. You have plenty of years remaining. (4) Stay engaged by working part-time or volunteering. Do all that, and you’re sure to have some fun!

Time To Test The Water Again?

April 2nd, 2012 at 02:42 am

(Evansville Business Magazine…April/May 2012)

Despite the Dow’s ability to bust through the 13,000 level earlier this year for the first time since 2008, investors at all income levels continue to hold their breath instead of letting out a big sigh of relief. Europe still appears shaky, especially with the prospect of another bailout of Greece looming. In this country, the economy must slog through a poor housing market, high gas prices, and debt, in order to keep climbing. Lipper, a fund-tracking company, found that investors pulled out $3.6 billion from stocks in January and February at the same time the stock market was rising 8%, the best start since 1998.

At least one veteran Evansville financial advisor believes investors have more to fear by sitting on their money than by trusting at least a portion to the stock market.

“A lot of people are way too defensive,” says Certified Financial Planner Mark Pettinga, chief executive officer of Pettinga Financial Advisors. “The biggest opportunity is for those fully allocated in a balanced portfolio that includes stocks and bonds. That’s not very flashy, but I really believe that is what will work best in the long run. I also think the tide is beginning to change. People see virtually no interest credited to their savings accounts, they see inflation moving up, and at least in the early part of the year they’ve seen the stock market go back up. People are not shooting for the moon. They just want to get back to an acceptable level of return.”

Here is Pettinga’s list of five ways for investors to prosper:
1. Maximize your 401(k) or 403(b) retirement account.
2. Diversify your assets.
3. Have exposure to the stock market.
4. Make sure the stock market exposure includes international funds, including emerging markets.
5. Monitor your debt. Make it a manageable amount in case of a job loss or some other unforeseen event.

“I get it,” Pettinga says about investors’ caution. “They’ve been through crashes in 2000 and 2008. They’ve seen some pretty harsh treatment, and there’s more negative news out of Washington. But despite the lack of pro-economic policy-making, the private sector has continued to strengthen. That’s what keeps me optimistic.”